<article><p class="lead">Australia will cap carbon credits at A$75/t ($50/t) for big polluters and consider a carbon tariff on imports, as it firms up the details of its path to reduce greenhouse gas emissions by 43pc of 2005 levels by 2030.</p><p>Under the planned <a href="https://direct.argusmedia.com/newsandanalysis/article/2407799">reform of the safeguard mechanism</a> Canberra expects the 2015 emissions-intensive trade-exposed (EITE) facilities, which are dominated by gas, coal and metal producers, to first use technology to cut emissions and then in cases where this is not possible to buy carbon credits to offset emissions. Those that manage to cut emissions by more than the mandated 4.9pc/year will be issued Safeguard Mechanism Credits, which they can sell to other EITEs that are struggling to meet the baseline cuts. </p><p>EITEs can also buy Australian Carbon Credit Units (ACCUs) which are created by offsetting projects outside of the safeguard mechanism, such as through planting trees. ACCUs cost A$34.50/t on 11 January. They peaked around A$57/t in January 2021 before returning to trade between A$25/t and A$35/t since late February 2021, according to the Clean Energy Regulator (CER). </p><p>Carbon credits used to offset EITEs emissions will be capped at A$75/t under the new safeguard mechanism, which is out for consultation until 24 February, and will come into effect on 1 July. This will help EITEs in their investment planning, according to federal minister for climate change and energy, Chris Bowen. The EITEs will need to reduce emissions by 30pc in the seven years to 30 June 2030 under the safeguard mechanism.</p><p>Bowen is also considering options to protect local industry against lower cost imports from nations that do not have such strong carbon emission regulations. This includes the possibility of imposing import tariffs similar to the <a href="https://direct.argusmedia.com/newsandanalysis/article/2400146">European Union's Carbon Border Adjustment Mechanism (CBAM)</a>. "We will consider this option alongside others," Bowen told national radio broadcaster ABC. It is unlikely to be implemented on 1 July, he added.</p><p>A record 8.4mn ACCUs were traded in Australian during July-September 2022, up from <a href="https://direct.argusmedia.com/newsandanalysis/article/2369256">5.5mn in April-June</a> and more than quadruple the number traded in July-September 2021, according to the CER. Trading is likely to increase further once the safeguard mechanism comes into effect. </p><p>A recent <a href="https://direct.argusmedia.com/newsandanalysis/article/2407813">review of the ACCU system</a> found it to be sound, with some recommendations to improve it. </p><p>The facilities covered by the safeguard mechanism contributed 28pc of national emissions in 2020-21 fiscal year to 30 June.</p><p class="bylines">By Jo Clarke</p></article>
