Nearly all safeguard facilities issued statements: CER

Australia's Clean Energy Regulator (CER) has already issued the annual position statements to "nearly all facilities" covered by the compliance carbon market's safeguard mechanism under the July 2023-June 2024 reporting year, it told Argus today.

"Any remaining position statements will be issued in the near future," the regulator said in an emailed response on 19 November.

The position statements set out each facility's annual baseline emissions number, as well as their covered emissions and net emissions number for the year. A total of 219 facilities were covered in the 2022-23 year, with a record high of 1.22mn Australian Carbon Credit Units (ACCUs) surrendered.

The 2023-24 compliance year will be the first to see the issue of safeguard mechanism credits (SMCs) to facilities that report Scope 1 greenhouse gas (GHG) emissions below their annual baselines, effectively introducing emissions allowances into the Australian carbon market.

Australian chemicals and fertilizer producer Incitec Pivot (IPL) said on 18 November that it will earn 63,529 SMCs with its Moranbah ammonia facility in Queensland, which will be partially used to cover excess emissions at Phosphate Hill, its other facility under the safeguard mechanism. SMCs will start to be issued by the CER in early 2025, with facilities recommended to apply for the units by 30 January, according to the regulator.

Facilities will then have until 31 March to surrender ACCUs or SMCs to avoid any excess emissions by 1 April 2025. The regulator must publish the broader safeguard data for the 2023-24 period by 15 April 2025.

No estimates of SMC issuance and ACCU/SMC surrenders

Despite having issued position statements to almost all facilities, the CER declined to give an estimated number of SMC issues or ACCU and SMC surrenders for the period.

"Estimates of SMC issuance and ACCU and SMC surrenders are still subject to a range of factors, including applications for Multi-Year Monitoring Periods, applications for Trade-exposed Baseline Adjusted determinations, and the CER's data quality assurance processes," it told Argus.

SMC issuances will be "relatively modest initially", the CER's executive general manager Carl Binning said in a forum in Sydney in September. Volumes are expected to build up over time as companies intensify efforts to reduce emissions while baselines converge to industry averages, he noted.

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 July 2023-June 2024 year, rising to 7.4mn in 2030 and 10.3mn in 2035. Facilities that fall below the safeguard coverage threshold of 100,000t of 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).

It also projected safeguard demand for ACCUs and SMCs to rise from 4.19mn in the July 2023-June 2024 year to 28.26mn in July 2034-June 2035, while total ACCU demand — from the safeguard mechanism, deliveries to the federal government under carbon abatement contracts, the Climate Active certification programme, and other sources of voluntary, state/territory and compliance demand — would increase from 8.68mn to 24.15mn (see table).

By Juan Weik