Read our news: sustainability and decarbonation
- Will the Northern Hemisphere’s summer extremes lead to real climate commitment? A commentary from Pangolin Associates MD, Iain Smale
- Climate Active news: Reminder – Climate Active submission deadlines are coming.
- Australia’s Safeguard Mechanism reforms
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Will the Northern Hemisphere’s summer extremes lead to real climate commitment?
Pangolin Associates Managing Director, Iain Smale
Over my morning coffee I read about people fleeing into the ocean to escape wildfires, local hospitals inundated with burn and smoke inhalation cases, and a panicked state.
No, I am not reflecting on Mallacoota, Victoria on New Year’s Eve 2019; rather the 10th August 2023 and the Hawaiian Island of Maui, on fire and tragically unprepared. Another causality of the catastrophic Northern Hemisphere summer?
In the past months the climate crisis has become a terrifying reality for billions of people around the world. Record temperatures and debilitating heatwaves in Southern Europe, the US, Canada, China, the Middle East, and North Africa, resulted in devastating wildfires across the Northern Hemisphere.
The aftermath is all too familiar for Australians: extensive loss of life and property, mass evacuations, tens of millions of hectares of burnt vegetation, and loss of habitat. At the same time devastating floods caused landslides, property damage, and killed scores of people in Japan, South Korea, India, Pakistan, and parts of the US and China. Temperatures have been untenable for health and for maintaining reliable energy: this month Iran declared a two-day public holiday as temperatures surpassed 50 degrees Celcius in the southwest of the country.
Era of ‘global boiling’
In a very short period we saw a slew of new climate records: the earth’s hottest day, week, and month in July, sea surface temperatures breaking previous records in the North Atlantic, and Antarctic sea ice at its lowest ever level.
By the end of July, the escalation of the climate crisis prompted United Nations Secretary-General Antonio Guterres to declare that ‘the era of global warming has ended; the era of global boiling has arrived’. Guterres urged global leaders to increase their climate ambitions, signalling that the UN Climate Ambition Summit in September and COP28 in November are key opportunities for revitalising efforts to lessen the accelerating impacts of climate change.
Once again, Guterres reminds us that time is running out.
These international gatherings and the upcoming elections in the US and the UK where, like Australia’s last federal election climate change is expected to be a key issue, make the next 18 months another crucial period for the planet.
Extreme weather ups pressure on UN COP28 outcomes
The United Nations Conference of Parties (COP28) in Dubai is eagerly, if not anxiously, anticipated by those hoping for decisive climate action. Since the Paris Agreement in 2015, most of the COPs have fallen short of expectations. Unfortunately, early signs ahead of COP28 are that the disappointing trend is likely to continue: the President of COP28 is also the Chief Executive of the Abu Dhabi National Oil Company, Dr. Sultan Al Jaber, and recent meetings of the G20 and the Bonn Climate Change Conference failed to reach any meaningful agreement.
While it is likely that COP28 will face familiar roadblocks – including disagreements around a Loss and Damage Fund, the phasing out of fossil fuel use and extraction, and the setting of more stringent interim emissions reduction targets – there is some hope that recent extreme weather events may be enough to escalate pressure for stronger targets and real, enduring commitment from all 194 Paris Agreement signatories.
Will the natural disasters finally drive change?
As Australian’s witnessed during the 2022 federal election, natural disasters and extreme weather events can indeed impact voter sentiment. Climate can change a government (and a senate) and drive stronger mandates for action. With millions of people across the globe feeling the devastation of global boiling in recent months, the opportunities for a similar shift in public opinion are higher now in the US and the UK.
At Pangolin, our fervent hope is that despite the cost-of-living pressures felt across the globe and the risk of backlash against the costs of decarbonisation, voters – and by extension their representatives at meetings such as COP28 – will help overcome the immovable roadblocks of the past.
Meanwhile, we continue to put faith in the global business community as our best hope for the technology and the pace of change we so desperately need. And we urge all organisations to do more. Right now. Time is running out.
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Climate Active news
Reminder: Climate Active submission deadlines are coming.
In recent months, Climate Active has increased the enforcement of annual report submission deadlines. As a result, Climate Active has sent reminder notices to organisations requiring the submission of their reports by a set deadline, or risk facing the cancellation of their certification.
Under the Climate Active Licence Agreement, existing certified organisations that do not submit their annual reports by the set deadline are in breach of the License Agreement. If this occurs, the organisation can no longer promote itself as carbon neutral.
The deadlines are as follows:
- 30 April for calendar year submissions.
- 31 October for financial year submissions.
