Safeguard Mechanism credit units (SMCs) are tradeable credits issued to a responsible emitter for each tonne of carbon dioxide equivalent (t CO2-e) by which its facility’s emissions come in under its baseline. The Clean Energy Regulator describes them as an accounting tool within the Safeguard Mechanism’s regulated emissions limit, not offsets.
Key points
- One SMC is issued for each tonne below baseline
- SMCs are an accounting tool, not offsets
- Landfills and facilities borrowing baseline cannot receive SMCs
- Apply after the Safeguard position statement, recommended by 31 January
- An ANREU account is needed to receive SMCs
How SMCs are calculated
For a full year of responsibility, the SMC entitlement is the facility’s baseline, less its covered emissions, less any ACCUs issued for the facility in the monitoring period. The baseline used here is the figure before any rounding up to the 100,000 t CO2-e minimum. Where the responsible emitter held the facility for part of a year, the entitlement is pro-rated by days.
A facility can earn SMCs even if its total emissions rise, provided emissions stay below the baseline and its emissions intensity stays below the baseline intensity.
Who cannot receive them
Landfill facilities cannot be issued SMCs. Nor can a facility in the first year of a borrowing adjustment. A facility that has dropped below the Safeguard threshold may still qualify if it meets the eligible facility criteria in the Safeguard Rule.
How to apply
Responsible emitters apply through Online Services once the CER has issued the facility’s Safeguard position statement for the year. The CER recommends applying by 31 January, and SMCs are issued in late January. The applicant needs an Australian National Registry of Emissions Units (ANREU) account to receive them.
Using and trading SMCs
SMCs are held and traded in the Unit and Certificate Registry. They can be held, sold to other parties or surrendered to reduce a facility’s net emissions number. The CER can require SMCs to be relinquished if they were issued on false or misleading information.
SMCs and ACCUs
SMCs and ACCUs are both prescribed carbon units, so each one surrendered reduces a facility’s net emissions number by one tonne. The difference is where they come from. ACCUs are issued to eligible offset projects, while SMCs are issued to Safeguard facilities that emit below their baselines.
References & sources
Primary regulatory documents and authoritative references underpinning this answer.