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
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