Australia reviews Safeguard Mechanism and carbon offset limits

The Australian Albanese Government has launched a review of the Safeguard Mechanism, the nation’s primary policy for reducing greenhouse gas emissions at large industrial facilities. Climate Change and Energy Minister Chris Bowen stated the review aims to ensure the mechanism drives “real, durable emissions reductions” and contributes to Australia’s 2035 climate targets.

A key component of the review involves considering limits on the use of carbon offsets. Currently, over 200 large coal, gas, manufacturing, and transport facilities can purchase unlimited carbon credits to meet mandated targets. The government is exploring caps on these offsets to encourage more direct, on-site emissions cuts by major polluters.

Additionally, the government is evaluating the introduction of a border carbon adjustment. Following a 2025 review on carbon leakage, recommendations suggest imposing carbon-related tariffs on specific imported commodities, such as cement and clinker, to prevent energy-intensive industries from relocating to nations with weaker environmental regulations. The Safeguard Mechanism review is expected to be completed in early 2027.