While the bill target of 43% reduction seems aggressive, this is compatible with keeping temperature rise below 2°C above pre-industrial levels, but not with the Paris Agreement target of keeping the temperature rise below 1.5°C above pre-industrial levels.
This target has been identified by modelling based on the government’s; Rewiring the Nation ($20 billion initiative to update the electricity grid); Driving the Nation (incentivizing electric vehicles) and updating Safeguard Mechanism initiatives (limits placed on Australia’s largest GHG emitters); ensuring that limits on Australia’s largest GHG emitters are established.
As part of this new legislation, the government is obligated to report annually on its progress towards the goal and the Climate Change Authority has been made responsible for advising on future goals and increasing the transparency and accountability towards this goal.
Along with the energy sector, as part of the Safeguard Mechanism, facilities including coal mines, aluminium smelters, gas production, steel, and manufacturing plants as well as airlines will be considered for the setting of baselines, limits on emissions and/or use of offsets, and introducing tailored treatment for emissions-intensive and trade-exposed businesses.
Since the emissions reduction target of a minimum 43% of the new bill is still not completely compatible with the Paris Agreement (to keep the global temperature rise below 1.5°C above pre-industrial levels), there is likely a gap between the target and the reality of achieving the goal (net zero emissions by 2050).
SMEs can consider ESG (Environmental, Social, Governance) principles to begin to understand the steps they can take to reduce their emissions. It is wise for all businesses to understand the requirements of the Climate Change Bill 2022 and the future impacts this may have on their business.
Whether you are engaged in the plight or not, sooner or later you may find the tide too strong as eventually, by the size of impact, you will be caught in the net. It’s important you are aware of all the contributing factors and consider the discussion about baselining your business, or minimum, consider or assess the opportunities or risks as part of your ongoing management, including:
- Meeting the needs of consumers demanding carbon neutral products,
- Working with suppliers who may require you to act on your carbon footprint to help reduce theirs, or;
- Understanding the potential cost exposure of any mandated reduction in carbon.
For any business wanting or needing to make changes to their management practices, it is important you first seek advice before taking any action. The changes you make may reward you with carbon offsets or abatement, in turn providing you with credits. These credits cannot be achieved after the work has already begun. Registering for a Carbon Project could see great benefit for you, or indeed be necessary for you to continue to sell your products and achieve your own carbon neutral status. It is not just farms that can benefit from a Carbon Project, many businesses may have projects that generate credits under the relevant methodologies.
Noting that the Climate Change Bill 2022 is not completely compatible with the Paris Agreement, it is likely that stricter limits on emissions over the largest emitters of Australia can be expected, as well as possible limits that may also be imposed on sectors that were previously excluded from limits.
Given this is a new legislative environment, you are not expected to understand it without guidance and support. Talk with your advisors to ensure any oversight of legal, tax or reporting requirements do not cost you dearly.