Senate Standing Committee on Environment and Communications

Inquiry into the Safeguard Mechanism (Crediting) Amendment Bill 2022.

Smart Energy Council submission – 26 January 2023

Introduction

The Smart Energy Council welcomes the opportunity to provide a submission to the Senate Standing Committees on Environment and Communications regarding the Safeguard Mechanism (Crediting) Amendment Bill. The Safeguard Mechanism is one of Australia’s most important climate action policies and the Australian Government is right to reform this critical policy to make sure Australia’s biggest polluters slash their emissions.

While the proposed reform is a useful step in the right direction, in order for the mechanism to drive real emission reduction, that benefits the Australian economy and particularly its regions, some adjustments are required.

The adjustments set out below are necessary in order to catalyse the Safeguard Mechanism to be a force for creating jobs and economic opportunities from climate action, particularly in regional communities.

Please note the Smart Energy Council publicly refers to the Safeguard Mechanism as the Big Polluters Program, a more accurate reflection of what the mechanism is. Indeed, as it stands, it is not at all clear what the Safeguard Mechanism is safeguarding. The Smart Energy Council urges the Australian Government to change the name of this critical climate change measure.

The use of Offsets in the Big Polluters Program

The role of carbon credits requires careful attention to ensure the Big Polluters Program drives real emission reduction, that benefits Australia. Carbon credits can play a small role in reducing Australia’s pollution, but we can’t offset our way to net-zero. Offsets should only be used by hard to abate sectors after exhausting options to avoid, minimise, and mitigate emissions.

Real and significant emission reduction from Australia’s largest polluters, a group dominated by fossil fuel companies, demands Australia’s largest emitters take account of their fossil fuel operations, and expansions not by merely buying ACCUs. This is an offset pathway which currently lacks sufficient integrity at the present moment, given the issues raised by Professor Andrew Macintosh and the Academy of Science in their deliberations as part of the Chubb Review.

The most appropriate way to reduce emissions is to stop new coal and gas, providing real incentives to a fast and fair transition to renewable energy.

Australia’s biggest polluters should be directly reducing their emissions through projects in Australia – creating jobs, investment and economic opportunities in Australia, particularly in regional communities. International offsets should be banned. Domestic offsets should only be used by hard to abate industries, as a last resort.

Implementation

In order to reduce the use of offsets and particularly ACCUs the following recommendations should assist in reducing the use of offsets and particularly ACCUs.

• In order for a facility to utilise Safeguard Mechanism Credits (SMCs) or ACCUs a facility needs to demonstrate reasonable steps taken to achieve on-site emission reduction. Once this has been demonstrated, the purchase of a capped number of offsets could be
  made available.
• If reasonable steps have been taken to achieve on-site emissions, SMCs must be purchased first, up to a certain threshold. If the threshold of SMCs has been purchased, only then can ACCUs be purchased. This will deliver the real achievement of the Safeguard Mechanism cap.
• All new Entrants to the Mechanism (After 1 July 2023) will only be able to offset their emissions not reduced on-site, through the purchase of SMCs, thus excluding any use of ACCUs.
• All international offsets should be banned for facilities covered by the Big Polluters Program.

Integrity

• Strong improvements in transparency and integrity throughout the entire administration of the mechanism, including the reporting of ‘reasonable steps’ to
  reduce emissions on-site.
• The establishment of an independent integrity review committee.
• The abolition of new credits for “avoided deforestation”, where credits were applied to land which would not have been cleared.
• The Big Polluters Program should be reviewed every two years to ensure it is consistent with climate science and Australia’s international climate change
  commitments, with an appropriate emissions reduction trajectory.

The Smart Energy Council welcomes consideration of a Carbon Border Adjustment Mechanism, crediting, trading, hybrid baselines and other mechanisms. We welcome any further consultation on these matters to ensure the success of these mechanisms, schemes, and frameworks. It is imperative that emission reduction in heavy industry results in a transition away from fossil fuels, and into industries that form part of Australia’s future as a Renewable Energy Superpower.

The Smart Energy Council strongly supports the Australian Government’s new $1.9 billion Powering the Regions, which complements the Big Polluters Program. The Powering the Regions fund should be limited to zero emissions technologies of projects that will reduce emissions by at least 43% by 2030, consistent with the Climate Change Act.

The Smart Energy Council would welcome the opportunity to appear before the Committee to discuss these matters further.