Australia has committed to reaching net-zero greenhouse gas emissions by 2050. To support this goal the Federal Government introduced the Safeguard Mechanism, a policy designed to limit emissions from the country’s largest industrial facilities, whose sectors are responsible for a significant share of national greenhouse emissions (DCCEEW, 2025a).
The largest industrial facilities – ranging from oil and gas production to mining, manufacturing, transport and waste facilities- are all present in Western Australia and are now facing challenges and opportunities under the Safeguard Mechanism. Compliance costs, credit trading, and pressure to decarbonise are day-to-day realities shaping investment and production decisions across WA (DWER, 2024).
But what does this policy actually mean in practice? Is it applied to every business, or only to the largest emitters? What limits or ‘baselines’ are set for industry and how much must companies cut to meet government expectations? Ultimately, what steps must businesses take to comply with the regulations? This Insight takes a closer look at what the Safeguard Mechanism means on the ground in WA – and why it matters to every industry stakeholder, large or small.
The Safeguard Mechanism: Australia’s Policy to Limit Industrial Emissions
The Safeguard Mechanism establishes baselines – or limits – on the greenhouse gas (GHG) emissions of Australia’s largest industrial facilities. Introduced under the National Greenhouse and Energy Reporting Act 2007 (NGER Act), the policy applies to companies emitting more than 100,000 tonnes of carbon dioxide equivalent (CO2-e) per year. Its primary aim is to address these large emitters, promoting a predictable, gradual decline in facilities’ baseline emission rates over time. This trajectory aligns with Australia’s targets for 2030 and its long-term goal of net-zero emissions by 2050 (DCCEEW, 2025b).
Under the Safeguard Mechanism, each facility receives a baseline or annual emissions limit set by the Clean Energy Regulator (CER). Baselines are production-adjusted, meaning they vary with the facility’s output. This system emphasizes reducing the emissions intensity of production over time. From July 2023 to 2030, the CER has set baselines to decline by approximately 4.9% per year, gradually reducing the total emissions a facility is allowed. After 2030, declining baselines will be reviewed and adjusted in fixed five-years periods (DCCEEW, 2025b).
For example, a facility currently emitting 120,000 tonnes of CO2-e per year may initially have a baseline set close to this level. As baselines decline each year, thefacility’s permitted emissions reduce, requiring it to either cut actual emissions or take other actions to remain within its limit.
Compliance is simple: if a facility stays at or below its baseline, it meets its obligations. If emissions exceed the baseline, the facility must act to cover the difference. It may:
- Reduce its emissions directly
- Purchase Safeguard Mechanism Credits (SMC) units from facilities emitting below their baseline, or
- Acquire Australian Carbon Credit Units (ACCUs) to offset excess emissions (CER, 2015a).
An ACCU represents one tonne of CO2-e avoided, stored, or removed. Landholders and businesses can generate ACCUs through approved projects such as reforestation, soil carbon improvements, or waste-related emissions reductions. There credits may then be sold to companies needing offsets under schemes like the Safeguard Mechanism (CER, 2025b).
Facilities may also apply for a Multi-Year Monitoring Period, which allows them to exceed their baseline temporarily (for up to five years) provided they have a credible plan to bring total emissions back below the cumulative baseline by the end of that period (CMI, 2025).
Aligning WA’s Environmental Policy with Safeguard Mechanism
WA’s policy approach is to allow the Federal Safeguard Mechanism to regulate emissions from the state’s largest industrial facilities. This avoids duplication and ensures consistency between Commonwealth and State requirements.
At the same time, WA applies its own regulatory tools- particularly the Environmental Protection Authority (EPA) Environmental Factor Guideline – Greenhouse Gas Emissions – to manage emissions through the environmental impact assessment process (DWER, 2024). The EPA maintains its independence and continues to consider greenhouse gas emissions as a key environmental factor (EPA, 2024).
For projects that emit more than 100,000 tonnes of CO2-e per year, the EPA provides two pathways for demonstrating how emissions will be managed:
Option A – Safeguard Mechanism Confirmation
Used when a facility is already covered by the Safeguard Mechanism. Proponents show their federally assigned baseline and explain how emissions will decline over time using best-practice measures (EPA, 2024).
Option B – Benchmarking and Best Practice
Used when the Safeguard Mechanism does not apply or when proponents prefer to provide more detailed technical information. This option requires demonstrating current best practice in the relevant industry, presenting the project’s pathways to net-zero, and explaining how offsets will be used. Under this option, the proponent is expected to demonstrate the reduction plan is clear, evidence-based, and achievable (EPA, 2024).
What the Safeguard Means for WA Projects
For Western Australian businesses, the Safeguard Mechanism is another instrument that reshapes how large projects are planned, operated, and financed. Covered facilities must report their emissions annually under the National Greenhouse and Energy Reporting (NGER) scheme and demonstrate that they are under their baseline. If emissions exceed this limit, companies must reduce their output, adopt cleaner technologies, or acquire credits to make up the difference (CMI, 2025).
While this may present challenges for emissions-intensive industries such as oil and gas production, mining, or manufacturing, it also creates opportunities. Facilities that decarbonise more quickly than expected can generate and sell Safeguard Mechanism Credits, opening new revenue streams in the carbon market. At the same time, the declining baseline levels – set to decrease by about 4.9% per year until 2030, and then fixed in five-year blocks – means that WA facilities will need to steadily reduce their emissions intensity or increase their reliance on offsets to meet government expectations.
Many companies are already turning their participation in the Safeguard Mechanism into a strategic advantage. For instance, according to industry modelling a big resource group could earn between $50 and $150 million annually from selling the carbon credits, if it meets its decarbonisation target (Carbon Credits, 2024). These opportunities motivate companies to invest in renewables, electrification and carbon capture initiatives today. Beyond regulatory compliance, the scheme creates value for companies and stakeholders as it drives innovation and efficiency; for investors, it signals how climate change policy shapes risk and opportunity in the transition to a low-carbon economy. Therefore, the ability to adapt quickly will shape both competitiveness and reputation in a low-carbon economy (DWER, 2024).
Ultimately, understanding the Safeguard Mechanism is essential not only for industry participants, but for anyone interested in how Western Australia’s resources sector can thrive while advancing Australia’s net-zero goals. At Integrate Sustainability (ISPL), we help organisations navigate these requirements and turn them into strategic opportunities. For more information on how we can help you, please contact us by email at enquiries@integratesustainability.com.au or call us at 08 9468 0338.
ISPL- Safeguard Mechanism- Regulating Industrial Greenhouse Gas Emissions- PDF
References
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