ANALYST UPDATE: “Two phase” safeguard scheme emerging

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Last Thursday, Environment Minister Greg Hunt lodged the administrative rules for the operation of the Emissions Reduction Fund “Safeguard Mechanism”, the final component of the government’s Direct Action Plan policy.

The new regulation is largely in line with the government’s earlier draft rules, released in September, providing high emitting companies with headroom to grow emissions, coupled with flexibility to avoid compliance obligations should baselines be at risk of being breached.

The final text of the legislative rules includes:

  • No substantive change to the operation of emissions baselines or scheme coverage as detailed under the draft rules.
  • The definition of a specific window for a review of the policy, commencing on 30 June 2017, reporting by 15 November 2017.
  • As we anticipated in our earlier Analyst Update, the scope of the policy review has been broadened to consider the operation of the safeguard mechanism in the context of Australia’s 2030 emissions reduction target.

We discuss the implications for covered entities and offset providers below.

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