Promise check: Gradually and predictably reduce emissions baselines for non-electricity sector facilities covered by the safeguard mechanism

At the 2022 election, Labor promised to gradually and predictably reduce emissions baselines for non-electricity sector facilities covered by the safeguard mechanism. Here's how that promise is tracking.

(Image by ABC Capricornia: Erin Semmler)

As the Clean Energy Regulator explains, the safeguard mechanism requires Australia's largest greenhouse gas emitters to keep their net emissions below an emissions limit, or "baseline", set by the regulator.

Since July 2016, the mechanism has applied to facilities that emit more than 100,000 tonnes of carbon dioxide a year, including direct emissions and emissions from fuel combustion, waste disposal and industrial processes such as cement and steel making.

It extends to businesses across a broad range of industry sectors, including electricity generation, mining, oil and gas extraction, manufacturing, transport, and waste.

The mechanism sets a baseline of emissions for each facility covered. These can be set on either a production-adjusted basis, or an absolute figure.

(Electricity generators are covered by a separate, sectoral baseline).

If a facility exceeds its baseline, it is required either to purchase and surrender Australian Carbon Credit Units, or to apply to the regulator for a baseline variation or a multi-year monitoring period, which allows facilities to manage their emissions over several years.

In October 2021, the Business Council of Australia released its plan to achieve a net zero economy, which contained a recommendation that "[t]he safeguard mechanism emission baselines be reduced predictably and gradually over time to achieve the proposed emission budgets out to 2050 — and that this is done in a way that supports international competitiveness and economic growth".

When Labor released its Powering Australia energy plan in December 2021, it contained a pledge to adopt this recommendation: "For facilities already covered by the government's own safeguard mechanism, Powering Australia will adopt the Business Council of Australia's recommendation that "emission baselines [be] reduced predictably and gradually over time" to "support international competitiveness and economic growth".

Labor's plan also included a pledge to "provide tailored treatment for emissions-intensive, trade-exposed industries. This will be based on the principle of comparative impact — ensuring that exporters remain competitive, and that emissions do not 'leak' overseas".

Subsequently, then shadow minister for climate change and energy, Chris Bowen, laid out the scope of the pledge on Facebook:

"There are 215 facilities covered by the safeguard mechanism.

"For facilities covered by the safeguard mechanism, Labor will adopt the Business Council of Australia's recommendation that the baseline for each facility be regularly and gradually decreased over time."

The Business Council's plan also included a recommendation that "The eligibility threshold for entities covered by the Safeguard Mechanism be reduced from 100,000 tCO2 per year, down to 25,000 tCO2 per year — to increase the scheme's coverage of emission point sources across the economy."

On April 15, Mr Bowen made clear it was not part of Labor's policy to add any more facilities to the safeguards mechanism by way of lowering the threshold for inclusion.

In a tweet, he pointed to reported commentary from then deputy prime minister Barnaby Joyce which implied the threshold would be reduced from 100,000t CO2-e per year to 25,000.

"Barnaby is lying about Labor policy," he said.

"The safeguard mechanism under Labor will apply to 215 facilities, same as under the government," he said.

The 215 facilities would not include grid-connected electricity generators, which are covered under a sectoral baseline.

Twitter post by Chris Bowen "Surprise! Barnaby is lying about Labor policy. The safeguard mechanism under Labor will apply to 215 facilities, same as under the government. Difference is it will actually work. Industry has backed our policy - why do the LNP think they know industry better than industry?

Modelling commissioned by Labor from Reputex showed the policy beginning in 2023-24 with emissions reductions occurring from the following financial year.

The pledge was also contained in Labor's policy platform, which said:

"Adopt the Business Council of Australia's recommendation for facilities already covered by the government's safeguard mechanism that emissions be reduced gradually and predictably over time, to support international competitiveness and economic growth — consistent with industry's own commitment to net zero by 2050."

Assessing the promise

If the government releases and enacts a plan to reduce baselines on either a production-adjusted or absolute basis for non-electricity sector facilities covered by the safeguard mechanism beginning in 2023-24, this promise will be considered delivered.

Exceptions to these criteria will be granted in the case of facilities which are in "trade-exposed industries", in accordance with Labor's pledge.

19 May 2023

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Promise check: Gradually and predictably reduce emissions baselines for non-electricity sector facilities covered by the safeguard mechanism