On 1 July 2016 amendments to the National Greenhouse and Energy Reporting Act 2007 (C'th) (NGER Act) will commence, bringing into operation the Safeguard Mechanism.
The Safeguard Mechanism requires facilities whose net emissions exceed the safeguard threshold of 100,000 tonnes of carbon dioxide equivalent to keep their greenhouse gas emissions at or below a baseline set by the Clean Energy Regulator (CER).
Our recent client alert 10 Considerations for Companies Regarding the Safeguard Mechanism provides a detailed overview of the mechanism. Below we highlight some of the important implementation steps and deadlines associated with the Safeguard Mechanism's commencement.
In the past few weeks, the CER has been providing notifications to responsible emitters of their proposed reported-emissions baseline calculations. These notices set out the basis for making the report-emissions baseline, the proposed reported-emissions baseline number and details about how the number was calculated, including any adjustments.
It is important to note that the CER has been adjusting baselines to reflect updated values for the global warming potential of greenhouse gases based on the Intergovernmental Panel on Climate Change's Fourth Assessment Report. This means that there may be variances between historic reported scope 1 emissions and the proposed reported-emission baseline number. Variances may also apply where the CER is satisfied that facility boundaries have changed or that activities have ceased.
Our experience with this process to date suggests that the proposed reported-emissions baselines are in line with the expectations of responsible emitters and are largely uncontroversial. This notwithstanding, responsible emitters are invited to provide comments to the CER before 31 July 2016.
The CER intends to make final report-emission baseline determinations by 1 September 2016 and notify responsible emitters of those determinations in the first week of September.
Some facilities may require a separately calculated baseline, either because they:
- have exceeded or reasonably expect to exceed their baseline emissions number in the first year of the Safeguard Mechanism (initial calculated baseline);
- are new facilities that have exceeded or reasonably expect to exceed 100,000 tonnes carbon dioxide equivalent in the first year of the calculated baseline;
- have significantly expanded; or
- are affected by the inherent variability of a natural resource.
If a facility needs an initial calculated baseline to commence on 1 July 2016 (i.e. for the first year of the Safeguard Mechanism) and wants to rely upon production and emissions intensity data for the 2016/2017 year, then an application for a calculated baseline will need to be made by 30 July 2016. Applications forms have now been published by the CER.
In considering whether to apply for a calculated-emissions baseline, responsible emitters need to assess their forecast productions levels and expected emissions intensity of production for the next few years. In some cases, it may be more appropriate to manage excess emissions scenarios through the use of the multi-year monitoring process and apply for a calculated-emissions baseline at a later date.
Applications for a calculated baseline will need to be accompanied by an independent audit report that provides assurance with respect to the facility's forecast production and emissions baseline and that confirms that any other applicable criteria has been met. If a responsible emitter has not already engaged auditors to review an application where 2016/2017 data will be relied upon, it should do so as a priority.
Other key dates
Some of the other key dates to be aware of in respect of the Safeguard Mechanism are:
|31 October 2016||NGERS data for the 2015/2016 year must be reported. This data may be relevant to determining whether a facility is likely to exceed the safeguard threshold or otherwise be impacted by production and emissions intensity changes that could influence the need for a calculated baseline.|
|30 June 2017||The final date that a company can notify its intention to transfer reporting obligations under s.22X of the NGER Act within its corporate group. This mechanism may be useful to align both NGER reporting and Safeguard Mechanism compliance with the responsible emitter.|
|30 July 2017||The final date to submit a calculated baseline application that relies upon production and emissions intensity data for the 2017/2018 year.|
|30 August 2017||The final date for registration as a responsible emitter under the NGER Act if not already registered.|
|31 October 2017||Deadline for submitting 2016/2017 applications for calculated baselines, multi-year monitoring periods, variations in baselines and exemption declarations. NGERS data for the 2016/2017 year must also be reported by this date.|
|28 February 2018||Deadline for responsible emitters to surrender Australian carbon credit units (ACCUs) to avoid an excess emissions situation.|
Should a responsible emitter be in an excess emissions situation at the end of the first compliance year of the Safeguard Mechanism and elect to surrender ACCUs, there are a number of emissions avoidance and sequestration projects developed under the Emissions Reduction Fund that may be able to supply ACCUs. These include projects that have not entered into carbon abatement contracts with the CER or that have not contracted all their ACCUs to the CER. Affected responsible emitters may want to consider entering into offtake arrangements with project developers to manage this compliance risk.