No, Mr Morrison – the safeguard mechanism is not a ‘sneaky carbon tax’


Prime Minister Scott Morrison claimed this week that Labor is planning a ‘sneaky carbon tax’ if it wins power, and National Senator Matt Canavan said the goal of net zero emissions by 2050 is ‘dead “.

We can expect these two concepts to be used quite a bit during the federal election campaign, so it’s worth clarifying some things now.

The safeguard mechanism is not a carbon tax

The Coalition’s claims of a ‘sneaky carbon tax’ refer to Labor plans to bolster an existing policy known as the safeguard mechanism.

The safeguard mechanism was introduced by the Abbott Coalition government in 2016 – and it is not a carbon tax.

The mechanism was meant to ‘safeguard’ gains made through the Coalition’s then-appointed Emissions Reduction Fund, ensuring that emission reductions were not offset by increases elsewhere in the economy.

The rule applies to around 200 large industrial polluters who directly emit more than 100,000 tonnes of greenhouse gases per year, in sectors such as power, mining, gas, manufacturing and transport.

The safeguard mechanism applies to Australia’s biggest polluters.
Shutterstock

Under the safeguard mechanism, these polluters must keep their emissions below historical levels, called the reference level. If they exceed the reference level, polluters can either buy carbon credits to offset the excess pollution or ask the Clean Energy Regulator to adjust the reference level.

Baseline adjustments were allowed because no overall cap was placed on the amount of emissions produced. Without a cap, the regulator has greater flexibility to make adjustments.

This flexibility made the safeguard mechanism ineffective. Indeed, since its implementation, the companies subject to the mechanism have indeed increased their emissions by 7% in total.



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Thus, the Labor Party promised to strengthen the safeguard mechanism if it wins the elections. This means that large emitters will be less able to adjust their baselines, and gradually their baselines will be reduced.

This approach is consistent with the original purpose of the safeguard mechanism and is supported by the Business Council of Australia and others.

The analysis suggests that Labor Party policy could prevent 213 million tonnes of greenhouse gas emissions from entering the atmosphere by 2030.

Labor has indicated that emissions-intensive industries, such as large coal and gas exporters, will not be forced to reduce pollution in a way that makes them less internationally competitive.

man with headphones and glasses
Labor plans to strengthen the Safeguard Mechanism, a policy introduced by the Abbott government.
Lukas Coch/AAP

Australia has never had a carbon tax

Let’s be clear. No Australian government has implemented a carbon tax – and any suggestion to the contrary is incorrect.

The specter of a so-called “carbon tax” has haunted Labor since the 2010 election campaign, when then Prime Minister Julia Gillard ruled out introducing one.

Upon his return to power, Gillard announced his intention to legislate a carbon price, in the form of an emissions trading system.

Carbon pricing does not always equate to a carbon tax. But the Abbott-led coalition nevertheless sought to confuse the two and accused Gillard of breaking a key campaign promise.

Greenhouse gas emissions and associated climate change have costs. Extreme weather conditions such as droughts and heat waves damage crops and increase the demand for health care. Floods, bushfires and rising sea levels damage property.



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Carbon pricing aims to ensure that those responsible for a large share of these costs – the big polluters – reduce their emissions or help pay for the social and environmental damage they cause.

The Labor Emissions Trading Scheme required polluters to report and pay for every tonne of carbon dioxide they produced, or face financial penalties. The program was a success: compliance was high and emission reduction targets were met.

The policy was short-lived, however. The Abbott government repealed it in July 2014.

houses damaged by fire
Climate change brings “external” costs such as damage from bushfires.
Shutterstock

Net-zero by 2050 is alive and well

So what about Senator Canavan’s claims this week that net zero emissions targets were “dead” and should be scrapped?

Canavan told the ABC this week:

“[UK Prime Minister] Boris Johnson said he was suspending the net zero pledge, Germany was building coal and gas infrastructure, Italy would reopen coal-fired power stations. All is finished. It’s over except for the screams here”.

Late last year, Australia pledged to achieve net zero emissions by 2050. This means reducing greenhouse gas emissions as much as possible, and then, for emissions that cannot be avoided, eliminate an equivalent quantity from the atmosphere.

Net zero emissions by 2050 are needed to avoid the worst impacts of climate change. Australia is also bound to meet the target under its obligations under the Paris Agreement.

All Australian states and territories are committed to net zero. Victoria, the ACT and Tasmania have gone further and legislated net zero as a goal.

man in a suit speaks behind microphones
Senator Canavan falsely claims that net-zero is “dead.”
Mick Tsikas/AAP

Australia may be a long way from reaching net zero by 2050, especially in the absence of a robust and credible carbon price. But Canavan is wrong to suggest that the goal has been abandoned globally.

Some countries have already reached net zero. The UK has a legally binding net zero target by 2050 and Germany has pledged to achieve it by 2045.

Russia’s invasion of Ukraine has left countries like Germany worried about their dependence on Russian gas, which could lead to a near-term increase in fossil fuel use in Europe.

But the world remains largely committed to the net zero goal.

Just a few days ago, German Finance Minister Christian Lindner underlined the importance of the low-carbon transition for the country’s energy security, calling renewables “the energy of freedom”.

So, contrary to Canavan’s suggestion, the global transition to clean energy should accelerate in the longer term.



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