Insights / February 28th, 2018

Safeguard Mechanism baselines review

Under the National Greenhouse and Energy Reporting Act 2007 (Cth) (Act), the Safeguard Mechanism sets emissions baselines for Australia’s largest greenhouse gas emitters. In 2017, the Government reviewed the countries climate change policies. As a result of the review which looked at the Emissions Reduction Fund and Safeguard Mechanisms, DEE has released the Emissions Reduction Fund Safeguard Mechanism Consultation Paper (paper) to look at ways to bring the Safeguard Mechanism baselines up to date.

Baselines are set by reference to the highest historical emissions levels between 2009/2010 and 2013/2014. These baselines can be increased under section 22XE of the Act. Currently, when baselines are permanently increased, the emissions baseline is a forecast of emissions intensity over three years (or five years depending on the size of the emitter). This calculated baseline is replaced with a new production adjusted baseline after the forecast period.

The paper aims to promote discussion about how to make access to calculated baselines broader and improve the application process.

Transitioning to calculated baselines

Inconsistent treatment for accessing baseline increases across facilities was identified as a key issue by businesses. Exceeding initial baseline calculations is an ongoing issue for expanding businesses because the true extend of emissions is difficult to predict without historical data. To address this, the paper seeks comments on:

  • Transitioning landfill facilities away from historical baseline levels;

  • Transitioning all facilities to calculating baselines over 2018/2019 and 2019/2020; and

  • Assessing whether facilities that apply for a calculated baseline in 2016/2017 should or should not be able to reapply.

Simplify calculated baselines

Simplifying the baseline increase application process to lower administration costs is the second focus of the paper, with a proposal to use a default production variable and emissions intensity value rather than the current forecast of production and emissions intensity.

Under the new proposal, the Government would publish calculated default values on the basis of average sector performance or other levels. Similar to the lower order methods of emissions reporting under the National Greenhouse and Energy Reporting Scheme.

Annual updating baselines for actual production

Currently, calculated baselines remain fixed once they have been updated as production adjusted baselines. This leads to baselines being out of date. The paper proposes calculating baseline updates more often, allowing increases or decreases with production.

Comment is sought on whether baselines updated annually should apply to emissions intensive trade exposed facilities only or more broadly to other facilities. In particular, the paper seeks feedback on whether:

  • Baseline updates for production should be updated less frequently than yearly; and

  • Whether baselines annually updated for production negate the need for existing flexibility provisions.

In order to facilitate automatic baseline adjustment annually, reporting would need to occur each production year. While this requirement is not new for many producers, for example the oil, gas or coal industries, it will be new for other areas such as transport. Two options for updating baselines have been proposed:

  • Updates based on annual production – baselines set after the compliance year; or

  • Updates based on forecast production – baselines set in advance.

The paper seeks feedback on updating baselines on the basis of actual production.

Information gathered from submissions on the paper will be used to propose amendments to the National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 and the National Greenhouse and Energy Reporting Regulations 2008.

Consultation on the paper is open until 30 March 2018.

If you would like assistance with preparing a submission in response to the paper, please contact Kathryn Walker or Leah Cowell.