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.

Not a subscriber?

To learn more about our research services for the Australian energy and emissions markets, click the button below, or email our subscriptions team.

Sign up for regular insights

LATEST UPDATES

  • ALERT: Australian carbon price ends 2019 higher as climate policy pressure builds

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

    The Australian carbon spot price ended 2019 higher, trading between $17.20-30 in January, just under […]

    Analyst Alerts, Research Insights | January 14th, 2020
  • The impact of the early closure of Yallourn power station on the Victorian electricity system

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

    RepuTex has been engaged by Environment Victoria to analyse the potential impact of the early […]

    Research Insights | December 16th, 2019
  • ALERT: Australian carbon offset price hits 4-year high, more price increases ahead?

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

    The price of Australian Carbon Credit Units (ACCUs) has continued its recent climb, reaching a […]

    Analyst Alerts, Research Insights | November 18th, 2019
  • INSIGHTS: How do weather patterns impact wind REZ correlations?

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

    As the Australian renewable energy market reaches a turning point in its development cycle, the […]

    Research Insights | November 6th, 2019
  • OUTLOOK: Carbon windfall gains …or losses? Long-term carbon price outlook

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

    The price of Australian Carbon Credit Units (ACCUs) has rebounded to a 5-month high of […]

    Research Insights | October 31st, 2019
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Quick Navigation

  • Electricity

    Learn more about our modelling and price outlooks for the NEM
  • Renewable Energy

    Learn more about our services for wind and solar developers
  • Carbon Market

    Learn more about our Australian carbon price and market analysis
  • Latest Insights

    View our latest articles, white papers, reports and publications