Australia restricts use of international carbon permits

The Australian federal government has ruled out the use of international carbon permits for the country's largest emitters under a reform of the country's safeguard mechanism, which imposes emissions caps on all facilities emitting over 100,000 t/yr of carbon dioxide equivalent (CO2e).

The government released draft legislation for the safeguard mechanism on 10 October for industry comment, ahead of the legislation being introduced to parliament next month and the new rules coming into force on 1 July 2023.

An element of reform under consultation, which will require legislation, not regulation, is access to international credits for the purposes of achieving requirements under the safeguard mechanism, Australian energy and climate change minister Chris Bowen told the AFR Energy and Climate Summit in Sydney.

"My position is that any move to provide access to international credits for this purpose would need to be accompanied by strict requirements to ensure real abatement that can be counted in Australia's 43pc emissions reduction target," Bowen said. "Even strong advocates of the use of international credits recognise that we are several years off from being able to assert that these requirements can be met."

Participants in the safeguard mechanism will be able to purchase domestic carbon credits, known as Australian Carbon Credit Units (ACCUs), Bowen said. Safeguard participants can currently surrender ACCUs, as an alternative to reducing their on-site emissions, which is intended to continue under the reformed scheme.

"There are strong reasons to retain the flexibility for safeguard facilities to use ACCUs to meet their compliance obligations," Bowen added. This is expected to provide incentives for new offsets projects to be registered and, over time, replace the need for support from government contracting."

Facilities covered by the safeguard mechanism contributed 28pc of national emissions in the 2020-2021 fiscal year to 30 June, a government consultation paper said. To contribute this proportional share of the national emissions target of a 43pc fall by 2030 from 2005 levels, aggregate baselines need to fall to 99mn t of CO2e by 2030 from around 137mn t of CO2e in 2020-21. Australia's national emissions were 621.1mn t of CO2e in 2005 and must fall to 354mn t of CO2e by 2030 if Australia is to meet its international target.

By Kevin Morrison