Safeguard Mechanism implementation: production variable updates and international best practice benchmarks

SAFEGUARD MECHANISM INTERNATIONAL BEST PRACTICE
Australian Energy Producers | 23 January 2024
Australian Energy Producers welcomes the opportunity to make a submission on the exposure draft for the priority international best practice emissions intensity (IBPEIs) benchmarks. This submission complements and reaffirms the earlier Australian Energy Producers submission, dated August 2023.
The Australian oil and gas sector is committed to delivering its fair share of abatement in Australia’s transition to net zero and supports the principle of IBPEIs for new facilities and new products at existing facilities.
However, the proposed, extremely onerous IBPEIs risk resulting in outcomes in direct opposition to the aims of establishing IBPEI benchmarks, including undermining emissions reductions and increasing energy costs for Australian households and businesses. The IBPEIs as proposed risk Australia’s energy security and its transition to net zero emissions by creating a significant barrier to entry for new gas facilities, curtailing new gas supply from entering the market and inhibiting the uptake and diffusion of new low emissions technologies and practices associated with new projects. In turn the proposed benchmarks risk undermining efforts to address projected gas supply shortfalls, exacerbating cost of living pressures and adversely impact on jobs, particularly in remote and regional Australia.
Constraining new gas supply also compromises the rollout of renewable power in the grid, domestic processing of critical minerals, and growth of Australia’s manufacturing and industrial base.
The process for establishing the IBPEIs has been lacking in transparency and prevented independent scrutiny of the benchmarks proposed. While Australian Energy Producers and members have engaged in the consultation process in good faith, the ability of industry to contribute constructively to the process has been hampered by a lack of transparency regarding the establishment of the IBPEI benchmarks, including the underlying data sources used, how the IBPEI methodology has been applied, and how the global facility data has been adjusted for Australian conditions.
The process has prevented the independent scrutiny of the numbers proposed, which in some cases appear to depart significantly from what would reasonably be considered international best practice. Concerns regarding the application of the IBPEI methodology compound concerns with the methodology itself, which have been raised previously.
Australian Energy Producers’ priority issues include:
• The IBPEIs proposed present an undue barrier to entry for new gas supply projects, undermining competition in the
energy sector and in turn jeopardizing emissions reductions and energy security in Australia and the region, as well
as risking increases in energy costs for Australians. The proposed IBPEIs disproportionately impact the gas sector
and risk creating sovereign risk and compromising Australia’s competitiveness in the region.
• The values proposed for oil and gas IBPEIs appear significantly lower than, and inconsistent with, what industry would
consider to be international best practice applied to Australian conditions. While Australia is widely considered to
be a lower emissions intensity natural gas producer globally, the proposed values imply that Australian facilities
currently exceed international best practice on average by as much as a factor of 10.
• The process by which the values were developed was rushed, lacking in transparency and appears to contradict the
departments principles of IBPEI development, namely that they should be effective, consistent, robust, and
representative. The inability to independently scrutinise and test the values proposed leaves serious concerns
regarding their accuracy and applicability.
Given the serious concerns regarding the integrity and impact of the IBPEIs proposed, Australian Energy Producers requests the government fully disclose the data and calculations associated with the proposed IBPEIs – in a way that maintains all necessary confidentiality – and makes provision for a further month of consultation to fully scrutinise and verify the values proposed.
Yours faithfully,

Samantha McCulloch
Chief Executive

PO Box 2201 Canberra ACT 2601 energyproducers.au
+61 2 6247 0960
ABN 44 000 292 713 contact@energyproducers.au
COMMENTS AND RECOMMENDATIONS ON THE EXPOSURE DRAFT
Context setting
The Australian Government recognises gas is a critical energy source for Australia’s current and future economic prosperity, energy security and reliability, and in its transition to net zero emissions. Recent international statements coupled with the proposed stringency of these IBPEIs for our sector has sent mixed signals to the market as to what its position is on new gas projects. In acknowledging the need for new domestic gas supply, these proposed IBPEIs could well ensure that no new gas projects proceed here in Australia starting immediately.
In-house member benchmarking analysis for example for the two US based facilities identified by DCCEEW as setting the IBPEI for ‘LNG from processed gas’ PV, which includes Freeport and Elba Island, reveals the best performing facility has an EI at least twice as high CO2-e/GJ as the proposed IBPEI. This comparative analysis is based on publicly credible and proprietary data sources, including DCCEEW’s primary data source, Wood Mackenzie’s Emissions Benchmarking
Tool.
