In our latest Talking Points, we review the government’s recently released Consultation Paper on the ERF Safeguard Mechanism.
While the ‘light touch’ compliance scheme is a short-term win for the market, the flexibility provided to industry has come at the expense of the environmental effectiveness of the draft scheme, with few companies forecast to exceed their historical high-point baselines, causing emissions to continue to grow.
This may allude to an inconsistency between the design of baselines and the objective of the scheme – to safeguard ERF investment – whereby investment made by the ERF “today” may be expected to be safeguarded from emissions increases from current levels, not those of five years ago.
Moreover, the government may be missing an opportunity to protect Australian industry from later compliance shocks by not addressing ways to make compliance cheaper – not just flexible – via the design of an expanded domestic offset market.
Please view our briefing slides below:
