Safeguard Mechanism must prioritise deep, rapid and sustained cuts to emissions
The Department of Climate Change, Energy, the Environment and Water is currently undertaking a review of the Safeguard Mechanism. Climate Integrity has made a submission to the review, emphasising the need to reform the scheme to close loopholes, avoid perverse outcomes and to prioritise the achievement of real and rapid reductions in Australia’s greenhouse gas emissions.
The review of the Safeguard Mechanism is urgent and unprecedented. Despite decades of scientific warnings, global climate action has not produced sufficiently rapid cuts in emissions, and as a consequence, exceeding 1.5°C of global warming is now inevitable – likely within the next few years.
As the United Nations Environment Programme (UNEP) report Limiting Overshoot makes clear, there is no good or safe outcome above 1.5°C. The world is already experiencing increasingly severe heatwaves, fires, droughts and extreme weather, and beyond 1.5°C the impacts will "intensify non-linearly and compound over time," including ecosystem loss, the submersion of Small Island Developing States and low-lying cities, and severe damage to human health, food security, water supplies, infrastructure, cities and economies. The risk of crossing irreversible tipping points – such as the disruption or collapse of the Atlantic Meridional Overturning Circulation (AMOC), which would permanently alter global weather patterns – also increases.
Current and future generations of Australians face escalating costs and damage to their lives and livelihoods. The Australian government's National Climate Risk Assessment, released in September 2025, found that climate risk to the economy, trade and finance system is projected to rise from "moderate" today to "very high" by 2050. Even under a 1.5°C scenario, the economic cost of natural disasters is projected to reach $40 billion annually by 2050. Physical risks will drive property and infrastructure damage, higher insurance costs, and even loss of homes – particularly in coastal areas vulnerable to sea level rise and erosion.
According to UNEP, the world's best remaining option for returning to "not a safe world, but [one] safer than remaining above [1.5°C]" is an overshoot, peak and decline pathway, focused on minimising the magnitude and duration of overshoot. This can only happen through a rapid and sustained reduction in emissions.
Success or failure, says the UNEP, "is not predetermined; each decision and action implemented determines its trajectory … it hinges on the mitigation actions we take now”. This means we still have a chance to shape the future: the primary object of Australian climate policy must be the achievement of the deep, rapid, and sustained reductions in greenhouse gas emissions that are necessary to deliver upon the goals of the Paris Agreement and Australia’s national targets made under that agreement.
The Safeguard Mechanism is Australia’s primary emissions reduction policy, covering approximately 30% of Australia’s total greenhouse gas emissions. Despite significant reform in 2023, it is functioning less as a driver of onsite emissions reductions and more as a low-cost clearing house for carbon credits. For example, in 2024-25 aggregate onsite emissions dropped by just 2.3%. The use of offsets, however, increased by 49% as facilities preferred cheap offsets over meaningful emission reductions onsite. Reforms must give priority to measures that will reduce greenhouse gas emissions, rather than pushing the emissions reduction burden onto the land sector via increased ACCU reliance.
Australia has committed to an emissions reduction target range of 62-70% by 2035, which the Climate Change Authority (CCA) advised should be presented as Australia’s “minimum commitment” while not ruling out the potential for overachievement. To align with the goals of the Paris Agreement, Australia must at a minimum meet the upper ambition of the 2035 target for domestic emissions reductions.
Despite the CCA providing a blueprint for how Australia can decarbonise and build a sustainable and economically resilient economy, Australia is currently off track to deliver its 2030 emissions reduction target of a 43% reduction below 2005 levels, and very far off track to meet its 2035 target. The CCA's own 2025 report found that for Australia to meet its 2030 target, emissions reductions would need to more than double from current trajectories. For the 2035 target to be met, those cuts would need to more than triple.
The Safeguard Mechanism must be strengthened so it can meaningfully contribute to meeting Australia’s obligations to accelerate domestic emissions reductions in line with, or beyond, the upper range of our 62-70% 2035 target.
Ultimately, as we have been warned in the national climate risk assessment and the UNEP Overshoot Report, it is people and communities who are bearing the brunt of climate change and who shoulder the risks and costs of delay. The Australian Government must meet the moment and act with urgency and moral clarity.
Our recommendations
R1. As a principle, any reforms to the Safeguard Mechanism must prioritise actions that support emissions reduction and the achievement of Australia’s emissions targets.
R2. The Safeguard Mechanism must be reformed to address the unintended and perverse outcomes being created by its current design, particularly in relation to the treatment of coal mines.
R3. It would be appropriate for industries to receive differential treatment in baseline decline rates. In particular, recognising the outsized role they play in driving both domestic and global emissions, coal and gas extraction and processing facilities should receive faster decline rates to support Australia’s commitment to a transition away from fossil fuels.
R4. The use of international carbon offsets should not be allowed under the Safeguard Mechanism.
R5. Limits on the use of Australian Carbon Credit Units (ACCUs) for Safeguard Mechanism compliance should be introduced to strengthen the incentive for investment in onsite emissions reduction.
R6. Post-2030 baseline decline rates must be consistent with delivering emissions reductions that are at least in line with the upper end of Australia’s 2035 Nationally Determined Contribution (i.e. a 70% reduction by 2035).
R7. The Australian Government must consider reforms to other policies that work to undermine the objectives of the Safeguard Mechanism. This includes the Fuel Tax Credits Scheme.