Department of International Cooperation

In order to gradually reduce carbon emissions, Australia has implemented the Safeguard Mechanism since July 2016, targeting 215 domestic corporate facilities with annual carbon dioxide equivalent emissions of over 100,000 tons, including in the electricity, mining, oil, natural gas, manufacturing, transportation and waste sectors.

Different standards for emissions limits or baselines are set based on individual industries. When carbon emissions exceed the specified baselines, carbon credits are supposed to be purchased.

The Australian Labor Party government passed the Climate Change Bills in September 2022, officially enshrining the targets of a 43% reduction in carbon emissions in 2030 compared to 2005 levels and net zero emissions by 2050, thereby providing investors and participants in the energy market with certainty.

In order to achieve climate goals and maintain the international competitiveness of Australian enterprises, the Department of Climate Change, Energy, the Environment and Water has pushed ahead with Safeguard Mechanism reforms. After consulting with stakeholders, the department recently announced its position paper and invited all sectors of society in Australia to provide their opinions by Feb. 24 this year. The goal is to complete the amendment in April and have it take effect on July 1.

Safeguard Mechanism reforms include updating the carbon emission caps of various industries, formulating more flexible policies (such as the issuance and trading of carbon emission rights, and domestic and international offsets to reduce costs), formulating special norms for affected industrial facilities and providing assistance, strengthening enforcement, formulating penalties, etc.

From July 1, 2023, the carbon emission cap of industrial facilities involved in the Safeguard Mechanism will be gradually reduced. Overall, industry's carbon emission cap must be reduced by an average of 4.9% per year until 2030, which is expected to decrease carbon emissions by 205 million tons by that year. In addition, the acquisition and trading system of new Safeguard Mechanism Credits (SMCs) will also be established.

The above-mentioned position paper also pointed out that many stakeholders have reported the issue of carbon leakage and suggested implementing the Carbon Border Adjustment Mechanism (CBAM) to maintain trade competitiveness. The mechanism provides solutions to the problem of carbon leakage by imposing import duties or even export tax rebates when trading with countries that do not have equivalent climate policies.

The Australian government has agreed to review policy options to address the issue of carbon leakage and will consider the possibility of implementing the CBAM, believing that this can complement the Safeguard Mechanism reforms as well as take into account the interests of major trading partners.

Sources: Economic Division, Taipei Economic and Cultural Office in Australia; Associated Press