AICD submission to consultation on proposed design of Safeguard Mechanism reforms

With emissions from Safeguard Mechanism facilities contributing to approximately 28% of Australia’s emissions, the AICD considered that the Safeguard Mechanism is a critical component of Australia’s climate policy architecture. The AICD strongly supported the introduction of the Climate Change Act, and produced a joint statement in support of the Act together with seven other business, investor and conservation groups.

We highlighted it was imperative that the Safeguard Mechanism reforms provide clarity on industrial decarbonisation whilst simultaneously ensuring that the competitiveness of Australia’s exports are not disproportionately affected.

Given the technical nature of the consultation, we have limited our submission to a number of high-level comments. The key points of our submission were:

• We support the concept of annual baseline reductions as a mechanism for facilitating industrial decarbanisation. We also agree that the rate of decline should proportionately reflect the contribution of the industrial sector to Australia’s emissions.
• We consider that the government should carefully consider the rules for the use of offsets and trading. While carbon credits (namely Australian Carbon Credit Units) have a significant role to play in genuinely hard-to-abate sectors, there are concerns that their uncapped use within the Safeguard Mechanism may discourage effective emissions mitigation.
• We consider that carbon leakage is a significant issue that needs to be addressed. Further detail needs to be provided as to the type of activities that funding under the Safeguard Transformation Stream will support.
• Our members have expressed particular interest in understanding the government’s position on any proposed Carbon Border Adjustment Mechanism and welcome the government’s commitment to hold a separate consultation on this topic.
• The government should consider whether and how disclosure requirements under the reformed Safeguard Mechanism may interact with disclosure requirements under the proposed mandatory climate reporting regime, as well as any other intersecting regimes. A key consideration should be harmonising reporting across the multiple regimes and ensuring that the costs of compliance are proportionate to the expected benefit.