The Safeguard Mechanism and Corporate Advocacy

Despite the widespread support for action on climate change, entities from heavy emitting sectors are actively opposing real-world climate policies. InfluenceMap's research reveals that corporate entities across the fossil fuel, mining and heavy industry sectors have engaged in extensive advocacy aimed at weakening and obstructing the Labor Government's efforts to reform the Safeguard Mechanism. This is despite many of these companies and associations also having stated support for climate action in the past 12 months.

This is in the face of growing support from Australian citizens, policymakers, and corporates from other sectors of the economy for urgent action to address climate change. The dominance of oppositional voices in key climate policy discussions poses a significant threat to Australia's ability to achieve its greenhouse gas emissions targets.

This research spans across three separate consultation processes from the Australian government on the Safeguard Mechanism reforms, analyzing 85 separate consultation responses from 42 of Australia’s most influential companies and industry associations. The findings reveal a predominantly negative sentiment towards the reform of Australia's key emissions reductions policy, but from only a few heavy emitting sectors. Out of the responses evaluated, 62% expressed a negative or oppositional stance towards ambitious reform, while only 19% were supportive. The majority (81%) of the negative responses came from the oil and gas, mining or heavy industry / industrial sectors.

Of the entities that negatively engaged, 92% had expressed support for either the net-zero by 2050 target, the Paris Agreement, or the need for climate policy in Australia. This contradiction exposes a clear hypocrisy in the companies' and associations' public statements on climate change, highlighting the discrepancy between their overarching communications on climate and their actual engagement with specific climate policies.

Opposition to ambitious Safeguard Mechanism Reforms came from the oil and gas, mining, and heavy industry sectors in particular, with only one company or association from these sectors appearing to be supportive of the reforms (BP). Negative actors included BlueScope Steel, Whitehaven and Alinta Energy among many others.

The analysis finds that corporate advocacy during the engagement process may have led to policy changes in the final reforms of the Safeguard Mechanism, potentially influencing the introduction of a price cap on Australian Carbon Credit Units (ACCU's) and adjustments to "deemed surrender" provisions as well as interest rates on borrowing.

The agreement reached between the Labor and Green parties, enabling the passage of the reform through parliament, also faced substantial opposition from the oil and gas sector, which voiced strong opposition towards the provision that mandated new oil and gas facilities be net-zero in their scope 1 emissions from the outset.

The share of the abatement task and baselines: Safeguard facilities would be required to contribute a proportional share of Australia’s 2030 target, calculated to be 28%. A default emissions baseline decline rate of 4.9% to 2030 was proposed in order to achieve this. Baselines are to be set to remove ‘headroom’ that currently exists, the gap between baselines and actual emissions, to compel immediate emission reductions. If headroom was to be retained, baselines would remain significantly above actual emissions and therefore no immediate emission reductions would be required.

Formalizing emissions trading:

Offsets: International offsets are not included, but the government stated it may consider their use in the future.

Treatment of Emissions Intensive Trade Exposed facilities (EITE’s): EITE’s will have a dedicated $600 million fund as part of the Powering the Regions fund, to help decarbonization efforts. EITE’s that are classified to be Trade Exposed Baseline Adjusted facilities are able to apply for a discounted decline rate, with a minimum decline rate of 2%.

InfluenceMap’s system adheres to key features of sound corporate assessment metrics: objectivity, transparency, ease of comprehension and use, and includes like-for-like comparisons across and within sectors.

InfluenceMap’s system does not judge climate policy itself, but instead measures corporate positions against Paris Agreement-aligned benchmarks of government policy, and Science-Based Policy (SBP) benchmarks based on analysis of IPCC statements.

InfluenceMap scores each item of evidence on a 5 point scale from +2 (strongly supportive) to -2 (strongly oppositional). For a more detailed explanation see InfluenceMap's methodology here.

InfluenceMap defines “policy engagement” based on the UN Guide for Responsible Corporate Engagement in Climate Policy (2013), which defines a range of corporate activities as engagement, such as advertising, social media, public relations, sponsoring of research, and direct contact with regulators and elected officials.

