The Federal Government recently released its long-awaited discussion paper on the proposed establishment of a pilot ‘below-baseline crediting mechanism’ for facilities under the Safeguard Mechanism, from 1 July 2022. The scheme would credit facilities that reduce their emissions intensity relative to a historical baseline, with new units referred to as Safeguard Mechanism Credits (SMCs).
The proposed scheme seeks to move away from the underutilised Facilities method under the ERF, designed with strict additionality requirements, instead implementing a lower additionality threshold to encourage industry participation. As a result, the proposed framework raises questions over the rewarding of business as usual (BAU) improvements
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