Submission to the 2026-27 Safeguard Mechanism Review
The Safeguard Mechanism is in need of refinements in order to continue delivering on its role in supporting industry decarbonisation.
As governments seek to reduce greenhouse gas emissions, major economies are increasingly likely to price carbon domestically and implement carbon border adjustments, as the European Union now does. Australia should prepare for falling demand for high-emissions exports and rising demand for green exports.
The Safeguard Mechanism can help position Australian industry for this transition.
A key challenge is ensuring our existing production plants remain competitive. The current trend is for new large industrial plants to be built in places with fewer emissions restrictions, like Indonesia. A poorly tuned Safeguard regime could drag on these exporting Australian firms. Safeguard Mechanism rules should remain stable over time to bring certainty to large ($1-5 billion) long-term (20–25-year cycles) investments in hard-to-abate industries.
The design of a facility largely sets its lifetime emissions. It is therefore important for the current review to make minor changes to the Safeguard Mechanism to better support industry to achieve technology-driven emissions reductions.
ATSE makes the following recommendations to refine the Safeguard Mechanism:
Recommendation 1: Define sector-specific standards for low-carbon technologies, linked to streamlined approval processes.
Recommendation 2: Encourage low-carbon design by applying a discount rate to ACCUs for new facilities, facility expansions, and significant renewal of capital equipment on existing facilities that do not meet these standards.
Recommendation 3: Consider reducing the Safeguard Mechanism threshold.
Recommendation 4: Sequence post-2030 coal mining baseline arrangements with improvements to National Greenhouse and Energy Reporting (NGER) fugitive methane estimation methods and ensure method-driven changes in reported emissions are handled as measurement corrections rather than as headroom or emissions growth.
Recommendation 5: Base eligibility to trade-exposed baseline adjustment (TEBA) on carbon leakage risk and not on the Safeguard Mechanism emissions cost.
