ESG reporting is becoming increasingly demanding and is unlikely to become any less so in the months and years ahead. GreenTECH Fuel works with customers to make ESG reporting as efficient as possible. Where necessary, we generally involve Empire C&E, independent consultants specialising in ACCUs and carbon credits. GreenTECH Fuel will introduce Empire C&E to customers that could benefit from their involvement. 

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Legislation

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The Australian government's Safeguard Mechanism requires more significant greenhouse gas emitters to reduce emissions by 4.9% each year from July 01, 2023, or face substantial penalties.

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​While this legislation currently applies to the top 215 emitters, it has implications for most businesses in Australia. Smaller businesses in the supply chains of more significant emitters will be required to demonstrate carbon reduction, and businesses seeking business from more significant emitters or government agencies may require 'Green' credentials in the form of carbon emissions reductions.

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​The even more demanding MCR requirements apply from January 01, 2025.

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Scope 1, 2 and 3 emissions

 

In 2025, businesses of all sizes and types are increasingly accountable for their:

• Scope 1 - or direct emissions from sources that the business owns or controls directly. 

• Scope 2 - or indirect emissions the business causes from needs within the business. 

• Scope 3 - emissions that occur in the value chain or operation of the business.

 

These three types of emissions.

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All three are critical to businesses addressed in the Safeguard Mechanism and MCR reporting. They are also essential to businesses providing services to the top 215 emitters. Smaller businesses' Scope 1 emissions are the Scope 3 emissions of the businesses they service. Larger businesses will require suppliers and contractors to reduce their Scope 1 emissions.

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Board liability

 

'Until recently, ESG issues have been viewed as non-financial risks that have been addressed by undertaking corporate social responsibility measures to mitigate any ethical, sustainability and environmental impacts of the organisation. A growing body of stakeholders, including investors and regulators, evaluate ESG issues as material financial, commercial, legal and reputational risks. This evolving understanding of ESG is driving responsibility for ESG into the boardroom and increasingly requires that directors build ESG considerations into their organisation's strategy and risk framework.

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​There is growing recognition among directors that making decisions about ESG issues makes good business sense and leads to long-term value creation. By thoughtfully considering their organisation's impact on the environment and the community and proactively ensuring they maintain trust, brand, and reputation through sound governance, directors protect their organisations' social licence and long-term commercial success.

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​This guide is designed to assist directors grappling with the complex issues ESG oversight poses. It steps through applicable directors' duties, highlights some of the global trends underlying the meteoric rise of ESG and outlines why these trends are making ESG a boardroom priority. It also outlines the Board's role in setting ESG strategy, understanding the risks, and ensuring the appropriate governance and oversight are in place.  Corrs Chambers Westgarth (Australia)

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Penalties

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‘Under the Safeguard Mechanism, businesses that exceed their emissions baselines must purchase carbon offsets as ACCUs or reduce emissions elsewhere in their operations. Failure to comply with the Safeguard Mechanism can result in $250 per tonne of CO2-e financial penalties.’ PWC - Recent reports suggest fines may increase to $330 per tonne of CO2-e.

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Greenhouse emissions

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The greenhouse gases reported under the NGER Scheme include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur hexafluoride (SF6), and specified kinds of hydrofluorocarbons and perfluorocarbons. When reporting emissions, energy production, and energy consumption data, only those activities, fuels, and energy commodities for which there are applicable methods under the NGER Scheme are reported.

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​Greenhouse gas emissions are measured as kilo-tonnes of carbon dioxide equivalence (CO2-e). This means that the amount of greenhouse gas that a business emits is calculated as an equivalent amount of carbon dioxide, which has a global warming potential of one. For example, in 2015–16, one tonne of methane released into the atmosphere will cause the same amount of global warming as 25 tonnes of carbon dioxide. So, the one tonne of methane is expressed as 25 tonnes of carbon dioxide equivalence or 25 t CO2-e.

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Safeguard mechanism

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The Safeguard Mechanism is an Australian climate policy that limits greenhouse gas (GHG) emissions from extensive industrial facilities. It operates under the National Greenhouse and Energy Reporting (NGER) Act 2007 and is part of Australia's broader Climate Change Act 2022 framework.

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The mechanism is a key tool in Australia's decarbonisation strategy. It ensures major emitters contribute to the country's climate goals while providing flexibility through credits and offsets.

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Key elements of the Safeguard Mechanism include:

 

Coverage

SM applies to facilities emitting more than 100,000 tonnes of CO₂-e per year.

SM covers all sectors except electricity generation, which is regulated separately.

 

Baselines and emissions limits

• Each facility has a baseline emissions limit, which is gradually reduced over time to align with Australia’s net zero by 2050 target.

