Australia's Department of Climate Change, Energy, the Environment and Water (DCCEEW) opened the statutory 2026-27 Safeguard Mechanism review on August 7, 2026, publishing a consultation paper that will decide how fast industrial baselines decline after 2030 and how trade-exposed facilities are treated. Submissions close at 11:59pm AEST on September 18, 2026. The review is the scheduled checkpoint built into the 2023 reforms and the government's Net Zero Plan, and its conclusions will reshape compliance for every facility emitting at or above 100,000 tonnes of CO2-equivalent a year.
The four issues on the table are the post-2030 baseline decline rate, whether the scheme properly incentivises onsite abatement, the suitability of arrangements for trade-exposed facilities, and how to incorporate the final report of the Carbon Leakage Review. Together they determine the cost trajectory of carbon for Australia's largest mines, smelters, LNG plants, cement kilns and chemical producers through the second half of the decade and beyond.
What is the Safeguard Mechanism and who does it cover?
The Safeguard Mechanism sits under the National Greenhouse and Energy Reporting (NGER) Act 2007 and is administered by the Clean Energy Regulator. Reformed by the Safeguard Mechanism (Crediting) Amendment Act 2023 (Act No. 14, 2023), it applies declining emissions baselines to roughly 200 industrial facilities with Scope 1 emissions at or above 100,000 t CO2-e per year. The 2023 reforms set baselines declining at 4.9 percent each year to 2030, in line with Australia's legislated target of 43 percent below 2005 levels by 2030 and net zero by 2050 under the Climate Change Act 2022.
Facilities that beat their baseline earn Safeguard Mechanism Credits (SMCs); those that overshoot surrender SMCs or Australian Carbon Credit Units (ACCUs) to comply. Covered operators include BHP, Rio Tinto, Fortescue, South32, BlueScope, Woodside, Santos, Origin, AGL, Orica and Incitec Pivot, alongside cement and alumina producers whose marginal cost of abatement is among the highest in the scheme.
Why does the post-2030 decline rate matter now?
The 4.9 percent annual decline rate only runs to 2030. What happens from 2031 to 2035 is the central open question of this review, and it is the lever that sets the scheme's long-run stringency. A steeper trajectory tightens the compliance cost for covered facilities and reshapes the economics of ACCU and SMC demand; a flatter one eases near-term pressure but risks misalignment with the net-zero-by-2050 anchor. Because baselines and credit positions feed directly into corporate transition planning and AASB S2 climate disclosures, the chosen rate propagates beyond carbon accounting into capital allocation and impairment modelling.
The consultation paper asks whether onsite abatement is being incentivised appropriately, signalling concern that some facilities may be meeting baselines through credit surrender rather than physical emissions cuts. The answer will shape whether the post-2030 architecture rewards direct abatement more aggressively, with consequences for technology investment roadmaps at every covered site.
How are trade-exposed facilities and carbon leakage treated?
The review will also reconsider trade-exposed facility (TEF) arrangements, which shield emissions-intensive, trade-exposed operators from carbon costs that competitors in less-regulated jurisdictions do not face. The final report of the Carbon Leakage Review feeds directly into the design choices here. For exporters of aluminium, steel, cement, LNG and chemicals, the calibration of TEF support determines whether the scheme drives decarbonisation or merely relocates production offshore.
This is the moment to recalibrate baseline, ACCU, SMC and trade-exposure strategy. Operators should read the consultation paper against their current NGER data and model the cost impact of plausible post-2030 decline rates before lodging a submission via the DCCEEW consultation hub. The Carbon Leakage Review final report should be read in parallel, as its recommendations frame the trade-exposure options on offer.
| Milestone | Date |
|---|---|
| Consultation paper released | August 7, 2026 |
| Submissions close (11:59pm AEST) | September 18, 2026 |
| Current 4.9 percent baseline decline rate ends | 2030 |
| Net zero target under Climate Change Act 2022 | 2050 |
Continuous, per-jurisdiction monitoring surfaces a consultation like this the moment it publishes, rather than after the submission window has closed. Obsidian tracks the Safeguard Mechanism and every downstream amendment in real time, so compliance teams can act inside the consultation window instead of reacting to the final rule.
Take advantage of this real-time watch
Next steps for covered operators: confirm your facility's baseline and credit position against the 2026-27 review scope, identify which of the four issues most affects your cost curve, prepare a submission before September 18, 2026, and brief your NGER, carbon-markets and climate-disclosure teams together, since the post-2030 rate will move all three at once.
