A new report published this week has declared that Australia’s flagship climate policy, the Safeguard Mechanism, “is failing miserably” to achieve its goal of reducing dangerous greenhouse gas emissions due to its “overwhelming reliance on carbon offsets.”
The Australia Institute report, Safeguarding the Fossil Fuel Industry, has been published in advance of the federal government’s review of the Safeguard Mechanism, planned to get underway in the next financial year.
The Safeguard Mechanism, which applies to facilities that emit more than 100,000 tonnes of carbon dioxide equivalent (CO2-e) in a year, was first legislated in 2014 and has been in place since 2016, before being reformed in 2023 to reduce emissions at the country’s largest industrial facilities.
Australia’s highest greenhouse gas emitting facilities are required under the Mechanism to reduce their emissions in line with Australia’s emission reduction targets of 43 per cent below 2005 levels by 2030 and net zero by 2050.
In 2023–24 there were 219 Safeguard facilities covered across the mining, manufacturing, transport, oil, gas, and waste sectors, which together produced around 31 per cent of Australia’s greenhouse gas emissions.
But the report’s authors Fergus Green and Frances Medlock say the mechanism is failing to drive real emissions reductions because it enables polluters to rely on unlimited amounts of so-called ‘offsets’ to meet their obligations.
As was highlighted earlier this year by the Climate Change Authority – the federal government’s own independent climate change advisory body – emissions were “steady” compared to 2024, with a minor decline in gross emissions due mainly to “permanent closures, decreased production, and temporary shutdowns” and not any actual decarbonisation efforts.
Climate and energy consultant and founder of Naru Research Tim Baxter also demonstrated earlier this year that, “once the impact of facilities entering and exiting the scheme is excluded, aggregate annual emissions fell by less than four-tenths of one percent (0.4%) between the first and second years of the reformed scheme.”
“While millions of Australian homes and businesses are doing the right thing, installing solar panels and batteries, and buying EVs, many of our biggest polluters are using dodgy offsets to pollute more than ever,” said Dr Richard Denniss, co-CEO of The Australia Institute.
“The Safeguard Mechanism’s main function was supposed to be to make our biggest polluters pollute less. That is simply not happening.
“The scheme is undermining the overall goal of reducing real emissions because it allows polluters to rely on an unlimited amount of carbon offsets. Under the Safeguard Mechanism there is simply no obligation for big polluters to reduce the actual levels of pollution.”
Federal minister for climate change Chris Bowen said in April that “emissions have fallen across heavy industry” and that “emissions across facilities covered by the Government’s Safeguard Mechanism fell 5.5 per cent year-on-year and are now down over 12 per cent from when our reforms began.”
However, as Green and Medlock explain, the key word in Bowen’s comments is “net.”
“According to the regulator, net emissions did indeed fall by 5.5% relative to the previous year,” write Green and Medlock.
“However, the credits used as offsets under the scheme do not reliably represent additional and permanent abatement equivalent to the actual industrial emissions that they purportedly offset. Consequently, the ‘net’ emissions numbers do not reflect reality.”
The report goes on to demonstrate that carbon avoidance credits are “untenable” for use as offsets, carbon removal projects in the land sector are at best only temporary measures, and the so-called “hard cap” introduced in the 2023 reform is not fixing the problem.
“[It] doesn’t stop individual polluters from relying wholly on offsetting and lacks effective enforcement mechanisms,” the report says. “[It] has failed to stop new coal and gas projects from being approved, which add to the emissions covered by the scheme.”
The Australia Institute wants the Safeguard Mechanism review process to reconsider the role of carbon offsetting in the country’s climate policy, that allows Australia to remain an international outlier on climate action and holding polluters to account.
TAI says allowing polluters to meet mandatory baselines by purchasing carbon credits that lack integrity leads to “more carbon pollution entering the atmosphere than is accounted for on paper,” exacerbating the increasingly dangerous impacts of climate change being felt around Australia.
“The government has an opportunity to fix this mess and get back to basics when it reviews the scheme during the next financial year,” said Denniss.
“If the Albanese government is serious about the science of climate change then it needs to reform its main climate policy to require big polluters to reduce their actual greenhouse gas emissions.
“The science is simple. If actual greenhouse gas emissions are still rising, then we clearly aren’t ‘decarbonising’ the economy.”
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