Australia's CER undecided on SMC issuance details

: Emissions
24/09/12

Australia's Clean Energy Regulator (CER) has not yet decided on the level of details that will be published alongside the upcoming safeguard mechanism credits (SMCs), while estimated issuance numbers remain within a "wide" range, delegates heard at a forum in Sydney.

The regulator will start to issue SMCs early next year to safeguard facilities that report scope 1 greenhouse gas (GHG) emissions below their annual baselines. Each SMC will represent 1t of CO2 equivalent (CO2e) below a facility's baseline, which will have the option to either hold it for future use or sell it in the market.

The CER has an estimated range of SMC issuance numbers for the July 2023-June 2024 compliance year, the first under Australia's reformed safeguard mechanism. But this range is "very wide" as several factors are at play, executive general manager Carl Binning told delegates at a safeguard mechanism forum organised by the regulator in Sydney on 11 September.

SMC issuances will be "relatively modest initially" according to Binning, but volumes are expected to build up over time as companies intensify efforts to reduce emissions while baselines converge to industry averages. He declined to provide any internal estimates on SMC issuances.

Australian companies need to submit their emissions and energy data under the National Greenhouse and Energy Reporting (NGER) scheme by 31 October, including covered emissions data for individual safeguard facilities. The CER is finalising the so-called energy intensity determinations for each facility, which will be used to set their baselines.

Baselines will be based on a production-adjusted framework initially weighted towards site-specific emissions intensity values, transitioning to industry average emissions intensity levels by 2030.

Under the reformed mechanism, facilities that emit more than 100,000t of CO2 equivalent (CO2e) in a fiscal year face declining baselines — at a rate of 4.9 pc/yr until 2030 — and need to surrender Australian Carbon Credit Units (ACCUs) or SMCs if their onsite abatement activities were not enough to keep their emissions below thresholds.

Australia's Department of Climate Change, Energy, the Environment and Water (DCCEEW) late last year estimated SMC issuances would start at around 1.4mn units in the 2024 financial year ending 30 June 2024, rising to 7.4mn in 2030 and 10.3mn in 2035. Facilities that fall below the coverage threshold of 100,000t CO2e can choose to continue receiving SMCs for up to 10 years — with their baselines continuing to decline if they opt in — and the DCCEEW expects such issuances will be the main source of SMCs by 2035 (see table).

Uncertain data level

All safeguard facilities will need to give a breakdown of the surrendered ACCUs by the method under which they were generated for the first time from the 2024 financial year, as well as a breakdown of their emissions by CO2, methane and nitrous oxide. The CER will publish 2023-24 safeguard data by 15 April 2025.

But while the regulator will also need to publish the number of SMCs issued to a facility, there is still no definition on whether it will disclose where SMCs surrendered by facilities came from, Binning told delegates.

"One of the issues we're really wrestling with in the design of our new registry is how much information we tag," Binning said. "I think the marketplace is interested in more granularity… so I'd actually invite feedback on this topic," he added.

The CER expects that the new registry replacing the Australian National Registry of Emissions Units (ANREU) will be operational by the end of calendar year 2024. It plans to issue SMCs into the new registry and transfer all ACCUs from the ANREU "gradually" over the following months before the start of the next safeguard compliance period.

By Juan Weik

Projected SMC issuances			(mn)
Financial year	From safeguard facilities	From below-threshold facilities	Total

2024	1.36	0.05	1.41
2025	1.62	0.13	1.75
2026	2.27	0.06	2.33
2027	3.20	0.26	3.46
2028	3.52	0.22	3.74
2029	4.34	0.54	4.88
2030	5.67	1.77	7.44
2031	5.31	1.92	7.23
2032	5.29	3.75	9.04
2033	6.77	3.47	10.24
2034	5.82	4.72	10.54
2035	4.80	5.51	10.31
Source: DCCEEW

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