InfluenceMap relies on a range of data sources that are publicly accessible and are reliable representations of corporate policy engagement. These include organizational websites, social media, senior management statements, regulatory consultation comments, financial disclosures, and reliable media outlets.

Although the system does not require the cooperation of the organizations being assessed, InfluenceMap has engaged with over 100 large corporations, industry associations, and other stakeholders on our methodology and results.

InfluenceMap’s system is updated continuously as new information becomes available, which is assessed and added to the InfluenceMap.org online database. These results are freely available and in the public domain. The results are provided in the form of metrics and analysis on individual organizations (see, for example, BP’s online InfluenceMap profile).

The companies and industry associations included in this research are those that InfluenceMap tracks on an ongoing basis as part of its Australia analysis. This includes 59 companies and 25 industry associations. Details as to how those companies and industry associations have been selected can be found here.

To determine an entities’ overall position on the Safeguard Mechanism Reforms, the average score across the three consultations has been taken. An average of 1.5 or greater is determined to be strongly supportive, 0.5 to 1.4 is supportive. 0.4 to -0.4 is unclear or mixed, - 0.5 to -1.4 is unsupportive and -1.5 to -2 is oppositional.

Of the 42 companies and associations assessed in the analysis, 26 (62%) appeared to have an overall negative position on the Safeguard Mechanism Reforms.

23 of the 26 unsupportive companies and associations (92%) have also publicly supported either the net-zero by 2050 target, the Paris Agreement, the need for climate policy in Australia, or all of the above in the past 12 months.

The majority of these unsupportive positions came from select sectors of the economy. 21 of the 26 negative responses (81%) came from entities belonging to the oil and gas, mining or heavy industry / industrial sectors. Only one company from these sectors (BP) has an overall supportive position.

Negative engagement from the mining sector included responses from Glencore and Rio Tinto, from the oil and gas sector including Alinta Energy and Woodside, and from industry such as BlueScope Steel and Fortescue Metals Group. A full list can be found in the graphic below.

Industry associations representing the above-mentioned sectors appeared to be the most oppositional to the reforms, including the Australian Petroleum Production and Exploration Association (APPEA), the Minerals Council of Australia (MCA), and the Association of Mining and Exploration Companies (AMEC), among others.

8 of the 42 (19%) entities appeared to consistently support ambitious reform of the Safeguard Mechanism. This included BP, Iberdrola, and AGL on the company level, alongside several industry associations.

The Australian Petroleum Production & Exploration Association (APPEA) did not support the universal removal of headroom from the policy or a pre-defined baseline decline rate. It also suggested that the 10% interest rate on borrowing was too high and that the proposed assistance for EITE’s may not be sufficient, while also not appearing to support best practice baselines for new facilities.

Alinta Energy supported "building" on the existing framework rather than "substantially reforming" the policy. It also opposed the proposal to limit Safeguard facilities' ability to generate ACCUs.

Origin appeared to oppose the proposal. The company did not support the complete removal of headroom and advocated for more support for EITE’s. While Woodside appeared to support the reforms, but with major exceptions, such as the inclusion of international offsets and for allowing ERF projects to continue generating credits.

BP appeared to support the reforms. It advocated for the gradual increase of the policy scope and supported the formalization of emissions trading. BP also opposed any free allocation to EITE’s and called for flexibility and equal treatment for new fossil fuel entrants. BP did not appear to support the government's "cost containment" measures.

Rio Tinto appeared to advocate for the free allocation of SMC’s, for differential baselines for EITE’s and called for a maximum decline rate of 6%, while advocating for its own sector to qualify for a 2% decline rate.

Whitehaven Coal also appeared to call for a differentiated decline rate for EITE’s that also appeared unsupportive of the removal of headroom, adding that the proposed EITE assistance was ‘entirely inadequate’ and did not support a uniform baseline decline rate.

Glencore stated that the removal of headroom should be carried out on an individual basis. The company also stated that Safeguard facilities should be exempt from any additional state-based policy and called for more EITE assistance, but did not support the proposed adjusted baselines for some EITE’s, stating it will penalize those that are not eligible and subsidize those that are.