Because this proposed IBPEI value seems orders of magnitude below (i.e., more stringent) the most stringent EI estimate in our members’ benchmarking efforts, this suggests DCCEEW’s and/or its advising consultant’s calculations should be reviewed for possible errors (perhaps due to conversion errors) or that they are not representative of our global sector’s emissions performance at this time.
We support the SGM’s PV EI approach and the PVs that have and are being legislated but highlight that every facility is engineered and operated differently. Adopting a hybrid approach to estimating common PV level EIs, especially when drawn from heterogenous samples of whole of facility populations, remains a constant challenge in the calculation of any international best practice metric.
It is possible that many of the analogue facilities DCCEEW propose as ‘best practice’ do not exist in either operation or in engineering design, nor in a manner consistent with the aggregation of defined PVs. DCCEEW’s efforts could be substantiated by authenticating the operational existence of such facilities by PVs.
Engineering requirements require the setting of IBPEIs to account for project-specific element conditions such as temperature (arctic versus sub-tropical climates) and gas composition. The exclusion of emissions from onsite and purchased power from PV IBPEIs remains an important omission in the engineering choices and process optimisation.
The power options available for onshore facilities differ to offshore facilities, and these will necessarily influence the upfront design of best practice facilities. Also, off-grid power can increase a facility’s scope 1 emissions and compliance costs under the SGM, especially given the proposed 67 per cent reduction in the electricity generation
IBPEI baseline compared to its DEI, and when compared to purchasing grid power (scope 2) which is not covered.
Specific concerns
1. Lack of public disclosure on the data sources and functional forms underpinning IBPEI derivations, and the
intention to imminently table these estimates as proposed in Parliament noting there is no consensus across our
membership for any of them | As already observed, there needs to be greater transparency on how these IBPEIs
have been calculated to provide for a fully informed and genuine engineering-anchored discussion to validate
them.
We seek a month extension to these public consultations so that our members and officials can reach a
collaborative consensus on a (potentially different) suite of appropriate (practicable, efficient, equitable, reliable,
etc) IBPEIs for the reform period being considered.
An extension should also be afforded to all SGM responsible emitters reliant on legislated IBPEIs for the purposes
of meeting the Emissions Intensity Determination deadline of 30 April 2024. Members also remain concerned at
the proposed amendment for existing facilities that do not have an EID in place for a financial year will have an
emissions intensity for the production variable of zero. The consequence of non-compliance is arguably severe if
the reason is there is limited availability of assurance services to audit data required for application. We further
recommend extending the EID deadline to accommodate resource constraints and/or removal of the proposed

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amendment to subsection 11(1) at this time.
2. Australia needs to transition to a net zero economy at least cost; it is not clear that these IBPEIs have been set with
any reference to least cost or technological capacity of sectors to meet them under Australian conditions within
the relevant reform period considered | In proposing these IBPEIs, DCCEEW should disclose their empirical basis
including potential economic and emissions impacts in Australia’s national interest, including on new gas supply
and as an intermediate input into production for many other sectors, for gas-fired power generation, to deliver the
energy transition to net zero emissions.
3. Our sector supports SGM reforms that improve the efficiency of Australia’s emissions reductions in its industrial
facilities but considers the proposed IBPEIs have been unrealistically set too onerously for our sector within the
relevant reform period considered | Our sector supports the transitioning of baselines from a hybrid of site specific
and sectoral average production variable (PV) emissions intensities (EIs) today to ultimately DEIs (sectoral average)
and IBPEIs by 2030 at the legislated decline rates.
These decline rates will immediately force all new facilities, and ultimately existing ones, to operate well beyond
these proposed IBPEIs going forward. It is highly probable that many facilities will increasingly and materially rely
on the purchasing and acquittal of offsets for their compliance purposes.
This will inevitably place upward pressure on the demand for and price of carbon credits as well as associated
compliance costs and may reveal an excess of demand for available ACCUs and SMCs. This reaffirms the
importance of a deep and liquid domestic secondary carbon market, as well as future linkages and fungibility with
international emissions schemes so that SGM facilities can take economic advantage of alternate low-cost
abatement options. The Government’s undertaking to consult on establishing a legislative framework for
international units (ITMOs) for emissions reduction target compliance as indicated in the SGM Factsheet (p4)
remains a priority.
