The Australian Conservation Foundation’s investigation unit has uncovered serious flaws in the system for assessing the environmental impact of mines and gas fields across the country. 

Findings released in a joint initiative between ACF investigators and students from the Australian National University found that one in three fossil fuel facilities with publicly available Environmental Impact Statement (EIS) data exceed their annual emissions estimates.

Of the 48 facilities with public EIS data, more than 1 in 5 significantly exceeded their emissions estimates.

You’re probably wondering: why isn’t there a system in place to prevent this from happening?

Well, there is.

And on paper, the safeguard mechanism is core to the process of undoing the damage done by excess pollution. 

But like a champion forward who hasn’t scored a goal all season, the safeguard mechanism is a good instrument that is functioning poorly. 

What is the safeguard mechanism?

The safeguard mechanism is part of a federal policy framework intended to manage Australia’s carbon emissions. 

It sits alongside other schemes that encourage entities to reduce their carbon emissions by issuing carbon credits.

These schemes allow polluters to buy these credits or invest in carbon-reduction projects to bring their net pollution down. The federal government also buys these credits through auctions as part of its Emissions Reduction Fund. 

As part of this, the safeguard mechanism is meant to ensure excessive pollution in some parts of the economy doesn’t undo the good work of carbon reduction efforts in others.

It should be an effective deterrent to prevent companies from exceeding pollution limits, but as we’ll see, it’s not working as it should…

So, how does the safeguard mechanism work?

Any facility that releases the equivalent of 100,000 tonnes of carbon dioxide into the atmosphere in a year is subject to the safeguard mechanism (with some exceptions including power stations).

The safeguard mechanism provides a baseline limit on how much carbon pollution can be emitted by a facility in a year.

But it’s not a pollution cap; a facility can and (given the findings of ACF’s investigation) often does exceed the threshold.

In reality, the baseline is more of a ‘line in the sand’ - a high-set benchmark that should not be exceeded.

The mechanism activates processes by which facility owners must rectify the problem if the baseline is exceeded.

What happens when someone exceeds the baseline?

Once a facility’s carbon pollution exceeds the limit set by the safeguard baseline, its owners must get to work remedying the situation. 

Yes, the pollution horse has bolted - there’s more carbon in the atmosphere than there should be.

But carbon can be recovered through a range of environmental activities, some of which are projects implemented as part of the federal Emissions Reduction Fund. 

An excessive polluter is able to ‘convert’ their gross emissions into net emissions if they support carbon-recovery projects by purchasing carbon credits.

Each credit represents carbon mitigation equivalent to one tonne of carbon dioxide.

So, a polluter that exceeds its facility’s emissions baseline by the equivalent of 10,000 tonnes of carbon dioxide would need to purchase 10,000 carbon credits to offset their excess.

So that means a polluter can cancel out their excessive emissions? 

In principle, yes. But in terms of climate pollution, prevention is better than cure.

Ultimately, the work, money and time required to remove carbon from the atmosphere can be avoided by reducing pollution at the source: by ensuring strong baselines that are not exceeded by facilities subject to the safeguard mechanism. 

After all, the word ‘safeguard’ suggests some degree of protection.

But the obligation to purchase carbon credits to ‘pay back’ excessive climate pollution does at least provide some remedy. 

And what if they don’t ‘pay back’ their excess pollution?

Then there are various penalties that the Clean Energy Regulator can impose upon companies that exceed their baseline. These include:

  • Infringement notices
  • Enforceable undertakings - where the regulator imposes compulsory actions for owners to fix the problem and make sure it doesn’t happen again.
  • Legal action to make polluters rectify their over-pollution and
  • Civil penalties up to a maximum of $18,000 per day.

On the face of things, it’s good to know that there is a framework in place to make polluters repair some of the damage they cause to the atmosphere. 

How are safeguard baselines set?

It is important that baselines are set by the regulator. After all, that’s what regulators are for. 

And safeguard mechanism baselines are set by the Clean Energy Regulator.

But it isn’t an entirely independent process; often, these limits are set in consultation with facility owners. 

Does that mean a facility could skew what’s reasonable during this benchmark-setting process? 

Potentially, yes.

ACF’s investigation shows many examples of facilities with baselines double their estimated emissions.

In one instance, a facility had a baseline set twenty times higher than its predicted annual emissions. 

“So it’s unlikely a facility would breach its baseline limits, even if it emits much more than it was supposed to,” says ACF investigator Kim Garratt.

“And even when companies do breach their baselines, the Clean Energy Regulator usually adjusts that baseline temporarily.

“The safeguard’s flaws are a result of a status quo where industry and the Clean Energy Regulator nominate baselines that are derived from very loose interpretations of what is reasonable and what is business-as-usual.”

There are obvious issues with polluters ‘negotiating up’ their baseline limits based on anticipated pollution. 

Perhaps most obvious is that increased pollution limits counteract the purpose of tools like the Emissions Reduction Fund and the safeguard mechanism.

But the safeguard mechanism has been ‘triggered’ on many occasions, so why aren’t companies changing their ways?

This system only works if baselines are appropriate and penalties are enforced.

This investigation found “no company has ever been penalised by the Clean Energy Regulator for exceeding the baseline.”

That’s a problem. 

Essentially, Australia already has an instrument to make polluters remedy the damage they do to the climate.

But a failure to enforce the policy means there’s been scarce action taken against companies that over-pollute.

As a result, these companies have little incentive to change their practices.

Far too much climate pollution is escaping into our atmosphere, with no enforcement to fix the problem.

How does ACF propose improving the safeguard mechanism?

Currently the safeguard is largely a ‘do-nothing’ mechanism. 

But on paper, it could achieve emissions reductions in important parts of Australia’s economy. 

We now know that the setting of baselines is often a negotiated process between the regulator and facility owners.

We also know that no company has ever been penalised by the Clean Energy Regulator for exceeding their baselines, despite the regulator having the provision to do so.

Facility owners could be more effective and responsible players in an economy-wide transition to a clean energy economy. 

This can be achieved by regulators setting prescriptive and ambitious baselines that decrease in a predictable fashion over time, in line with Australia’s emissions reduction goals.

Baselines could be established in line with environmental impact statements for new facilities added to the safeguard mechanism.

The key is to make sure that pollution thresholds are lowered as time goes on, ensuring that polluters continually reduce their climate impact.

In doing so, this could: 

  • Stimulate the market for carbon reduction projects under the Emissions Reduction Fund.
  • Force companies to seriously consider the costs and benefits of their project in terms of carbon emissions.
  • Incentivise industries to innovate and invest in mitigation technology.

The Australian Conservation Foundation believes the safeguard mechanism could be a great solution, but in its current state, is highly flawed and needs an overhaul.

ACF welcomes the release of the Albanese Government’s consultation paper on and looks forward to engaging in the process to turn the safeguard mechanism from a broken tool into an effective scheme to cut emissions from the nation’s major polluters.

Further to this, ACF is also calling on fossil fuel companies to take responsibility for the inaccuracies and to address the sometimes gross under-estimation of emissions in projects’ environmental impact statements, in order to better inform the public about the true impact they are having on our climate.  

 

Header image: Taras Vyshnya/Shutterstock.com

Australian Conservation Foundation