Safeguard Mechanism (Crediting) Amendment Bill 2022

"The Albanese government was elected because we listened and created a policy that reduces our country's emissions without needing to cripple industry. By lowering the cost of reducing emissions, crediting and trading will help the safeguard mechanism meet Australia's climate targets in a cost-effective way and enable increased ambition over time."

Address to the House of Representatives, Bills, Safeguard Mechanism (Crediting) Amendment Bill 2022 - Second Reading

Wednesday 22 March 2023

I also rise today to speak in favour of the Safeguard Mechanism (Crediting) Amendment Bill 2022. I would like to take the opportunity to commend the Minister for Climate Change and Energy and the Prime Minister for their hard work on this legislation. I particularly commend the extraordinary work of their departments.

The latest Intergovernmental Panel on Climate Change report, released this week, confirms what we already know: there is a rapidly closing window for transformative climate action both here and around the world. This latest IPCC report shows global warming has increased at an unprecedented rate over the past decade, resulting in more frequent and severe droughts and cyclones. By the 2030s, every region in the world is expected to face increasing risks from climate change. We know that Australians will experience increasing and increasingly devastating climate events, just as we've seen in recent years. After a decade of denial and delay, Australia finally has a government that is committed to taking serious action on climate change. These reforms to the safeguard mechanism are the first opportunity in over a decade for action to bring down emissions from Australia's largest emitters. This is an opportunity we can't afford to miss.

I recall spending hours talking to voters on prepolls across Bean and meeting climate action communities during last year's election and, of course, meeting the same Canberrans and Norfolk Islanders during the whole duration of the last term. These are issues they care about. A consistent issue raised with me was the need for responsible and effective action on climate change and emissions reductions. Public servants that I spoke with often raised with me how ineffective the current safeguard mechanism was and how reforms to that mechanism could make a significant difference in a very quick way over the next five to 10 years.

The safeguard mechanism is one of three existing components of the Emissions Reduction Fund, or ERF. The ERF has been one of the central policy tools supporting the achievement of the Australian government's emission reduction targets in accordance with its nationally determined contribution under the Kyoto Protocol and, more recently, the Paris Agreement. It's key to meeting the reduction targets that we have set for 2030. The safeguard mechanism was intended to ensure that the emission reductions purchased through the ERF were not displaced by significant increases in emissions elsewhere in the economy.

However, the safeguard mechanism has been allowed to operate in a manner such that the emissions of covered facilities have increased in accordance with business as usual. It has essentially operated as an additional reporting mechanism rather than requiring covered facilities to reduce operational emissions—a perverse outcome. More specifically, the emissions of covered facilities have increased by seven per cent since the commencement of the safeguard mechanism in 2016. Emissions are projected to increase further by 2030 unless we achieve change. An enhanced safeguard mechanism is a crucial building block for Australia's transition to net zero. As announced with our Powering Australia plan, it will require Australia's largest industrial facilities to reduce their emissions gradually and predictably, in line with our national targets, but to do so with certainty.

I do not wish to re-dredge history, but history matters. In 2009, the crossbenchers and the opposition at the time blocked then Prime Minister Kevin Rudd's Carbon Pollution Reduction Scheme. The Australian people were then forced into a decade of climate change inaction because it was decided by a few that it wasn't good enough for them and so the whole country would have to go without. As someone who worked for more than a decade in science and engineering advocacy, I know the extent of the opportunity that was missed.

Last year the Albanese Labor party went to the Australian people with a proposal and said, 'We can get 43 per cent emissions reductions by 2030—an achievable and meaningful reduction that will encourage innovations in industry and won't cripple business.' On 22 May the Australian people emphatically said yes to that proposal. We have here today a bill that will ensure this country meets its emissions reduction targets and its international obligations. We have before this House legislation that makes it possible for climate action to happen.

The Albanese government was elected because we listened and created a policy that reduces our country's emissions without needing to cripple industry. By lowering the cost of reducing emissions, crediting and trading will help the safeguard mechanism meet Australia's climate targets in a cost-effective way and enable increased ambition over time. Kerry Schott, the Chair of the Energy Security Board from 2018 to 2021 and the nation's top climate adviser to successive Commonwealth governments, has described this policy as a really important policy measure to reduce emissions and has said that delaying the implementation of this legislation by even a year would mean the emissions reduction targets of the facilities with the heaviest pollution will become even more difficult to reach.

