The Emissions Reduction Fund: The Safeguard Mechanism
The safeguard mechanism will ensure that emissions reductions paid for through the Emissions Reduction Fund are not offset by increases in emissions elsewhere in the economy.
How will the safeguard mechanism work?
The safeguard mechanism will encourage businesses not to increase emissions above historical levels.
The safeguard mechanism will commence on 1 July 2015, to provide time for consultation with business on important technical details.
What has been decided and what will be subject to consultation?
The safeguard mechanism will apply to facilities with direct emissions over 100 000 tonnes a year.
Emissions baselines will be set using data already reported under the National Greenhouse and Energy Reporting Scheme (NGERS).
Before the safeguard mechanism starts on 1 July 2015, the Government will undertake detailed consultation with business on flexible compliance arrangements and the treatment of new entrants.
How will historical emissions levels be determined?
Emissions baselines will be set using historical data reported under NGERS, as shown in the figure below.
Safeguard baselines will reflect the highest level of reported emissions for a facility over the historical period 2009–10 to 2013–14. This will avoid new mandatory reporting requirements and accommodate natural variability in emissions and changing production levels.
Who will be covered by the safeguard mechanism?
The safeguard will apply to around 130 large businesses that already report under NGERS and have direct emissions of more than 100,000 tonnes a year. This results in coverage of around 52 per cent of Australia's emissions.
The Government has stated that its objective is not to raise revenue from the safeguard mechanism. The Government has not budgeted for any revenue from the safeguard mechanism.
Which emissions will be covered by the safeguard mechanism?
The safeguard mechanism will apply to direct emissions (scope 1), including direct emissions from energy production. Electricity generators will be responsible for the direct emissions from electricity production, not the electricity users.
What is the consultation process?
Consultation will continue during 2014 and 2015 on compliance arrangements for the safeguard mechanism and the treatment of new investments. The Government will release draft legislation to implement the safeguard mechanism in early 2015.
The consultation process for the safeguard mechanism is set out in the figure below.
Details about the Emissions Reduction Fund are available at:www.environment.gov.au/emissions-reduction-fund.
Note: While the Commonwealth has made reasonable efforts to ensure the accuracy, correctness or completeness of the material, the Commonwealth does not guarantee, and accepts no liability whatsoever arising from or connected to, the accuracy, reliability, currency or completeness of this material. Any references to the potential costs or benefits of undertaking an activity in accordance with an emissions reduction method are estimates only. This material is not a substitute for independent professional advice and entities should obtain professional advice suitable to their particular circumstances.
 Scope 1 emissions are defined in the National Greenhouse and Energy Reporting Regulations 2008 to mean the release of greenhouse gas into the atmosphere as a direct result of an activity or series of activities that constitute the facility.