Investors have greeted the announcement today of a deal between the Greens and the Government on the Safeguard Mechanism by leaving mining and energy stocks.

A major aspect of the deal means that the mechanism for the first time will place a cap on emissions by facilities covered under the scheme. This will ensure a large portion of coal and gas proposals in Australia cannot proceed, and clearly investors’ first reaction was to leave mining and energy companies.

Woodside Energy was down 3.0%, Santos down 1.8%, BHP down 0.4% and Whitehaven down 1.9%. The ASX200 Energy Index was down 2.3%

While of course stock prices are affected by numerous factors, including concerns the current financial ructions will affect demand for gas and oil, and we should not place too much emphasis on one day of trading, it is pleasing that the announcement of the Safeguard Mechanism deal was not viewed as a win from coal and gas mining companies.

While the deal does improve the original proposal there remains much to do and further legislative reform will be required to reduce Australia’s emissions as the impacts of climate change continue to intensify.

Both IEA and the UN say that no new fossil fuel projects can be approved in order to avoid ‘the worst effects of climate change’ by limiting global temperature rise to 1.5°C. New gas and coal projects will still be able to occur under this new mechanism.

While the market might initially view the deal as a loss for gas and coal companies, so long as new gas and coal projects can continue, the real losers are future generations who will have to deal with the catastrophe of climate change.