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

You must be registered to view this report.

Explore our Insights & Data

Explore our research insights, forecasts & data centre for the Emissions Reduction Fund and Australian Emissions Market.

Or…Get Pricing & Samples here.

LATEST UPDATES

  • Electrifying Victoria: The impact of election policy on wholesale prices

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

    In the absence of a robust federal energy and climate policy framework, Australian states and […]

    Carbon Market Update, Research Insights | November 16th, 2018
  • UPDATE: The impact of a 26-45% NEG target on electricity prices to 2030

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

    Modelling indicates that increased ambition under the National Energy Guarantee (NEG) will place downward pressure […]

  • UPDATE: Carbon price may double to $35/t in 2030 for industry sector

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

    With the electricity sector locked into the National Energy Guarantee (NEG), other sectors of the […]

  • UPDATE: Modelling the interaction between the NEG and State RETs

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

    While initial modelling of the NEG has been undertaken for the Energy Security Board, to […]

  • INSIGHTS: So what is the current Australian carbon price?

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

    As the design of the National Energy Guarantee (NEG) passes another milestone, and the seventh […]

    Analyst Update, Research Insights | March 18th, 2018
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Quick Navigation

  • Carbon markets

    Learn more about our carbon market analytics and pricing service
  • Electricity markets

    Learn more about our electricity price outlooks and analytics
  • Research insights

    View our latest subscriber reports and publications
  • Our Services

    View our service levels, access pricing and sample reports