Kate Chaney (Curtin, Independent) Share this | Hansard source

Thank you to the member for Swan for her contribution on this topic. As she mentioned, I take great pleasure standing here today knowing that, nearly a decade ago, the member for Swan and I were working on climate change issues. I was working at a big emitter, and she was working in a consulting capacity—supporting us on both reporting and abatement. It's fantastic to be part of that debate today. Back then, and now, the thing that was most important to business was certainty. That is why today I rise to provide my qualified support of the Safeguard Mechanism (Crediting) Amendment Bill 2022 and of the proposed safeguard mechanism rules, because certainty is really important here.

Australia has already warmed by about 1.4 degrees since pre-industrial times, more than the global average. If we want to slow the impacts of climate change, such as floods, droughts, bushfires, acidifying oceans, marine heatwaves and rising sea levels, we need to reduce emissions. To meet our current emissions targets of 43 per cent by 2030 and net zero by 2050, the industrial sector must play its part. The industrial sector represents 28 per cent of our total emissions and so should bear the weight of at least 28 per cent of those reductions. I believe that markets are generally good at finding efficient outcomes, and it is government's role to set the rules within which markets can operate to ensure that the efficient outcomes are in line with the public interest. We definitely need to set the rules so that the industrial sector can effectively and efficiently play its part in decarbonisation.

The question is: will the safeguard mechanism in its current form deliver this? In reality, the most efficient and effective way to do this would be by setting a carbon price. This is acknowledged by nine out of 10 economists. It draws on principles, taught in year 10 economics all over the country, about the efficiency of putting a price on a negative externality such as pollution. Unfortunately, this is politically unpalatable after the last decade of polarising debate and scare tactics. So, instead, we have the safeguard mechanism, a compromise between previous Liberal policy and Labor government election promises.

Since the safeguard mechanism's introduction, in 2016, it has failed to reduce industrial emissions. Instead, emissions have increased as baseline limits have been set far above actual emissions, due in part to the practice of individual facilities negotiating their baselines with the government. An Australian Conservation Foundation investigation found that, even where baselines have been breached, no facility has ever been penalised by the Clean Energy Regulator for a breach.

There's no doubt that the safeguard mechanism is imperfect in its current form. Even with the changes proposed by the current government, it permits unlimited new entrants—baselined at global best practice emissions standards, which may be subject to negotiation—and it permits unlimited offsets of potentially variable quality. But the reality is that we need in place as soon as possible a mechanism that starts to turn the ship around. Government needs to provide certainty to business by setting the rules of the game and getting out of the way. We need to do this to ensure that Australian industry is incentivised to innovate and invest in technology that will ensure we remain competitive in a low-carbon global economy—and the member for Swan mentioned the example, from when we were working on this nearly a decade ago, of a large emitter investing in a piece of technology that reduced emissions on the expectation that there would be a price on carbon.

By establishing a framework for creating safeguard mechanism credits, the bill will incentivise facilities to reduce emissions below their baselines. It's a clumsy version of a carbon price. It does establish a mechanism for carbon trading, even if it does create some inefficiencies. I have no doubt that we'll look back on this version of the safeguard mechanism as a crude early draft. It doesn't do the brave work needed in shifting our economy away from fossil fuels by limiting new fossil fuel entrants. It perpetuates the idea that we can offset our way to net zero. But it is at least a start.

We will need a market for offsets. While offsets cannot be seen as a panacea and as permission to keep emitting, every credible pathway to zero emissions includes at least a small number of offsets, ideally limited to five to 10 per cent of total abatement. We do need to create and nurture this market and incentivise investments in offsets, and this bill will start to do that.

In the interests of committing to a path of action, rather than endless debate, I urge all parts of the parliament to pragmatically work towards trying, and continuing to improve, this mechanism, rather than either rejecting it outright, which makes little sense from the coalition opposition which invented this beast in the first place, or letting the perfect become the enemy of the good, which the Greens have heard a lot about lately.

Many of the mechanisms of the regulatory framework will sit in the safeguard rules, which are subordinate legislation and therefore won't be debated in parliament. But I will take this opportunity to discuss the aspects of the entire mechanism that need to be improved, preferably now but possibly down the track, to ensure that this regulatory framework is effective in delivering carbon emissions reductions. One of the biggest issues with the safeguard mechanism in its proposed form is that it creates room for new fossil fuel facilities to be developed. I acknowledge that new entrants to our industrial sector will be required in various industries. We'll still need to make cement, steel and other things, and we can't afford to freeze the profile of our industry as it is in 2023. Baselining new facilities in line with global best practice should mean that they replace less-emissions-efficient facilities over time through natural competitive forces. There are more than a hundred coal and gas projects at various stages of development across Australia. Many of these are export projects. These projects have no viable role in a clean, climate-safe future economy. The climate impact of these projects would be immense. Most of these projects have not yet been financed or received regulatory approval, and most will not be able to go ahead. The additional emissions generated by new fossil fuel projects would have to be absorbed by existing safeguard mechanism projects in order for us to reach our decarbonisation goals. This means that, by creating new room in our limited carbon budget, we're shifting the burden to everyone else. This makes absolutely no sense.

I'm not proposing that we shut down existing gas facilities; we will need gas as a firming fuel while we transition. But that doesn't mean we need new developments. There are multiple forecasts and experts who show that, globally, we have enough gas to see us through our transition. We have seen the US commit to the Inflation Reduction Act, potentially a trillion-dollar commitment to repositioning the US for prosperity in a net-zero economy. This is great for the planet. It will create scale and drive down costs. But we're massively underestimating the impact of this on Australia. By continuing to develop new coal and gas projects, we're free-riding, relying on other countries to do the heavy lifting on emissions reduction while we reap the profits from fossil fuels while they last. We're also reducing the likelihood that we can continue to be as prosperous as we used to be, as sooner or later our fossil fuel infrastructure will become stranded assets. We are accelerating towards a wall.

We have a small window in which to transition our economy and play a leading position in green energy. Instead, we're arguing over the details of a scheme that allows us to keep producing fossil fuels. We're even considering subsidising trade-exposed new entrants with access to the $600 million safeguard transformation stream under the Powering the Regions Fund. This makes absolutely no sense. There are various ways the safeguard mechanism can reduce the potential for new fossil fuel projects to better align with the economy we need to build, and I will continue working with the government to find opportunities to do this.

The unlimited use of offsets by covered facilities threatens to undermine the integrity of the safeguard mechanism by allowing absolute emissions under the scheme to increase. We cannot offset our way to zero. We must actually reduce the amount of carbon that we're omitting. Offsets should sit at the very bottom of a hierarchy that starts with avoiding, minimising and mitigating emissions. They should be a last resort and used only until mitigation technologies and operational changes can take effect for hard-to-abate-but-necessary industries. They should not be the primary means of achieving pollution reduction. Allowing 100 per cent of emissions reduction to be met with offsets puts us up there with Kazakhstan, the only other country that allows this.

The unlimited use of offsets is even more concerning when you think about it in the context of fossil fuel export facilities. Due to the globally accepted approach to accounting, as a country, we have no direct accountability for scope 3 emissions, or emissions from using the fossil fuels that we export. If we're allowing 100 per cent offsets on fossil fuel projects, we're effectively finding accounting loopholes to continue emitting and contributing to climate change globally. While this may make sense from an accounting perspective, it's hard to see how it's a good idea for the planet. There must be a limit on the use of offsets.

There are a number of ways this could be done, and I will continue to talk to the minister and the government about possible approaches. It could be done through a hard limit, a sector based limit or a weaker 'please explain' approach that depends on the public to drive accountability. I acknowledge that the opportunities for abatement vary significantly from sector to sector. This makes it hard to set hard caps on the use of offsets, but it may be something we need to consider after the first review, in 2026. At the very least, there must be a hierarchy of offsets to make it clear that abatement efforts must come first, followed by real abatement elsewhere in the industrial sector via safeguard mechanism credits, with ACCUs to be used only in limited numbers as a last resort.

On the quality of offsets, I am glad to hear that the recommendations of the Chubb review will be fully implemented. While there are some differences of opinion on the quality of existing credits, the Chubb review recommends changes that will improve the integrity of future carbon methodologies.

Given the flaws in the safeguard mechanism model, transparency will be vital. We'll need to be honest with ourselves about whether it's actually working. This includes the need for improved methane reporting. New measurement approaches are available and should be required. This may show that we're emitting a lot more methane than currently reported. As signatories to the Global Methane Pledge we're starting to acknowledge the vital role methane plays in climate change, but now we need to deliver on the pledge and improved reporting is a good next step.

The bill being debated only relates directly to the creation of safeguard mechanism credits, a necessary step to ensure that all covered facilities are incentivised to abate emissions, even if they're already below industry standards. Many of the changes needed relate to the regulations. Along with other members of the crossbench, I will be working with the minister and the government to find ways to address the issues that I've raised, specifically around new entrants, improving the use of ACCUs, and transparency and accountability. The things that I will be specifically advocating for: on new entrants I would like to see the definition tightened to ensure new gas projects disguised as expansions by using the same processing facilities will be seen for what they are, new projects. Existing facilities that are planning expansions or extensions to their current operations should be treated as new entrants if their expansion will create a significant new level of emissions. We cannot allow current coal and gas projects to continue to expand and explore and emit without regulation.

I would also like to see better measurement and regulation of methane emissions. There are more accurate measurement methods available and facilities should be required to use them. A specific methane reduction target would be good to see in due course, in line with our Global Methane Pledge. I will also support any amendments requiring new entrants to meet their baselines and targets without the use of ACCUs. On the use of offsets, I will be supporting any amendment that implements the Chubb review recommendations into law. I support amendments that create a hierarchy, as discussed, and if facilities do use SMCs or ACCUs they should be required to report on why abatement was not feasible. Lastly, I will be pushing for any amendments that improve the transparency and accountability of this bill. This includes beefing up reporting obligations and improving the appointments process. The review in 2026 will need to take an honest look at whether the safeguard mechanism is actually delivering on our targets.

In conclusion, there are many ways that this mechanism could be improved, and I will continue to work with the government and the crossbench to make those improvements. I appreciate the collaborative approach the minister has taken to working with the crossbench to genuinely improve this mechanism. It may not be perfect but it's a start. It's vital that we put something in place to give business some certainty, so facilities can invest in abatement technology as soon as possible. Turning the economy around is a huge challenge. We need to keep improving the mechanism and I urge government to keep trying.

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