From 1 July 2023, the Commonwealth Safeguard Mechanism will transition to a ‘baseline and credit’ emissions market, with declining baselines set to align Australia’s largest emitting industrial facilities with net-zero emissions by 2050.
To incentivise emissions reductions, Safeguard Mechanism Credits (SMCs) will be issued where a facility reduces emissions below its baseline, which may be traded to another entity. Companies will therefore be given flexibility to manage their excess emissions, based on the least-cost combination of internal emissions reductions, and external abatement (SMCs and/or offsets).
The transition to a regulatory-led market is forecast to be supportive for ACCU prices, with the private sector set to become the largest buyer of ACCU offsets in 2022 – for the first time since the conclusion of the Carbon Price Mechanism in 2013-14. The creation of a transparent signal to drive industry investment in long-term emissions reductions will therefore trigger a structural change in local market fundamentals.
In this webinar, RepuTex Head of Research, Bret Harper, discusses the impact of tighter emissions reduction settings for the industrial sector under the Safeguard Mechanism, and our expectations for price and market development.
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The RepuTex Team
Australian Electricity Markets