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The CBAMs and the Safeguard Mechanism: explained

January 20, 2023

The Australian Government is making some of the biggest ever changes to the rules for carbon emissions from industrial sites. But what do these changes mean for you? The AWU is here to cut through the detail for you.

What is the Safeguard Mechanism?

The Federal Government has set an overall 43 per cent greenhouse gas emissions reduction target below the 2005 level by 2030, and net-zero by 2050.

The Safeguard Mechanism is a policy that requires heavy emitters to reduce greenhouse-gas emissions in line with these targets. If they can’t make the required cuts, they need to buy carbon credits. These credits can either come from other facilities that are emitting within their limits, or by buying Australian Carbon Credit Units (ACCUs) which are given for new vegetation that absorbs carbon from the atmosphere and carbon storage projects (among other sources). .

Details of the Safeguard Mechanism are under review, but it currently applies to Australian industrial facilities that emit more than 100,000 tonnes of greenhouse gases annually.

How does it work?

The mechanism requires Australia’s largest greenhouse gas emitters to keep their emissions below a baseline level.

The plan is to gradually reduce these baselines to help Australia reach net zero emissions by 2050, introduce credits for facilities that emit less than their baseline, and provide tailored treatment to emissions-intensive, trade-exposed facilities.

Will it affect me?

One of the Safeguard Mechanism’s main aims is that local businesses are not disadvantaged compared to international competitors and that emissions do not increase overseas.

The AWU has members in more than 140 of the 200 facilities covered by the mechanism.

These facilities – mainly manufacturing (including steel, aluminium, plastic, concrete, food processing, chemicals and glass), metalliferous mining, and oil and gas extraction and processing – are part of a diverse range of industries in the union’s membership.

The AWU believes that the best way of achieving this is through a Carbon Border Adjustment Mechanism, or CBAM.

What is a CBAM?

CBAMs (Carbon Border Adjustment Mechanisms) are taxes applied in Australia on carbon emissions-intensive goods imported from countries that are not taking reasonable action to reduce emissions.

How do they work?

CBAMs impose a charge on the embedded carbon content of certain imports that is equal to the charge imposed on domestic goods, with adjustments made to take into account any climate regulation in the exporting country.

Why have them?

CBAMs are designed to ensure a level playing field for economies that have expensive but essential carbon-pricing schemes, such as Australia’s. They are also a way for countries that are serious about climate action to compel nations that aren’t to do better. 

Do we need one?

Without a CBAM, products and materials such as steel, aluminium, glass, plastic, chemicals and foodstuffs can be made on the cheap in countries that are not working to cut greenhouse emissions, and dumped here. This would put local businesses and thousands of Aussie jobs at risk while rewarding the dirty offshore producers and encouraging them to keep polluting.

Who else has CBAMs?

Australia would not be alone. The EU has announced a CBAM that kicks in this year and many of Australia’s key trading partners – including the US, UK, Canada, and Japan – will most likely soon follow suit.

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