New and expanded fossil fuels risk blowing the Safeguard Mechanism carbon budget

06.03.23 By
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Climate Council and the Australian Conservation Foundation engaged RepuTex Energy to model the impact of changes in the production of coal and gas – including the addition of new projects – on the Safeguard Mechanism.

This modelling explores how increases in fossil fuel production and new projects may affect the overall emissions reduction delivered by the Safeguard Mechanism, and the feasibility of meeting – or improving on – Australia’s 2030 emissions reduction target. 

Emissions from coal, oil and gas currently make up approximately half of all emissions regulated under the Safeguard Mechanism. Threatening to add to this already large share is a pipeline of potential new coal and gas projects and proposed expansions. These will bring significantly more emissions into the Safeguard Mechanism if they proceed. The amount of fossil fuel production that occurs in coming years will therefore have a significant impact on the success or otherwise of the reformed scheme

In outlining proposed new settings for the Safeguard Mechanism, the Australian Government has assumed that some new coal and gas projects will enter the scheme in the years to 2030. This would be contrary to expert international advice and scientific evidence about what is needed now to tackle harmful global warming and hold global temperature rise as close as possible to 1.5 degrees. The best way for Australia to ensure the Safeguard Mechanism stays within its carbon budget and contributes to our national emissions reduction effort would be to cease approving new or expanded coal, oil and gas projects.

Climate Council and the Australian Conservation Foundation do not support new or expanded fossil fuel projects proceeding. Rather, we recognise that Australia and the world at large must rapidly accelerate the transition from fossil fuels to clean energy. This modelling takes the government’s proposed policy settings as a basis, but should not be interpreted as an endorsement of those settings. For more information on our detailed recommendations to deliver a stronger Safeguard Mechanism, check out Climate Council’s submission to the Australian Government.

By taking the government’s proposed policy setting as its basis, this modelling illustrates the very real risks and challenges associated with progressing further fossil fuel expansions and new projects – both to the Safeguard Mechanism’s emissions budget and the achievement of Australia’s legislated emissions reduction target. 

Report key findings:

The Safeguard Mechanism only regulates Scope 1 direct emissions produced by regulated facilities through their onsite activities. For that reason, this analysis also only considers these direct emissions.

Emissions from the burning of coal, oil and gas in domestic and overseas end markets (Scope 3 emissions) are many times larger than Scope 1 emissions and are not regulated by any Australian law or policy. Scope 3 emissions from Australia’s fossil fuel exports are more than eight times higher than direct onsite emissions regulated by the Safeguard Mechanism. Emissions from fossil fuels cause dangerous climate change no matter where they are produced around the world. This means the total emissions impact of any new or expanded fossil fuel projects under the Safeguard Mechanism would be significantly greater than modelled in this report.