Industry Pays While Coal and Gas “Cook the Books:” Modelling Reveals Urgent Need for Safeguard Reset

Why It Matters

Tightening the Safeguard Mechanism is critical for Australia to meet its Paris‑aligned targets and to shield the economy from volatile fossil‑fuel markets. The proposed changes could shift the emissions reduction responsibility away from high‑polluting coal and gas projects toward a broader set of industries.

Key Takeaways

• Coal and gas account for >50% Safeguard emissions.
• Stricter baselines could raise emissions to 31 MtCO₂‑e.
• Net emissions drop 7% by 2035 with tighter rules.
• Browse project alone adds 6% to Safeguard pollution.
• Offsets may rise, but on‑site cuts remain limited.

Pulse Analysis

Australia’s Safeguard Mechanism, introduced to cap emissions from the country’s biggest polluters, currently assigns a default baseline to existing facilities and treats expansions as minor upgrades. Critics argue that this approach lets new coal and gas projects inherit outdated baselines, effectively masking the true carbon cost of additional capacity. By contrast, best‑practice baselines would reflect the latest efficiency standards, forcing projects like Woodside’s Browse and Pluto 2 to account for their full emissions impact.

The RepuTex modelling, commissioned by the Australian Conservation Foundation and the Climate Council, quantifies the stakes. If the default‑baseline loophole is closed, covered emissions could surge to 31 MtCO₂‑e, yet the nation’s overall emissions would fall 7% by 2035 because other sectors would inherit a larger, more realistic emissions budget. This reallocation would compel manufacturing and mineral‑processing firms to accelerate modernisation, while curbing the “free ride” that coal and gas operators currently enjoy. The model also flags a potential 50‑million‑tonne emissions blow‑out if carbon‑capture technologies fail, underscoring the urgency of tighter accounting.

Policy makers now face a pivotal decision as the 2026‑27 Safeguard review approaches. Strengthening measurement protocols—such as moving coal‑mine methane reporting from generic factors to site‑specific temperature and gas sampling—could lift reported emissions by 18%, but would provide the data needed for credible reductions. Higher ACCU prices are likely, reflecting tighter supply, yet without genuine on‑site cuts the market may lean heavily on offsets. Aligning the Safeguard Mechanism with international best practices would signal to investors that Australia is committed to a resilient, low‑carbon economy, encouraging capital flow into clean manufacturing and green export initiatives.