Australia’s primary policy tool for reducing industrial greenhouse gas emissions, the Safeguard Mechanism, is showing early signs of progress according to new data released by the Clean Energy Regulator (CER) on 15 April 2026. The 2024-25 reporting period data indicates a 2.3% reduction in covered emissions, alongside a more significant 7.3% decrease in total baselines. This initial performance arrives ahead of a crucial government review scheduled for the 2026-27 financial year, which will assess the mechanism’s ongoing effectiveness.
The Safeguard Mechanism, reformed in 2023, mandates Australia’s highest-emitting industrial facilities to reduce their carbon footprint in alignment with national targets of a 43% cut below 2005 levels by 2030 and net zero by 2050. It applies to facilities emitting more than 100,000 tonnes of carbon dioxide equivalent (tCO2-e) annually, encompassing sectors such as mining, oil and gas production, manufacturing, transport, and waste. Responsible emitters whose facilities exceed their baselines are required to manage these excess emissions, typically through purchasing and surrendering carbon credits. Conversely, facilities operating below their baselines may be eligible to receive Safeguard Mechanism credit units (SMCs).
Key Data from the 2024-25 Reporting Period
The CER’s latest publication provides a detailed snapshot of the mechanism’s second compliance year:
“The safeguard outcomes for 2024 to 25 show 132.8 million tonnes of carbon dioxide equivalent covered emissions, which is 2.3 percent less than last year, alongside 126.2 million tonnes of carbon dioxide equivalent total baselines, which is 7.3 percent less than last year.”
Specifically, the data reveals:
| Metric | 2024-25 Outcome |
|---|---|
| Covered Emissions | 132.8 million tonnes of CO₂-e (2.3% decrease from previous year) |
| Total Baselines | 126.2 million tonnes of CO₂-e (7.3% decrease from previous year) |
| Total Units Surrendered | 13.4 million units |
| - Australian Carbon Credit Units (ACCUs) | 10.8 million units |
| - Safeguard Mechanism Credits (SMCs) | 2.6 million units |
| SMCs Issued | 6.7 million units |
Notably, the 2024-25 period marks the first year since the mechanism’s reform where total covered emissions surpassed total baselines, a development that is expected to strengthen the market driver for on-site emissions reductions and greater engagement with carbon markets.
Industry Response and Future Outlook
The Carbon Market Institute (CMI) has welcomed the initial performance data, with Director of Corporate Transition, Kurt Winter, stating that the mechanism appears to be “on track to deliver its legislated goals towards 2030, with continued modest net and gross emissions reductions.” Winter also highlighted the increased surrender of both ACCUs and SMCs by covered entities, which he attributes to the growing maturity and commercial viability of various on-site decarbonisation solutions.
However, the relatively modest 2.3% reduction in covered emissions, while positive, underscores the scale of the challenge in meeting Australia’s ambitious 2030 targets. The mechanism’s baselines are designed to decline at a flat, linear rate of 4.9% annually from 2023-24 to 2029-30. This consistent decline is intended to progressively sharpen the incentive for industrial facilities to invest in decarbonisation technologies and practices.
The Impending 2026-27 Review
The Australian Government’s Department of Climate Change, Energy, the Environment and Water is slated to conduct a formal review of the Safeguard Mechanism in the 2026-27 financial year. This review will be critical for evaluating the scheme’s effectiveness, identifying areas for improvement, and ensuring it remains a robust instrument for achieving Australia’s emissions reduction commitments. CMI has indicated its intention to engage with this review, focusing on recommendations that support policy stability, investment certainty, and further incentivise on-site emissions reductions.
For businesses operating under the Safeguard Mechanism, the upcoming review represents an opportunity to shape future policy settings. It will also necessitate continued strategic planning to manage emissions, invest in abatement technologies, and navigate the evolving carbon market landscape. The interplay between declining baselines and the availability and cost of ACCUs and SMCs will remain a key factor in compliance strategies. As Australia progresses towards its net-zero goals, the Safeguard Mechanism’s performance will be under continuous scrutiny, with the 2026-27 review providing a pivotal moment for its trajectory.
Broader Implications for Australia’s Energy Transition
The Safeguard Mechanism’s performance is intrinsically linked to Australia’s broader energy transition. While focused on large industrial emitters, the drive for decarbonisation within these sectors can stimulate innovation and investment in clean energy technologies across the economy. The success of the mechanism in driving down industrial emissions will be a critical component of Australia’s overall climate action, complementing efforts in other areas of the energy sector.
The initial data from the CER provides a foundation for assessing the Safeguard Mechanism’s role in Australia’s decarbonisation journey. The insights gained from the 2024-25 reporting period will be vital inputs for the upcoming government review, shaping a policy that is not only effective in reducing emissions but also supports a competitive and resilient industrial sector in a net-zero future.