Safeguard credits offer an important opportunity to quicken the pace of industrial decarbonisation and beat a 43% target, according to Thomas Hodgson of sustainability consultancy Ndevr.
Hodgson told Footprint he is working with a number of industrial clients that would like to develop ERF projects, but are struggling to do so.
The hurdle is that the two ERF methods most suited to their proposed activities – the industrial and commercial method and the facilities method – both require proponents to attest the projects need to earn ACCUs to be viable.
However, businesses are under increasing pressure from shareholders to develop stronger decarbonisation plans and clear net-zero pathways, and government and community expectations are shifting, he said.
Consequently, it is already difficult for many proponents to state "hand on heart" that their projects wouldn't proceed without earning ACCUs.
ACCUs will remain a centrepiece
Hodgson said ACCUs will always have a critical role to play on several fronts.
For example, businesses that are voluntarily offsetting want units that are rigorous and represent abatement that is additional, and if possible, have other benefits, he said.
ACCUs are also well-suited to be traded internationally, and are useful for consumer-facing businesses that want to allow customers to purchase carbon-neutral goods and services.
But he said ACCUs aren't well-suited to supporting large-scale industrial decarbonisation, or encouraging burden-sharing under a mandatory regime of declining emission limits.
On the other hand, a well-designed Safeguard credits regime could play an integral role, he said.
Hodgson said one important feature a Safeguard credits regime needs to have is few or none additionality requirements.
"The purpose is to tap into the most cost-effective decarbonisation available," he said.
If a company is already taking advantage of a low-cost decarbonisation opportunity because it makes sense for the business, "why should that be locked away to that individual organisation, when it could be shared across the broader industrial economy?"
"A Safeguard Mechanism credit provides an opportunity to monetise abatement that doesn't necessarily meet the robust additionality criteria of an ACCU, and neither should it, because it is really performing a very different purpose," he said.
Excessively constraining the use of Safeguard credits through extensive additionality criteria would also limit their potential to help Australia achieve and exceed a 43% emissions reduction target, Hodgson added.
Opt-in opportunities
The government is committed to applying the Safeguard Mechanism only to facilities emitting more than 100,000 tonnes of greenhouse gas a year, but Hodgson said it would be worth considering allowing those emitting more than 25,000 tonnes to voluntarily opt-in to the scheme.
Opting-in would potentially appeal to companies that are engaged in activities covered by the Safeguard Rule, and which have an emissions intensity low enough to give them opportunities to create and sell Safeguard credits to large emitters.
Because the process would be voluntary for these emitters, "it won't generate a huge amount of pushback", Hodgson said.
It also opens up the opportunity to drive decarbonisation much more broadly across the economy, while reducing the impact on very large emitters, he said.
However, if a voluntary opt-in process was introduced, the overall cap on industrial emissions would need to be tightened, he said, otherwise it would just drive down the price of the credits with no extra abatement benefit.
"Bringing this extra supply of credits in allows you have to a more ambitious reduction target," he said.