A related issue with the current 30 per cent threshold on the use of carbon credits before lodging reports with the
Regulator is the possibility that the 2026-27 review could consider discounting or limiting their use going forward.
There continues to be facility concerns on the availability and future values of carbon credits necessary for
compliance purposes.
DCCEEW acknowledges in its explanatory document (p17) that the proposed carbon constraints intended for our
sector, as represented by its proposed IBPEIs already extend beyond what might be otherwise regarded as
international best emissions practice. It finds for these proposed IBPEIs that the “the emissions intensity reduction
required by the SGM’s benchmarks is larger than the emissions intensity reduction required by the Oil and Gas
Methane Partnership 2.0 (OGMP).” Worth noting that natural gas can consist of between 85 to 97 per cent of
methane depending on the resource.
4. Domestic gas and LNG facilities should not be unfairly disadvantaged by having to bear higher carbon costs than
competitors and other sectors inside and outside of Australia | The impacts of domestic policies imposing
disproportionately higher carbon costs for some sectors compared to others, such as these IBPEIs are expected to
do in our sector, will be felt not just by Australia’s natural gas and LNG sectors, but whole supply chains including
sectors that use gas as an input to production (steel, cement and other final products) and countries that import
our gas.
Many of the technological options to decarbonise gas, LNG, and other production processes such as cement (gas
generates high heat), iron and steel (gas is a reductant, a source of heat and fuel, power generation, and in cutting
and welding applications) at pace and scale have necessarily long-lead times due to both regulatory approvals and
Engineering, Procurement, and Construction (EPC) requirements and/or are in pre-commercial stages of their
technology cycles due to the sophistication of their engineering requirements. Integrated carbon capture
utilisation, transport, and storage (CCUS) projects for example have long-lead times, and hydrogen is generally
considered pre-commercial at scale.
5. The unexpectedly stringent IBPEIs proposed for our sector could risk investment in some new gas facilities | An
increase in risk has the potential to derail economic development of Australia’s gas sector by slowing and/or
restricting the availability of capital, insurance services, research and access to leading edge production and mitigation technologies.
Many of our SGM members who have engaged deeply in this process since its beginning were not expecting an average 84 per cent reduction in their allowable baselines relative to DEIs, and certainly not as high as 98 per cent as illustrated in Table 1 below. Previous engagement with the department on best practice PVs indicated an average of between the top 30 to 50 per cent of facility level production data points as a reasonable and representative basis for estimating IBPEIs relative to DEIs.
Anecdotally, we understand the IBPEIs for our sector have been set using typically 2 analogue facilities per PV, based on 2 years of data, and representing about 10 per cent of aggregate SGM production. However, the
Guidelines state that “five facilities should be used, so long as their combined annual production is between 10 and
25 per cent of the combined annual production of all relevant Safeguard facilities.”
The impact of this is discussed further below in our submission, noting however there appears further scope to expand the sample set used to revalue the proposed IBPEIs, and which would inevitably be higher estimates (less stringent) than what is being proposed.
Table 1

Source: DCCEEW Compilation of proposed amendments

The changes being proposed between the DEIs and IBPEIs for our sector are of orders of magnitude. They compare to an average 47 per cent reduction for other sector IBPEIs relative to their DEIs, which are also being allocated an increase of about 7 per cent on the original DEIs as illustrated below in Table 2.
Table 2

Source: DCCEEW Compilation of proposed amendments

Imposing such high carbon constraints across and between SGM facilities, coupled with higher levels of investment
risk for our sector, could result in a faster development of alternative gas supplies globally at the expense of the
Australian economy, worker, and domestic gas sector, as well as constrain downstream processing capacities and
their ability to manage inherent energy related supply chain risks.
These IBPEIs may also encourage a flight of capital out of Australia’s new gas projects to overseas projects where
regulatory standards and compliance oversight may not be as robust or ambitious, creating a high potential for
carbon leakage, which will necessarily have implications for Australia’s GDP growth, trade, employment, and
business decisions.
6. Reductions in investment in new gas supply due to the proposed IBPEIs is not in Australia’s national interest;
ongoing investment in Australia’s natural gas supply is essential under all credible net zero emissions scenarios |
The IBPEIs as proposed will materially and adversely impact the project economics of most if not all planned gas
project investments in Australia today. The potential of these investments being redirected to other countries with
more supportive gas regimes will result in Australia missing out on the jobs, economic activity, and domestic gas
supply that these investments underpin.