With the recent end of the 2022/23 financial year, we recommend that all certified organisations reporting on a financial year basis begin to prepare for the next annual report as soon as possible to ensure compliance with the upcoming 31 October 2023 deadline and to maintain your carbon neutral status.
Australia’s Safeguard Mechanism reforms
On 1 July 2023, the Federal Government’s revised Safeguard Mechanism came into force. The scheme, which is Australia’s most significant federal climate change policy in more than a decade, requires the country’s largest businesses to make meaningful cuts to emissions in line with Australia’s targets: reducing emissions by 43 per cent by 2030, and reaching net zero by 2050.
Currently the mechanism applies to facilities that cumulatively account for approximately half of Australia’s carbon emissions.
A brief explanation of the mechanism
The Abbott Government devised the Safeguard Mechanism in 2014. The mechanism then commenced under the Turnbull Government on 1 July 2016. This policy requires organisations with annual scope 1 emissions of more than 100,000 tCO2-e to remain under an emissions baseline which is calculated for the type of facility or by a facility’s reported data.
Under the Coalition’s policy, facilities that exceeded their baselines had to offset excess emissions through the purchase and surrender of Australian carbon credit units (ACCUs). Now the Labor Government reforms require the purchase of ACCUs or Safeguard Mechanism Credits (SMCs) – new abatement under the reformed policy framework – if organisations cannot reduce emissions below their baselines.
Safeguard Mechanism exceptions
The Safeguard Mechanism applies to all sectors of the economy, but the electricity sector and emissions intensive, trade-exposed businesses are subject to separate requirements.
Baselines for the electricity sector are calculated for the entire sector’s emissions rather than on an individual facility basis. For emissions intensive, trade-exposed businesses, baselines vary depending on the difficulty of decarbonising operations or the potential for carbon leakage – for example, when a facility moves operations to another country with more lenient climate policies thus resulting in higher global emissions.
Issues with the 2014 mechanism
When the policy was first put in place the government described it as ‘the Australian Government’s central climate change policy tool’, yet it was largely ineffectual. Emissions covered by the scheme increased by four percent in the six years under successive Coalition Governments. The increase was due to the significant scope for facilities to alter and increase baselines, avoid emissions reductions measures, and to the limited enforcement of penalties associated with the scheme.
How the Safeguard Mechanism has changed
Following the 2022 federal election, the Albanese Government made several significant changes to the Safeguard Mechanism, including:
- Adding a baseline decline rate of 4.9 per cent per year for all facilities until 2030.
- Moving from site-specific baselines to industry average baselines and reducing the adjustment scope.
- Allowing facilities to earn Safeguard Mechanism Credits (SMCs) as an incentive for reducing emissions beyond their baselines.
- Requiring facilities to explain why emissions have not reduced if relying on ACCUs or SMCs for more than 30 per cent of abatement.
- Giving emissions-intensive, trade-exposed facilities access to additional funding to invest in low emissions technology and a discounted baseline decline rate for some facilities.
Following negotiations with the Australian Greens party, the government added an absolute emissions cap to the scheme. This cap limits the total amount of emissions permitted under the Safeguard Mechanism to 1,233 million tCO2-e between 2020 and 2030, guaranteeing that the scheme will deliver more than 200 million tCO2-e of abatement by 2030.
The ultimate objective of the Safeguard Mechanism is to reduce the emissions of Australia’s largest facilities to no more than 100 million tCO2-e by 2030 and zero by 2050.
Who do the reforms impact?
The Safeguard Mechanism still applies to facilities with scope 1 emissions of more than 100,000 tCO2-e per year. As of 2021-22 (the most recent reporting period), the mechanism covered 219 facilities, representing combined emissions of 137.5 million tCO2-e.
Productivity Commission recommendations
According to the Commission, this would involve:
- Reducing the emissions threshold to 25,000 tCO2-e, thereby adding an additional 300 facilities to the scheme.
- Expanding the scheme to include individual facilities in the electricity sector.
- Expanding the scheme to include the transport sector by attributing all downstream scope 1 emissions from cars, buses, and trucks to fuel wholesalers.
- Providing no additional protections for emissions intensive, trade-exposed businesses.
Unfortunately, the Albanese Government has shown no sign that it will enact the Productivity Commission’s recommendations, and it is unlikely to make any additional changes to the Safeguard Mechanism in the near term considering that the reforms have only recently come into force.
However, Australia’s commitment to net zero by 2050 requires additional measures to meet the country’s climate goals. As an established policy, the government may well use the Safeguard Mechanism to achieve these goals by reducing the emissions threshold or ratcheting up the baseline decline rate.