What is the safeguard mechanism?

01.06.22 By

The safeguard mechanism was introduced by former Environment Minister Greg Hunt for the Liberal-National Party in 2014 under then Prime Minister Tony Abbott, and stayed a pillar of the former Morrison government’s Direct Action policy

The safeguard mechanism was and is intended to manage Australia’s biggest polluters, which in total emit 140 million tonnes of greenhouse gas emissions – or just shy of 30% of Australia’s total

How does it work? 

The safeguard mechanism sets a baseline limit on how much carbon pollution can be emitted by a facility in a single year. There are, however, some exceptions to this cap. It does not currently apply to the electricity sector despite the fact that nine out of ten of Australia’s biggest emitters are coal-fired power stations. Once a source surpasses its limit – which happens frequently – it is the owners responsibility to bring their net emissions down. Enter the Emissions Reduction Fund, another of the former Coalition government’s policies. This scheme is designed to create credits for actions to reduce or remove greenhouse gas emissions, with each credit being equal to one tonne of carbon dioxide emissions. Breaching facilities are allowed to purchase or fund their own offset programs to bring their emissions back to the baseline, but rarely do. If facilities fail to pay back their excess emissions, the Clean Energy Regulator can slap infringement notices, legal action, forced action and fines up to $18,000 per day on them. 

While prevention is always better than the cure, this framework to offset runaway emissions from Australia’s biggest polluters sounds good right? Not quite…

Scott Morrison looking unimpressed

Is it working? 

The mechanism is so fraught with inefficiency it’s flat-out broken. No company has ever been penalised for exceeding its baseline despite 1 in 5 fossil fuel companies significantly exceeding their approved emissions. There’s also the fact that over the life of the safeguard mechanism, emissions from covered facilities have increased by 4%. That’s likely to be an underestimate as some large facilities in the most recent year of the scheme applied to have their emissions data withheld from publication. And if that wasn’t enough, individual baselines are also set in consultation with the polluting parties themselves, which is equivalent to allowing drivers to select their own speed limit

“Huge fossil fuel companies are consistently speeding and the limits that they are picking for themselves are not adequate” – Climate Council CEO Amanda McKenzie. 

An investigation by the Australian Conservation Foundation found that there were many examples of facilities with baselines double their estimated emissions and in one instance, a facility had an agreed baseline twenty times higher than predicted annual emissions. These facilities could have dramatically increased their emissions without penalty as a consequence of excessive baselines.

And let’s not forget when former Minister for Energy and Emissions Reduction Angus Taylor admitted: “The safeguard mechanism was never meant to be a tool to force businesses to reduce their emissions” 

Cartoon Koala holds and Fail score

So, can it be fixed – and actually do its job? 

In its current form, the safeguard mechanism is broken and nowhere near effective enough to deal with the escalating climate risks Australians are facing right now, as a result of greenhouse gas emissions. 

Enter our new federal government. You might have seen the Morrison Government try to pin its own safeguard mechanism and Emissions Reduction Fund policies on Labor, calling it a “sneaky carbon tax” in the weeks leading up to the May 2022 election. 

Basically, the Albanese government has said it will strengthen and adapt the safeguard mechanism to operate as it was intended. It Intends to impose new facility-by-facility emissions caps with the overall aim to get to net zero emissions by 2050.

However, the science has made it clear that net zero by 2050 isn’t good enough. A credible, robust climate policy that moves us away from polluting coal, oil, gas and gets us to net zero as quickly as possible is our only option. The difference between this kind of strong action, and the continued climate timewasting we’ve been stuck with for the past 9 years, will be measured in Australian lives and livelihoods lost.

An aerial image of a town with houses surrounded by floods
(Photo by Bradley Kanaris/Getty Images)

Although the Albanese government’s plan to strengthen the safeguard mechanism is a step forward, it needs to ensure we see deep emissions cuts this decade, and pair that with a plan to phase out coal, oil and gas as soon as possible. 

Where does that leave the safeguard mechanism? 

The potential for the Safeguard Mechanism to be effective is not impossible, but it needs actual enforcement of its penalties, independence from polluting industries, transparency, and an ability to ratchet up caps over time so it remains relevant as we progress through this critical make or break climate decade. 

The election made one thing clear: the new Albanese government has a mandate for strong climate action this decade. We need emissions to plummet as soon as possible, and if they do it through the safeguard mechanism, so be it. But we cannot afford to waste any more time and let our biggest polluters continue to get off scot-free, locking in more devastating floods, deadly bushfires, as well as crippling droughts and heatwaves.