“The reform of the Safeguard Mechanism is a big challenge and the Government, industry and the community will need to work together if the result is going to deliver for us all,” Innes Willox, Chief Executive of the national employer association Ai Group, said today.
“Policy that ensures industry thrives on the path to a net zero world and beyond is a difficult needle to thread. The early signs are that the Government is taking that challenge very seriously in its just announced redesign of the Safeguard Mechanism and related support policies. All of us – large industry, smaller businesses, and households – have a stake in the success of this reform and will need to participate responsibly in landing it.
“Trade-exposed industries have legitimate concerns about their competitors, and their fate will have impacts on workers, communities and supply chains across Australia. Other industries and households have a right to be cautious that arrangements for trade exposure don’t increase the burdens they bear. Everyone will suffer if Australia and the world fail to reduce emissions fast enough to avoid dangerous levels of climate change.
“Australia needs industry to supply the materials and goods that we all require, and the jobs and investment returns that allow us to afford them. Industry needs to be competitive to survive. And when it comes to climate policy, competitiveness has two faces.
“Global action on climate is broad and strengthening, and also messy and multi-speed. The risks of ‘leakage’ of industry to economies with laxer carbon constraints have changed in the past decade. They have not vanished.
“At the same time, it is becoming ever clearer that staying competitive will require industry to slash emissions, as major economies consider carbon border adjustments and other trade measures, and major investors and buyers look for net-zero consistency in the businesses they work with.
“This debate will produce better results if we shed some of the baggage of the past decade. The Safeguard Mechanism is quite different to the old Carbon Pricing Mechanism. But the laws of economics have not been repealed, and there is no reason to shy away from concepts and design elements like emissions trading that can lift efficiency and cut the cost of achieving our shared climate goals. Carbon prices have been embedded in Australian government policy throughout the past ten years. Making them more explicit would help everyone plan and respond better.
“The paper signals that there may be no access to international carbon units, at least in the early years of an amended Safeguard. Industry has long raised the importance of international units to moderating Australia’s adjustment costs. However, it will be some years before new Paris-compliant emissions units become widely available and the costs, volumes and credibility involved become clear. There is time for Australia to bed down Safeguard reforms before revisiting the question of international units.
“We now have a month to consider the important design issues raised in the Government’s Safeguard consultation paper. Ai Group will be closely consulting our members of all sizes and many sectors to shape our input.
“Ultimately the question for all stakeholders is not ‘does this work for me?’ but ‘does this work?’ We are very hopeful that a robust Safeguard 2.0 can be designed which will support the transformational investments industry needs to get to net zero,” Mr Willox said.
