Why tear down safeguard reforms when you can build them up?

Let’s be clear. The Safeguard Mechanism changes alone do not constitute an industrial decarbonisation plan. But at the same time, you cannot have a strong, workable industrial decarbonisation plan without them.

By setting the long-term abatement task for the industrial sector and cumulative baseline decline rates for individual facilities, the overhauled Safeguard will support long-term investment certainty to fund emissions-cutting technologies that will be costly and complex to deliver.

In our submission released yesterday, we have advocated for elements of the Safeguard Mechanism to be stronger, however it is entirely possible that industrial emissions will rise if the bill falls over. This will push the task and cost of abatement onto other parts of the economy that will need to grapple with their own complex transition.

For many industrial facilities, that is because there is still a material lead time for at-point decarbonisation solutions. In part, this is a consequence of more than 10 years of investment uncertainty, as well as the absence of abatement technologies for hard-to-abate industrial activities.

While much of the public discussion has centred on this policy and its ability to speed up Australia’s transition – and rightly so – it’s also important not to lose sight of other measures that can complement it.

Three complimentary steps to accelerate industrial decarbonisation

Thinking about industrial decarbonisation more broadly, there are three actions that the government should consider that would complement the proposed Safeguard Mechanism reform and speed progress towards net-zero.

One step the government should take is to commit more to guiding businesses and communities towards a net zero and ultimately negative emissions economy.

As this week’s Australian Industry Energy Transitions Initiative report highlighted, structural transition requires strong, effective and coordinated action from government, industry and finance.

A ban on new coal and gas could be extraordinarily disruptive to Australian communities and our international supply chains and would need to be carefully managed.

To address this, the government could establish a formal transition authority with a serious remit to develop effective incentives, regulations, and workforce support programs to ensure a just transition.

Working across governments, the authority could guide Australia’s structural adjustment away from high emission industries and towards the industries of the future that will best support a net zero emissions economy.

In establishing this authority, advice could be sought from the Climate Change Authority, or planning could be made the remit of the Net-Zero Economy Taskforce that is already established within the Department of the Prime Minister and Cabinet.

The authority could also be empowered to provide guidance with respect to the government’s $1.9 billion Powering the Regions Fund to ensure its funding streams best support the government’s economy-wide decarbonisation plan, leveraging private capital to do so.

A second step should be to require industrial businesses – whether listed or unlisted – to prepare public transition plans – documents that specify targets and describe actions to achieve them.

This would provide transparency to investors on companies’ long-term value in a net zero emissions economy and would also enable policymakers to develop more targeted transition policies and initiatives.

The UK government, for example, is making the preparation of transition plans mandatory for listed companies and some other businesses.

Treasury’s current consultation on climate-related financial disclosures provides an opportunity to establish a legislative framework that supports high-quality transition plans.

This could further build on international best practice, including the work of the International Sustainability Standards Boards, the Taskforce on Climate-related Financial Disclosure and the UK Transition Plan Taskforce.

A third step should focus on establishing a more rigorous assessment framework for emissions-intensive developments in Australia by introducing a requirement for new developments to demonstrate their impact on the climate.

This could be implemented by establishing a form of climate trigger into the EPBC Act, but not a trigger that results in an automatic ban on large-emitting projects.

In its response to the Samuel review of the EPBC Act, the government has already said that it will require proponents of EPBC projects to publish their operational emissions, and will require them to disclose how their project aligns with Australia’s emissions commitments.

A trigger requiring EPBC assessment of every large-emitting project – to ensure they are all subject to these requirements – seems a logical step. Threshold development standards could be established for new projects or alternatively criteria could be established to assess the cumulative impact of individual projects on Australia’s carbon budget.

Given that Australia is one of the world’s largest exporters of downstream emissions and the Safeguard Mechanism only addresses Scope 1 emissions, the government should also contemplate ways in which a climate trigger framework could effectively account for Scope 3 emissions arising from customer use of their commodities. After all, offshore oil and gas projects already report Scope 3 emissions to meet the approval requirements of National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), the agency which regulates them.

At this critical juncture in the parliamentary debate on whether the Safeguard Mechanism (Crediting) Amendment Bill should pass, negotiations should acknowledge the importance of the Safeguard changes whilst committing to complementary actions that build greater confidence in Australia’s race towards net zero.

Kurt Winter is the Carbon Market Institute’s director of corporate transition. CMI’s members include primary producers, carbon project developers, Indigenous organisations, technology and advisory services, insurers, banks, investors, and emission intensive industries.