Australian businesses operating large industrial facilities have a pressing deadline of Friday, September 18, 2026, to submit their feedback on the federal government’s 2026-27 review of the Safeguard Mechanism. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) commenced stakeholder consultation on August 7, 2026, releasing a comprehensive consultation paper to inform the review. This process is crucial as it will shape the trajectory of emissions reduction for Australia’s largest emitters and directly influence the nation’s 2030 and 2050 climate targets.

The Safeguard Mechanism, initially established in 2016 and significantly reformed in 2023, is the Australian Government’s primary policy tool for driving down emissions from industrial facilities that emit more than 100,000 tonnes of carbon dioxide equivalent (CO2-e) per year. This includes sectors such as mining, oil and gas production, manufacturing, transport, and waste facilities. The current review aims to ensure the scheme’s settings remain appropriately calibrated to deliver emissions reductions consistent with Australia’s ambitious target of 43% below 2005 levels by 2030 and net zero by 2050.

Key Areas Under Review

The consultation paper outlines several critical areas for feedback, designed to refine the scheme’s effectiveness and fairness. These include:

  • 2030-2035 Decline Rate for Baselines: A central focus is determining the appropriate rate at which emissions baselines for facilities will decline post-2030. Currently, baselines generally fall by 4.9% each year to 2030.
  • Scheme Coverage Arrangements: The review will assess the scope of the scheme, considering potential competitiveness issues for businesses, abatement potential, and regulatory compliance burdens.
  • Role of Safeguard Mechanism Credits (SMCs), Australian Carbon Credit Units (ACCUs), and International Units: The future function and interplay of these credit types in meeting compliance obligations will be examined.
  • Incentivising Onsite Abatement: The government is seeking input on whether the scheme adequately encourages facilities to reduce emissions directly at their sites and if additional incentives are required.
  • Arrangements for Trade-Exposed Facilities: Specific considerations will be given to facilities that are highly exposed to international competition, ensuring the mechanism does not unduly disadvantage them.
  • Recommendations of the Carbon Leakage Review: The review will also incorporate findings and recommendations from a separate assessment of carbon leakage risks.

“The Safeguard Mechanism was reformed in 2023 and has been operating for over 2 years. The reforms were significant and a review was scheduled for 2026-27 to ensure the reformed scheme settings remain appropriately calibrated and continue to deliver emissions reductions in line with Australia’s targets.”

Consultation Timeline and Impact

The current consultation period is a critical opportunity for affected businesses and stakeholders to directly influence the future design and implementation of this cornerstone climate policy. Following the close of submissions on September 18, 2026, the Department will engage in further stakeholder discussions. Policy positions and any draft rule amendments are anticipated to be released in early 2027.

The Climate Change Authority (CCA) has also played a role in advising the Australian Government, undertaking its own consultation from July 2 to August 9, 2026, on the appropriate baseline decline rate and the effectiveness of onsite abatement incentives.

Performance and Future Outlook

Recent data from the Clean Energy Regulator (CER) provides context for the review. The CER’s Safeguard Mechanism performance data for 2024-25 indicated that total covered emissions fell by 2.3%. However, compliance obligations saw the surrender of 10.8 million ACCUs and 2.6 million Safeguard Mechanism Credits (SMCs), representing a 49% increase on the prior year, leading to an overall 5.5% reduction in net emissions. This data underscores the ongoing reliance on carbon credits for compliance and highlights the importance of the review’s focus on driving genuine onsite abatement.

For businesses looking to invest in new technologies and strategies to reduce their emissions footprint, exploring financial support mechanisms can be vital. Options such as Best Green Loans in Australia 2026: Rates from 4.24% p.a. can assist in funding abatement projects. While the Safeguard Mechanism primarily targets large industrial emitters, the broader policy landscape also includes initiatives like Australia’s 2026 Solar, Battery & EV Rebates: Unlock Up To $20,000+ in Savings that can support various business sizes in their clean energy transition efforts.

The outcome of this review will directly impact the operational costs and decarbonisation strategies for approximately 219 facilities responsible for around 30% of Australia’s total greenhouse gas emissions. Their input is essential to ensure the Safeguard Mechanism remains an effective, equitable, and economically viable tool for achieving Australia’s climate objectives.

Businesses are encouraged to review the consultation paper on the DCCEEW website and submit their feedback before the September 18 deadline via safeguard.mechanism@dcceew.gov.au.