Matt O'Sullivan (WA, Liberal Party) Share this | Link to this | Hansard source

The committee is considering the Safeguard Mechanism (Crediting) Amendment Bill 2023 and amendments (1) to (14) on sheet SK147, moved by Senator McAllister.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I have a series of questions that I'm keen to get some clarity on from the minister, so I'm just flagging that I've a line of questioning here I would love to be able to ask. Often we do each other the courtesy of allowing that. So, Minister, if I can commence with the supplementary explanatory memorandum, which was circulated earlier today. Can I take you to paragraph 3 on page 10, which states:

The intent of the updated second object of the NGER Act is to ensure that covered facilities reduce their net emissions …

The updated objects now also include what we have described as a hard cap, which is covered by subsection (d). Could you please confirm that the intent of the cap in section 3(2)(d) is for real or gross emissions to be capped at the current five-year average and reduced over time?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thank you, Senator Waters, for the question. Yes, the intent is that net and gross emissions are reduced. So the government, as you know, has legislated our 2030 targets, and these amendments in this bill before us now apply a proportionate share of those targets to the safeguard sector. This is a budget of 1,233 million tons of emissions from 30 June 2020 to 30 June 2030 and a single year amount of 100 megatons in 2030. These are net targets, which include the use of offsets.

We are also committed to reducing gross emissions overall from safeguard facilities tested on a five-year, rolling-average basis, and this bill is crucial to that task of reducing onsite emissions as it creates safeguard mechanism credits.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Thanks very much, Minister. Just on that rolling five-year average, can you advise me please what will the rolling five-year figure be for the first financial year, and can you please provide an estimate of that amount?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Since the safeguard started, total safeguard emissions have risen by around four per cent. The current five-year average of annual emissions is around 140 megatons, noting that emissions have been down somewhat in recent years as a result of the pandemic.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Can the minister also please clarify the other parts of that same paragraph, number 3 on page 10 of the supplementary explanatory memorandum, which states that, in order to reduce the aggregate emissions, changes to the rules shouldn't be made to reduce the number of designated facilities? Our understanding of that paragraph, and that's what I am seeking your clarity on, Minister, is that making clear that the thresholds for facilities to be covered by the scheme from 100,000 tonnes shouldn't be raised artificially to remove facilities from the scheme rather than changes to baselines or offsetting to reduce a facility's emissions. Is that correct, and can you provide an explanation of the intent of that paragraph?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

In broad times, yes, that's correct. What we're saying here is that any attempt to adjust coverage thresholds in the legislative rules for the scheme to show a reduction in total emissions from all covered facilities would not be consistent with the object of the act. The object is to reduce emissions from these facilities. It is not to exclude facilities by rule changes when those emissions would still occur in Australia and contribute to our national targets. So any rules that were made for such an improper purpose would not be consistent with the rulemaking test to be implied under the bill.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Thank you, Minister. I am grateful our interpretation is correct. The proposed section 22XS(1D)(c) states that the information provided to the secretary by an agency or authority of the Commonwealth or a state or territory also needs to be considered. Can I confirm what agencies that will include. Would it include, for example, state based environmental protection agencies, NOPSEMA or Infrastructure Australia?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Yes, NOPSEMA and other Commonwealth agencies and authorities would be covered, as would state based EPAs. The department already engages with a range of Commonwealth, state and territory entities on future projects and their emissions as part of collecting information for the government's inventory and projections.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

ATERS (—) (): Moving topics now, Minister, can you provide a rough time line of when you expect production factors and baselines for international best practices for new entrants to be rolled out? What time frame are we talking about here?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thank you, Senator Waters. We will consult by mid-2023 on guidelines for how international best-practice values will be set and then consult on the setting of specific factors during the second half of 2023, with the aim of having best-practice values set by the end of 2023. The guidelines will apply to all values and we will work with stakeholders to ensure that we've prioritised necessary values. This will include considering the likely entry of new facilities across safeguard sectors to ensure all values are in place for the required 2023-24 compliance year.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Within the confines of those time frames, which ones will you be prioritising, if you're in a position to tell me that?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think, Senator Waters, the answer I've provided provides a principle, which is that we would work with stakeholders to identify priorities and, as part of that, we'd consider the likely entry of new facilities across safeguard sectors.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

When do you expect new lithium or iron ore projects to come on board and how will you manage the triage process for international best practice standards?

The TEMPORARY CHAIR: Minister, do you want some time?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm just seeking advice on that latter specific question.

Thank you for your patience in allowing me to seek advice. I think we expect that there may be iron ore projects coming on in that 2023-24 compliance year, and lithium in the 2024-25 compliance year. That is the advice at this stage, but, as indicated, we would work with stakeholders and it may be that there is other, or different, information available to us.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I move now to offset methodologies. With the pausing of the human induced regeneration, or HIR, projects, how many existing projects does this affect?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

ISTER (—) (): Thank you very much, Senator Waters. The government, as you know, is committed to implementing recommendation 8 of the Independent Review of Australian Carbon Credit Units in full. That would be done by the Clean Energy Regulator, consistent with the review's recommendation that the CER should continue to be responsible for project monitoring, compliance and enforcement.

As Professor Chubb noted in his recent statement, 'Where projects do not meet the requirements of the method or of the scheme, the Clean Energy Regulator has the processes and the authority to act, to make adjustments to projects, to restratify CEAs, to pause credits or to cancel projects.' Professor Chubb also noted in that statement that the CER can, and does, use existing provisions to address project noncompliance.

The government will direct the Clean Energy Regulator not to issue future credits to human induced regeneration projects until the regulator is satisfied that the project complies with recommendation 8 of the review. The government will also direct the regulator to prioritise the integrity of these projects by appointing independent auditors in relation to human induced regeneration project gateway reviews. That would be under section 215 of the existing act. These checks would ensure that vegetation in the project area is growing as expected and as required by the method and the Carbon Farming Initiative, or CFI, rule.

Senator Waters, you asked how many existing projects this affects. It is as many as 371, but we have no reason to believe these projects aren't in compliance with the criteria set out in recommendation 8. In a strict answer to your question, it is 371.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Thank you very much, Minister. I've got a series of more detailed questions; your head answer there has alluded to some of them. How long do you expect it will take for those projects to meet the higher standards laid down in the Chubb review, noting your commitment to implement rec 8 there?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The way the scheme works at the moment is that a registered project—and I hope that I have my terminology entirely correct; I'm sure someone will correct me if I'm wrong—approaches the CER at various points in time to seek crediting based on the activities that have been undertaken. It's anticipated that that compliance check we've been referring to in this most recent of exchanges would occur at that point in time. It's a little dependent, therefore, on the way those project proponents come forward and approach the CER.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

When will the updated HIR methodology be completed?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think this is a question of terminology but the agreement is to implement recommendation 8 of the Chubb review. That doesn't ask for a revision of the methodology; it provides guidance about how the method should be interpreted. I think you'll know that the recommendation goes through three points:

The method should be interpreted as requiring:

The process I've described will see those principles applied at the point in time that project proponents come to the Clean Energy Regulator seeking to have their credits allocated.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Just to clarify—I think you answered this earlier: does the minister have the power to cancel ineligible projects or is that all up to the CER?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think our view would be that the Clean Energy Regulator can and does use existing provisions to address project noncompliance, and that is the approach we would expect.

Matt O'Sullivan (WA, Liberal Party) Share this | Link to this | Hansard source

Just before I give you the call, Senator Waters: I intend to move around the chamber but we'll stick with you for a little bit longer.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Thanks very much, Chair; I appreciate that. It is good to get these questions answered.

Just to clarify: does the minister technically have the power to do it?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Not at an individual project level.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

There have been accusations that the CER have misapplied the methodology and that HIR projects are occurring in places where even aged forests never existed or weren't cleared. How will the government ensure the CER is acting to ensure the genuine integrity of ACCUs rather than trying to protect its own reputation if it did, in fact, originally misapply the methodology?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Recommendation 8 of the Chubb review sets out some very clear expectations in relation to the CER's work. It provides, I think, helpful guidance about the interpretation of the method and what would be required. It also indicates that the CER should, as soon as feasible, include nominated suppression mechanisms and eligible HIR activities for new and existing projects on the project register. We are confident that the CER is in a position to implement the recommendation and we expect them to do so.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Ministerial directions to the CER, I understand, have to be general in nature under the act. How will you ensure an integrity of assessment at the project level, rather than at that higher methodological level?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

This is a question of governance. We trust the CER to undertake its work. We will of course provide general direction about our expectations, but we have confidence in the CER to implement these recommendations at project level.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Can I move now to the Powering the Regions Fund. I note that its specific use for safeguard facilities has been increased from $600 million to $1 billion. How much of this has already been allocated, and to whom have those allocations been provided?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I am advised that the safeguard transformation stream will provide dedicated funding for projects that reduce emissions at safeguard facilities that are trade exposed, but that has not started yet, so the answer to your narrow question is none.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Will they be large grants or a series of smaller grants, or is that yet to be determined?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Perhaps I can provide some background about the safeguard transformation stream. It will provide dedicated funding for projects that reduce emissions at facilities that are trade exposed. It will support projects that reduce emissions covered by the safeguard mechanism, i.e. the eligible facility scope 1 emissions. It's intended to be technology and project neutral. It could support a range of project types like energy efficiency upgrades, shifts to lower carbon processes or fuel switching. Funding through this stream would reduce the capital costs for safeguard facilities to invest in new low-emission technologies and then fast track their adoption. By reducing safeguard facilities covered emissions it can reduce the ongoing cost for trade exposed facilities to meet their falling baselines.

As you have alluded to in your question, another $400 million has been announced for industries providing critical inputs to clean energy industries, including steel, cement, lime and aluminium and alumina. There are no program guidelines yet established for these programs. They will be developed in the coming months. The delivery vehicle will also be considered in the context of the budget.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

S (—) (): In relation to the delivery vehicle, noting that you've said that will be considered in the context of the budget, I'm interested in whether it's been decided whether ARENA would receive any of this money to distribute, or whether it will be run through the Grants Hub?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

You're right that ARENA already plays a very important role in innovation and renewable energy, electrification and energy efficiency, but, as per my earlier answer, it's yet to be determined.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Can I clarify whether the purpose will be to drive co-investment in upgrades using existing technologies, or is it more to push the boundaries of commercial deployment?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The answer is a mix, dependent on the applicant and the circumstances they are facing. Largely co-investment, but there may be circumstances when another approach is suitable.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

This is my final line of questioning. Something like 17 Hunter Valley coalmines are scheduled to close in the next decade, but it's anticipated that the vast majority of them will seek extensions of time but possibly at lower rates of production. Most extensions are controlled actions under the EPBC Act when it's an expansion, but my question pertains to extensions in time. Given that they're extensions in time rather than in scope, and given that they're likely to have lower scope 1 emissions than the 100,000 trigger—even though emissions from the whole project will still be over the trigger—I want to know how those coalmine time extensions will be treated by the pollution trigger under the safeguard mechanism.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thank you, Senator Waters. If it is already a safeguard facility and an additional action which is likely to result in increased scope 1 emissions is approved under the EPBC Act, the minister responsible for the EPBC Act will notify the minister for climate change, the climate change secretary and the Climate Change Authority of the nature of this change and the quantum relating to the action. That would then allow each of those people or bodies to carry out their functions in relation to compliance with the emissions requirements and the objects of the act.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

There is just one point of clarification there. Thank you; I understand that process. But I'm interested in what will happen when the scenario is an extension of time of an existing facility which would emit scope 1 emissions below the threshold, despite applying to a project that is cumulatively above the threshold and ergo is covered by the safeguard mechanism. I don't know how the EPBC Act would treat that, because it's not an expansion in scope; it's an extension of time with a reduced production output. So I'm interested in how those extensions would be treated by the hard cap and by the pollution trigger in the safeguard mechanism.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think it's difficult to provide a clear response in relation to that scenario, because it would be a little bit dependent on a number of things, including the nature of any regulatory interactions it had with the state EPA, perhaps, or with the Commonwealth under the EPBC Act. I think that, in the circumstances described in your question, it would be quite dependent on the Minister for the Environment at the time. I'm happy to seek further information for you, but it's quite a specific circumstance, and I'll have to make inquiries.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

ator WATERS (—) (): Thank you, Minister. I gratefully take you up on that offer. I understand there'll be interactions with EPBC regulations there, and I don't already know the answer to that, so I would be grateful to you for coming back to me when you've got that information.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Before we were interrupted by all of the other proceedings of the Senate, I asked a couple of questions about modelling and particularly about what analysis or modelling had been done on the amendments that had been agreed to by the government, or indeed introduced by the government, as a result of the broad conversations that occurred in the intervening period. Obviously, I remain interested in understanding exactly what level of work and in-depth analysis and modelling has occurred, because, as the minister said, a lot of work went into developing these policies and these laws post election, so it would be horrible to see this whole thing derailed by something that hasn't been analysed properly or thoroughly.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thanks, Senator Duniam. I think there is an underlying premise in your question: that the amendments before the chamber today substantially depart from the model that was presented earlier. In truth, as we've been very clear about in our public commentary on the process we were going through, we have been willing to take helpful suggestions that strengthen the policy intent and the implementation arrangements for the proposal we took forward. We think that the additional reforms that are before us today in the form of amendments are sensible. They provide arrangements in relation to transparency and certainty in the operation of the mechanism. But the fundamental analysis is as I have already described it to you.

There was, as has been discussed at estimates and in the committee process for this bill, some modelling work that was undertaken around opportunities for onsite abatement on facilities. There has also been very broad consultation over a very long period of time with a very broad range of people. I do note that a broad coalition of business leaders and groups support the reforms, principally because they provide policy and investment certainty for large emitters. It's also the case, and it has been widely noted, that around 170 facilities already covered by the safeguard mechanism are already covered by net zero commitments that they have made in response to other drivers in their businesses. That represents 86 per cent of scheme emissions, and a third of the publicly listed companies that are in safeguard facilities use an internal carbon price for investment decisions, with half using a price of more than $100 a tonne. These things are already part of business decision-making, and the feedback that we have has been overwhelmingly supportive of the approach.

In part that is because the proposed reforms have been designed to provide sufficient flexibility to moderate and mitigate any cost impact. I point to three features of the scheme: the hybrid approach to setting baselines moderates the initial scheme impact while encouraging production to occur where it's less emissions intensive, which lowers the overall economywide cost; there are flexible compliance options, including borrowing, multi-year monitoring and the use of domestic offsets which will help safeguard facilities meet their obligations at a lower cost; and, as we have just been discussing in relation to the Powering the Regions Fund, assistance will be available to ensure businesses are not competitively disadvantaged.

I make this final point: there are costs that arise from inaction, and so, without a credible domestic policy to reduce industrial emissions, Australia's exports may increasingly be subject to import tariffs or to carbon border adjustments imposed by our trade partners. As I think former Treasurer Frydenberg said rather publicly, Australian businesses may also face increased capital costs in an environment where global financial institutions and decision-makers are taking coordinated steps to align investment with the transition to net zero.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I appreciate that response, although, whether changes are significant or small, this is a significant piece of legislation which will have significant impacts on the economy. If we are to take the government at their word, it's changing the landscape and providing certainty et cetera. To that end, beyond what had been done for the existing legislation—the consultation and analysis that you referred to—surely the government has sought to understand what impact the changes, be they large or small, will have on business so that they can provide that certainty. We received the amendments this morning with the supplementary explanatory memorandum, so, on that basis, to satisfy myself that what you're saying, that it will be all okay, is correct, I would be interested in knowing what modelling has happened. You referred to the cost of not doing anything. Has there been any analysis or quantification of those costs with regard to sea bans or other important tariffs? Do you have any examples of the costs that might be imposed on any particular industry that you could enlighten us with?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

In my answer just now I stepped through the approach that the government has taken. There has been some modelling undertaken internally between the department and the Treasury. There has been a design process which has sought to provide flexibility to mitigate the cost impacts. There has been wide consultation to properly understand businesses' circumstances and the way that the proposal would interact with existing businesses covered by the mechanism. As I've indicated, there are potential costs of inaction, and they were alluded to by a former Treasurer in a government that you were part of. If I have any specific information about that I will provide that to you. But I think it is certainly the case that there is a global move towards investors making quite substantial requirements in relation to decarbonisation, and Australian businesses are not immune from that.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I appreciate that. What you did step us through was all of the work to the completion of the bill as it was presented, prior to any changes, and I appreciate that. I've talked about the fact that that appears to be a very in-depth and thorough process. What I was asking about was everything from that point in time to the end product, such as the changes we have here that have been asked about by the Greens. I think you're telling me that, as its the government's opinion that they're not significant departures from what was there, there has been no modelling undertaken. You said there was no capacity to provide information borne out of modelling or analysis around costs to businesses relating to any of the changes to the bill that have brought forward through these negotiations. I'd be interested to have that compare and contrast with the cost of inaction. You referred to former treasurer Frydenberg's contribution to the public debate on this. What are those figures? It should be a like-for-like thing, particularly with the various international agreements we are reaching, the trade arrangements. There must be some capacity for you to step us through what the cost of not doing something is, compared to doing what this bill proposes to do.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think I have largely answered most of the questions that you've just put to me again, and I don't think I can add to the answers I've already provided. I will draw your attention to the government's decision to initiate a review to examine CBAM arrangements, and that's precisely because we need this sort of information to make good public policy decisions in the Australian context.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Minister, I know Senator Duniam has asked something similar—and you have gone through a time line, so you might be able to do this quickly—but can you confirm when the government commenced consultation on the safeguard mechanism reforms? I know you ran through a time line before.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I have run through this before, and I'm not sure what value there is in asking me questions that I've already answered in the committee.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'll consult with Senator Duniam. I want to know if the consultation is continuing, even though the safeguard mechanism crediting bill has already been put through the House of Representatives—and the fact that we only got the amendments this morning.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The government is in very regular communication with business about a whole range of matters, and I don't expect that to change.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Perhaps you could inform us: what are the issues that businesses are raising in these consultations, with particular reference to the safeguard mechanism?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

It's simply not possible to run through all of the matters that are canvassed between departments and business. However, I can point you to some of the public information that business has provided. For example, the Business Council of Australia has said:

Additional support for trade exposed businesses and workers as well as critical sovereign capabilities is a crucial step that will help save jobs and ensure Australian businesses are competing on the global stage.

As designed the Safeguard Mechanism and its baseline targets are tough but achievable …

… Australia needs a credible, durable framework to reach its climate targets and grow the economy.

The Ai Group says:

The treatment of new facilities appears to strike a workable balance, providing pathways for new projects that stack up to go ahead without adding to burdens on existing facilities or threatening national emissions goals.

The Investor Group on Climate Change have indicated:

The reforms will help to unlock investment in the new and existing industries that will maximise Australia's competitive advantages in a net zero world.

They are obviously some of the peak bodies. BP has said:

bp reaffirms its support for reforms to the safeguard mechanism to provide incentives for large emitters to reduce their emissions in support of Australia's emission reduction targets. We support the goals of the 2015 Paris Agreement on climate change and believe ambitious climate policies, like the safeguard mechanism reforms, will be essential to enable the world and Australia to meet these goals. We look forward to working with the government as the reforms are finalised.

Rio Tinto says:

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

The 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.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Minister, with regard to specific businesses as opposed to industry associations or groups, have any of the 215 businesses indicated that they cannot achieve the imposed 4.9 per cent annual reduction to the emissions baseline? Specific companies?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Implicit in your question, Senator Hughes, is an expectation that all businesses will be required to reduce by 4.9 per cent. We have been through a long process of consultation, and amongst the changes that Minister Bowen announced recently were changes to the threshold that would allow emissions-intensive, trade exposed industries to access a—how shall I characterise it?—less ambitious decline pathway in recognition of their significance and the challenges for those businesses in meeting that pathway.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Minister, maybe for my benefit, have any businesses suggested that they will not be able to achieve the emissions reduction that has been set for them, even if it is less than 4.9 per cent? Are they struggling? Have they said to you that they will struggle to achieve that, regardless of what the figure is that you will set for them?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

As I have indicated, the changes announced by Minister Bowen just a couple of days ago were in response to representations particularly from the manufacturing sector. Those changes involve a number of things, the most significant of which, perhaps, is a change to the test that applies to establish whether they are requiring some kind of concession in the targets that are applied to them.

It is an example of the consultation process and working through the issues. We are very determined to truly understand the businesses that are covered within the safeguard mechanism. One feature of this mechanism is that it does cover hard-to-abate sectors and it needs to be designed in such a way as to provide incentives for those sectors to start the transformation that's critical for their long-term competitiveness, but also in recognition of the technologies that are available to them at this point in time.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

ES () (): We might keep moving on. Can I just point out that I did ask for specific businesses rather than sectors or industry groups or associations or anyone representing manufacturing, mining et cetera—any specific businesses. Perhaps you can come back to us if there are any specific businesses that have suggested they will struggle to meet whatever is the imposed figure for them to reduce emissions by.

Senator Duniam asked some questions this morning around modelling that had been conducted and commissioned. I noted that you said that Treasury had done no modelling of the economy-wide impact of this policy. Who did what modelling on what, where? So, if Treasury didn't do it on industry-wide or economy-wide—without giving us the modelling, what modelling has been done and by whom?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Hughes, I have answered this already on several occasions during this debate. It's also been answered in estimates and it has also been answered during the committee inquiry into this bill. I'm going to repeat it, but I know that you were present in the discussions of this on previous occasions. I'll repeat the answer for you on this occasion, but I do question your motivation in continuing to ask.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

If I can just help clarify, I have been in estimates and I've been here, and what we've been told is who hasn't done modelling on what specifically. We still don't know what modelling has been done, by who, on what. Any question we ask, such as: has Treasury done modelling on what the impact is going to be on GDP? Has Treasury done impact on what job losses may occur? Has any modelling been done by anyone—DCCEEW and Treasury? All have said, 'No.' So we've been told what modelling hasn't been done, but I'm trying to understand what modelling has been done, because we have not been told anything in the affirmative, only who hasn't done what.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

R (—) (): Senator, that is incorrect, but I'll tell you again. As I indicated earlier to Senator Duniam, economy-wide modelling was not undertaken. The Treasury and department jointly undertook analysis of the potential for onsite abatement at safeguarded facilities and on implications for the domestic carbon market.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

The point is well made about what we don't know, so we'll just move on from that and hope that things aren't as bad as we predict they will be. In a moment, I'll come to some of the comments of some of the groups out there that are expressing fear about this. I'm interested in this issue of modelling around analysis for demand for ACCUs. While we're thinking about that, I'd also be interested in how the carbon price being set here in this legislation compares to the carbon price that Australia's trading partners have as well as the carbon price in other developed nations.

On that, I think it's important to put on record some of the comments that have been made by entities like the Australian Pipelines and Gas Association's chief executive, Steve Davies, who said:

… there are questions over whether the flow-on effects of any additional restrictions on gas supply will be borne by Australian households and businesses who are already facing major increases to energy bills due to the transition.

The CEO of the Australian Chamber of Commerce and Industry, Andrew McKellar, said:

The fundamental test for the safeguard mechanism is whether it supplies secure and affordable energy for households and business.

He also pointed to the fact that, as he said:

AEMO already expects a shortfall which will worsen if new gas production doesn't progress.

…   …   …

The fact of the matter is that gas will be essential to our energy system in the years ahead. But there is a risk that energy supply will be choked off before alternative sources are available, threatening reliability and driving up electricity prices.

I've got a range more that I'm sure I'll be able to put on record before we conclude debate on this bill, but these are the reasons we're asking these questions, seeking certainty. It's not for no reason or for spurious political games. It is because there are entities, individuals, businesses, households and communities who all have concerns about what this could mean.

I asked two questions just before, which were about analysis for demand of ACCUs and how our proposed price compares to the price of Australia's trading partners and other developed nations.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I've indicated to you that the department and Treasury jointly undertook analysis on the potential for onsite abatement and implications for the domestic carbon market. We have spoken at length about the fact that that analysis is cabinet-in-confidence. It is also price-sensitive information, because the Commonwealth is the largest purchaser of ACCUs. This is a matter that has been canvassed on many occasions.

In relation to trading partners and pricing, I don't know that I have pricing before me but it is the case that many of our trading partners are on a similar journey to us. I will see what I have before me.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

In the period while the minister seeks that information, which I think is quite important for Australia to understand, how we stand in this internationally competitive, globally competitive, market when it comes to carbon: Are we pricing ourselves out of the market? Are we making it more expensive for business to operate here because we've set a price higher than others? I thought the minister might be able to tell us that pretty straightforward information, when it comes to our trading partners.

Now that you've had a bit of time, you might be able to give me a dollar figure or a couple of examples. I was impressed with your clarity and straightforward ability to answer Senator Waters' questions. Perhaps we might have the same here.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm advised that the European price is $145. I was looking for some additional information, which I know is in my folder somewhere—in the depths of it—and it runs through a range of obligations that have been adopted by many of the countries that we trade with. When I find it, I will let you know.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I know you will, Minister. I'll happily receive that when it comes through, because it is an important part of the consideration here. We operate as part of a global economy. We have global environmental obligations. I want to make sure what we do fits in and doesn't unfairly penalise us.

On that basis, as you look for a bit more of that information, I wonder if you might be able to enlighten the Senate as to how the $75 price cap was determined and what role DCCEEW had in setting that price, and—I think the answer might be yes to this—was there a direct consultation between Treasury and DCCEEW on the setting of the $75 carbon price? On that, we might look to explain the difference between the price outlined in the Powering Australia policy document and where the government has landed with what is proposed here.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

As I've indicated, the Treasury undertook modelling with the department to understand the likely impact on the carbon market, and that informed a range of features of the design.

The current market price, I think, is between $37 for an ACCU. The government considered that $75 represented a reasonable price cap. Business certainly was keen to see some kind of cost containment measure, and this was the figure that was arrived at.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Just to clarify, are you saying it's the modelling that is subject to cabinet-in-confidence and contains market sensitive information that informed the price cap and, therefore, you can give us no further information? Is that what I am to believe you're saying?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

There are a range of inputs to this, including the consultation process we went through. We have stepped through that extensively, and other forms of analysis that were put before the government, and ultimately this was a decision of government.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

On that basis, it being a decision of government, I wonder if a range of processes, a range of inputs, the consultation—it's a pretty significant decision to reach. What role did DCCEEW have in setting this price? That was the question I asked before.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

DCCEEW provides advice to the minister.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I'll just accept that. Can we then look to the dollar amount for the penalty for emissions over the baseline, which I understand to be $275 a tonne. How was that figure arrived at?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The existing scheme, which operated under your government, also has a penalty for noncompliance, and it's linked to the standard penalty units that are present in the Commonwealth framework. Essentially, the penalty is a penalty that would be paid for noncompliance. We expect that most businesses will want to comply. The cost containment measure is a far more likely pathway for a business that is seeking to avail itself of ACCUs for compliance than the penalty; however, it is important that a penalty for noncompliance exists. I will note, however, that the safeguard mechanism so far has had 100 per cent compliance.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

There are some significant differences between what's in place now and what's proposed here, particularly with regard to penalties, noncompliance and enforced baselines. How is the $275 that's proposed linked to what's in place now?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

McALLISTER (—) (): You might need to clarify the question. What is it that you're seeking to understand?

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

My original question was how the government determined the $275 penalty and has proceeded with that. In your first answer to me you indicated that there are penalties in place now, and I inferred that there was some link between what's in place now and what's proposed. I was seeking to explore that point.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I understand. It's not so much that it's linked to but how it compares with the existing arrangements. Essentially, the bill updates the arrangements for a civil penalty that a facility would incur if its net emissions were higher than permitted. That would be described as an excess emissions situation. As you'd understand, excess emissions could impact our climate outcomes, so the penalty should be proportional both to the length of delay in meeting the requirements and, importantly, the quantity of excess emissions. Previously, the penalty for an excess emissions situation depended only on the duration, not on the relevant quantity.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Do you know what the current penalty rate is for noncompliance?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

At the time the bill was introduced a penalty unit was $222, and in November 2022 the parliament passed the Crimes Amendment (Penalty Unit) Bill 2022, which updated the value of a penalty unit to $275 from 1 January 2023. The maximum civil penalty will be set at one penalty unit per tonne of excess emissions every year. I am trying to seek information—staff very helpfully point out that this is set out in the EM, which says it:

differs to the existing penalty that is set in the NGER Regulations, which for a non-individual is 100 penalty units for each day in an excess emissions situation, up to a maximum of 10,000 penalty units. For an individual, the existing penalty is 20 per cent of this amount—

noting that no covered facilities are individuals. There needs to be a degree of proportionality between the seriousness of the contravention and the quantum of the penalty; I've explained that. The EM says:

The level of the maximum penalty, being set at 1 penalty unit per tonne carbon dioxide equivalent of excess emissions, is intended to be commensurate with the adverse economic impacts of climate change, now and in the future …

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

If a facility exceeds its baseline and can't access ACCUs—and it certainly won't be in possession of SMCs—they then have to pay a penalty. Does the payment of that penalty extinguish any liability for being over the baseline in perpetuity or is it for that calendar year—or does it not do that at all and they remain in a position where they need to rectify this breach by meeting the baseline?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think that question misunderstands the far more likely choice of a business that found itself in that scenario. A business that was unable to meet its baseline and was unable to secure ACCUs in the private market, under the cost containment measure would secure ACCUs from the government at that cost containment cap of $75.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

So there is a guarantee that no business will ever be in a situation where they can't access ACCUs under this cost containment measure?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The government intends to make available ACCUs at that price, and that will be set out in the rules.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I'm just trying to understand this. Obviously I agree with you that no businesses want to continue to be in the situation where they are exposed to such a liability, with the penalty being $275 per tonne per year. If they can't access ACCUs in the ordinary way, you're saying there is a facility available through the cost containment measure through the government's ACCUs—if I understand correctly—and on that basis no business will ever face the penalty. Is that right?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I don't wish to speculate on all of the circumstances, but you can imagine a circumstance where a business wilfully did not comply. Under those circumstances—for whatever reason they do not seek to access the cost containment measure—it would be important that a penalty was in place for such noncompliance.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

That sounds to me that there's almost an intent component in the assessment of whether a penalty is applied or not. We talked about wilful noncompliance with the baseline. My simple understanding of this is that the business is in breach because it can't meet the baseline—the 4.9 per cent per year through to 2030—and it can't access offsets because the market may not have them available. The new piece of information to my mind is that the government is going to make available capacity to cover any business that can't find them elsewhere, which to my mind says that there will be no-one paying the penalty unless, as you said, they are wilfully in breach, which talks to almost some sort of criminal mental intent. If you could just explain that, I'd be grateful.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Duniam, I was trying to provide a plain example of the circumstances that you described and how that might come about. Ultimately a decision about whether to find a business in breach would be a decision for the regulator, and they would step through a series of processes. However, to date compliance with the safeguard mechanism has been 100 per cent. It's not our expectation that covered facilities or covered entities wish to do anything else but comply. All of the design features of the scheme were designed with close consultation with the regulated community to create circumstances where they can comply, and the cost containment measure is part of that, as are the borrowing arrangements that would allow an entity to borrow some of their future entitlements within a five-year period and also the trading arrangements that would allow them to purchase safeguard credits from other participants in the safeguard mechanism.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Have Treasury made any estimations—or are they as part of the budget process—of how much revenue might be obtained through this penalty arrangement?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The assessment is 'none' because, as I have indicated to you, the historical experience is that there has been 100 per cent compliance. I do have some additional information about how a penalty would be imposed in a more tactical way. It is not an automatic penalty; it is the maximum penalty that can be imposed by a court:

… the amount of any penalty imposed for a breach will be decided by the court taking into account relevant matters prescribed by subsection 31(4) of the NGER Act, including 'the nature and extent of the contravention', 'the circumstances in which the contravention took place' and 'whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct'.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

So there's a degree of discretion. Obviously, there's a framework for decision-making for the regulator to view these matters through, and they step through a decision-making process. You're telling me that, if you're in breach and you can't get your offsets, one way or the other, you don't automatically get a penalty. That is an important difference. I wasn't aware of that. Are you projecting no revenue based purely on historical experience or because you believe the framework for decision-making will ameliorate the need to impose penalties in the future?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The way that you framed that circumstance doesn't accurately reflect the options that are available to a scheme participant. The cost containment measure means that, if it was not possible for that business, for whatever reason, to find ACCUs in a market environment, they would be able to purchase them from the government.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I might have a bit more on that down the track, and I'm sure Senator Hughes will as well. In terms of the industries and sectors that are hard to abate, is there a prescribed list or is there some sort of methodology that sets out a threshold by which they can be included as hard to abate? I'm interested in who is included in the concessions and carve-outs.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Perhaps I can answer your question in a slightly different way. The scheme contemplates trade exposed entities that are baseline adjusted. Whether or not an entity qualifies for that second category is dependent on the cost of compliance and what proportion of business revenue—or EBIT for manufacturing businesses—it is. The second pathway was the change to the proposed rules that was announced on Monday as a consequence of the consultation with industry that has been going on for many months.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

So trade exposed industries would include cement, I presume. Could you list for me the trade exposed industries we're dealing with, either by facility or by sector/industry? That would be helpful.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm advised that it is listed in the draft rules and is expressed as part of the production variable.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Where one can obtain draft rules from?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

They were released in January, along with the consultation paper that describes the effect of those rules.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Are you able to table that for me? I don't have a copy here, and we don't have that long. You could read them out if there aren't many.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

They are on the internet. I have googled them on more than one occasion. This is just one page from a quite lengthy document, so I'm not sure that it will really assist you in the way that you hope.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I can guess them. I have my staff googling it for me now. Are cement, aluminium and steel included?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Cement, aluminium and steel are included.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Is fertiliser manufacturing included?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Ammonium nitrate is included.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

How many more are on that list?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

On this page there are 32, but I understand there is more on the following page. It extends to 65 in total.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Thank you for that. I will be in possession of that list shortly, I am sure, which is helpful. I don't know where I was in January—probably on holiday. But we're not now, and we'll be going through this in some detail. So there are 32 industries?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

As I indicated, I failed to turn the page. There are 63 production variables that are indicated as trade exposed in schedule 2.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Thank you for that. So that's the draft rules. Is it projected that any will come on or go off as part of what has been happening to this point?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

No. But, as a consequence of the change announced by Minister Bowen earlier in the week, there will be additional information provided to define those trade exposed activities that are defined as manufacturing activities. It's that category that will allow those entities to have access to the differentiated test for whether or not they should be eligible for an adjustment to their baseline.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I'd be interested to know what the differentiated test actually involves, if you could run me through that. Is the end result, the adjusted baseline, subjective? Is it going to be assessed on a case-by-case basis, or once you meet this test you then get an adjusted baseline which is X per cent as opposed to 4.9 per cent?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

You asked two questions, I think, there. Trade exposed baseline adjusted—perhaps I can take you through all of it. It is the subset of trade exposed facilities that can demonstrate that their costs are above a specified threshold. Facilities will have a different framework depending on whether the facility is manufacturing or non-manufacturing, which is why I made reference to the need to make such a determination in the rule. That differential treatment between manufacturing and non-manufacturing reflects stakeholder feedback on the differences between the two in terms of their margins and their capital intensity. For non-manufacturing, the proposed threshold will be based on scheme cost as a percentage of facility revenue. As a I indicated for manufacturing, the proposed threshold will be based on scheme cost as a percentage of facility EBIT. That simply reflects the differences in the way that these businesses are organised. Either way, trade exposed baseline adjusted facilities can apply for a lower baseline decline rate. The policy rationale for that is that these facilities face concentrated impacts under the scheme and present a genuine risk of carbon leakage. So the minimum baseline reduction for non-manufacturing activities will be two per cent, and it will be one per cent for manufacturing. That baseline would be locked in for three years.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

You said 'minimum', so there's a chance that after this work is done they might find themselves in receipt of an adjusted baseline decline of somewhere between 4.9 and one or two, and for three years. At what point in time in that three-year cycle do they then engage in a reassessment, for certainty's sake, about what comes after the end of that three-year period on the rate?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

There's two questions there. Yes, it is a sliding scale which operates between the standardised expectation of reductions of 4.9 per cent and the minimum of either two or one depending on the category and entity that we're talking about. You asked about the means by which that baseline would be established. Each year the facility would apply, so it would have a forward baseline established for the forward three years, but that would be reassessed the following year, if they wish to.

Ross Cadell (NSW, National Party) Share this | Link to this | Hansard source

In my speech on the second reading and also on NRF I have spoken about my concerns around a specific company, Orica, and their ammonium nitrate production. You've just mentioned that ammonium nitrate is now a carve-out. My understanding is, taking some time so there can be conversation, that Orica may have been in discussions with the government and received some sort of carve-out on the understanding that with some grandfathered contracts to 2029 there may be a carve-out in this form, or some other legislation or delegated legislation to come. Could you tell me how that might come about, what form that is in, and how we could give certainty for that investment decision into Gladstone if that is the case?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thanks, Senator Cadell. I was aware of your interest in Orica. My understanding is that the government has been in discussions with Orica about their particular circumstances and, having reviewed the contractual arrangements that are in place for them, has indicated that it will be possible to grandfather that arrangement due to the existing contractual circumstances and their arrangements with the government.

Ross Cadell (NSW, National Party) Share this | Link to this | Hansard source

Thank you very much. That will be wonderful for the people of Gladstone as well as Newcastle. Are there many other businesses that are in a similar position in the manufacturing space, or is this pretty much a one-off?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The advice I have is that no others have contracts beyond two years, so Orica was in a relatively unique situation.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

On further support for the trade exposed industries, you have referenced before, Minister, in providing flexibility and additional support for industry, the target funding of at least $1 billion in funding for the manufacturing sector through the Powering the Regions Fund, including the $400 million for industries providing critical inputs to clean energy industries, including steel, cement, lime, aluminium, alumina, in addition to both the $600 million safeguard transformation stream and other funding pools including the NRF, CEFC and ARENA. Firstly, could you indicate how the quantum of $400 million was arrived at, and also in the case of the $600 million for the safeguard transformation stream?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Both of these, of course, are a decision of government. The $600 million was announced in January as a consequence of consultations. As I have indicated on many occasions throughout this debate, we have been in very close consultation with covered sectors. The additional resources, the $400 million announced recently, is again as a consequence of those discussions with stakeholders and their articulation of what would be required to support them through this transition.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

On consultation with stakeholders and industry groups, I understand there is at least one manufacturing business that indicated that $600 million wouldn't be enough and that $6 billion was a closer figure for what would be necessary to support a transition. Is the government satisfied that that amount of money is going to adequately support these businesses that are trade exposed to be able to get to where they want to be?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Just yesterday this chamber finished debate on the National Reconstruction Fund, which, as I recall, you opposed. The government is very firm in its commitment to establish arrangements to support manufacturing and industrial activity. The safeguard mechanism is part of that. It is about providing the certainty that is necessary for those businesses to make the necessary investments to remain competitive in a world that is decarbonising. The National Reconstruction Fund is part of that. It is about providing resources to ensure that we continue to be a country that makes things—and, frankly, makes more things than we do at the moment. The Powering the Regions Fund, more broadly, is designed to provide support for the transition, and notwithstanding the specific allocations for safeguard facilities, safeguard facilities will also be eligible to apply for the other resources in the Powering the Regions Fund.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I referenced one business, Rio, who indicated that $6 billion seemed to be something more adequate than $600 million. If you do your maths, they're indicating that $1 in every $10 required to be spent on the transition is going to be a significant impost on business to be able to make the transition. I wonder whether that sort of feedback, as part of this very broad consultation which has taken in the views of stakeholders, was considered as part of what government looked at as it moved into setting up these funds? If you could indicate to me whether that impost on business—$9 out of every $10 coming from a business to be able to transition, as opposed to $1 out of every $10 being the support from government to get to where the government and the world want them to be—has been factored in and, indeed, whether there is any assurance that a lack of support isn't going to result in a reduction in investment, a loss of jobs, the passing on of costs to consumers. Those sorts of things are what we're concerned about here, and based on the feedback of one significant employer, one significant contributor to our economy, it sounds like there are going to be some big costs.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

We have been very grateful for the engagement with Rio Tinto. I do note that Rio Tinto, prior to any obligation imposed by the safeguard mechanism, have their own commitment to net zero by 2050, and that's a commitment that they've made to their shareholders and investors. More broadly, can I just bring a sense of reality to this debate. We have gone through 10 years where the business environment for many of these businesses was terribly uncertain as a consequence of your government's—the previous government's—inability to land a climate policy or an energy policy. I well remember the many Senate inquiries that I attended when these same businesses came before us and said that what they desperately wanted was certainty and that was the thing that would unlock the investment that you're speaking about. For example, I remember when Energy Users Association of Australia said:

We have identified five specific areas of concern that have contributed to the current perilous situation being:

…   …   …

2. A dysfunctional political environment that has dramatically increased the risk associated with investment.

That is what was said when you guys were in charge.

The Investor Group on Climate Change, back in 2017, said:

Australian institutional investors have a strong appetite for low carbon assets, but policy uncertainty and a lack of scalable deals are major barriers.

They said:

Despite the recent surge in renewable energy investment, investment is still not coming through institutional investors.

And:

Yet, the Federal climate change and energy policy landscape provides no investment certainty.

The Energy Supply Association in 2015 said:

The current uncertainty will itself drive up prices. Banks have put away their cheque books on energy projects. Policy uncertainty has rendered electricity generation projects unbankable. That cost has been masked because lower demand has meant we haven't needed new projects but where new assets are needed, that risk premium will be there and it will push up electricity prices.

We are moving in an orderly way to put some certainty into the system after a decade of incompetent management. So, we're happy to have a sensible discussion about how we might best do this—what the best implementation arrangements might be. But I do think we have to have a sense of reality about where we are now and how we got here.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Indeed, I do agree that a sense of reality is important. That's why I'm very concerned about the parallel universe in which this deal was struck up, which is why I've been asking these questions. And while I appreciate the gratuitous political points being made about the last 10 years, this is about looking forward. You won the last election. I find myself on this side of the chamber asking questions of the government about their policy—what it's going to do and how much it will drive up power prices. I can run through the record of power prices in the last term if you want, but that actually doesn't assist us in understanding what this legislation is going to do.

So, back to reality—the laws that you're seeking to implement, the funds and the huge amounts of taxpayers' money we're seeking to appropriate through the various bits of legislation going through the parliament this week—I want to talk about the two funds we've talked about already, the $400 million and the $600 million. I would be interested to get a sense of how entities would be able to access support through these funds. What sort of process? Who do they speak to? What sort of application form? What thresholds? Any data of that nature would be helpful. And then perhaps I might look to Senator Waters down there. I'm sure she has questions, and I can come back to this.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thanks, Senator Duniam. I provided answers to these same questions to Senator Waters when she asked me earlier about arrangements for accessing the fund. The short story is that the funds are being established in the context of the forthcoming budget, and the rules and the approach to grants, including the entity that would be responsible for distributing any funds, are under development.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I do have just a few follow-up questions, but first I will stick with that last subject matter. I know you said that the delivery mechanism for the Powering the Regions Fund will be decided through the budget process. I accept that. My question is whether you've had any feedback from industry or regulators—or from any quarter, really—that the grants hub for hydrogen hubs and modern manufacturing initiative programs are substandard vehicles for getting projects up and running and whether that's therefore factoring into your decision-making when you decide on the delivery mechanism for the Powering the Regions Fund.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Not that I'm aware of, but can I say this: we'd always think carefully about the best way to distribute funds. Sometimes a grants hub is a suitable way of doing it, and you will be aware that the grants hubs across the Commonwealth administer quite a wide range of projects. In this particular case we are simply working through the best arrangements to distribute the resources in the most effective way, given the particular policy task before us.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I notice that you were referencing the draft rules before. When will we see the final rules? Do you have a date on that? When will it be registered on the FRL and ready for us all to see?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm advised the end of April, Senator.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

In relation to the question that I sought some guidance on from you earlier about how the new proposed mechanism will deal with expansions of existing projects that aren't an expansion in scale, as such, but rather a temporal expansion, I'm hoping for an answer, if you've had that advice provided. Essentially, it's whether or not the increased emissions will be treated as within the safeguard mechanism or below the coverage. I just want to know how that will be treated.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

LLISTER (—) (): I think the best way of answering this is to refer you to the provisions in the act, which set out the test that the environment minister would apply. It is this: if in a financial year the environment minister approves the taking of an action for the purpose of a controlling provision within the meaning of the act; and the environment minister is satisfied that the action is likely to result in an increase in the financial year or future financial years of scope 1 emissions of greenhouse gases from the operation of a designated large facility for the financial year or a new designated large facility for the financial year or a future financial year; and the environment minister has been given an estimate of the scope 1 emissions of greenhouse gases from the taking of the action in one or more financial years, they must give that estimate to the minister, the climate change secretary and the Climate Change Authority as soon as practicable. It's the passing on of that information that then triggers a consideration by the minister, or indeed any of those entities—the minister, the Climate Change Authority or the secretary—of whether any additional action is required.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Thanks very much, Minister. I think I understand that. I ask one follow-up question to make sure that I'm following you. If the test in the EPBC Act, which you just quoted from, was an increase in scope 1 emissions—it doesn't have to be a significant increase; it's just any increase. Ergo, in my scenario, where I put to you that the time frame for the operating coalmine would be extended and therefore there would be an increase in emissions but it wouldn't itself be above the 100,000 trigger, I interpret what you've just read out as saying that that increase would therefore trigger the need for the environment minister to pass on the number of those projected scope 1 emissions, which will then be treated in the fashion that you've taken us through—namely, it will be checked against the hard cap.

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

My apologies, Senator Waters, I was being too loud.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I get that all the time!

Andrew McLachlan (SA, Deputy-President) Share this | Link to this | Hansard source

We might have to start again, Senator Waters.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I was on such a roll. Hopefully I can say the same thing again.

Andrew McLachlan (SA, Deputy-President) Share this | Link to this | Hansard source

You were very articulate.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

I just wanted to confirm that it will be any amount of increase because it's already an existing facility, but the EPBC Act is simply extending the temporal range of the approval for that increase, however big or small it might be, and it will be referred to the climate change minister to be assessed as to whether it will breach the hard cap in the normal fashion?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Waters, as I indicated when we last discussed this, I do think it's difficult to give a definitive answer without understanding what the overall profile of the emissions over time of the operation of a facility might be. However, yes, in the main, if this is a covered facility, no matter the scale of the increase, it would engage an obligation to make such a notification. I just make a clarification. I may have misheard this, but just for clarity: the obligation that we're discussing would sit within the Climate Change Act not within the Environment Protection and Biodiversity Conservation Act.

Larissa Waters (Queensland, Australian Greens) Share this | Link to this | Hansard source

Thanks, Minister. Yes, that was my error there. I appreciate the clarification, and I'm happy with the answer.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I wanted to go not to modelling or internal government deliberations on things but to a general sense of whether the government thinks these laws will put downward pressure on power prices.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Power generators are not covered by the safeguard mechanism, or, at least, by the approach considered here.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Noting that, obviously things are interlinked and it might not cover power generators, but there are inputs and other impacts. Will this put downward pressure, to coin a phrase, on electricity prices, consistent with everything we heard in question time this week from the acting leader, and last week, consistent with your election policies and every other government member?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Of course the government is thinking—always—about the optimal pathway for the developmental electricity system, but the amendments before you and the changes that are proposed here don't cover electricity generators. As has been put to you on many occasions, there is something a little odd about being questioned about our determination to put downward pressure on electricity prices when every single member of your party room voted against concrete measures to reduce electricity prices, put downward pressure on electricity prices, in December last year.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

In the real world—where I've been for the last little while—there's been a lot of talk about the agreement reached between the Greens and the Labor Party and the chilling effect that will have—in fact, the direct claim that this will kill off all new coal and gas. Then there's this basic principle around supply and demand, the economics of supply and demand, and when you don't have enough supply you can't meet demand. We need these inputs to be able to generate energy, given the way our energy mix is generated at the moment.

To that point, given the arrangement that has been reached here—we've talked about it enough, the rooms in which it was reached. I'm just seeking to understand whether the claims being made by the Greens about killing off all new coal and gas—what that does to supply, bringing on new supply in order to meet demand. We only have to look at the ACCC and AEMO, who tell us the best way and only way to deal with some of these cost pressures we're facing with electricity today, tomorrow and into the future is by bringing on supply. The Greens tell us that supply is not going to be met, that we're killing it off and it's not going to be a part of what happens here, as a part of the arrangements reached under this legislation.

Is it still the government's view that this law, this legislation and everything it entails, even though it doesn't cover energy generators but has the impact that we've talked about here, will put downward pressure on electricity prices in this country?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The big facilities—Santos and Shell—have very ambitious goals for reducing their own emissions. I think Santos is aiming for net zero by 2040. I think Shell is aiming to halve their emissions by 2030. These entities, these important participants in Australia's energy system, are already on this pathway. I think you should reflect on whether the claims you are making are really aligned with the publicly expressed intentions of the companies that you are talking about.

The safeguard reforms take into account the possibility of new entrants and still deliver 205 million tonnes of abatement. We don't accept the assertions that you are making around implications for supply. That is not our expectation.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

They're not my assertions. They're the assertions of the Greens and industry leaders. But we'll let the people of Australia be the judge, as time marches on and we see the full impact of your laws in partnership with the Greens.

If I could go to the impact on facilities, there is one company—I've got a range here that I want to run through, as a matter of fact. Incitec Pivot is one of our nation's leading suppliers of fertilisers. You'd be familiar with them. They have a number of facilities in Queensland that are going to be impacted by the changes, as I understand it. How many Australian farmers rely on fertiliser products produced by this Incitec Pivot?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I don't intend to comment on the individual business decisions of individual businesses. That's really not something I'm in a position to do.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I'm not asking about individual business decisions. Obviously the laws we make in this place have an impact on the cost of doing business. That's what we've been talking about. You've just told me that I am wrong for suggesting that anything we do here has an impact of that nature. I'm asking about Australian farmers who are relying on this business. I just wonder whether, as part of the broad-ranging consultations that have occurred that you've talked about, whether this sort of thing, with the stakeholders, the NFF or the Queensland equivalent et cetera, might have reached into the consultation process and indicated that the facilities that Incitec Pivot owns, what sort of an impact any changes to the arrangements they operate under would have on the farmers. Hence my question about how many farmers rely on their products.

While you consider that, energy and fertiliser make up half of the total operating cost to grow crops like oats, wheat and barley. Has there been any assessment of the financial impact of Labor's changes to the safeguard mechanism on farmers that grow these crops?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

You asked me about the fertiliser question and what impact it might have on fertiliser. I guess the answer is—and that's why I am reluctant on to comment on individual facilities—that the impact of these reforms will vary between facilities within these sectors. Some facilities that have a lower emissions-intensive production might receive safeguard mechanism credits. They would be able to sell those to other safeguard facilities. As we have already canvassed at length, trade tailored assessment is available for trade exposed facilities.

For the agricultural sector it is perhaps worth noting that the safeguard reforms will result in increased demand for ACCUs, incentivising abatement in the land sector and allowing landowners and farmers to generate another source of income.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I know Senator Brockman and perhaps others have some questions around the NFF's concerns around the turbocharging, as the NFF puts it, of demand for carbon abatement on the land. I don't want you to try and guess what businesses are doing. I guess I am using this company as an example. Incitec Pivot has a number of entities in Queensland that will be affected by the changes here. There will be an increase in the cost of what they do. The IMF actually found that a one per cent rise in fertiliser prices increases food commodity prices by 0.45 per cent . Minister, can you indicate whether the government accepts that there's a close correlation between, for example, fertiliser price increases and how much Australians pay for their groceries and, to that end, if there is an increase in the cost of doing business for Incitec Pivot, for them to produce the product that farmers rely on, that that would then be passed on to the consumer? Is that something that has been contemplated and potentially concerns the government?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The government is in fact very concerned about the affordability of food and groceries. Indeed, in the October budget fruit and vegetable prices were estimated to be eight per cent higher than what they would otherwise have been. It was a consequence of the flooding events at the time. The truth is that climate change is resulting in increased frequency and severity of severe weather events—drought, flooding, fire and storms. These events do disrupt supply chains, impact productivity and increase insurance costs for business and consumers. I raise this because it's an example of the mistaken analysis of looking at only one variable in the costs that are affecting Australian consumers. We are going through a period of change in what's expected from the investment community, in our global market, in our global supply chains and, frankly, in the operating environment, particularly for Australian farmers. We understand and major agricultural producers understand that the transition towards net zero is extremely important because it impacts, more than most sectors, the ongoing capacity of the agricultural sector to produce food and fibre.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I appreciate that analysis. Of course, in addition to those increased costs relating to fruit and vegetables that you mentioned, Minister, the ABS indicated that the cost of bread and cereal products has increased by 12.2 per cent over the last year, the cost of meat and seafood has increased by 8.2 per cent and the cost of dairy and related products has increased by 14.9 per cent. So it's across the board, and I accept that there are variables and many inputs. But, just because there are other impacts on the price, including climate induced flooding or drought, that doesn't mean we should then up the price or put pressures on industry elsewhere. I'm going to move off the farming component now, and I might go to some broader questions around facilities, if I may. Of the 215 facilities captured under the mechanism, how many had existing plans to reduce their emissions by 30 per cent by 2030?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The information I provided to the chamber is that 80 per cent have a commitment to reduce their emissions to net zero by 2050.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

So 80 per cent of those 215 facilities have a plan and a commitment to reduce their emissions by 30 per cent by 2030? Or is it net zero?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I said net zero by 2050.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Then I'll ask my question again. How many of the 215 facilities captured by the safeguard mechanism had existing plans to reduce their emissions by 30 per cent by 2030?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

There are obviously some, such as Fortescue, committing to net zero by 2030, but I don't have a complete list of the 2030 commitments for all of the covered facilities.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

Does the government intend, or did the government at any point intend, to investigate how many of the facilities captured by the safeguard mechanism did have a plan that mirrored, matched, bettered or was close to the government's plans to reduce emissions by the target amount?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Our focus is on meeting our national target. As we talked about in this chamber on many occasions, that is because it is the single most significant thing that Australia can do to catalyse the necessary global action that we need to tackle dangerous climate change. We have been through, this afternoon and this morning, the extensive consultation process that has been undertaken, talking with all of these facilities. We examined, in many instances, what businesses were keen to discuss with the department about their plans and their thinking. There is a wealth of information in the public domain. In fact, I was recently, just now, pointed to Incitec Pivot's Climate change report, which talks about their commitment to reducing emissions and the four projects that they are undertaking in Australia and internationally as they seek to deliver material change in their operational emissions. They said:

These projects collectively give us a pathway above 42% reduction in the medium term with our current asset portfolio.

I mean, business is doing this. And as we've canvassed in a range of different ways over the course of the debate, they are doing so as a consequence of a range of forces, including the investor community.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

So, just back on 2030, I seek clarification. Did you say that Incitec Pivot is reaching the 42 per cent reduction by 2030?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm reading to you from their media release. They say:

These projects collectively give us a pathway above 42% reduction in the medium term with our current asset portfolio.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

I'm not sure what 'medium term' is, but I'll ask one more time on this question around the facilities—there are only 215 of them—whether the government is seeking, or sought before going down this pathway, to understand how many of the 215 facilities caught by the safeguard mechanism had plans to reduce their emissions by 30 per cent by 2030.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Duniam, I have answered your question. I will give it one more go, which is to say that it is undoubtedly the case that the government has engaged deeply and over an extended period of time with the regulated community in relation to this reform. We have talked about the many activities that took place—the round tables, the public consultation, the written consultation, the targeted meetings—because the government does seek to deeply understand the plans and commitments of the businesses that are engaged in the safeguard mechanism. That involved talking to them about their plans. Did the department gather exactly the data you are requesting? Perhaps no. But I don't think you can deny that there has been deep and sustained engagement over a long period of time with the covered businesses.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

No, I don't deny what you've said about the deep, sustained, thorough consultation. You made a point there about deeply understanding the businesses. I would have thought, where the businesses had plans that mirrored or matched something similar to what the government was intending to do, that it would be something government might have done. But you've said you've answered. You've told me you don't have that data, or the government perhaps does not have that data. I was just provided with the information that Incitec Pivot said they'd reduce by 25 per cent by 2030. So, that's handy to know.

I will just ask: as part of the agreement with the Greens, all new gas fields supplying LNG facilities will need to be fully offset from day one. Does this apply to new wells, or just new projects? I wonder whether there's any clarity there.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Sorry about the delay. I just wanted to pause, because your characterisation of the arrangements was not quite accurate, and I thought it best to give you very specific information. New gas fields supplying existing liquefied natural gas facilities will be treated as new facilities, regardless of their ownership structure. On that basis, they will be given international best practice baselines for the carbon dioxide in their new fields. For these fields' reservoir CO2 emissions, best practice is a zero, given the existence of low-CO2 fields and opportunities for carbon capture and storage.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

So, to be clear, Minister, that includes the expansion of existing operations. Is that right?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

What I've indicated is that it is where there is a new gas field. Whether or not the expansion of an existing operation would be understood in those terms is really dependent on the particular circumstances, and it is only for those supplying existing liquefied natural gas facilities.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

We might come back with a couple of further questions on that, because I am interested in exactly what might apply—without going into hypotheticals and cameos. I know Senator David Pocock has some questions, so I'll just ask this one, which I suspect you may not be able to answer. I just want to know whether the financial data that was used to model the impact of the safeguard mechanism on individual safeguard facilities was information relating to the facilities, or whether it was information relating to the corporate entities that owned the facilities.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Implicit in your question, I think, is a set of assumptions about inputs and the workings of the modelling. I have on successive occasions given you and also Senator Hughes some indication of what work was done. I've also indicated that it was cabinet-in-confidence and commercially sensitive. I don't intend to have any deeper discussion about the content or the nature of the modelling.

Jonathon Duniam (Tasmania, Liberal Party, Shadow Minister for Environment, Fisheries and Forestry) Share this | Link to this | Hansard source

On that, I understand cabinet-in-confidence. We have sought the information. Even offering a private briefing on the way through might have been handy. But it's been put to me that the information used to underpin the modelling was corporate data rather than being reported by facility. I would appreciate it if you could confirm otherwise, but to my mind that might skew the data that underpins the modelling. It's hard to pursue this properly, because we are operating without access to the information. You've explained why, and I'm not going to ask you to table it or go into detail on it. But if an assurance can't be provided that that information, as I've just characterised it, wouldn't result in a skewed outcome—that is, that it is facility as opposed to corporate, which is what I'm told would be a better arrangement—then I think we have some concerns. So I just wonder if you can provide that assurance that the information provided—the financial data—was by facility. I don't want to know what it said or have it tabled; I just want to know that it was by facility, as opposed to a corporate-level piece of information.

David Pocock (ACT, Independent) Share this | Link to this | Hansard source

In the interests of the committee's time, I might just make a few remarks and briefly foreshadow amendments that will be circulated later, for when we get to them, and then I have a proper question at the end if that's alright.

I've been a senator in this place for a short time, but, like all senators, I am conscious of history, and one thing that seems very clear to me is that this parliament will be judged on the way that it approaches climate change. We know that there is no time to waste, not just because the scientists are urging us and warning us, as we saw in the recent IPCC report, but because we are starting to live with the impacts. We are seeing the impacts across the country. Our farmers are feeling the impacts. Their profits are down 20 per cent since the year 2000 due to climate change. This is here. This is 1.1 degrees of warming that we're living with, and the consequences of moving beyond 1.5 degrees of warming are stark. We know that there are tipping points for cascading climate breakdown, and failure to take action is morally irresponsible.

This week, as a parliament, we are taking a significant step in the right direction. But, to be clear: the reform is far from perfect. We're a long way away from the ideal climate policy in Australia. Economists, including the Productivity Commission, tell us the most efficient way to encourage climate action is to put an economy wide price on carbon, as many other countries have done. This mechanism only covers the 215 heaviest emitters, as we have heard. We must ensure that we keep that in mind because it is very clear that this mechanism is not in line with the goal of 1.5 degrees of warming. It's a start, but our ambition is not enough. Furthermore, the whole mechanism is built on offsets, which we know should only be used as a last resort. In this policy, they're available without restriction. As has been noted, the only other country which allows unrestricted offsets is Kazakhstan.

But politics is all about compromise and getting things in place. This reform, while far from perfect, is a substantial step in the right direction. The reform will put downward pressure on emissions from the industrial sector, and that alone is the big change. Finally, businesses will have better incentives to invest in new technologies and decarbonise. For too long in this country the business community has been ahead of government on the issue of climate change. The businesses I speak to want to decarbonise to give themselves the edge in a competitive international environment. Many of our major trading partners are moving away from fossil fuels and starting to look for low- or no-carbon products.

It's up to us here in this place and those in the other to create a regulatory environment that will encourage the success of future industries like green steel and green aluminium. We need to incentivise decarbonisation so the businesses we want to form part of our future are able to decarbonise and remain here in Australia. I welcome the government's commitment to provide an additional $400 million from the Powering the Regions Fund to assist strategic industries like steel, cement and aluminium to decarbonise. But the reality is that the billion-dollar total is a drop in the ocean when it comes to the capital cost of technology transition and decarbonisation. We have seen the Inflation Reduction Act in the United States and a similar measure in the EU provide a huge boost for sustainable manufacturing. I call on the government to do more in the upcoming budget to support the businesses and industries that will drive future economic growth.

Businesses are not the only ones calling for action on climate. People around the country want us to take a step forward—a step that will result in actual reductions in emissions. They are clearly frustrated with the politics of climate change and want to get on with the job of making our future safe. My sense is that they want to step forward—a step in the right direction, even if it does not go far enough. This policy, despite its flaws, is a significant step in the right direction. Our heaviest emitters will reduce their net emissions by more than 200 million tonnes between now and 2030. Total emissions will come down. New fossil fuel projects will find it more difficult to set up, extract our resources and send them—along with hefty profits—overseas, while they continue to damage our climate, the climate that we share. And on the back of this new green industries will develop.

I would like to acknowledge Minister Bowen and his office for their work on the safeguard mechanism. Throughout discussions and negotiations with the minister there was much we did not agree on, but it was clear where the minister stood, and I thank him for the way he approached our conversations. Ultimately, a point was reached where I'm satisfied that the reform is a substantial step in the right direction, but we need to move a lot faster. This is just a step.

I call on the government to have more ambition as they formulate the many pieces of climate policy we will need to make up for the decades of inaction, so we can protect the people and places we love. There is so much work to do, from fuel efficiency standards to electrification across households and businesses, and the setting of a far more ambitious 2035 emissions reduction target.

But before we get to the safeguard mechanism before us, and I believe that this reform can be improved, I plan to move a series of amendments. As I said, to save the Senate's time I will foreshadow them now. Amendments (1) and (2) on sheet 1903 revised circulated in my name improve the way that offsets are used under the reform. Offsets are a very necessary part of this but should be reserved for hard-to-abate industries. They should only be used as a last resort, and this amendment will make sure that is the case.

Amendment (3) on sheet 1903 removes the price cap on ACCUs and limits the risk to taxpayers should the cap be breached. If we're going to have a market mechanism, I don't see a reason to put a ceiling on the price. If you're going to use the market to try and fix this, then it really doesn't make sense to cap it and, in doing so, potentially expose the Commonwealth and taxpayers to a liability should the Commonwealth run out of ACCUs.

The amendments on sheet 1915 discount the value of offsets if more than 50 per cent of compliance with baseline is achieved through offsetting. This will drive onsite abatement and bring forward investment in decarbonisation. If we're not going to have a hard cap on ACCUs there is provision in the regulation-making powers for the minister to discount ACCUs, referred to as the four-fifths rule, and I really believe this would be a valuable tool in imposing a carbon mitigation hierarchy which is well-established and acknowledged around the world. It makes sense for Australia to have one of them embedded in this legislation.

The amendments on sheet 1907 extend standing to allow third parties to challenge issues in the carbon market. This is simply an accountability measure that will improve the integrity of the carbon market. There has been much conjecture about certain methodologies. This whole reform hinges on integrity in offsets. It makes sense to me that people should be able to go through the process of challenging projects should they think that there are issues.

For me, the most significant detractor from this bill is the unlimited access to offsets. I have concerns that it is shifting a huge amount of emissions reduction onto the land sector rather than abating them on site.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

tor McDONALD () (): Minister, I've just been up at a Dairy Australia function where they felt caught by surprise by the amendments to this legislation around human induced regeneration. Have you identified the number of projects that are currently registered that would be affected by this legislation?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator McDonald, I answered this question earlier in the debate. The number of projects associated with human induced regeneration is 371. There is no reason to believe—well, perhaps I'll start with what the commitment is here. We have committed to the Chubb review. The Chubb review's recommendation 8 makes a series of recommendations about how the human induced regeneration method should be interpreted by the CER when it's evaluating projects and evaluating credits to be assigned as a consequence of activities within projects. Our expectation is that the Clean Energy Regulator will adopt that and apply those recommendations as set out by Professor Chubb.

It is true that 371 is the maximum number of projects that may be implicated. But, in truth, we have no reason to think that these projects are not already in compliance, and we expect how this will be implemented is that when they go to the Clean Energy Regulator to seek their credits it would be at that point that the Clean Energy Regulator would seek to implement the recommendations around interpretation of the method suggested by Professor Chubb.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

I believe Senator Brockman has more questions, in this regard, so perhaps I won't dwell on it. I want to return to the resources sector. I listened carefully when you spoke earlier about not disclosing the detail of the modelling. However, I've had consultation with a number of the 215 emitters who tell me that whilst they have a program to reduce emissions over the medium turn they will not meet the targets by 2030. When they've raised this in consultation with the department, they've been told they will just have to pay the penalty. Has there been modelling done by the department that would provide information on the budgetary impact of that?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

r McALLISTER (—) (): I don't believe the dialogue, as you characterise it, is a fair characterisation of the many interactions that have occurred between the department and stakeholders over a very long period of time and by multiple means. However, if people have concerns I would always be open to you making a referral, and my door is always open to stakeholders.

I was asked this same question, I think, by one of your colleagues. The answer I provided is that the government does not anticipate a revenue stream, of any kind, arising from businesses paying the penalty. Historically, the level of compliance within the safeguard mechanism was 100 per cent.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

If the modelling would imply that the compliance will be 100 per cent, there are resources companies that have identified that the technology is not yet available to them to allow them to make the transition, particularly from diesel, from new motors, that would allow them to comply with the—

I'm sorry, if you're listening to something, I don't want to interrupt you. Should I give you a second? What I was asking, Minister, is that resources projects have advised me that they are on a pathway to emissions reduction, net zero, but that the technology that would allow them to convert from diesel to new motors won't be available to them by the 2030 time frame. One of those emitters told me that it would be a $50 million penalty that they expect the safeguard mechanism will cost them. I'm trying to understand, in the extensive consultation that has happened between the department and resource companies, if there is an understanding of the cost impact across the 215 big emitters, given that we have companies that have themselves modelled the costs that they will incur.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thanks, Senator McDonald. I do appreciate you referring to the plans that some of these businesses have in place. I think one of the things that a mature debate might recognise is that many of these businesses are thinking very carefully about their own transition to net zero.

The Minerals Council of Australia, of course, regularly issue a progress report on how the sector is moving and they are very thoughtful about the technologies that would be necessary to get there. For example, the Minerals Council's most recent report indicated:

The mining industry recognises the need to reduce emissions globally, nationally and at the sites and facilities driving Australia's resources industry.

They go on to say:

Achievement of both the 2030 target and the 2050 net zero target will require close consultation … with … stakeholders.

That is a welcome and positive engagement from the government's perspective and, I suspect, from the community's perspective as well.

The safeguard mechanism is deliberately designed to minimise the costs associated with implementation, and it provides flexibility for that reason. We've had a very big debate in recent months around the nature of the government's reforms to the safeguard mechanism, where various people have expressed views about that flexibility. But, for the reasons you describe, there are limitations on the technology available this decade for some of the covered facilities. In addition to that, in some instances the necessary investment to make it a reduction may well be somewhat lumpy. It might be something that you do at a certain point in time.

The design of the compliance arrangements allows for borrowing. It allows for banking. It allows for a business that makes a large investment now to reduce its emissions below the baseline that's required of it—in, say, this financial year—to create credits and sell them to another provider. Of course, it allows for the purchase of ACCUs which has been the subject of quite some public discussion.

All of these design features are there to provide flexibility and to allow optimal progression towards net zero whilst maintaining an incentive to get on that journey. Many of the businesses that are covered already have a public commitment to net zero by 2050, and many of them have interim targets as well.

We talked quite a bit about the modelling and analysis that has been undertaken. I would say to you that the most important feature of the policy development around this has been a very extended engagement and consultation process with business. It has run over a very long period of time. It has been supported by a Senate inquiry process. It has been supported by public consultation and the issuing of discussion papers. We have engaged deeply to understand how these impacts might bear on individual businesses and on sectors. We've done our best to strike a balance. Many stakeholders have told us that we've done so. We're providing the certainty that business needs to make necessary investments, but also getting us on the path to meet our commitments to the international community.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

Minister, I won't continue pressing you because my sense is that you're not going to be able to provide me with the number for the 215 companies that have identified that they don't have the technology available before 2030 to meet the emissions reductions that are modelled—the 4.9 per cent each year. Consequently, I think I'm going to have to find another way to identify that information. I have one company that has identified $50 million. If we extrapolate that across the 215, that is going to be a significant impost on those businesses. If the government doesn't know what that number is, I am concerned, because that is going to be money that would otherwise go into jobs, emissions reduction and other investments. I think the gap in the government's understanding of the impact of this tax is a gap that should be understood and appreciated by both the tax department and this department and certainly by the business community more broadly.

Minister, how did the government determine the priority industries that would qualify for funding? For example, the government has picked out cement and aluminium. If they're part of the energy transition, why would iron ore, met coal, copper and nickel—all of which the World Bank says are essential—not have also been included in that list?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Critical minerals are of course the subject of a separate process and a separate strategy for government. The sectors that you're referring to now are essentially judged to be critical to the clean energy transformation for the manufacturing sector. Retaining this capability for these hard-to-abate sectors is, in our judgement and based on the feedback we received through the consultation, essential. It was on that basis that we made adjustments to the scheme design and some of the financial arrangements, as announced by the minister earlier on.

David Shoebridge (NSW, Australian Greens) Share this | Link to this | Hansard source

This bill has made it abundantly clear that the Labor Party still functions as the political wing of the coal and gas industry. Labor's first draft of this bill actually allowed carbon pollution to rise and unlimited dodgy offsets to flood the market. It was literally insupportable. It's clear that billion-dollar multinational fossil fuel companies, like Woodside, Santos, Adani, the Minerals Council and Chevron, write the climate policies of both major parties. Coal and gas corporations remain the puppeteers of both Labor and the coalition, and, unfortunately, as we saw from the first draft of this bill, Labor is a very willing puppet. Despite all the promises of the climate election, despite climate scientists, experts and every credible international organisation telling us we need to keep all new coal and gas in the ground as a bare minimum to save our burning planet, Labor is still refusing to deliver a national climate policy that seriously addresses the science and meets the reality of the climate emergency.

The Greens negotiated long and hard on this bill because we knew, and we know, that we can't wait another moment for climate action. We know how important it is to take immediate action to keep every single tonne of coal and gas in the ground that we can. That's why we kept going back; that's why we kept fighting. When we look at where we've landed, what does this actually mean for those of us—the millions of Australians—who care about, voted for and demand the climate action that the science is telling us we need? It shows we've got our work cut out for us. It shows we need to break up the weird, toxic marriage between the fossil fuel industry and the Commonwealth government. We need to stop the revolving door of major party donors, who literally switch their seats in this place for seats in the boardrooms of some of the most polluting companies in the world. It's no wonder that climate politics are so cooked, when the chefs are paid and run by the fossil fuel industry.

But there is good news. In the face of all of those forces, in the face of decades of climate-action obstruction, and despite Labor continuing to act as the political wing of the fossil fuel industry, the Greens have secured some genuine wins that will make pollution go down in a serious way. Because coal and gas have taken a huge hit with what has been negotiated by the Greens team. I want to give credit to Adam Bandt and his team for taking that hard road, for continuing to go to the negotiating table despite what at many times seemed to be a no from the fossil fuel industry delivered by the Albanese Government.

Here are some of the key wins the Greens have secured: a legislated hard cap on emissions, which means that emissions will ratchet down and actual pollution must decrease, not just the offset. That will effectively knock off around half of Labor's 116 coal and gas projects. That's a huge blow to the worst polluting projects and will make a real difference to the climate. And here's a big reason to celebrate: we have derailed the Beetaloo and Barossa gasfields. I pay tribute to those First Nations communities and activists. I pay tribute to Senator Dorinda Cox, who has campaigned long and hard against those projects. We're not done, but the future sure is looking brighter.

The Greens have secured a pollution trigger, a carbon trigger, which will force the government to assess the climate impact of all new coal and gas projects. A climate trigger has been a key demand of the environment movement for years now, and we've knocked off most of the dodgy list class of assets. Our changes could take about a quarter of future offsets out of circulation. That means companies have to commit to more actual pollution reduction, and the cost of those offsets, the cost of doing nothing, will go up. Crucially, new gasfields will have to be net zero from day one. That means opening up new gas is increasingly not viable financially.

We know that's not enough. We know that all new coal and gas needs to stay in the ground if we're going to keep this planet liveable and deliver a secure future for our kids and their kids. We have work cut out for us to break up the toxic marriage between the fossil fuel industry and the major parties in this place. The fact we had to fight Labor tooth and nail to secure these wins is more than frustrating, but it also shows what we can win. We don't win that alone here in parliament. We win that because there are millions of Australians behind us demanding this action.

The fight is not over, but today we take hope from the fact that we have stopped many of the 116 new coal and gas projects in the pipeline from going ahead. We take hope from the fact that carbon pollution for the first time will be compelled to go down. We take hope from the fact that we have derailed the Beetaloo and Barossa gasfields. We can also take heart from the fact that the share price of several large coal and gas corporations took a hit straight off the back of the announcement of what the Greens have achieved. The safeguard mechanism, this bill, which regulates Australia's 215 biggest polluters, will now have a hard cap on emissions thanks to the work of the Greens, meaning real pollution must actually come down and the coal and gas corporations can't just keep paying their way out with dodgy offsets.

These are big steps towards a future with no coal and gas, but let's be clear, this is the start of an ongoing fight. Every single coal and gas project that gets approved, if any do, every single one will be approved by Labor, because the only thing stopping us implementing policy that meets the science, that keeps all new coal and gas projects in the ground, the only thing that is stopping that is the lack of Labor's ambition.

I again give credit to those millions of Australians who voted for more. We are here to continue to deliver more. We will support this bill because we know it's going to make a meaningful difference, but by no means is this the end of the struggle.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I was going to ask a question, but I feel that I do need to respond to some of that in addressing this bill. I mean, really, we have the Greens standing up in this place, talking proudly about having depressed the share price of great Australian companies like Woodside. I find it shocking that they would stand up in this place and say that. These are people who have just done a deal with the Labor government, a government that they describe as a corrupt ecocidal petrostate. This is the deal that you've done, Senator Shoebridge, and then you stand up in here and you talk about how wonderful it is that you depressed the share price of a great Western Australian company, a company that is in the super funds of hundreds of thousands of Australians, particularly Western Australians, and a company that employs thousands of Western Australians and, with secondary flow-on effects, employs probably tens of thousands. It supplies gas to DomGas of Western Australia, which provides energy and heat for industrial uses right across my home state of Western Australia.

WA is also the highest domestic gas user in Australia, so it provides heating, it provides gas for stoves and it provides gas for hot water. This is a great Western Australian company. It doesn't deserve to be treated with contempt by this place, by this Labor government in alliance with the Greens. Again, I can't get pass this: Senator McKim described the government they just did a deal with as a 'corrupt ecocidal petrostate'. This is the kind of alliance in government that we have between the Labor Party and the Greens. I do have some substantive questions for the minister, but I will leave it there for now.

David Pocock (ACT, Independent) Share this | Link to this | Hansard source

Following on from my comments earlier, one of my big concerns is the reliance on the land sector and offsetting. I have had concerns raised with me by farmers. Some farmers, who do have carbon projects generating ACCUs, are saying that they would prefer not to have to sell their ACCUs to fossil fuel companies who are making their lives harder and risking their family farming operations. And, earlier today, the National Farmers Federation put out a media release titled Safeguard mechanism needs to be safe for agriculture,and to quote the CEO, Tony Mahar:

The safeguard mechanism will turbo charge demand for offsets, and with few other options on the table, emitters will look to farmland.

Agriculture is a truly hard to abate sector, unlike fossil fuels. We have alternatives for them, particularly new fossil fuel projects—there is no real argument for them. Farmers who wish to offset their own emissions, or 'inset' their emissions, are concerned about competing with fossil fuel companies for offsets, offsets that will most likely come from the land sector. We've seen farmers having to compete with fossil fuel companies for water during drought. They simply don't have the same budgets and the same access to capital. What reassurance can the government give that farmers will not suffer in the long-term as a result of the high offset prices due to huge demand from fossil fuel companies?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thanks for your question, Senator Pocock. The situation you describe is an interesting one, isn't it, because implicit in the way that you ask the question is an acknowledgement that the land sector potentially, in a low-carbon world, is a source of real value. It offers enormous potential to store carbon, and, once a value is attached to that, that's potentially a source of value for landowners and landholders that can provide social, economic and environmental benefits to regional communities and to the landholders themselves. There are co-benefits as well. Soil carbon projects obviously have a carbon benefit, but they also improve soil health and potentially agricultural productivity. We've got lots of people operating in that way now around the country, doing interesting work and I think advocating in really interesting ways for sustainable farming.

But you're right that it's not without tensions, and we ought to pay attention to the way that change impacts on regional communities. This was something that was considered by Professor Chubb in his review, and that review recommended that the government continue to support regional communities to participate in and to benefit from the creation of ACCUs. The government is working on implementing that recommendation. As a first step the government will implement a $20 million carbon farming outreach program. This program will support farmers and other land managers to access independent trusted advice to empower them to make informed decisions about whether and how to participate in carbon markets. This will ensure that farmers can make the decisions that are right for them and right for their businesses.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

Minister, if we could turn back to our last topic, I asked a question about how the government determined the priority industries which would qualify for funding. I identified some other transition materials—iron ore, met coal, nickel and copper—none of which are on the critical minerals list, which is surprising to many because I believe many of those should be listed, but they're not. How did you pick out cement and aluminium to be priority industries which would qualify for funding?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

McALLISTER (—) (): Senator McDonald, I'll return to the broad idea that I've put to this chamber on many occasions over the last hours, which is that this has been a very detailed process of engagement and discussion with businesses. There were some particular issues that were identified through the course of the consultation, and they have led the government to create a separate stream of funding for the manufacturing sector, as you've described. However, for clarity, all safeguard mechanism participants will be broadly eligible to participate in the Powering the Regions Fund allocations overall, subject to other eligibility criteria. There is also the original $600 million for decarbonisation, and that is available to a broad range of safeguard participants.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

That is good news, Minister, and I'm sure that all the resource companies will have taken that on board and will be examining the other guidelines that you just referred to. Are those guidelines for application for the priority industry funding or for the $600 million decarbonisation fund available?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

enator McALLISTER (—) (): I have answered this already. The government is developing the funding allocation approach, including the delivering entity for both the $600 million fund and the $400 million fund, as part of the budget. For clarity, I can run through with you again the eligibility for both of those because I want to make sure that we are both talking about the same thing, so I would like to just run through it with you specifically. There are two streams, and I'll give them their proper names so that we can talk about the same things. The safeguard transformation stream will provide dedicated funding for projects that reduce emissions at safeguard facilities that are trade exposed. That stream will support projects that reduce emissions covered by the safeguard mechanism, specifically, and eligible facilities' scope 1 emissions. It is intended to be technology and project neutral and can support a range of project types like energy efficiency upgrades, shifts to lower-carbon processes and fuel switching. The second stream, which I think is the one you were originally asking about, is a $400 million stream of funding that's been announced for industries providing critical inputs to clean energy industries, and, as I indicated now, the program guidelines will be developed for both of these programs in the coming months.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

I've asked you a couple of times about how it was identified that cement and aluminium were in. You're saying to me that those other important transition elements like copper and nickel, iron ore and met coal would be able to apply under the developing guidelines for the $400 million fund. Can I clarify that that is correct, that I have understood that correctly.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Almost correctly. The $600 million fund is the safeguard transformation stream. That is funding that will reduce emissions at safeguard facilities that are trade exposed. The definition of a trade exposed activity is defined by what are called 'production variables', and they exist in the draft rules that have been published alongside this legislation.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

So many questions so little time. In determining the hard cap on emissions, has there been a calculation of how long the safeguard mechanism facilities currently covered will operate for? I'm wondering if that means no new entry for hard-to-abate industries unless facilities close.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The safeguard mechanism makes an assessment about the likely emissions in the case of no intervention and seeks to apply our 43 per cent obligation to the covered entities. In establishing the baseline reduction requirements, the government gave consideration to expected increases in production, including the possibility of new entrants. That's not specific to particular kinds of facilities or particular kinds of activities. It's true across the board.

David Pocock (ACT, Independent) Share this | Link to this | Hansard source

Minister, one of the things we heard during the Senate committee from a number of people, including the Australian Workers Union national secretary, Daniel Walton, who we've heard a lot about during the Committee of the Whole so far, was that there was a need for a carbon border adjustment mechanism. My understanding is that the government has committed to consultation on a CBAM. I'm interested to know what is a realistic time line for the implementation of a CBAM, should the consultation show that this is something that has widespread support.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I was seeking clarity about some of the particulars of the review. You're right. The government has committed to initiating a review of CBAM arrangements, with particular focus on cement and steel, although not exclusively on those things. I am advised that we would expect a 12- to 18-month process to examine that issue.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

On the same issue, of the CBAMs, how does the government not, by going down this path—I'm not saying you've committed to it, but we know that overseas jurisdictions are seriously considering it. How does it not turn into a modern form of tariff?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I imagine that these are questions that could be contemplated as part of a review.

Michaelia Cash (WA, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Could I just change to another topic? I've got a discrete set of questions in relation to lithium mining. Just so I have absolute clarity, will lithium miners be impacted by the changes to the safeguard mechanism? I'm happy for you to seek advice.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The sort of entry point for a facility to become a covered facility is 100,000 tonnes of carbon dioxide or equivalent in a year. That is the same as the arrangements that were in place under the previous government. So, it depends on the particular nature of the operation, and I'm advised that there are a number of facilities that are covered at the moment.

Michaelia Cash (WA, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

So, the answer is that yes; they could be covered. I understand that. Can I get you to guarantee, though, that no lithium miner will be worse off under the changes?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Amongst the many virtues of proceeding down this reform path is our ability to provide certainty for a range of entities that seek to make investments in Australia. Anyone who is making an investment at the moment I think already understands that they will be required, whether as a consequence of international markets or their investor community or of regulatory arrangements or some other pressure, to move to low-carbon arrangements. What the implementation of these reforms will do is give anyone who is seeking to make a decision some measure of certainty about what the government of Australia expects of them in contributing to our transformation to a low-carbon economy.

Michaelia Cash (WA, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Thank you for that answer. Based on that answer, a lithium miner could be worse off. They would at least have knowledge of what the government wants them to do and certainty in that regard. In terms of their ability to undertake this process if they're impacted, they could be worse off than they currently are.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Cash, I'm not going to speculate about hypotheticals. It's just not possible for me to respond to a hypothetical of this nature.

Michaelia Cash (WA, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

I'm a bit concerned that lithium miners in Australia are considered to be hypothetical situations. They'd be very interested to know that. In terms of lithium mining itself, some companies are being provided with a subsidy, a grant or support through other measures provided by the federal government. Certainly when we were in government we wanted to increase the mining and processing of critical minerals, such as lithium, obviously, which supports Australia's energy transition. In terms of whether they're worse off or not, if they're currently receiving the grants, the subsidies or support but they are impacted by these changes—so, they've been given this grant, subsidy or support to undertake the mining and processing of the critical minerals—is there some way to ensure that they are no worse off as a result of being impacted by the changes?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Throughout the course of the debate I have provided information to the chamber about a range of financial supports that will be available to safeguard participants. I have also indicated that the program guidelines for those funds are under development in the context of the budget.

Michaelia Cash (WA, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Thank you for raising the rules. Will there be an exemption in the rules for critical mineral processors if they are supporting our energy transition?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

It's a quite general question. I suppose there are a range of characteristics, in scheme design, which seek to respond to the individual circumstances of particular activities. In particular, on Monday the minister indicated his intention to establish a distinct test for manufacturing entities, so as to assess whether or not they would be eligible for an adjusted baseline. To the extent that people are engaged with activity associated with manufacturing, there are some very particular arrangements. But I think your question is very general in nature.

Michaelia Cash (WA, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Sorry, I'm a little confused as to how critical mineral processes is general in nature. I do have a very specific question. It might be that you need to come back to the chamber on it, and I'm happy for the advisers to take it away.

In the terms of companies that process lithium spodumene concentrate to lithium hydroxide—this is of concern to some of the companies—can you guarantee that they will not be adversely impacted by these changes? So it's quite specific: lithium spodumene concentrate to lithium dioxide.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Indeed, it is very specific. I will see what can be provided.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I want to go back to Senator David Pocock's earlier question about the comments, particularly, from the National Farmers Federation around the impact of turbocharged offset markets. I'll put to one side the ACCUs, and I believe Senator Davey has some questions about those.

In terms of the overall impact on agricultural land—you talked about the opportunities in carbon farming and I accept that some in the industry are exploring those ideas—is there any mechanism in this bill to control or oversight the purchase of farmland by the entities covered under the safeguard mechanism?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think that this is outside the scope of the legislation before us. But I'm advised that, at the moment, under arrangements established by the previous government, there is a process where the agriculture minister considers the impact where a human induced regeneration project is established in such a way as to occupy more than 30 per cent—is the benchmark—of a piece of agricultural land of a farm.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I could be wrong, but my understanding is that will be captured if a carbon unit is involved. But if a mining company or a big oil and gas company buys up a piece of farm agricultural land and uses it as a direct offset, is there anything in this legislation or other government bills in planning that would capture that?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think, Senator Brockman, I'd refer you to some of the advice I provided Senator Pocock. We are conscious that the development of a market for carbon and carbon sequestration presents an opportunity for landholders. You're quite right that landholders may choose to realise that in different ways, and you contemplate the possibility of sale as one of those options. I think the Chubb review gave some consideration to this, and recommended that the government continue to support individuals and communities in their engagement with that process. We're working through how to implement that. I made reference to a specific program that provides individual advice. I understand the broader question that I think you're alluding to. That is something that the government is alive to, but this bill is not a place where this is being pursued.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I think why it's important that we should be alive to this and, quite frankly, why it should be covered in this bill, is that farmland has been valued on the basis of agricultural production for thousands of years. That has been the baseline of what farmland is worth. Here's a piece of land; how much agricultural produce can I sustainably draw from this land? We've also got a long-term process in the agricultural sector where efficiency gains and modernising and different agricultural methodologies have meant that being able to purchase your next-door neighbour has been essential to agricultural survival in the long term. I'll ask you the question, Minister: this completely changes the economic dynamics and valuation of agricultural land. By saying what you just said you're effectively agreeing with that.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I was listening reflectively to your contribution and trying to indicate that I was engaging in a serious way with what you're putting to me. I suppose part of the thing that might influence your thinking on this is that the enhanced carbon sequestration on a property is not incompatible with continuing agricultural production. In fact, there are plenty of places where that is taking place right now. It's also not the only alternative use for agricultural land. If we think about some of the pressures on agricultural land, they are widespread and diverse. It is an ongoing and general question that a country ought to be thinking about carefully. I think you're assuming that these things are mutually exclusive. In many examples they are not.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

With due respect, I'm not assuming that they're mutually exclusive, but they've been done on the basis that evaluation of carbon is an adjunct to an existing agricultural enterprise. This risks taking that equation and completely wiping it out on the back of companies wishing to survive having to achieve certain obligations, not being able to do it within the timeframes required through technological means, and therefore being left with no option, if there is no technological solution, the only meaningful, viable, realistic option for them is to buy up agricultural land and lock it up. That has flow-on impact on communities right across regional Australia. It has flow-on impact on agricultural industries as agricultural industries are made smaller and their economies of scale decline and the chance of those industries folding altogether becomes much, much more realistic. This is not a hypothetical. This is happening in regional WA at the moment, where large entities are buying up agricultural land effectively to lock it up.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I think I see the scenario that you are pointing to. I don't know that there is evidence of this happening at the moment. There is a review scheduled for 2026 for the arrangements that are proposed here. These are matters that could be considered and would be raised by senators who had concerns at that time.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I'm happy to share the call with somebody else. This will be my last question for now. Did you have any submissions on this bill that asked for this issue to be addressed?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The officials are checking on the submissions, but I indicated some clicks back that this was a matter that was contemplated as part of the Chubb review, and Professor Chubb made recommendations about this. The implementation of the Chubb review goes to this question. There are also other pathways in the specific context of the legislation before us for these issues to be raised as part of any review.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

Minister, when was the regulatory impact statement undertaken?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm advised that the bill creates a framework, and it would be the rulemaking under that framework that had the regulatory impact.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

This regulatory framework has been identified by the 250 large emitters as having financial imposts upon them. They have been able to identify that based on the framework that's been identified to this date. With what I've been told so far, just as a back-of-the-envelope calculation, we are talking at least hundreds of millions of dollars, and your answer is that there has not been a regulatory impact statement undertaken?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I'm merely pointing you to the requirements that are placed on governments, or that governments place on themselves. It is the rulemaking process that would engage the requirement for such an assessment.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

The 215 high emitters that have been identified are some of the biggest taxpayers and employers in Australia. They ensure that Australians have well-paid jobs. But you're telling me that the government has not done a broad framework of modelling of any description to identify the cost to Australian industry and potentially the cost to Australian jobs? I want to clarify this because I think this is a very serious matter for Australia.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

This is essentially the same question that was asked of me by Senator Duniam. It was then asked of me by Senator Hughes. The nature of the analysis that's been undertaken in support of the bill has also been canvassed in Senate estimates. It was canvassed in the Senate committee that examined this legislation. I don't have anything further to the answers that I've already provided the chamber.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

I will finish on this statement, then. I think there is an exceptional flaw in the modelling of this proposal and this policy if I can tell you that this will have, at a bare minimum, hundreds of millions of dollars of impost in taxes from our most-successful and highest-tax-paying industries and employers, and the government has not done any modelling. I think this is a massive flaw in this policy, and I can only imagine the views of the government in opposition on how they would have held us to task for having failed to have done this. I appreciate that you believe you've said something to Senator Duniam and Senator Hughes, but I think that industry and people who rely on these companies will be pretty shocked to discover that there has not been specific modelling around this framework that identified a cost to Australia and Australian businesses.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator McDonald, I have indicated in answers to previous questions the nature of the analysis that has been undertaken. Your characterisation is incorrect, and I will point out again that the process of developing this policy has been done in very close consultation with a very wide range of stakeholders over an extended period of time.

Matt O'Sullivan (WA, Liberal Party) Share this | Link to this | Hansard source

Minister, I presume you were listening to Senator Shoebridge's contribution earlier this evening. In his contribution he talked about the hard cap, if I understood what he was saying, and the connection to another point that he made, which was that 58 projects were not going to proceed based on the implementation of the hard cap. I think I have what he said right, and you can correct me if you think I might be wrong. I'm wondering if you have a list of the 58 projects that might not proceed under this.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Thank you for the question. We are grateful for the Greens' willingness to negotiate, to discuss and to provide ideas about how to strengthen the policy that we took to the election. With respect to Senator Shoebridge and his colleagues, we do not accept that characterisation of the effect of the policy, so I will run through the amendment that we do in fact propose. It is that net emissions, which include offsets, by implication, must not exceed 1,233 million tonnes between '21-22 and '29-30 and that aggregate emissions must reduce over time. It does not change the elemental design feature of the proposal we put forward, which is to allow for entrants and also to allow for expansion of production of existing covered entities. With respect to colleagues, we don't consider that characterisation accurate.

Matt O'Sullivan (WA, Liberal Party) Share this | Link to this | Hansard source

I take it that there's not a list of 58 that you have.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

I should also say that the arrangements we propose set out a set of obligations on the Climate Change Authority and the secretary of the department of climate change and on the minister to contemplate what actions might be necessary, should it seem that that objective to have a decline in emissions over time would not be met. Nothing about those arrangements suggests the cancellation of a particular project or a particular facility.

Matt O'Sullivan (WA, Liberal Party) Share this | Link to this | Hansard source

There are 215 facilities currently captured under the safeguard mechanism, as I understand it, and about 30 per cent, 66 facilities or projects, are across Western Australia, my home state. Thirty per cent is a big chunk, considering we good Western Australians make up 6.9 per cent of the population. Can you guarantee that, because of the changes that have been implemented as part of this bill and the amendments that have been agreed to with the Greens, there won't be projects, particularly in Western Australia, that would have been viable but will no longer be viable? Can you guarantee that that is not the case?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Sorry, Senator, I just had a moment of having been awake for quite a long time. Let me pause and gather my thoughts. The bill anticipates establishing a baseline for each of the covered facilities and then establishing a decline rate for them which, in the ordinary course of things, would be 4.9 per cent annually but under certain circumstances might be reduced. We canvassed these in discussions with other colleagues. The proposed decline rate includes explicit consideration of emissions from new developments consistent with the way that we treat those in our emissions projections that are already produced by government each year. New developments include new facilities, backfill projects and expansions.

As I tried to indicate to you in my earlier answer, the arrangements that are being put in place today don't alter that. What they do is establish a requirement that, on occasions when the environment minister makes an approval that will increase the emissions from a covered facility, that information is automatically transferred to the secretary of the department of climate change, to the minister and to the Climate Change Authority. That transfer of information, as you would probably understand, would occur in many instances anyway. This formalises it as a requirement on the minister for the environment. Under certain circumstances, if the Climate Change Authority or the secretary of the department considers that, on receipt of that information, we are at risk of not meeting the objects of the act, which are to reduce emissions, they must make that analysis available to the minister, who must then set in train some steps to try and remedy it. Those steps could be a change to the overall rule or they could be some other step that the minister considers necessary to achieve the objects of the act. Nothing about that alters the way that the minister for the environment would provide approvals. Nothing about that provides a capacity for the minister for climate change to stop or halt a project. I think it's important to be quite clear about that.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

As a follow on to that line of questioning, did the government flag with overseas trading partners the likelihood of a number of new offshore developments not proceeding due to safeguard mechanism imposts, thus threatening future contracts and supply?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

We haven't, because that's not our expectation.

Perin Davey (NSW, National Party, Shadow Minister for Water) Share this | Link to this | Hansard source

I want to come back to the issue of land use conflicts and the concerns raised by the National Farmers Federation. Minister, in one of your answers to Senator Brockman earlier, you mentioned the ministerial veto for projects whereby human induced regeneration may exceed 30 per cent of the farm. As you rightly pointed out, we brought the ministerial veto in when we were in government, in response to industry concerns. Do I take it from your answer that there will be no change to the 30 per cent ministerial veto in that legislation?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Davey, may I ask you just to clarify the pointy part of your question? I heard the preamble. I'm just not quite sure what you are asking.

Perin Davey (NSW, National Party, Shadow Minister for Water) Share this | Link to this | Hansard source

The concern that has been put to me by industry is about that ministerial veto of 30 per cent. I understand it's under another minister, but the concern is that that will now be removed to enable large-scale human induced regeneration offsets to satisfy the demands that will be created by this safeguard mechanism.

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

Senator Davey, that is not the subject of the legislation before us. I also indicate that we've had some discussion with a number of senators—and I thank you all for your questions and your engagement—about the concerns as they are expressed. I think it's important to be clear about what the position of the National Farmers Federation is. They have, as you've indicated, raised questions about the interaction between the safeguard mechanism and farms, but they have said:

We need to find the balance between delivering carbon offsets and meeting our global food and fibre demands.

Importantly, this also means supporting farmers to make informed business decisions about their participation in carbon markets. That's why we're calling for greater investment in on-ground extension services.

I think that's a very constructive approach from the NFF. As I've indicated to other senators, a first step in our thinking about the recommendations that came to us from Professor Chubb is the implementation of arrangements for on-ground advice. That program was funded, I think, in the last budget.

Perin Davey (NSW, National Party, Shadow Minister for Water) Share this | Link to this | Hansard source

Thank you very much, Minister. I appreciate that you've mentioned the Chubb review a couple of times tonight, and I'm glad you have, because I have real concerns about the deal struck with the Greens relating to the Australian carbon credit units and human induced regeneration.

As you've quite rightly pointed out, farmers very much understand that the climate is changing. They live the reality every day. From droughts to flooding rains they manage their lands. Every farmer wants to find the balance. Commodity group after commodity group is working towards net zero. They know it's not only good for the planet but also really good for their market access. That's why farmers have actually embraced the exchange of human induced regeneration projects within reason, within a percentage of their land, as ACCUs. But now we see the risk through this backroom deal that you've done with the Greens to get their flawed policy through this place. When the Greens announced their deal with the government, Adam Bandt said:

The agreement will significantly improve the integrity of ACCUs with a freeze on the most dubious offset class (Human Induced Regeneration) until they are subject to an independent audit.

However, as you've mentioned, we've already had the Chubb review, and in Minister Bowen's press release he did not mention anything about a freeze. So who do we believe, Minister? Do we believe the Greens or do we believe that the ACCUs will not change?

Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

TER (—) (): Thanks very much, Senator Davey. I have canvassed this reasonably extensively earlier in the day. The commitment we've provided over the last few days is very specific and relates very directly to the Chubb review. It relates even more specifically to recommendation 8 from Professor Chubb. That recommendation essentially makes a set of observations about how the test associated with the human-induced regeneration method ought to be applied. We have made clear that we expect that method and that interpretation to be considered in issuing any new credits to projects established under the human-induced regeneration method. We expect that the way that would happen would be in the ordinary process by which project proponents approach the Clean Energy Regulator and seek to have their credits allocated on the basis of activities undertaken under the project. I hope that makes it clear. We wouldn't characterise it in quite the same way as you've described just now.

Jess Walsh (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Minister, there've been a lot of questions and concern today from those opposite about the impact of our reforms on the business community. I understand that there's actually been considerable support for the government's safeguard mechanism policy design from business advocates and that there's considerable support on the record. For example, from the BCA, Jennifer Westacott said about these safeguard reforms:

… my message to all involved is let's pass this bill.

She also said:

… let's get it done, let's get some momentum so that we can get this big investment change happening …

There were similar comments and similar endorsement from Andrew McKellar of ACCI. He said:

The business community has been very clear in its support for reforms to the Safeguard Mechanism. This is the best way to secure the planning, investment and innovation that will underpin the decarbonisation of our economy without sacrificing reliability or affordability.

There was also considerable support on the record from the Australian Industry Group, the AIG. Mr Willox said:

While debate over the detail of the reformed Safeguard Mechanism will continue, the crediting Bill before Parliament is essential policy infrastructure and it is strongly in everyone's interest to pass it.

Mr Willox also said:

It is time for the Parliament to come to a workable agreement on the current package of Safeguard Mechanism reforms so that the private and public sectors can get on with the transition to a net zero emissions economy.

I note further the comments that were actually made just yesterday, I think—I think yesterday was 28 March, it's been a bit of a time-space vortex in here recently, but I think these comments were made yesterday—from Manufacturing Australia on 28 March and those comments take into account all of the debate that's been happening over the last few days. Manufacturing Australia said:

These changes are sensible and pragmatic. It's now vital that we get the details and the implementation right, to enable the multi-decade investments that are needed to underpin low emissions manufacturing.

It's great, of course, to hear that support from our manufacturing sector as recently as yesterday that the changes are sensible and they're pragmatic, and it's vital that we continue now with the implementation phase and get that right so that industry can get on with the long-term investment that they need to transform to low-emissions manufacturing.

Of course, it's not just in the manufacturing sector that we have seen this support from business and from industry. I have also seen comments that I wanted your reaction to, Minister. Glencore CEO Gary Nagle said:

We are committed to reducing our total emissions (Scope 1, 2 and 3) by 15% by 2026 and 50% by 2035, both on 2019 levels. Post 2035, our ambition is to achieve net zero total emissions by 2050, with a supportive policy environment.

We have heard today figures about just how many of the businesses that are covered by the reformed safeguard mechanism already have those net zero total emissions targets by 2050, and Glencore is clearly one of those. Their website explains it really well. The website says:

We aim to be a net zero total emissions company by 2050. This means we're not only reducing the direct emissions from our own operations (Scope 1 and Scope 2 emissions), but also those created from the use of our products (Scope 3).

It's fantastic to see the great ambition there from Glencore, the support that they have for the safeguard mechanism and their desire to see a supportive policy environment that gives them the certainty that they need for their business to go forward.

We have also had on the record support from the Minerals Council of Australia. Ms Constable said to the Senate inquiry back in February, speaking about where the mining industry is at with reducing emissions:

The mining industry recognises that there is a very big task that is required to reduce emissions, and we have been on that path for a long time. The minerals industry has signed onto net zero by 2050.

Again, they are already well on the way and looking for the certainty and stability of the types of reforms that the government is putting forward this week in the Senate. She went on to say that they have made that target. Then she went on to say:

We have not been sitting on our hands waiting for policy change. We have been making that change over time. In 2020, the Minerals Council of Australia and its members released our first climate action plan. Since that time we have reported on an annual rolling basis our activities across the industry. It has been measured and, as I said, it has been recorded. MCA members have around about 39 separate activities that go from fuel switching—changing out of current energy sources to new energy sources—autonomous operations, renewable energy, battery storage, digitisation, a whole range of issues on site and in our headquarters, so across all of our operations. That is ongoing and will continue to be ongoing. It is a hard task, but every member is taking action.

It is tremendous to see that level of support from the business community for these safeguard reforms.

The BCA's Jennifer Westacott has said, 'Let's get on and pass this bill.' ACCI said, 'The business community has been very clear in its support for reforms to the Safeguard Mechanism,' and that it's the way forward for decarbonising our economy. The AiG said that of course there will be implementation questions and of course there will be detailed questions, but that this is 'essential policy infrastructure'. They say that it is time for the parliament to come to a workable agreement, which is what we're here to do, of course, this week in the parliament. Again, of course, as recently as yesterday, in taking on board all of the debates that have been happening in and around the parliament, we see that Manufacturing Australia have said that these changes are 'sensible and pragmatic'. That's what we aim to be as we get on with the job of delivering net zero by 2050 and reducing our emissions over the next several years to 2030 as well.

Minister, what type of support does the proposed safeguard mechanism have from the business community?

The Senate transcript was published up to 20:00 . The remainder of the transcript will be published progressively as it is completed.