Recent Ernst & Young (EY) analysis commissioned by Australian Energy Producers found that “Australian natural
gas will continue to have an important role powering the economy of Australia and the region to 2050 and beyond
and is a crucial tool for the path to net zero”. It continues to power and serve as a feedstock for Australia’s
industrial base including the processing of critical minerals and rare earths.
These latter resources are critical for Australia and the world’s net zero emissions futures through continued and
economy-wide electrification. Gas also underpins residential and industrial heating, while supporting the transition
away from higher emissions energies such as coal and diesel towards higher shares of grid-based renewables by
firming the system and preventing associated outages due to increased intermittency and volatility of
asynchronous energies.
High penetrations of asynchronous generation such as wind and solar energies can decrease overall grid stability. In
2022, 14 per cent of Australia's electricity generation was sourced from solar and 11 per cent from wind. The
Australian Energy Market Operator (AEMO) recognises the firming requirements of the grid in its draft 2024
Integrated System Plan (ISP) noting (p61): “Renewable energy connected by transmission, firmed with storage and
backed up by gas is the lowest cost way to supply electricity to homes and businesses throughout Australia’s
transition to a net zero economy.”
7. The stringency of the proposed IBPEIs for our sector is expected to impose disadvantage on new gas facilities
relative to incumbents, and relative to other sectors | Giving effect to a principle of ‘no disadvantage’ means
affording all facilities and sectors policy parity. This can be undermined when proposed regulations and policy
incentives do not apply equitably or consistently and can serve to drive adverse (commercial
advantage/disadvantage) and/or perverse (carbon leakage) outcomes.
Affording substantially higher allowable and free baseline allocations to existing facilities than for new entrants
(regardless of sector) will bestow potentially significant market disadvantage on the latter given they face upfront
and additional carbon costs which may prove to be a prohibitively costly barrier to entry.
The potential anti-competitive nature of this approach can be illustrated through a simple hypothetical example
(see Appendix 1 for calculations). Assuming two firms (existing and new) with different marginal abatement costs
(MAC), with the existing facility grandfathered a baseline allocated on the DEI (10tCO2-e) and the new facility on
the IBPEI baseline (1.6tCO2-e). The latter allocation is consistent with the proposed average 84 per cent reduction
under these IBPEIs. The optimal allocation for this example yields the existing firm much better off than the new
firm, after the existing firm is afforded the opportunity to sell almost half of its free allocation (SCM) to the new
facility as the latter needs to purchase about 4 times its initial allocation at the equilibrium price.
Due to the comparative stringency of the proposed IBPEIs relative to other sectors, new gas facilities could be
further penalised by being made to acquit for twice that of other sectors with an average of 84 per cent less
grandfathered emissions compared to 47 per cent less for other sectors. A disproportionate share of the mitigation
burden and cost is being imposed on new gas facilities relative to other sectors, with the associated additional
costs also impacting our sectors downstream sectors such as steel and cement and ultimately consumers due to a
need to pass these costs through.
Alberta’s Technology Innovation Emissions Reduction (TIER) Regulation addressed these inherent needs of new
facilities by adopting a three-year relief from EI based compliance obligations to provide for the stabilisation of new
operations (including new processes and mitigation technologies) along with either a facility-specific benchmark at
95 per cent free allocation or opt-in of a ‘high performance benchmark’ starting in the third full year of operation.
8. These IBPEIs are expected to create a high barrier to entry for new gas facilities, and they will unlikely achieve their
policy intent of fostering the development, adaptation, diffusion, and deployment of new technologies and may
well serve to entrench old technologies | If set appropriately, IBPEIs can be useful (among many policy options) in
encouraging innovation by pulling mature technologies to deployment, but alone are insufficient to drive (market
push) development, demonstration, and deployment of more nascent innovations required for compliance
purposes as facilities are forced up their MAC curves.
The proposed IBPEIs seem to also disregard the:
• Strength of the national systems of innovation that fostered them into existence.
• Extent to which Australia’s innovation ecosystem and commercial drivers differ from other national systems of
innovation in which they were developed.
• Type of support these innovations need throughout their technology cycle and for Australian conditions.
