Baselines

The Clean Energy Regulator is setting greenhouse gas emissions baselines for about 140 industrial facilities - from power stations to cement plants and aluminium smelters - that emit 100,000 tonnes of carbon dioxide equivalents a year.

These baselines - calculated by reference to emissions intensity "benchmarks" for each industry - take effect from July 1.

The operators of the 140 covered facilities will have to keep their actual emissions within their "net emissions" baseline - that is, their original baseline less any emissions reductions that the government has agreed to pay them for.

The government issues Australian Carbon Credit Units (ACCUs) for purchased reductions. If the plant operator sells these ACCUs to another facility or surrenders then to the government, they are deducted from its baseline so the operator can not "double count" its emissions reductions.

Soft Baseline Target Department of Environment

This gives the "net emissions" baseline.

Velvet glove benchmarks


A facility that is struggling to meet its "net emissions" baseline can purchase ACCUs from another plant that is confident of beating its baseline. That is what makes the safeguard look like a dreaded ETS in principle.

But the safeguard mechanism doesn't look much like an ETS in practice because the initial baselines are such soft targets.

For existing facilities, the baseline is set at the highest annual greenhouse gas emissions over the five years from 2009-10 to 2013-14. The electricity industry has a collective baseline of 198 million tonnes based on this method.

Emissions Intensity Benchmark Dataset Department of Environment

These baselines should not be hard to beat. Despite the halting progress towards strong climate policies in Australia, industry assumes international momentum will require them to reduce their emissions and is already moving to do so.

From 2020, existing and new facilities will have to meet baselines calculated according to "best practice" benchmarks - defined in the guidelines to mean the weighted average emissions intensity of the best performing 10 per cent of production in that industry.

Iron fist?

Clause 7 of the benchmark guidelines could be the iron fist.


It provides for the government to review benchmarks for new facilities annually to see if best practice on emissions has advanced sufficiently - i.e. more than 5 per cent - to warrant changing the benchmark.

Steel and other heavy industries will have to meet emissions benchmarks in future. Picture shows Bluescope's Port Kembla Steelworks on 29 June 2012 Sylvia Liber SVZ

"Upon identifying an emissions intensity benchmark has changed, it is expected that benchmarks will principally be made more stringent," the guidelines say.

Reducing the baselines for new facilities would require the minister's intervention, and be disallowable by the Senate.

Facilities whose benchmarks are reduced will have to purchase or earn more ACCUs - by buying them from another facility or reducing their emissions - to reduce their "net emissions" in line with the new benchmark.

The catch is that new benchmarks generally don't take effect for three years. Only where the benchmark would be increased or was originally calculated by an alternative "reserve approach" do the new benchmarks take effect immediately.

Updating Benchmark Values Department of Environment

A future government could change the guidelines to reduce baselines more swiftly. Ultimately it is down to the government of the day to determine how hard they want to push industry to reduce emissions by pushing baselines down.