UPDATE: ERF Safeguards – Toothless Tiger or Hidden Dragon?

Prior to the announcement of Australia’s new post-2020 emissions reduction target – and the release of updated rules for the government’s ERF Safeguard Mechanism – in this Update we analyse the ability of the government’s proposed safeguard policy to curb Australian emissions growth, and explore scenarios for the potential size of the associated compliance market.

After accounting for the coverage threshold at the facility level, we anticipate that the Safeguard Mechanism will cover approximately 80 companies, controlling 261 facilities with emissions over 100,000 t/CO2e.

80 per cent of covered facilities are expected to be from Queensland, Western Australia and New South Wales.

While 261 facilities are expected to be covered by the scheme, just 85 facilities, operated by 30 companies, are expected to face any compliance obligation, largely derived from existing metals, coal mining, oil and gas, and transport facilities. For these firms, Australian Carbon Credit Units (ACCUs) are expected to be the marginal source of emissions reductions into the market.

Notably, out of Australia’s top 20 emitting facilities, none are expected to incur any liability, despite almost all being forecast to grow their emissions over the next ten years. This means the largest generators such as Loy Yang A and B, Hazelwood, Bayswater, and Yallourn are expected to avoid exceeding their sectoral baseline under the scheme, while LNG export facilities Wheatstone, Gorgon, Itchys and Pluto are also expected to avoid facing any liability as a result of re-baselining.

Given the ineffectiveness of the scheme, changes to the policy are a significant risk, with potential for more onerous baselines – or an alternate policy mechanism – to manage Business As Usual (BAU) emissions growth, while contributing towards Australia’s forthcoming post-2020 emissions target.

As outlined within the report, should adjustments be made, we anticipate the safeguard compliance market may grow to cover a significant portion of Australian emissions, suggesting that while the scheme is currently a ‘toothless tiger’, it may readily be characterised a ‘hidden dragon’ given the potential scope for a more meaningful compliance market to emerge, even if principles such as historic highpoint baselines be maintained.

Access Summary Briefing

This report is published under RepuTex’s Carbon Market Intelligence service, providing market professionals with detailed analysis, outlooks and pricing information on the Emissions Reduction Fund, the new Safeguard compliance market, and interaction with Australia’s post-2020 emissions reduction target.

To access a free summary briefing (PDF), please click the below link.

 

 

To set up a briefing with our analysts, or learn more about our subscriptions, please contact our Client Services team.

Restricted Access

This is a subscriber report. Please login to access this content.

Tour our EnergyIQ platform

RepuTex research insights and market data is published via our EnergyIQ platform.

Click below to learn more about our services.

Sign up for regular insights

LATEST UPDATES

  • Carbon Markets

    UPDATE: Generic and HIR prices rebound to mark recent highs, revised Environmental Plantings method released

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Our latest Carbon Weekly report has now been published, reviewing activity in the Australian and […]

    Research Insights | June 17th, 2024
  • Carbon Markets

    UPDATE: Spot prices hold stable on subdued activity, Dutton maintains opposition to 2030 emissions target

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Our latest Carbon Weekly report has now been published, reviewing activity in the Australian and […]

    Research Insights | June 11th, 2024
  • Carbon Markets

    MARKET WRAP: ACCU derivatives contracting surges to record high behind increasing forward activity

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Traded volumes across the Australian spot and forward markets reached a 15-month high of over […]

    Research Insights | June 6th, 2024
  • Carbon Markets

    UPDATE: Sporadic trading leads to 13-month high in daily HIR volumes, lifting prices back toward $34/t

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Our latest Carbon Weekly report has now been published, reviewing activity in the Australian and […]

    Research Insights | June 3rd, 2024
  • Carbon Markets

    BRIEFING: Potential Impact of Landfill Gas Reform Options on ACCU Supply and Market Dynamics

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    On 3 May 2024, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) […]

    Research Insights | May 27th, 2024
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Quick Navigation

  • Carbon Market

    Learn more about our Australian carbon price and market analysis
  • Electricity

    Learn more about our modelling and price outlooks for the NEM
  • EnergyIQ platform

    Access the latest market data with our EnergyIQ platform
  • Latest Insights

    View our latest articles, white papers, reports and publications