• Technical readiness and commercial viability of technologies to operate within their social licence across all
levels of government policy and regulatory settings.
The Productivity Commission recently observed (p11) a need to acknowledge the uncertainty of technology costs
and new technologies as carbon constraints tighten, with a national least-cost approach to emissions abatement
requiring pursuit of abatement options broadly in line with prevailing estimates of Australia’s MAC curve. It
considers higher cost abatement options, such as those higher up on the MAC curve, need time for ongoing
technological developments, and so a key priority for policy is to help reduce the cost of current abatement
options.
The only businesses likely to succeed in Australia’s future net zero emissions environment will be the ones afforded
the ability to access, adapt, adopt, and commercially finance solutions from the global portfolio of solutions that
can help de-risk and drive decarbonisation plans, and ultimately reduce point source emissions at pace and scale.
As many of the mitigation technologies required to meet the proposed IBPEIs evolve to maturity, it remains
critically important that the legitimate role and unconstrained use of high integrity offsets (real, additional, and
permanent abatement) are maintained for SGM compliance purposes to help facilities meet their obligations at
lowest cost. The SGM’s 30 per cent threshold for example could be seen as a means of qualifying the nature of
climate responsible outcomes, but the generation and purchase of high integrity offsets remain as legitimate as
with point source abatement when it comes to climate benefits to the atmosphere.
Point source emissions reductions that can be delivered in a technically and commercially viable manner clearly
need to be given effect by SGM’s responsible emitters. But consideration also needs to be given to the many
factors that have been administratively excluded from the proposed IBPEIs derivations. This includes for example
the extent and time in which facilities can commercially access, adapt, adopt, or licence, and deploy the required
technological innovations needed to retrofit or repower legacy assets as well as in the upfront design of new
facilities.
Emission gaps between allowable baselines and emissions need to be fully acquitted using either high integrity
offsets and/or SMCs regardless of the scale of the gap (>30 per cent). The Government should give consideration to
least cost approaches to compliance in its undertaking to consult on establishing a legislative framework for
accessing ITMOs for SGM compliance purposes.
9. IBPEIs and the decline rates have been set with no regard for the upfront engineering, procurement and
construction challenges in Australia or the optimal sectoral technology pathways to net zero emissions | Many
important factors have been administratively excluded from these IPBEI derivations, as identified in the Guidelines,
including the availability of skills (such as Science, Technology, Engineering, and Mathematics or STEM) and
technology-related matters.
The proposed IBPEIs exclude many real world factors that are critical to a project’s FEED and FID. If neglected,
these factors can serve to undermine new technology development, adaptation, transfer, and deployment in
Australia by discouraging investment in higher-engineered technologies going forward and/or imposing
prohibitively costly premiums and costs of capital for pre-commercial solutions.
This is arguably true for integrated CCUS projects noting that their major barrier to deployment is not engineering
design or operational but policy and regulatory which subsequently drives the economic viability of such long-lived
assets. The widescale deployment of CCUS is within imminent commercial reach here in Australia. It is also
important to recognise that CCUS is not only a natural gas-centric solution but is also applicable to many heavy
industrial applications (steel, cement, hydrogen) – some with few to no mitigation substitutes – as well as
renewable solutions (BECCS), and power sector.
Our sector and the Government both recognise that the adoption rates of innovations are non-linear (S-curve);
they initially start slow, rise rapidly as market penetration grows, and flatten out as market saturation is reached.
This is Australia’s experience with wind and solar technologies which have been nurtured and incentivised on the
back of a 23-year-old mandated (guaranteed) market under the Renewable Energy Target (RET) with additional
support expected going forward under the yet to be established Capacity Investment Scheme (CIS). \
This is equally true for CCUS as well as nascent and pre-commercial technologies if afforded similar policy parity to
(for example) the RET and CIS (contracts for difference). These proposed IBPEIs have no regard for the stages of
technology cycle that many technology projects currently find themselves in Australia today, and they fail to
account for the potential of the gradient of the rising part of the S-curve and what it could and/or needs to be to
make these solutions accessible, affordable, scalable, and more deployable.
10.Aspects of the proposed IBPEIs stray from alignment to the original guiding principles | The principles include
effective (suitable basis for setting baselines), consistent (treat facilities and industries consistently), robust and
representative (based on high quality data and robust methodology), and practical (simple and low cost).