Fortescue and South32 appeared unsupportive, Fortescue appeared unsupportive of the removal of headroom, advocated for the use of international offsets and did not support the use of international best practice baselines for new facilities. It also stressed the need to avoid duplication with state policy. South32 did support the removal of headroom and a baseline decline rate but appeared to call for a delay until 2024, appearing to emphasize the need for other areas of the economy to be included in the policy while advocating for further EITE support.

BlueScope supported the ability for facilities to continue to generate ACCU’s and also highlighted competitiveness and job concerns, opposing the proposed baseline decline rate of 4.9% and called for adjusted baselines for EITE’s to be less than 2% per year.

The Cement Industry Federation (CIF) called for cement manufacturing to be excluded from the requirement to reduce baselines under the SGM until a Carbon Border Adjustment Mechanism is introduced and appeared to oppose the unilateral removal of headroom. It also suggested the proportional share approach was not equitable and the target should instead “reflect what is reasonably considered to be achievable”.

Adbri appeared to oppose the proposed design in its response, it stated that the proposed baseline decline rate is not feasible and advocated for more EITE assistance. Orica stated support for the proposed changes to the policy but did also advocate for maintaining the ability for facilities to continue to be able to generate ACCU’s, stating provisions should be grandfathered for the entire length of existing contracts and questioned whether the proposed funding for EITE’s would be adequate.

APPEA Chief Executive, Samantha McCulloch, stated that the Labor-Greens deal will make Australia's climate change targets harder and more costly to achieve, adding that “new gas supply is essential to support the country's climate objectives, avoid energy shortfalls, and reduce prices.”

The CEO of the Australian Pipeline and Gas Association, Steve Davies, also stressed the importance of gas and stated that any additional restrictions on gas supply may result in additional costs for Australian households and businesses.

Likewise, the South Australia Chamber Of Minerals and Energy (SACOME) CEO Steve Knott stated that changes to rules for new gas projects were of particular concern. He argued that new gas supply is needed to support Australia's climate change objectives, avoid future energy shortfalls, and to put downward pressure on prices.

Santos CEO Kevin Gallagher appeared to criticize the Australian government for ‘handing power to the Greens’ in the final design of the Safeguard Mechanism Reforms, saying that this has escalated sovereign risk in Australia for investors.

Tamboran's CEO, Joel Riddle, refuted claims that the Safeguard Mechanism Reforms restrict the Beetaloo Basin's development and claimed that their sustainability plan aligns with the amendments. He also added that the deal “is a decisive political failure for the Greens, who have campaigned to destroy industry, jobs and real progress on emission reductions.”

Cost containment measures: In InfluenceMap’s February 2023 briefing on the two consultations that took place in 2022, it found that the government’s proposed reform of the Safeguard Mechanism, released in January 2023, includes ‘cost containment measures’ in the form of a price cap of $75 per ton on Australian Carbon Credit Units (ACCU’s), which can be used to meet Safeguard obligations. The inclusion of a price cap on ACCU’s comes despite the original consultation paper stating that ‘there may not be a need at this stage for further price stability measures’ regarding ACCU’s. This follows advocacy from APPEA and the MCA for a price cap to limit compliance cost in the consultations in 2022.

Selling ACCU’s to the government and a reduced interest rate: The government’s final design of the Safeguard Mechanism also includes some deviation from the proposed final design. ‘Deemed surrender’ provisions will be able to take place for the full length of the contract, instead of the proposed 2 years. This was strongly advocated for by several industrial groups including Orica and the Association of Mining and Exploration Companies. The interest rate on borrowing SMC’s was also reduced in the final design to 2% for the first 2 years, instead of the 10% rate proposed, that was advocated for by APPEA and Rio Tinto among others.

Minimum baseline decline rate decrease: The minimum baseline decline rate available for EITE’s under the adjusted baselines has decreased from the proposed 2% to 1%, something that was advocated for by BlueScope Steel.