The government last week tabled its Safeguard Mechanism (Crediting) Amendment Bill 2022 in the House of Representatives, paving the way for the imminent announcement of more detailed policy settings for the enhanced Safeguard Mechanism, which we expect to occur in the immediate short-term. The Safeguard Mechanism (Crediting) Amendment Bill establishes the framework for the creation of new Safeguard Mechanism Credits (SMCs) by covered facilities, including how credits will be issued, purchased, traded and reported. Beyond this, the legal architecture also formalises a raft of changes to the new Safeguard market, including penalty price settings, the extension of compliance deadlines (to end-March each year), potential limits on the use of prescribed carbon units – including disincentives for the use of external abatement – and flexibility to account for the integrity of units in surrenders.
Ahead of the release of the government’s preferred position on the setting of emissions baselines, in this note, we provide a detailed review of the Safeguard Mechanism (Crediting) Amendment Bill 2022, and key implications for market participants.