Effective: It remains difficult to gauge how effective these IBPEIs will be in facilitating Australia’s optimal glide to net
zero emissions at least cost in the absence of Government modelling being released on their projected emissions
and economic outcomes; noting many members holding concerns for the viability of new gas projects going forward
| The Government is yet to articulate its six sectoral plans, and in them, reveal preferences for the transition pathways to be managed under its Net Zero Plan (Plan). How the projected emissions reduction outcomes of these proposed IBPEIs align with such national ambitions under the Plan, especially at the sectoral and potentially facility levels, is indeterminable.
Our sector’s covered emissions of the SGM are currently about 31 per cent. These IBPEIs will likely require our sector to deliver a disproportionately higher share of the abatement burden relative to other sectors in the achievement of the explanatory document’s (p1) assurance that “the draft Amendment delivering within the carbon budget set under the National Greenhouse and Energy Reporting Act 2007 (the NGER Act)”; or it will serve to stop new gas projects from proceeding to construction and operation.
Consistent: Given the significant variability in the rate of changes proposed between DEIs and IBPEIs across sectors, and IBPEIs between sectors, it is not clear that a consistent approach has been applied | As illustrated in Tables 1 and 2, the proposed IBPEIs for the gas sector are on average 84 per cent more stringent than the corresponding
DEIs, and on average 37 per cent (84 less 47 per cent) more stringent than other sectors proposed IBPEIs.
It remains unclear how DCCEEW have applied adjustments to the proposed IBPEIs to take account of Australian conditions given their best practice analogue facilities operate in Arctic conditions. Our earlier submission emphasised adjustments need to account for more than just geological and temperature (as identified in the
Guidelines). It is far from clear how or even if these two factors have been adjusted for in the proposed IBPEIs let alone other key considerations such as technical, commercial, skills, economic, market, legal, regulatory, and political circumstances, as well as inter-jurisdictional considerations.
These are important elements of a facility’s ability to de-risk its engineering adaptations of (mostly) imported technologies to Australian conditions, as well as for the commercial attractiveness of operating new technologies.
For some technologies, world best available technologies will simply not be available to the domestic market given their proprietary ownership and potentially restricted access to intellectual property rights, lack of commercial attractiveness of associated business case, and/or proves infeasible because of high costs to entry due to policy settings such as these proposed IBPEIs.
Robust and representative: In our last submission we indicated problems with the proposed method to setting these
IBPEIs | In the absence of being shared the analytical basis for these IBPEI derivations, their order of magnitude difference with corresponding DEIs, and their level of stringency seems indicates they have not been based on either a robust or representative sample of facilities.
The adopted Guidelines state that “five facilities should be used, so long as their combined annual production is between 10 and 25% of the combined annual production of all relevant Safeguard facilities.” We believe anecdotally that all IBPEI’s for our sector have been based on 2 analogue facilities, representing on or about the lower end of the 10 to 20 per cent of the SGM’s production range.
This suggests that the setting of IBPEIs have strayed from the approved methodology, and that there is scope to add more facilities to the estimate sample which would make at least for different estimates than proposed, and at best for higher (less stringent) estimates.
We previously observed that it might be more practicable at this time to set facility level IBPEIs given the complexity (engineering and legal) of accurately compartmentalising global facility level data samples at the
Australian PV level. There has been little to no meaningful disclosure on how this has been executed nor the data quality assurances needed for such calculations.
We do not oppose PV level IBPEIs for new facilities, however, we observe that Alberta’s TIER initially opted for a facility-level EI benchmark for new facilities for good reason, with a view to transitioning to PVs within a reasonable timeframe. They acknowledge, as we do, that grouping facilities together fails to recognise that individual processes and adapted technologies used will be fundamentally different between and among facilities.
Appendix 1 – a hypothetical example of disadvantage imposed by the IBPEIs
Assuming two firms (existing and new) with different marginal abatement costs (MAC), with the existing facility grandfathered a baseline allocated on the DEI (10tCO2-e) and the new facility on the IBPEI baseline (1.6tCO2-e). The latter allocation is consistent with the proposed average 84 per cent reduction under these IBPEIs.
The optimal allocation for this example bestows on the existing firm a $75 advantage relative to the new firm, after selling 42 per cent of its free allocation (SCM) at an equilibrium price of $17.80 – see calculations in diagram below.

Source: Australian Energy Producers – for illustrative purposes only and does not reflect any real facility

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