Bulk of emissions reduction from Safeguard Mechanism is smoke and mirrors

Data from the second year of the Safeguard Mechanism show that only one-fifth has achieved actual emissions reductions. David McEwen He finds the devil in the details.

Behind the government’s headline claims that emissions are falling at Australia’s biggest industrial sites lies a more complex reality driven by closures, accidents and accounting rather than genuine decarbonisation.

On a “net” basis, the Safeguarding Mechanism appears to be achieving its goal of reducing emissions of most large industrial facilities by 4.9% per year. It’s set up this way. However, most of the decrease is due to offsets and other accounting. The real work on reducing emissions has not yet begun.

How does the Protection Mechanism work?

The Safeguards Mechanism, which will be reformed in 2023, is Australia’s primary policy to reduce emissions from large industrial facilities. It covers approximately 220 facilities that emit more than 100,000 tonnes of CO₂ equivalent per year, mostly in the mining, oil and gas, manufacturing, transport and waste sectors.

Together these facilities account for around 30% of Australia’s total national emissions, so it’s important it does what it says on the package.

Under the current plan, whose second year of data was released last week, each facility has an emissions baseline that must reduce overall by 4.9% per year by 2030. The policy is designed to contribute to Australia’s commitment to reduce emissions by 43% below 2005 levels by 2030 and reach net zero by 2050.

But when you get down to the details, there’s a lot of smoke and mirrors.

If a facility exceeds its baseline, the operator must ‘offset’ the excess by surrendering Australian Carbon Credit Units (ACCUs) or Safeguarding Mechanism Credits (SMCs) purchased from facilities exceeding their targets. These baselines are adjusted for production, meaning they rise and fall with output; This is a design choice that will become important later.

offset problem

A striking 147 of 228 installations (almost two-thirds) exceeded emissions reference levels in 2024-25. To ensure compliance, these facilities delivered 10.5 million ACCUs and 2.6 million SMCs; This was a significant increase over the 7.6 million ACCUs and 1.4 million SMCs delivered in the previous year.

This means that the vast majority of ‘compliance’ with declining baselines is achieved through the purchase of carbon credits, not through actual emissions reductions at sites.

While offsets have a legitimate role in transition, their increased use raises questions about whether they are delivering the resource reductions the scheme was designed to deliver. And ACCUs vary in their honesty; for example, firms are still allowed to withdraw previously granted “anti-deforestation” loans, although such loans were halted in the wake of the Chubb Review.

Unlike Australia, the EU Emissions Trading System does not allow companies to meet their obligations with external offsets. All compliance must come from within the program,

This is why EU carbon prices are four times higher

– and why the system leads to real reductions.

Offsets aside, what’s actually going on?

The Clean Energy Regulator’s latest data release shows actual emissions from Australia’s largest industrial sites fell by just 4% in the two years the scheme was in operation (from 138.6 Mt CO2).2-e in 2022-23 to 132.8 in 2024-25).

But a closer examination of the figures reveals that even this modest figure significantly overestimates the success of the Safeguards in delivering real emissions reductions.

Analysis of facility-level data reveals a troubling picture.

Only a fifth of the reported 5.8 million tonnes reduction in actual emissions is attributable to verified actual emissions reductions, most of which come from a single project: Santos’ Moomba carbon capture and storage (CCS) plant.

You may remember that there was a model of the Moomba facility. is prominently displayed On the Australian stand at the COP26 climate conference in Glasgow: now operational and in addition to creating a reduction in the gas project’s emissions on site record number of ACCUs For Santos.

Even then, Moomba’s advantage only applies to the landing zone.

Much larger emissions from burning exported gas remain untouched.

Woodside and the fundamental paradox

Perhaps the most revealing information comes from Woodside’s North West Shelf Project, Australia’s largest LNG processing facility. Despite their emissions To fall With an increase of 17% (from 6.94 million to 5.75 million tonnes), this year it is still exceeded The government mandated a Safeguard baseline of 921,000 tonnes and had to give that amount in carbon credits to ensure compliance.

How is this possible?

Under the renewed Protection Mechanism, base values ​​are ‘adjusted for production’; so lower production means a lower base allocation. Production has declined as the North West Shelf’s mature gas fields have been depleted. However, LNG plants have significant fixed energy requirements for compression and liquefaction that do not shrink proportionately.

