Australia’s Top Polluters Will Get $600 Million to Reduce Emissions by 5 Percent Every Year

A section of the Queensland Alumina Refinery in Gladstone, Queensland, Australia, on Jan. 18, 2012. The Refinery which opened in 1967 is one of the largest by Alumina production in the world. (AAP Image/Dave Hunt)

Australia’s biggest polluters will be required to reduce their net emissions by almost 35 percent by 2030 under the federal government’s new safeguard mechanism reforms.

Minister for Climate Change and Energy Chris Bowen said the reforms will support the country’s biggest emitters to remain competitive in a global economy while they work to reduce emissions.

Trade-exposed facilities will be supported by an initial $600 million (US$414 million) in funding to compensate for the cost of transition and ensure competitiveness, so emissions do not “leak” overseas from businesses outsourcing operations.

The safeguard mechanism was introduced by the previous Coalition government and requires the 215 facilities that annually produce over 100,000 tonnes of greenhouse gases to limit their net emissions below a baseline limit.

When the baseline limit is exceeded, businesses can “offset” the excess emissions by purchasing carbon credits.

“A reformed safeguard mechanism is expected to deliver 205 million tonnes of abatement to the end of the decade, equivalent to cutting emissions from Australia’s cars by two-thirds over the same period,” Bowen said.

Australian Minister for Climate Change and Energy Chris Bowen speaks during the Sydney Energy Forum in Sydney, Australia, on July 13, 2022. (Jaimi Joy - Pool/Getty Images)

The 215 mining, oil, and gas facilities emit around 28 percent of the country’s emissions, or 143 million tonnes of carbon dioxide equivalent, in 2022-23, according to government projections (pdf). The safeguard changes aim to reduce this to 100 million tonnes by 2030.

The proposed baseline decline rate is to be 4.9 percent every year to 2030, with the system to commence on July 1.

Decline rates after 2030 will be set every five years from 2027 to maintain the country’s progress towards net-zero by 2050, which was enshrined into law with the passing of the Climate Change Bill in September 2022.

In finalising the approach to setting baselines, the government chose to implement a hybrid approach between site-specific and industry-average levels.

At the commencement of the scheme, it will be “heavily weighted” towards site-specific levels to give facilities time to transition to industry average benchmarks.

Bowen said the reforms would ensure that the mechanism delivered “meaningful outcomes” and was “fit for purpose.”

“Reforms to the safeguard will help create an effective, equitable and efficient trajectory to net-zero,” he said.

“We know that 70 percent of facilities, representing over 80 percent of scheme emissions, already have corporate commitments to net zero by 2050—this reform helps deliver the framework to get there.

“Recognising strong stakeholder interest, the government will also conduct a review to consider how best to prevent international carbon leakage risks, while protecting Australia’s reputation as a reliable and secure trading partner.”

Business Groups Welcome Reforms

The Business Council welcomed the reforms, calling the safeguard mechanism a “crucial tool” to accelerate the decarbonisation of the economy.

“We must do everything we can to ensure Australia is at the global forefront of the clean energy transition,” the council said.

The Australian Industry Group (Ai Group), the peak national employer organisation, said the proposals were “pragmatic”, but there was “clearly” more work to do on major climate policy.

“The government’s initial measures to help trade exposed facilities invest in their future and to moderate their potential costs will be helpful,” Ai Group CEO Innes Willox said.

“However, trade exposure will grow more challenging over time as emissions baselines come down, particularly where alternative clean production processes continue to display a cost premium.”

Carbon Credit Scheme ‘Well Designed,’ Review Finds

The announcement comes after an independent review of the Carbon Credit Scheme, which had been criticised as having major flaws, found the system’s design was sound.

A six-month review led by leading Australian scientist Ian Chubb, as well as three other scientists, said the scheme had been working effectively after 11 years of operation.

However, a foremost critic of the scheme, Andrew Macintosh from the Australian National University, has argued that 70 to 80 percent of traded carbon credits did not represent a genuine reduction in emissions, according to his research.

“Unfortunately, Australia’s carbon market currently suffers from a distinct lack of environmental integrity,” Macintosh said in a statement.

“All of the major emission reduction methods have serious integrity issues, either in their design or the way they are being administered.”

Trees growing on forest land adjacent to Mount Rainier National Park are shown Monday, Nov. 23, 2015, near Ashford, Wash. The land is part of a new project of 520 acres on private timberland that allows the private nonprofit Nisqually Land Trust to sell so-called "carbon credits" to individuals and companies—including Microsoft Corp.—who are hoping to offset their carbon footprints. (AP Photo/Ted S. Warren)

With the release of the report, Chubb said the four-person panel did not share Macintosh’s view.

“There may be several reasons for the polar-opposite views. One is likely to be a lack of transparency, meaning that third parties cannot access the relevant data and so different conclusions can be drawn, and all genuinely held,” he said.

The Albanese government welcomed the findings and accepted the report’s 16 recommendations to improve the scheme, which include providing more clarity, transparency, and information.

“The panel’s recommendations will help ensure Australia’s carbon crediting scheme has the highest integrity, and contributes to achieving Australia’s emission targets,” Bowen said.

Daniel Y. Teng contributed to this article.