Climateworks supports introducing declining baselines in the Safeguard Mechanism as a key policy lever to accelerate emissions reductions in the highest emitting facilities in Australia.

Climateworks’ scenario analysis with CSIRO suggests that highly emitting industries – including in the sub-sectors covered by the safeguard mechanism – have the substantial technical potential to reduce emissions on least-cost pathways to net zero. We note that these scenarios show emissions reductions potential from an economy-wide perspective and do not provide information on the short-term economic and financial interests at a facility level.

Climateworks’ and CSIRO’s AusTIMES scenario pathways suggest that on a broadly comparable basis, there are opportunities to reduce emissions across industrial scope one emissions by an average annual rate of around 8 per cent to 2030 on a least-cost pathway in line with a 1.5C limit. (Climateworks analysis based on the ‘coordinated action’ scenario from the Australian Industry Energy Transitions Initiative).

Climateworks’ experience over the last decade shows the importance of a clear end goal for any policy or initiative – so decision-makers across government, industry, investors and consumers are pulling in the same direction, and there are clear signals for markets and investments. In the case of the Safeguard Mechanism, the relevant objective is for high-emitting facilities to undertake least-cost emissions reductions to net zero emissions in line with the Paris Agreement.

Industry sectors cannot reduce all emissions, even by 2050. Yet reliance on reductions in other sectors brings additional risks, and complexity especially in the case of land-based sequestration.

Given that Australia, along with all signatories to the Paris Agreement, is expected to increase the stringency of its emissions reduction targets, reform of the Safeguard Mechanism, including any flexibility mechanisms it contains, will need to be able to respond to stronger targets in the future.