Result: emissions intensity (emissions per unit output) is actually increases As production decreases.

The 40-year extension granted last May applies only to the LNG export terminal. It does not approve new gas fields. Without new upstream approvals (particularly the Browse Basin) production continues to decline, lowering the base level and increasing emissions intensity.

Turning to the Safeguard Mechanism, this raises a design challenge: Plants with declining production may face increasing difficulties in reaching reference values ​​even as their absolute emissions fall. With a decrease of 4.9% on an annual basis,

Mature facilities may be needed More It balances out over time, not less.

This somewhat counterintuitive result means that the scheme may inadvertently penalize facilities that naturally close.

Closings and events have led to recent declines

The list of facilities included in the Safeguard Mechanism changes from year to year as projects begin, entering the program when they reach the 100,000 tonnes annual emissions threshold, expanding and contracting towards the end of the facility’s life.

In the last two years, some three dozen new facilities, including new coal mines, have entered the Safeguarding Mechanism. Meanwhile, the actual number of exits from the facility remained modest. Among these was Alcoa’s Kwinana Alumina Refinery (WA). After 60 years of operation, it was permanently closed in September 2025, citing age, costs and market conditions. Emissions fell 87% due to lockdowns, not efficiency gains.

Meanwhile, unexpected events also had a downward impact. For example, British Coal: Grosvenor Coal Mine (QLD) has been sealed since the methane explosion in June 2024, reducing Safeguard emissions by nearly one million tonnes!

Since the mine is not operating, reported emissions have dropped by 97%.

Meanwhile, Anglo’s Moranbah North Mine (QLD) has experienced several safety incidents, including an underground coal fire in March 2025. Reported emissions fell 38% compared to the previous year.

Clearly, shutdowns and accidents are not climate policy.

Does not pull the weight of gas and coal

Unsurprisingly, gas and coal plants, which account for more than half of total Safeguard emissions, contributed only about 13% of the net decline over the past two years.

In the coal sector, 42 facilities increased their emissions while only 20 facilities decreased them. The modest net decline in the sector was largely offset by the entry of new coal mines into the scheme, including Pembroke Resources’ Olive Downs mine in Queensland.

In the gas sector, increases at facilities such as Chevron’s Gorgon (+830,000 tonnes), Inpex’s Ichthys LNG (+414,000 tonnes) and Chevron’s Wheatstone (+231,000 tonnes) partially offset reductions elsewhere. Gas’s share of total emissions actually increased from 30.3% to 31.0% between 2022-23 and 2024-25.

Where is the decarbonization investment?

Announcements of major decarbonization projects at Safeguard facilities reveal a disturbing pattern.

Both BHP and Rio Tinto have significantly reduced their decarbonisation budgets.

Rio Tinto fined its budget was increased from US$7.5 billion to US$1–2 billion and the dedicated decarbonization division was disbanded. BHP canceled It has significantly reduced spending on the 50 MW Jimblebar solar farm and decarbonization from the $2 billion announced in 2023. Cuts in capital spending today mean higher emissions later,

On the other hand, so does Fortescue’s ambitious ‘Real Zero by 2030’ program stay on trackhowever, most of the benefits will not appear in the data until 2026-2030. It is worth reflecting that there are real emission reduction projects on a large scale. To do take your time:

Those who don’t invest would be better off putting on their skates.

In conclusion

Safeguard data’s headline figure of a 4% drop in actual plant emissions over the two years that the declining (but production-adjusted) baselines were in place tells a selective story.

When you leave aside shutdowns, accidents and declines in natural production, the actual emissions reduction from proactive investments is only about one-fifth of the reported reduction.

The Safeguarding Mechanism review planned for 2026-27 will need to deal with these inconvenient realities.

If Australia is serious about its 2030 targets, the plan needs to support actual source reductions, not just measure incidental emissions benefits from mining booms and refinery closures. A good first step would be to phase out the use of ACCUs.

KEY DATA SOURCES:

• Clean Energy Regulator, 2024-25 Safeguard Mechanism data (published 15 April 2026)
• Clean Energy Regulator, 2023-24 and 2022-23 Conservation facility data

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