Safeguard Mechanism
Xenophon Amendments

Rationale and how it works

Baselines.

Case Study

Acquiring ACCUs

Some conclusions
Topics

Government has spent almost $2.55B

To purchase emission reductions

Through the Emissions Reduction Fund.

We need a mechanism to safeguard those
reductions

To ensure they aren’t negated

By increases elsewhere in the economy
Rationale
Above
Australian
Carbon
Credit Units
Compare
NGER
Report
Facility
>100,000 TCO2e
Baseline
NGER
Report
Oct 31
Regulator
Data
Below
Environmental
Accountant
Late Penalty
Supporting
Documents
How it works

This is a “Baseline & Surrender” system

[Net Emissions] = [Covered Emissions] – [Units Surrendered]

Excess Emissions Situation = [Net Emissions] > [Baseline]

Duty to ensure that excess emissions situation does not
exist (NGER Act §22XF)
Excess Emissions
Baseline
Units
Excess
Surrendered
Emissions
Situation
Net Emissions
equal Baseline
Excess Emission
Penalty Paid
After Feb 28
Until more units
surrendered
Covered
Emission
Net Emission
Getting a Big Green Tick
Designated Large Facility

Facility emitting more than 100,000 TCO2e

Needs to be registered with Clean Energy Regulator

Existing facilities >100,000 TCO2e automatically registered

Others need to be registered
Responsible Emitter

Group Member with operational control (NGER definition)

Onus is on the Responsible Emitter to register DLF
Some New Terminology

Obvious question “Where do I get units?”

Not clear how units are acquired

Maybe through offset projects

Maybe International Units

Maybe private contract with holder of ACCUs

Current policy is that Units will not be needed
Unit Acquisition

Every designated large facility has a monitoring
period

Default period is financial year

This means emissions are compared with the
baseline every 12 months

Facility can apply for Multi Year period where
emissions are averaged

Cannot be more than 3 years
Monitoring Period
 Current
policy is to set baselines so that no excess
situation occurs under “business as usual” conditions
 Facility
threshold of 100,000 TCO2e (effectively a
default baseline)
 Initial
baseline set by Regulator at:
◦ Highest reported emission 2009-10 to 2013-14
 Future
baselines to be production adjusted
Baselines

What happens if reported baseline is too
low?

Can apply for Calculated Baseline

Four Criteria
◦
◦
◦
◦

(at least one of which must be met):
New Facility
Significant Expansion
Inherent Variability
Initial Calculated Baseline
Criteria spelled out in “Safeguard Rules”
Baselines

Essentially emissions intensity

Expressed as absolute number

Example:
◦ Intensity = 141.6 kgCO2e/Tonne
◦ Production = 1,000,000 Tonne
◦ Baseline = 141,600 TCO2e
Calculated Baselines

National Greenhouse & Energy Reporting
Act 2007
◦ §22XB through to §22XS

National Greenhouse and Energy
Reporting (Safeguard Mechanism) Rule
2015
Legislation

Started 1 July 2016

Regulator issuing determinations

First 22XB report due 31 Oct 2017

Duty to ensure excess emissions situation
does not exist. (§22XF)

Must “make good” the excess by 1 March
2018
Timetable

If excess situation on or after 1 March

Late Penalty of 100 Penalty Units per day

Until ACCUs surrendered

Up to 100 Days (i.e. 10,000 penalty units)

Penalty Unit = $210

Max penalty = $2,100,000 - Each year

Same for 1 TCO2e as 1,000,000 TCO2e
Penalty

Review past NGER Reports

If facility emissions are over 100,000

Work out what the Reported Baseline will
be

Will future emissions be above or below?

Below - then accept Reported Baseline

Above - then apply for Calculated Baseline
What to do?

Forecast production 2016-17 to 2018-19

If 2017-18 will be max production;
◦ Apply by 30 July 2017

If 2018-19 will be max production
◦ Apply by 31 Oct 2017
Calculated Baseline

Application must be accompanied by
◦ An audit report
 Forecasts – Limited assurance
 Criteria Tests – Reasonable assurance
 Historical Data – Reasonable assurance
◦ an outline of measures to reduce GHG
intensity.
◦ Most recent environmental impact assessment
Calculated Baseline
Existing coal mine in SA
Baseline = 651,584 T CO2e
Potential Excess
Emission Situation
2017-18
Forecast emissions:
2016-17 = 599,311 T CO
(below)
Actual
2eemissions
year
2017-18 = 775,674 T COthis
2016-17
2e (above)
2018-19 = 574,336 T CO2e (below)
Variation due to normal operating
practices (stockpiling)
Case Study

Technicalities in Safeguard Rules prevent
a Calc’d Baseline 2016-17 to 2018-19

Technicalities prevent a 3 year multi year
monitoring period for 2016-17 to 2018-19

2 year monitoring period is possible – but
average emissions will be above baseline.

124,090 ACCUs need to be acquired and
surrendered by 1 March 2019.
Consequences

ACCUs are held on the Australian National
Registry of Emission Units (ANREU)

If not on ANREU they do not exist

Government policy is to acquire all ‘spare’
ACCUs through the ERF

At 02 June there were Zero uncontracted
ACCUs on ANREU
ACCUs

Do an ERF Project
◦ Plan, specify, finance and register project
◦ Undertake project
◦ Report and audit project
◦ Claim ACCUs
◦ Process takes around 2 years minimum

or wait and hope that some ACCUs become
available before 1 March 2019

Sitting back and paying the penalty is not an
option
Options

What happens if the facility inadvertently
exceeds the baseline by a small number?

Where do you buy 100 ACCUs?

What happens if the excess is less than
the uncertainty on the emissions?

The legislation is silent on these issues
Other Questions
 The
Safeguard Mechanism looks simple
BUT
 Each
facility must be looked at in detail
 There
are some unexpected outcomes
 Acquiring
ACCUs will not be straightforward
Conclusions
The End
It gets quite complicated