Carbon Markets

BRIEFING: Regulatory options to address on-site action under the Safeguard Mechanism

Negotiations on the Safeguard Mechanism (Crediting) Amendment Bill are set to intensify this week as the government seeks to secure support for its policy in the upper house. Two areas of the policy remain under scrutiny, focused on addressing emissions from coal and gas facilities: 1) the unlimited use of offsets, with some groups advocating for a quantitative limit on offset use; and 2) rules to account for emissions from new coal and gas projects.

While proposals to limit offset use are intended to incentivise direct emission reductions by industry, a quantitative limit on offsets will not be feasible under the proposed Safeguard Mechanism framework – unless supported by a penalty price – given facilities would have no recourse to meet their annual liabilities where they are unable to reduce their on-site emissions. This is because Safeguard Mechanism Credits (SMCs) are not forecast to be widely available on commencement of the scheme.

While offsets can be limited under cap-and-trade schemes, where “allowances” fulfull a similar role, ACCUs will therefore be required to underpin the Safeguard Mechanism “baseline and credit” scheme, particuarly in the early years of the new framework.

As an alternative to a hard limit on the use of offsets, a number of options remain on the table to address emissions from coal and gas facilities. These include a legislated cap on emissions, regular progress reporting and consideration of new entrants, and a potential soft cap on the use of ACCUs as a disincentive for heavy offset use.

In this briefing note, we discuss our expectations for the passage of the Safeguard Mechanism policy framework, and possible legislative amendments. We also outline our expectations for the proposed cost containment measure to be triggered in the latter part of the decade, and the implications for policymakers and market participants.

Restricted Access

This is a subscriber report. Please login to access this content.

Tour our EnergyIQ platform

RepuTex research insights and market data is published via our EnergyIQ platform.

Click below to learn more about our services.

Sign up for regular insights

LATEST UPDATES

  • Carbon Markets

    MARKET MONTHLY: Spot and derivatives volumes fall to seasonal lows in June, market turns to options over H1

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Total traded volumes of over 2.1 million ACCUs were reported via our daily Survey Panel […]

    Research Insights | July 7th, 2025
  • Carbon Markets

    UPDATE: FY26 opens with a surge of activity on release of latest Carbon Market Outlook, bearish price forecast

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Total volumes across the Australian exchange-traded and over the counter (OTC) carbon markets surged to […]

    Research Insights | July 7th, 2025
  • Carbon Markets

    RECORDING: ACCU prices to remain under $100/t to 2035, landfill gas extension to materially flatten uplift

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In May, DCCEEW published a new draft landfill gas method outlining updated rules for crediting […]

    Research Insights, Webinars | July 1st, 2025
  • Carbon Markets Outlook

    OUTLOOK: Australian carbon price, supply & demand outlook (ACCUs/SMCs) June 2025

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Our latest Carbon Market Outlook (CMO) for the Australian carbon market has now been published. […]

    Market Outlooks, Research Insights | June 30th, 2025
  • Carbon Markets

    UPDATE: ACCU prices remain tightly rangebound, Default Prescribed Unit Price set for FY25 compliance costs

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    ACCU spot prices remained tightly rangebound last week, with our Generic ACCU (Market Close) assessment […]

    Research Insights | June 30th, 2025
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone