Consultation on Safeguard Mechanism reform options
The Department of Climate Change, Energy, Environment and Water (DCCEEW) is consulting on options to reform the Safeguard Mechanism to help industry reduce emissions in line with Australia's climate targets.
The Safeguard Mechanism requires Australia's largest greenhouse gas emitters to keep their net emissions below an emissions limit (a baseline). The Australian Government proposes:
- gradually reducing baselines to help Australia reach net zero emissions by 2050
- introducing credits for facilities that emit less than their baseline
- providing tailored treatment to emissions-intensive, trade-exposed facilities so businesses are not disadvantaged compared to international competitors and emissions do not increase overseas.
Visit DCCEEW’s consultation hub for more information on these reforms and the consultation activities.
The safeguard threshold
The safeguard mechanism commenced on 1 July 2016 and applies to facilities that emit more than 100,000 tonnes carbon dioxide equivalent (CO2-e) covered emissions in a financial year. This extends to businesses across a broad range of industry sectors, including electricity generation, mining, oil and gas extraction, manufacturing, transport, and waste.
Under the safeguard mechanism, facilities are given a
baseline which is the reference point against which net-emissions levels will be assessed. A safeguard facility must keep its net emissions levels at or below its baseline.
We publish a list of all facilities covered under the safeguard mechanism, after emissions have been reported under the National Greenhouse and Energy Reporting scheme for each financial year. See
Safeguard facility reported emissions for more information.
Covered emissions
The safeguard mechanism applies only to covered emissions. Covered emissions are defined as scope 1 emissions, including direct emissions from fugitive emissions and emissions from fuel combustion, waste disposal and industrial process such as cement and steel making.
Some scope 1 emissions are not covered by the safeguard mechanism. These include:
Sectoral coverage
The safeguard mechanism has been designed to accommodate the unique circumstances of the electricity generation, transport, and waste sectors.
Sectoral baseline: electricity generation
A sectoral baseline of 198 million tonnes of carbon dioxide equivalent will apply collectively to grid-connected generators unless this baseline is exceeded. If the sectoral baseline is exceeded, individual baselines will apply to each generator.
A sectoral approach has been adopted as the electricity generation sector behaves more like a single entity, where the energy produced is centrally coordinated to meet demand in real-time.
Transport
To accommodate interstate transport operations, transport businesses will have the option to define their facilities on a state or national basis.
Waste
Waste facilities may apply for a landfill baseline. Landfill baselines recognise that waste facilities do not have an identifiable production variable and that associated emissions take place in the years after the waste is deposited. Emissions from waste accepted before 1 July 2016 are considered legacy emissions and are not covered under the safeguard mechanism.