AICD submission to the 2026-27 Review of the Safeguard Mechanism

On 18 September 2026, the AICD lodged a submission to the Department of Climate Change, Energy, the Environment and Water (DCCEEW) consultation on the 2026-27 Safeguard Mechanism Review.

The AICD has consistently highlighted the importance of clear, stable, and nationally coordinated policy settings to guide emissions reduction efforts across the economy. Policy certainty and coherence are essential enablers of long-term investment in clean energy infrastructure and innovation.

The Safeguard Mechanism is a critical component of Australia’s climate policy architecture. It supports the intent to drive emissions reductions at Australia’s largest industrial facilities, while allowing calibration of coverage thresholds and providing flexibility for entities to meet their Safeguard Mechanism obligations. In feedback to the AICD, directors support a well-designed and effective Safeguard Mechanism and view it as critical to supporting meaningful emissions reductions across the economy.

We strongly encourage the Taskforce to undertake direct consultation with Safeguard Mechanism entities on the relevant technical policy settings. Our comments are limited to high-level policy principles including the following key points:

• The consultation paper highlights that the Safeguard Mechanism is on track to meet its legislated 2030 emissions reductions with net emissions projected to be 90 Mt in 2030, outperforming the 100 Mt emissions target. The AICD notes that the Review is not intended to make fundamental reforms to the Safeguard Mechanism’s design and that a key objective is assessing whether existing policy settings are working as intended and are appropriately calibrated. Any significant changes to coverage thresholds or the use of Australian Carbon Credit Units (ACCUs) should be supported by a clear evidence base and careful assessment of economic impacts.

• We encourage detailed consultation in considering whether to change coverage thresholds. Any decision to expand coverage should be subject to a rigorous cost-benefit analysis, especially as business continues to be subject to the effects of cumulative federal regulatory requirements and compliance costs. The analysis should also be informed by advice from the Climate Change Authority (CCA) regarding the extent to which on-site abatement is being driven by the Safeguard Mechanism across the existing cohort of facilities.

• ACCUs have a particularly important role in hard-to-abate sectors where certain energy and emissions-intensive processes do not have accessible and cost-effective lower emissions alternatives. In time, technological advances may assist these sectors and allow less reliance on ACCUs, where more opportunities for on-site abatement become available. Therefore, any proposal to materially restrict ACCUs or increase their cost should be subject to careful analysis of both the emissions reduction benefits and any unintended consequences, such as impacts on the viability of Australian manufacturing facilities.