With the dust having now settled on last year’s historic COP21 negotiations in Paris, which resulted in a new global climate change agreement (Paris Agreement), the focus will be on domestic implementation of each Parties’ Nationally Determined Contributions (NDCs).

Pursuant to the Paris Agreement, countries have agreed to keep global temperature increases to “well below 2°C”. This overarching goal will guide countries’ mitigation and adaptation efforts for the period between 2020 – 2030.

Australia’s commitment to reduce its emissions by 26-28% by 2030, based on 2005 levels, will be implemented, in part, through the Government’s Direct Action Plan. This consists of the $2.55 billion Emissions Reduction Fund (ERF) for the competitive purchase of carbon abatement (with the third auction to be held on 27 and 28 April 2016) and the ERF Safeguard Mechanism (Safeguard Mechanism) to “ensure that emissions reductions purchased through the ERF are not displaced by a significant rise in emissions above business-as-usual levels elsewhere in the economy.”

On 1 July 2016, amendments to the National Greenhouse and Energy Reporting Act 2007 (NGER Act) will come into force, implementing the Safeguard Mechanism.

From that date, facilities that exceed the 100,000 t CO2-e threshold will be issued with a baseline for their covered emissions and these facilities must then take steps to keep their emissions below the baseline – or face penalties. The Safeguard Mechanism is set to cover half of Australia’s total emissions across various sectors including coal, aluminum, nickel, copper, electricity, oil and gas, transport and waste, with 80% of covered facilities expected to be located in Queensland, Western Australia and New South Wales.

RepuTex estimates that while 261 facilities will trigger the 100,000 t CO2-e threshold, only 85 facilities, run by 30 companies, will exceed their historical baselines. It is unlikely any of Australia’s current top 20 emitting facilities (which includes a number of electricity generators) will face penalties under the Safeguard Mechanism, even with forecasted increases to their CO2 emissions over the next decade.

The detailed rules for the Safeguard Mechanism are set out in the Safeguard Rule, which was made in October 2015 and provides guidance on how baselines will be set for covered facilities.

For further information, including the top 10 considerations for companies under the Safeguard Mechanism, please see our client alert here.

Author

Martijn is head of Baker & McKenzie’s Global Environmental Markets and Climate Change practice. Martijn's practice focuses on climate change law, international carbon and broader environmental markets, climate and conservation finance and conservation projects. He is also Chair of the Baker & McKenzie Law for Development Initiative. Martijn is regarded as a legal pioneer in the development of climate change law. He advises on legal matters relating to climate change, environmental markets, sustainable development and conservation finance. He is ranked as a Star Individual (the highest ranking available) by Chambers Global, is listed among the best lawyers in Environment and Climate Change by Best Lawyers Australia 2009-2016 and in the International Who's Who of Business Lawyers 2009-2016. He is also listed for Australia, Agriculture & Rural Affairs, Best Lawyers International 2013. In 2013, he was awarded the Lawyers Weekly "Law Firm Partner of the Year". Martijn's other roles include Professor of Climate Change Law at the Australian National University and an Affiliate, Cambridge Centre for Climate Change Mitigation Research Department of Land Economy University of Cambridge. He is Chair of the Australian Renewable Energy Agency (ARENA), a Director of the Clean Energy Finance Corporation (CEFC), WWF (Australia) and the Climate Council. He holds advisory roles as Chair of the NSW Climate Change Council, a Governing Board Member of the Renewable Energy and Energy Efficiency Partnership (REEEP) and a member of the Wentworth Group of Concerned Scientists. He is also the Deputy Chair of the Private Sector Roundtable of the Asia Pacific Rainforest Recovery Plan. Martijn recently Chaired the Independent Review Committee of the Victorian Climate Change Act. He was formerly Chairman of Low Carbon Australia and for many years chaired TRAFFIC (Oceania). Martijn has written widely especially on climate change law, environmental law and Antarctica. In 2012, Martijn was awarded a Member of the Order of Australia in recognition for "service to environmental law, particularly in the area of climate change through contributions to the development of law, global regulation, public policy and the promotion of public debate, and to the community".