This week the Albanese Government reached an historic agreement with the Greens and key crossbench senators on a modified safeguard mechanism to reduce industrial greenhouse gas emissions. So, why has such a nerdy concept featured so prominently in the media and caused such simultaneous and high-pitched rejoicing and angst?

Annual safeguard emissions, currently around 140 million tonnes, had been projected to rise to 146 million tonnes by 2030. Changing this trajectory to 100 million tonnes by 2030 was the signature element of Labor’s climate-change policy at the last election and central to achieving its commitment to 43 per cent emissions reduction from 2005 levels by 2030.

Labor chose to deliver this outcome by modifying the former Coalition government’s safeguard mechanism as had been envisaged by Greg Hunt, the originator of the policy. It became a watershed issue for the government.

Labor could use its majority to get legislation through the House, but required the support of the Greens and a couple of crossbench senators to legislate the changes that the Coalition opposition refused to support.

The Greens, and their leader Adam Bandt, had their own challenge. They correctly saw the policy as insufficient to meet Australia’s share of the climate-change imperative but did not want to bring it down. A repeat of the 2009 debacle, when the good was torpedoed in the quest of the perfect as the Greens voted down the Rudd government’s carbon pollution reduction scheme, would have been a policy tragedy.

And so, as is often the way of effective politics, there emerged a compromise.

The government agreed that absolute emissions would not increase, new gas fields with high reservoir emissions would have more restrictive conditions, and high use of offsets would be discouraged by public shaming.

Surely a policy that preferences low-emissions resources above the opposite is a step in the right direction.

The response from both sides was mixed. Pragmatic environmentalists welcomed progress while their more aspirational colleagues wanted more, notably in the shadow of a new, alarming, international scientific report on climate change. Much of the business sector welcomed policy certainty they could work with, while the gas industry was mightily affronted by the new restrictions. Arguably this means the balance is about right.

The government is clearly the big winner, both on the policy specifics and the broader political landscape. It expects that the policy will prove to be practically effective between now and the next election and provide Labor with an essential plank in its 2025 election platform.

Adam Bandt and his leadership team had a win in the form of a policy that, while short of their ideal, takes a big step in the right direction and creates longer-term momentum.

But is this deal dangerous, as the Coalition and the gas industry have argued?

The requirement that reservoir CO2 emissions from gas projects supplying existing LNG plants must be avoided or offset is new. However, it will have little impact on Queensland CSG fields or the Beetaloo field in the Northern Territory that have very low CO2, or the Narrabri project in NSW that is committed to the domestic market. Major projects such as Woodside’s Browse field in the Kimberley in WA and Santos’s Barossa field off the coast of the Northern Territory are higher in CO2. They will be caught. Yet, in both cases, the companies had already been contemplating the application of CCS to that CO2.

It is therefore hard to support the alarmist concerns of the industry. And surely a policy that preferences low-emissions resources above the opposite is a step in the right direction.

The requirement for sector emissions to reduce in absolute terms, i.e. without offsets, is significant. But it applies to the whole sector, not just new gas and coal projects. The obligation on the energy minister to apply corrective action if this obligation is likely to be breached, leaves such action open to several alternatives, not all specific to new gas projects. Supporters and detractors alike might be wary of the flexibility that this provision gives to the minister, but it is at least arguable that such flexibility is justified in the face of so many known unknowns.

The modified safeguard mechanism and the government’s projections of continuing emissions reductions from the electricity generation sector put the 2030 target within reach. Relatively light-touch policies on other sectors will deliver that target and together create a strong platform for the 2035 target the government will take to the next election and commit to internationally.

A critical milestone has been reached and should be acknowledged. Yet, it is only one step and many more lie ahead.

Tony Wood

Energy and Climate Change Program Director
Tony has been Director of the Energy Program since 2011 after 14 years working at Origin Energy in senior executive roles. From 2009 to 2014 he was also Program Director of Clean Energy Projects at the Clinton Foundation, advising governments in the Asia-Pacific region on effective deployment of large-scale, low-emission energy technologies.

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