In with our earlier market update, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) yesterday notified stakeholders that the Government will release its proposed Safeguard Mechanism reform framework for consultation in early-mid January. The updated timetable comes in light of the Government’s current focus on its Energy Price Relief Plan, which is expected to pass both houses of Parliament today, with the support of the Greens and Senator Pocock (and Lambie).
No change has been made to the Government’s regulatory timetable for the new reform package, with consultation to run through January and February on proposed draft rule amendments, including the methodology (or methodologies) for setting baselines (site-specific or industry average), baseline decline rates (for phases one and two), rules for the use of prescribed units (such as limits on the use of SMCs), allocations for emissions intensive trade exposed (EITE) facilities, and the treatment of new entrants.
In parallel, the Government will seek to legislate its Safeguard Mechanism (Crediting) Amendment Bill by end-March 2023, establishing the legal framework for the creation of new SMCs by covered facilities, including how credits will be issued, purchased, traded and reported. The Bill also contains architecture for the creation of market rules, such as penalty price settings, compliance deadlines, the use of prescribed units, and so on.
The first deadline for compliance under the new Safeguard scheme will be end March 2025 (for FY24), as described in our recent update.
A timetable for proposed Safeguard Mechanism reform is provided below:
|December 2022||Chubb Review reports||The Review Panel recommendations provided (to the government) by 31 December 2022.|
|Early/mid-January 2023||Release of Safeguard Mechanism reform proposed design and consultation||Release of proposed Safeguard Mechanism reform design and commencement of consultation.|
|February 2023||Conclusion of consultation on draft rule amendments||End of consultation on draft rule amendments for Safeguard Mechanism reform.|
|End-March 2023||Safeguard Rule and Legislation||Changes to the Safeguard Mechanism Rule and Act (for crediting) by March 31.|
|28 February 2023||Safeguard compliance deadline||Deadline to surrender ACCUs under the (former) safeguard scheme for FY22.|
|1 July 2023||New Safeguard Mechanism scheme commences||Commencement of the enhanced Safeguard Mechanism framework (for FY24)|
|1 November 2023||2022-23 NGERs reports||Submission of FY23 reported emissions and energy use.|
|28 February 2024||Safeguard compliance deadline||Deadline to surrender ACCUs under the (former) safeguard scheme for FY23.|
|1 November 2024||2023-24 NGERs reports||Submission of FY24 reported emissions and energy use.|
|31 March 2025||First compliance deadline under new Safeguard scheme||Deadline to surrender ACCUs under the (new) safeguard scheme for FY24.|
To access our latest Carbon Market Outlook for ACCU prices and supply-demand fundamentals over a 10-year rolling horizon, accounting for the impact of tighter policy settings under the Safeguard Mechanism framework, click here.
To read more about possible changes to the Safeguard Mechanism market, imposed by the Safeguard Mechanism (Crediting) Amendment Bill, read our summary here.
If you have any questions or comments, please contact our Client Services team.
The RepuTex Team
Australian Energy Markets