Australian Energy Producers Director, Climate Policy & Technology, Joe Doleschal Ridnell analyses what the Federal Government’s review of the Safeguard Mechanism means for Australia’s oil and gas industry.
Getting the Safeguard Mechanism policy settings right is critical to reducing emissions without increasing costs for industry, undermining competitiveness or driving investment offshore.
That is what is at stake as the Department of Climate Change, Energy and the Environment reviews the performance of the Safeguard Mechanism and considers policy settings for the period beyond 2030.
About the Mechanism and the Review
The Safeguard Mechanism is Australia’s principal framework for reducing emissions from large industrial facilities. It applies to facilities emitting more than 100,000 tonnes of CO₂-e each year, with emissions baselines declining by 4.9 per cent annually to 2030.
Independent analysis by EY has found that the Safeguard Mechanism imposes some of the most ambitious emissions reduction obligations on heavy industry anywhere in the world.
In 2024-25, the 208 Safeguard Mechanism facilities reported total covered emissions of 132.8 MtCO₂-e. The 29 oil and gas facilities reported 41.4 MtCO₂-e of covered emissions — approximately 31 per cent of all emissions covered by the scheme.
The review is considering several key issues that could impact the oil and gas sector, including the baseline decline rate from 2030, whether there should be restrictions on the use of carbon credits, and whether different sectors should face different emissions reduction obligations.
Reforms must recognise oil and gas industry is doing the heavy lifting
The Safeguard Mechanism imposes some of the most ambitious emissions reduction obligations on heavy industry anywhere in the world.
The oil and gas sector faces stricter Safeguard Mechanism requirements than any other sector, including net zero reservoir emissions for new gas fields supporting LNG projects and net zero for Beetaloo Basin gas developments.
New oil and gas facilities also face disproportionately strict emissions requirements relative to other sectors based on selective international benchmarks. This means that new oil and gas projects face greater complexity and costs compared to their international peers and other sectors in Australia.
The Clean Energy Regulator has noted that the “oil and gas sector had the largest covered emissions reduction in 2024-25” and highlighted the “successful implementation of carbon capture and storage (CCS) at the Moomba Plant facility”, which delivered almost one-third of Safeguard Mechanism emissions reductions in 2024-25.
Australian Energy Producers’ submission will make clear that any changes to the Safeguard Mechanism must recognise the oil and gas sector’s significant contribution to emissions reduction and the stringent requirements already imposed on new gas projects. Increasing that burden would risk undermining investment, jobs and Australia’s energy security.
The review should recognise that continued investment in natural gas is critical to Australia’s long-term energy security, and to achieving the government's goal of net zero by 2050.
Natural gas provides the firm, dispatchable power needed to scale up renewable power, supports industry’s transition away from coal, and remains the largest energy source for Australian manufacturing. Australian LNG is also critical to emissions reductions in the region.
Next steps
The Safeguard Mechanism can continue to deliver emissions reductions while supporting investment, competitiveness and energy security — but getting the post-2030 settings right will be critical.
The review should reinforce the principles that underpin the scheme: flexibility, technology neutrality, market-based compliance and a focus on achieving emissions reductions at the lowest possible cost.
Our submission will recommend the Safeguard Mechanism should:
Ensure 2035 emissions reduction targets are technically achievable and economically sustainable. The proposal to increase the emissions reductions burden on industry risks undermining jobs, investment and Australia’s international competitiveness.
Treat sectors equally. Lower baseline decline rates are proposed for several “trade exposed” sectors, creating inequity for other sectors that will impact their competitiveness and ability to attract capital.
Maintain unrestricted access to high-integrity offsets. The proposal to restrict or discount the use of Australian Carbon Credit Units would reduce compliance flexibility and make addressing industrial emissions more expensive.
Ensure stable and predictable Safeguard settings. Unnecessary changes to Safeguard settings will create policy uncertainty, increase costs and delay investment in energy, industrial and emissions-reduction projects.
Policies and programs must recognise and support emissions reduction through coal-to-gas switching, gas-powered generation and CCS. Safeguard targets will be harder and more expensive to achieve without policies that support new gas supply and the deployment of CCS.
Submissions to the consultation close 18 September 2026.
For more information on the Safeguard Mechanism or other climate-related matters, contact Australian Energy Producers Director, Climate Policy & Technology, Joe Doleschal Ridnell at jdoleschal_ridnell@energyproducers.au.