ASFI has provided a submission to the Australian Government’s review of the Safeguard Mechanism.

The submission highlights the important role of the Safeguard Mechanism in Australia’s climate policy architecture and its contribution to providing clear investment signals for industrial decarbonisation. ASFI’s recommendations focus on strengthening incentives for emissions reduction, supporting investment in genuine industrial transition, and providing the policy certainty needed to mobilise private capital at the scale required to achieve Australia’s climate goals.

ASFI Recommendations

1. Align the Safeguard Mechanism with the upper end of Australia’s 2035 emissions reduction target

ASFI supports aligning the Safeguard Mechanism with a 70% emissions reduction target to strengthen investment certainty and support achievement of Australia’s climate objectives.

2. Increase baseline decline rates while recognising sector differences

ASFI supports an average baseline decline rate of 7%, alongside consideration of differentiated decline rates that reflect industries’ varying transition pathways, access to abatement options and long-term roles in a net zero economy.

3. Expand scheme coverage over time

ASFI recommends lowering the Safeguard Mechanism threshold to 75,000 tonnes of CO2-e from 2031, with consideration of further reductions in future to strengthen economy-wide decarbonisation incentives.

4. Maintain access to ACCUs while strengthening incentives for on-site abatement

ASFI supports retaining Australian Carbon Credit Units as an important flexibility mechanism, while considering reforms that encourage earlier investment in on-site emissions reduction.

5. Improve support for industrial decarbonisation investment

ASFI recommends reviewing government decarbonisation support programs to improve accessibility, certainty and effectiveness while prioritising industries with a credible long-term role in a net zero economy.

6. Address carbon leakage through a Carbon Border Adjustment

ASFI supports the introduction of a Carbon Border Adjustment in line with recommendations of the Carbon Leakage Review and supports transitioning away from existing concessional arrangements where appropriate.

7. Provide greater certainty regarding electricity sector transition

ASFI recommends consideration of measures that provide confidence in the timing of coal-fired power station closures to support investment in replacement renewable energy, storage and enabling infrastructure.

8. Require transition and abatement plans for Safeguard facilities

ASFI sees merit in requiring facilities to prepare carbon abatement plans to improve transparency, support emissions reduction planning and provide greater visibility of future emissions reduction pathways.

9. Address barriers outside the Safeguard Mechanism

ASFI recommends reviewing broader policy settings that may limit industrial decarbonisation, including regulatory and fiscal settings that reduce incentives for low-emissions investment.

Achieving Australia’s emissions reduction targets will require strong policy settings that support both industrial competitiveness and decarbonisation. A well-designed Safeguard Mechanism can help provide the certainty, incentives and investment signals needed to mobilise private capital towards the technologies, infrastructure and industrial transformation required for Australia’s transition to a net zero economy.