The new form of carbon credits is part of a carbon package that will require legislation, either through the support of Peter Dutton’s coalition or the Greens plus one independent in the Senate.
Innes Willox, chief executive of employers’ association Ai Group, said crediting over-scores under safeguards was originally proposed by the Morrison government.
“It was a sensible reform then, and it still is now,” Willox said.
“For businesses to have confidence in the transformative long-term investments in low- and zero-carbon manufacturing that all political parties want, they need some confidence that the applicable rules will last over many election cycles.
“Lack of political certainty and the resulting political risk have been a handbrake on investment in the industry in the past.”
Minerals Council of Australia chief executive Tania Constable said the group had supported lending and trading since the scheme’s inception.
“Administrative credit allocation of protective mechanisms is integral,” she said.
“This encourages facilities that can reduce emissions by investing in emissions reductions to do so, which is key to achieving the 2030 target.
“The government’s bill currently before a Senate committee allows for protective lending and trading, but much of the detail of how the scheme will work will be governed by regulation that is currently in consultation and has yet to be finalised.”
Australian Chamber of Commerce and Industry head of policy and advocacy David Alexander said the use of statutory safeguards credits would encourage plants to reduce emissions above their baseline levels and allow others to buy those credits.
“These credits will be an integral part of establishing a market mechanism, the most effective way to reduce emissions and achieve the goals,” he said.
Energy and Climate Change Minister Chris Bowen said he would be very surprised if the Coalition did not support the protectionist credit legislation.
“The introduction of the lending scheme into the protection mechanism was a policy of the previous government,” Mr Bowen said.
“However, like so many things during their time in government, they just never got it.”
Sources pointed to a pledge in 2021 by then-Coalition energy minister – now shadow treasurer – Angus Taylor to “incentivize the adoption of new low-emission technologies through a $280m buffer lending mechanism, which will support projects that reduce the emissions intensity of large industrial facility. “
Opposition energy and climate spokesman Ted O’Brien said the coalition’s shadow cabinet and party room would consider the bill through normal processes.
“If Labor wants to work with the Coalition on legislation, they can start by explaining why they think a carbon tax is good for Australian businesses and households,” Mr O’Brien said.
Opposition Leader Peter Dutton and Opposition Energy and Climate Spokesperson Ted O’Brien will consult with colleagues. AFR
Australian Carbon Credit Units (ACCUs) already exist under a voluntary system.
Landowners can earn ACCUs, for example for planting trees and storing carbon in the soil, and can sell the credits to emitters who want to offset their emissions.
ACCUs now cost around $35 per ton, which market analysts expect will rise over time as emissions restrictions become more stringent.
Protection credits will be a new form of carbon credits.
As a backstop under Labour’s plan to protect businesses from the risk of future cost spikes and ensure cost certainty, the government will offer to sell the credits for $75, rising with inflation plus 2 per cent each year. The price could exceed $100 by 2030, depending on inflation.
RepuTex managing director Hugh Grossman said the initial supply of buffer credits was likely to be “thin”, as companies would need to make transformational investments to reduce their emissions below their declining emissions baselines in order to be credited with overperformance.
“We are likely to see companies focus on low-cost process improvements and small equipment upgrades before investing in capital-intensive projects as prices rise and policy certainty increases over the decade,” he said.
“This should lead to strong demand for ACCU offsets before companies start investing in larger, more transformative on-site emissions reduction projects, which in turn will bring more supply of buffer credits to market later.”
The John Connor Carbon Market Institute said it would strongly support bipartisan support for the government’s carbon policy.
“The coalition must make a decision about whether they will be seen as a permanent blocker of climate action, or whether they will be able to see this reform as a legacy of their foundational work on the safeguard mechanism and bipartisan commitment to net zero emissions. “