Safeguard Mechanism: Why is our industrial pollution law letting big polluters off the hook?

WHY DO WE NEED TO REIN IN POLLUTION?

Climate pollution from coal, oil and gas is driving worsening climate disasters and rising costs for essentials – with insurance premiums increasing $30 billion over the past decade, and groceries projected to cost up to $3,000 more a year by 2070.

Australians are doing their bit to cut climate pollution: 4.4 million families have solar on their roof and more than 340,000 installed a home battery in the past year. That’s a win-win for families who are cutting climate pollution and cutting their power bills at the same time.

But big polluters aren’t doing their fair share. Coal and gas corporations are pumping out more and more pollution and pocketing record profits, leaving everyday Australians to pick up the tab for the climate damage.

WHAT IS THE SAFEGUARD MECHANISM?

The Safeguard Mechanism is our main national law for cutting industrial climate pollution.

The law regulates facilities that generate at least 100,000 tonnes of climate pollution per year – like coal mines, gas facilities and manufacturing plants – and covers about one third of Australia’s total climate pollution.

The Safeguard Mechanism was introduced by the Abbott and Turnbull Governments, and reformed by the Albanese Government in 2023 to set stronger pollution limits that get tighter every year. When the reforms were made, the Government committed to reviewing the scheme after two years – and that review is now underway.

IS THE LAW WORKING TO CUT POLLUTION?

To put it simply: no, it’s not working. The Safeguard Mechanism is Australia’s key law to drive down industrial pollution – but two years into the Albanese Government’s reforms, pollution has barely budged.

The biggest polluters continuously covered by the Safeguard Mechanism have only reduced pollution by 0.4%, falling far short of the 4.9% cut set out in the law.

But that’s not even the worst part. Continuously covered fossil fuel facilities – coal, oil and gas – have actually increased their climate pollution by 0.2% rather than cutting it.

HOW ARE COAL AND GAS CORPORATIONS GETTING AWAY WITH IT?

The big problem with our industrial pollution law is that corporations are able to buy their way out of their obligations, purchasing as many cheap “offsets” as they like, rather than cutting their own pollution.

These offsets are like a “get out of jail free card” for big polluters. They let corporations pay someone else to deal with climate pollution somewhere else – for example by planting a tree. But that’s not the same thing as cutting pollution at the source.

It’s like dumping your rubbish in the street and paying someone else to pick up litter in another state. That’s not how it works.

That’s the loophole that we need to close to make sure our biggest polluters do the right thing and clean up their act.

WHY OFFSETS SHOULD BE A LAST RESORT

Offsets have a limited role as a last resort, for the small number of industries that can’t cut their pollution yet – like aviation. That exception shouldn’t apply to coal, gas and mining corporations that have affordable options to cut pollution today – from electrifying their trucks to stopping methane leaks. 

These are some of the most profitable companies in the world, but they’re buying offsets instead of cutting their own pollution because it’s cheaper and easier. For example, BHP shelved plans to electrify its massive truck fleet and bought up millions in offsets instead. 

The other problem with offsets is that they may only be a temporary measure. For example, if an offset is used to plant a tree, that tree could burn down in a bushfire and then you’re back at square one. Shifting to cleaner fuels and production processes is a guaranteed way to reduce climate pollution permanently whereas an offset is a risky bet.

SHOULD OUR BIGGEST POLLUTERS FACE TIGHTER LIMITS?

The resources sector – including coal, gas and iron ore – represents 64% of the pollution covered by our industrial pollution law, but isn’t doing enough to cut it. 

As noted above, proven, cost-effective technology to slash on-site pollution from the resources industry is already available, from electrifying trucks to stopping methane leaks.

Coal, gas and mining corporations also have the financial means to invest in cutting pollution. With net profit margins from 21% to 39%, they are some of Australia’s most profitable corporations.

Coal, gas and mining corporations can cut pollution now – so they should face tighter pollution limits than long-term industries like steel, aluminium, cement and chemicals, which have tighter margins and fewer options.

IT’S TIME TO FIX THESE LOOPHOLES

The Albanese Government must use the 2026-27 review of the Safeguard Mechanism to close these loopholes, end the free ride for fossil fuels and rein in industrial climate pollution.

Most Australians (62%) support the Government strengthening the Safeguard Mechanism – and the 2026-27 review is the moment to act. Here’s how:

• The Safeguard Mechanism should be aligned with the top-end of Australia’s 2035 climate target (a 70% cut), to deliver on our domestic and international commitments, and keep Australians safer from climate harm.
• Tougher rules should be applied to coal, gas and mining corporations that have the greatest financial and technological capacity to cut climate pollution now.
• The use of offsets (ACCUs) should be phased out over time to encourage cutting pollution at the source, and only used for climate pollution that cannot yet be cut entirely (such as aviation).
• Loopholes that allow major expansions and extensions to shirk the tighter ‘best-practice’ pollution limits given to new projects should be closed.
• All new, expanded, and extended coal and gas facilities should be accountable for every tonne of domestic climate pollution from day one – per existing rules for shale gas.

For more detail on our policy recommendations, check out our report Free Ride: How our biggest polluters are dodging their fair share.

WHAT CAN YOU DO ABOUT IT?

You can join our call for Prime Minister Anthony Albanese and key Government Ministers to stand up to fossil fuel corporations and protect the interests of all Australians by signing our petition to End the Free Ride for Fossil Fuels.

You can also share this explainer with your friends and family, and dig into our report for more information.