Safeguard Mechanism

The Safeguard Mechanism is an Australian Government policy that requires large greenhouse gas emitting facilities (exceeding 100,000 tonnes CO2-e per year) to keep their emissions below a baseline level. It operates alongside the Emissions Reduction Fund to drive emissions reductions in line with Australia's climate targets. Under the reformed Safeguard Mechanism, baselines will decline in line with trajectory to net zero by 2050. Facilities that exceed their baseline must purchase and surrender carbon credits (ACCUs or SMCs) to allow the excess emissions above their baseline to be emitted without financial penalty under the mechanism. This compliance system differs from voluntary offsetting. The Safeguard Mechanism differs from the AASB's sustainability reporting standards (ASRS) in that it is a compliance scheme focused specifically on reducing emissions from large industrial facilities, while the ASRS provides a framework for disclosure of climate-related financial information by reporting entities more broadly.