With the first compliance deadline under the reformed Safeguard Mechanism approaching, Australia’s largest emitting facilities will soon be eligible to be issued the first Safeguard Mechanism Credits (SMCs), with each unit representing one tonne of carbon dioxide equivalent (tCO2-e) emissions below a facility’s baseline.
The roll out of SMCs is a key milestone for the market, actioning the final ‘crediting’ component of the reformed ‘baseline and credit’ Safeguard Mechanism scheme, while providing facilities with a direct incentive to reduce emissions beyond their baselines.
In doing so, SMCs – combined with declining emissions baselines – provide industry with a long-term signal to invest in onsite decarbonisation activities, incentivising the uptake of the key technologies and actions that will underpin Australia’s industrial low emissions transition, such as fuel switching and electrification, carbon capture and storage (CCS) and other process improvements.
Following the publication of our latest quarterly Carbon Market Outlook, in this ‘In Focus’ briefing we take a closer look at our underlying modelling for forecast for SMC creation, including the sectors, technologies, and baseline methodology quirks likely to drive issuance, the availability of SMCs in the secondary market, and our expectations for SMC prices, including SMC taxation implications.
Notably, we also consider the impact of coal mine methane reporting reforms, with widespread implications for forecast emissions, SMC issuance – and prices.
