Carbon Markets

UPDATE: Safeguard Mechanism Discussion Paper – Understanding the key policy settings

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The Department of Climate Change, Energy, the Environment and Water (DCCEEW) is expected to release a Discussion Paper on proposed amendments to the  Safeguard Mechanism late this week, seeking feedback from stakeholders on improvements to align the scheme with Australian Labor Party (ALP) policy.

Prior the 2022 federal election, the ALP released modelling of its climate policy framework, “The Economic Impact of the ALP’s Powering Australia Plan”, undertaken by RepuTex, including policy measures for Industry & Carbon Farming sectors. The ALP adopted many of the proposals recommended by industry groups to improve the Safeguard Mechanism, with emissions baselines to be reduced predictably and gradually over time to align with net-zero emissions by 2050.

Several policy settings have subsequently been modelled by RepuTex to inform the design of an efficient and effective ‘baseline and credit’ market mechanism, supported by rules for the calculation of emissions baselines, the treatment of new facilities, the treatment of emissions intensive trade exposed (EITE) facilities, and the use of carbon credits and offsets (Safeguard Mechanism Credits and Australian Carbon Credit Units).

In this update, we summarise our modelling assumptions and outputs, helping to inform how the Safeguard Mechanism may be aligned with the ALP’s target to reduce emissions by 43% on 2005 levels by 2030, and net-zero emissions by 2050, and the key policy settings required to develop a credible, scalable emissions market.

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