• Baselines can be set using industry averages, historical emissions, or production-adjusted limits.

 

Credits and offsets

• Facilities that emit below their baseline can generate Safeguard Mechanism Credits (SMCs), which can be sold to others.

• Companies exceeding their limits must buy Australian Carbon Credit Units (ACCUs) or reduce their emissions.

 

Compliance and penalties

• Businesses must report emissions annually under the Clean Energy Regulator.

• Non-compliance may lead to penalties or requirements to offset excess emissions

 

Recent reforms

• Stronger baseline reductions: aimed at cutting industrial emissions by 4.9% per year to align with Australia’s 2030 emissions reduction target.

• More flexible crediting and trading system: introduction of Safeguard Mechanism Credits to incentivise low-emission production.

• Support for trade-exposed industries: certain industries receive assistance to maintain competitiveness.

 

An ACCU is an Australian Carbon Credit Unit representing one tonne of carbon dioxide equivalent (CO2-e) greenhouse gas that is not released into the atmosphere. The Australian Federal Government issues them for use in the compliance market (Safeguard Mechanism) and can also be used for Voluntary offsets

 

To be issued ACCUs, a business must run an eligible, registered project in accordance with the relevant rules as regulated by the Clean Energy Regulator (“CER”). Any individual or company can make an ACCU as long as it meets the methodology requirements. Once you sell an ACCU, you can’t claim the emissions reduction. 

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ICER

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The Industrial and Commercial Emissions Reduction (ICER) method is an initiative under Australia's Australian Carbon Credit Unit (ACCU) Scheme, designed to incentivise emission reductions in industrial and commercial sectors.

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This method covers all industrial operations, including mining and generating greenhouse gas emissions.

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Changing fuel sources or the mix of fuel sources used by existing emissions-producing equipment is eligible to be registered in this method, making ALL equipment at the site eligible to earn ACCUs from the switch to EPC+.

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The ICER method credits ACCUs to projects that reduce emissions from equipment located at a facility. This can include:

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• Direct emissions from any on-site fuel combustion in equipment, including boilers, furnaces, and generators.

• Direct emissions from on-site fuel combustion in mobile equipment that stays on-site.

• Indirect emissions from electrically powered equipment such as motors and heating elements.

 

Key Components of the ICER Method include:

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Eligibility criteria

• The method is suitable for businesses aiming to reduce emissions from energy use or processes at their industrial and commercial sites.

• Participants must develop a baseline emissions model to estimate the emissions that would occur in the absence of the project.

• A thorough understanding of the technical requirements is essential, either within the organisation or through external expertise.

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Legislative framework

• The method operates under the Carbon Credits (Carbon Farming Initiative – Industrial and Commercial Emissions Reduction) Methodology Determination 2021.

• It aligns with the Carbon Credits (Carbon Farming Initiative) Act 2011 and the Carbon Credits (Carbon Farming Initiative) Rule 2015.

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Project implementation

• Projects may involve activities such as upgrading or replacing equipment and fuel switching to achieve emission reductions.

• The method builds upon previous methodologies, introducing new abatement opportunities and improving usability while maintaining integrity.

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Crediting and compliance

• Upon successful implementation and verification, projects can earn ACCUs, which can be traded or sold, providing financial incentives for emission reduction efforts.

• Compliance with the legislative requirements and adherence to the method's guidelines are mandatory for participation.

 

Customers interested in registering an ACCU project need to look at the options and register a project before making any financial investment decision. Regulative requirements specifying newness, additionality, and rights to undertake the project all affect the timing. Customers can’t register a project after it has been built/commenced, contracts signed, or a purchase order raised.

 

The value of ACCUs is determined by market supply and demand. As a limited number of credits are available, the price can fluctuate over time based on the demand for credits and the overall success of emission reduction projects.

 

ACCUs can be traded on the open market, allowing businesses to buy or sell their credits. This creates an economic incentive for businesses to reduce their emissions, as they can potentially sell surplus credits to other emitting entities requiring them for compliance or other purposes.

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MCR

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Mandatory Climate Reporting has characteristics as follows:

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Safeguard mechanism liable companies + ASX200 must undertake mandatory climate reporting from January 1st, 2025, with more companies liable in future years.

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Corporations are required to disclose their yearly greenhouse gas emissions across Scope 1, 2, and 3. This move aligns Australia with global practices in mandatory climate reporting. Directors are required to make a specific directors' declaration attesting to the sustainability report's compliance. Sustainability reports must be audited exactly like financial reports.

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Scopes 1-3 are covered, which means that even if you do not currently measure and reduce your carbon intensity, your customers will require that you do so.