The Safeguard Mechanism is Australia’s main policy designed to drive down domestic climate pollution from mining, manufacturing, transport, oil, gas and waste.

The policy is poorly designed and not reducing emissions at the rate needed to help Australia do its part to limit the most harmful impacts of climate change.

The Federal Government has released a consultation paper seeking feedback on the Safeguard Mechanism. The review aims to assess how the current policy settings are working and to inform the best settings to achieve the scheme’s share of Australia’s 2035 target for achieving net zero by 2050.

See the consultation page here for more information and to make your submission.

Submissions are due by 11.59pm (AEST), Friday 18 September 2026.

What is the Safeguard Mechanism?

The ‘Safeguard Mechanism’ is Australia’s key policy mechanism for reducing emissions from industrial facilities in line with Australia’s emissions targets. The scheme is intended to cover  just over 30% of Australia’s annual national ‘scope 1’ direct emissions, such as fugitive methane leaks from coal mines.

However, it’s important to understand that the Safeguard does not cover:

How does it work? The way the Safeguard Mechanism works is not simple – but the broad idea is that facilities coming under the scheme’s requirements must keep their net emissions below a legislated limit, and over time that limit decreases. If a facility goes over its limit (baseline), it can use offsets/credits to make up for the excess emissions. If it goes under, it can earn a special type of credit to sell or bank. Learn more about the details here.

Who does it apply to? Not everyone. It only applies to defined facilities emitting over 100,000 tonnes of carbon dioxide equivalent emissions a year, and although various sectors are covered (including mining, manufacturing, transport and waste), coal and gas extraction make up more than half of covered pollution under the scheme.

Is the Safeguard Mechanism working?

Under the law, the purpose of the Safeguard Mechanism is to contribute to the achievement of Australia’s emissions reduction targets by ensuring that the ‘safeguard outcomes’ are achieved. These outcomes include:

  1. Safeguard emissions declining to net zero by 2050, and;
  1. Facilities covered under the scheme having a ‘material incentive’ to invest in reducing covered emissions from their operations.

1. Is the Safeguard Mechanism meaningfully reducing emissions?

No, the scheme is not meaningfully reducing Australia’s Scope 1 emissions.

The scheme aims for pollution limits to decline annually, but analysis from the Climate Council and Naru Research shows that major polluters continuously covered by the Safeguard have only reduced on-site emissions by 0.4% between the first and second years of the reformed scheme.

The Safeguard’s failure to sufficiently reduce emissions is due to a variety of factors, including:

  • the availability of unlimited, relatively low-cost carbon offsets;
  • integrity issues inherent to all offsets, facilities preferencing low integrity offsets and the scheme allowing the use of land sector offsets for fossil fuel facility emissions (learn more about the issues with offsets here)
  • the scheme does not prevent or properly address continued fossil fuel expansion.

2. Is the Safeguard Mechanism incentivising on-site pollution cuts?

No, the scheme is allowing unrestricted offsetting and is not adequately incentivising on-site pollution cuts.

The Safeguard Mechanism should incentivise facilities to cut pollution at the source rather than offset pollution with credits.

  • Safeguard Mechanism facilities are overwhelmingly opting to offset because it’s generally the cheaper and easier option and there is no limit on how many offsets can be purchased.
  • The best way to meaningfully reduce emissions is to invest in on-site pollution reduction (e.g. it’s better to prevent methane emissions leaking from a coal mine rather than find a way to ‘offset’ that pollution afterwards).

What needs to change

Three key recommendations for improving the Safeguard Mechanism that could inform your submission:

  1. The scheme should limit reliance on carbon offsets, improve credit integrity and incentivise on-site abatement
  • Limit the ability of facilities to rely on carbon offsets (Australian Carbon Credit Units, or ‘ACCUs’) to comply with baseline obligations. Facilities should only be able to use carbon offsets to compensate for excess emissions after all possible abatement has taken place.
  • Ensure that Safeguard Mechanism Credits (‘SMCs’, being offsets given to facilities when polluting below their baseline) reflect genuine emissions avoidance by requiring facilities to prove that emissions savings resulted from investment in emissions reduction technology to receive credits.
  • Review carbon offset price rules to incentivise on-site abatement.
  1. The scheme should differentiate fossil fuel facilities, increase their emissions reduction obligations and ensure all expanded fossil fuel facilities are subject to best practice emissions reduction rules
  • Increase emissions reduction obligations for fossil fuel facilities. Fossil fuel facilities should be differentiated for various reasons including recognising the scientific need for a fossil fuel phase out, their significant contribution to pollution covered under the scheme, and their financial and technical abatement capacity.
  • Amend the definition of ‘new facility’ to capture major fossil fuel extensions and expansions in best practice emissions reduction rules.
  1. Align the scheme with, at minimum, the top end of Australia’s 2035 climate target (70%) by increasing how quickly emissions caps decrease across the scheme.

You could also consider taking this opportunity to raise the need for broader national climate policy reform:

  • Australia must implement an orderly and fair pathway for fossil fuel phase out. To comply with our international legal obligations and achieve rapid emissions reduction, Australia should implement an orderly and fair phase out of fossil fuel production, use and export. The science tells us that new fossil fuel projects and expansions cannot be approved, and existing projects must be phased out if we are to do our best to reduce the worst impacts of climate change. Currently there is nothing stopping continuous applications across Australia for new or expanded coal and gas activities.

  • Downstream ‘scope 3’ emissions must be meaningfully considered in environmental assessment. Scope 3 emissions from the burning of coal and gas must be given appropriate weight in environmental assessment and in considering Australia’s carbon budget. Climate considerations should be expressly included in the EPBC Act and exported emissions should be considered in national reporting frameworks and environmental assessment regimes as pollution Australia is enabling to occur.

  • Accuracy of emissions reporting must be improved and accelerating fossil methane abatement must be prioritised. Emissions reporting must be improved to ensure an accurate understanding of how Australia is meeting its emissions reduction targets, particularly in regard to methane emissions. As reducing methane will assist in slowing warming over the next decade, accelerating fossil methane abatement must be a priority for the government.

Your submission matters:
have your say by 18 September

The 2026 Safeguard Mechanism review is a real opportunity to advocate for improvements to the scheme’s broken incentive structure which could help move Australia closer to meeting our national emissions reduction goals, putting us on the path to a safer climate.

The government has been clear, its mind is not made up. Submissions made now could genuinely influence how the government thinks about Safeguard Mechanism reform.

It’s also an important opportunity to advocate for the climate laws Australia needs to meaningfully reduce emissions and address Australia’s contribution to climate change.

Make your submission before midnight on Friday 18 September