These reforms are critical to contribute about 30 per cent of the cuts needed to deliver on Australia's legally binding target to reduce our greenhouse gas footprint by 43 per cent by 2030. At the end of the day Australia will be locked into 43 per cent by 2030. This is the floor. This is the minimum. We could actually achieve a higher reduction. This country will not achieve anything if it's not passed because there are some people who, as the previous speaker said, think this legislation doesn't go far enough or who think it goes too far.

To those opposite, who've long championed the need for every market to run efficiently, this legislation targets inefficiencies in our emissions markets. This bill addresses one element of the reforms—crediting. It aims to support and encourage industry to unlock emissions reductions where they are most efficient. Under this bill some businesses that have low-cost abatement opportunities ready to go could reduce their emissions faster than required by the safeguard mechanism. To incentivise such action, the bill enables these businesses to be issued tradeable safeguard mechanism credits. Other businesses with more limited abatement options could buy these credits to help them meet their required emissions reductions.

I'd like to remind the House about what some of the country's industry leaders and businesses are saying about this legislation. The Australian Chamber of Commerce and Industry say:

With the new climate change legislation committing Australia to reduce national emissions by 43% below 2005 levels by 2030 and achieve net zero by 2050, changes to the design of the Safeguard Mechanism are essential.

The Australian Aluminium Council says:

The focus of policy design for Safeguard Mechanism should be on establishing a framework to maintain industry, jobs and competitiveness while also decarbonising, through the period to 2030 and beyond to achieve net zero by 2050. The success of this policy will not be measured in 2030 alone, but in the transformation of Australia's industry in the biggest clean industrial and economic revolution this country has seen.

Rio Tinto, another group of radicals, say:

Rio Tinto supports the use of a reformed Safeguard Mechanism as part of a suite of policy measures to incentivise genuine industrial abatement.

Finally, the Energy Efficiency Council says: 'The Energy Efficiency Council strongly supports the government's proposal to enhance the safeguard mechanism by declining facility baselines. Overall the EEC believes that reforms to the safeguard mechanism should make a substantial contribution to Australia's emissions reduction targets and jumpstart the transition to achieving a net zero economy no later than 2050.'

It's clear that there is genuine support and demand for these reforms. This certainly doesn't sound like the Armageddon that those opposite, in different parts of the chamber, seem to think it is for different reasons. It sounds like industry has been waiting for an adult government to prepare achievable, mature policy that encourages innovation and drives efficiency.

Australian businesses and their investors know the world is changing and that they need the right signals in place to not just stay competitive, but to innovate and thrive. Many businesses that operate facilities covered by the safeguard mechanism have made long-term climate commitments that match or surpass Australia's climate targets. They demonstrate great levels of business frustration with the former government's lack of strong and coherent climate action policy.

We cannot be surprised that it's once again up to a transparent, climate conscious and responsible Labor government to legislate policy that isn't a smokescreen, but endeavours to deliver on this country's climate obligations. In September 2022 this parliament enacted the Albanese government's Climate Change Act 2022 which set out a national emissions reduction target of 43 per cent of 2005 levels by 2030 and net zero by 2050. It was the beginning of this government's plan to ensure that Australia meets its target of being a net zero country by 2050. The Safeguard Mechanism (Crediting) Amendment Bill 2022 complements this government's responsible and effective approach to reducing emissions. Reforms to the safeguard mechanism will provide strong investment signals and provide a balanced scheme that is effective, equitable, efficient and simple.

To those constituents that came to me, during the election and during the term of the last parliament, concerned about the integrity of Australian carbon credit units: your concerns were heard. The Australian government commissioned the independent review of ACCUs to ensure that they and the carbon crediting framework have integrity and maintain a strong and credible reputation. The expert panel concluded that the ACCU scheme arrangements are sound. Further to this, industrial emitters will have a strong incentive to reduce their emissions, but many in hard-to-abate sectors will need options to use credits from those facilities beating their baselines or high-integrity carbon offsets.

A broad coalition of business leaders and groups support reforming the safeguard mechanism to provide policy certainty for large industrial emitters. Most importantly, the Australian people made it clear that they want a policy that delivers on climate change, delivers on industry innovation and doesn't hurt business. They made this view clear and delivered the Albanese Labor government a mandate to get this done.

This legislation complements the Albanese government's approach to deliver tangible change in emission reductions, to ensure that this country will reach its goal of 43 per cent reductions by 2030 and be a net zero country by 2050. I thank the minister and the Prime Minister again for their hard work along with the hard work of those public servants that have brought this bill to this parliament. I commend this bill to the House.