The government yesterday commenced consultation on exposure draft legislation to enable the creation of a new unit type (Safeguard Mechanism Credits), and to allow for crediting and trading of units under the under new Safeguard Mechanism framework.
While the government’s legislative package is primarily an administrative vehicle, its political significance is much greater given it represents the only opportunity for the Senate to influence the design of Australia’s new emissions compliance market.
Support in the Senate will therefore come at a cost for the government, with the crossbench likely to seek assurances on key elements of scheme design, including the treatment of new facilities and the integrity of crediting, ahead of the release of a more detailed design policy proposal in December.
With this in mind, we expect the design of Safeguard Mechanism Credits (SMCs) to focus on the integrity of units, with each SMC to represent 1 tonne of emissions. This would enable SMCs to be traded, and used to reduce another facility’s net emissions (emissions above the regulated limit), while ensuring that the Safeguard Mechanism compliance market contributes real emissions reductions in net emissions.
Government releases draft Safeguard crediting framework
The government yesterday commenced consultation on exposure draft
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