The Carbon Market Institute (CMI) welcomes the Albanese Government’s draft Safeguard Mechanism Credits (SMC) Amendment Bill and next phase of consultation, supporting the introduction of SMCs to better incentivise and scale-up investment in industrial decarbonisation and emissions reduction.
CMI noted that the trading of new credits can create an efficient pathway for the industrial sector to decarbonise by broadening the range and volume of market supply, while also establishing the administrative requirements for SMCs in a manner consistent with Australian Carbon Credit Units (ACCUs).
However, it also re-iterated that separate decisions on the baseline decline rate, industry assistance and the future ACCU purchasing policy under the Powering the Region Fund (PRF) are still to be decided by government and will determine whether the mechanism is capable of meeting emission reduction targets.
Finally, it highlighted that any market interventions should be informed by market experience, given that the enhanced mechanism is intended to be implemented through a phased approach.
“The creation of SMCs will provide an important market incentive to accelerate at-source emissions reductions,” said John Connor, CMI CEO.
“This next phase of consultation will lay the groundwork on the design features of the policy, including clarifying not only the specific approach to implementing baselines, but also the rate at which these baselines must decline over time.”
“As a market-based policy, it is important that the market itself drives the desired abatement outcomes and price. The first phase of the enhanced mechanism will provide an opportunity to understand how the market is operating and whether any market intervention or guidance is needed.”
“Calls for measures like price caps on ACCUs are potentially heavy-handed and could devastate investment in ACCU-generating emission reduction projects. The government should only consider market guidance measures based on market experience to avoid distorting the market and undermining the policy’s effectiveness.”
“This is complex policy and the interdependencies with other policies such as the PRF are significant and have been bedevilled by arbitrary decisions in the past. These poorly communicated and arbitrary market interventions can have serious impacts, and we should lean from recent experience on this.”
“Making rash decisions on these elements not only has the potential to diminish confidence in emission reduction investment decisions, but also constrain future supply and significantly impact the potential future export of credits in the long term.”
“We look forward to opportunity to provide feedback on this latest consultation phase for SMCs, as well as on further elements of design to be released later in the year,” he said.
For more details on CMI’s recommendations for Safeguard Mechanism reform (including SMCs), view our full submission here. CMI also suggested a raft of reforms to the ACCU framework in its submission to the Chubb Review here.
About the Carbon Market Institute
The Carbon Market Institute (CMI) is an independent member-based organisation that is an industry association championing best practice for business leading the transition to net zero emissions. Its 140+ members include primary producers, carbon project developers, Indigenous corporations, legal, technology and advisory services, insurers, banks, investors, corporate entities and emission intensive industries developing decarbonisation and offset strategies. The positions put forward constitute CMI’s independent view and do not purport to represent any CMI individual, member company, or industry sector.
For further information, contact Thomas Hann on 0408880536 or thomas.hann@carbonmarketinstitute.org
