IEEFA submission to the Department of Climate Change, Energy, the Environment and Water 2026-27 Safeguard Mechanism Review

18 September 2026

To: Department of Climate Change, Energy, the Environment and Water

Re: 2026-27 Safeguard Mechanism Review

Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input to the 2026-27 Safeguard Mechanism Review.

IEEFA is an independent energy finance think tank that examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

In this submission we present views based on IEEFA’s expertise related to the Safeguard Mechanism’s interactions with Australian industrial decarbonisation and coalmining.

Our key points are:

• There is little evidence the Safeguard Mechanism is driving material abatement action in covered facilities. The government should clearly identify emissions reductions from abatement action by companies, differentiated from reductions from other factors such as facilities exiting coverage, closing down/scaling back, or using new reporting methodology. Adding granularity on emissions sources would also increase transparency.
• Complementary measures are likely to be needed to drive abatement in a number of areas, including energy efficiency, electrification and clinker substitution in cement. Government financial support may also be justified to support large investments, as well as for enablers such as common user infrastructure.
• Some government policies need to be reformed to ensure they do not undermine the Safeguard’s efforts; the Fuel Tax Credit is a priority.
• Expansions and extensions of fossil fuel projects should be treated as new facilities, with accompanying best practice emissions baselines, while new fossil fuel projects should face net zero emissions requirements from startup.
• There is strong evidence that access to unlimited offsets is hindering the uptake of abatement action, especially in the coalmining and oil and gas sectors. IEEFA would recommend introducing constraints on the use of carbon offsets, at a minimum in cases where companies can reduce their emissions at a lower cost.
• The government should discontinue the 50:50 hybrid approach to baseline setting for coalmines and move towards individual baselines for open-cut and underground mines.
• The government should consider introducing Scope 2 emissions coverage.

Kind regards,

James Bowen, Lead Analyst, Australian Industrial Decarbonisation

Amandine Denis-Ryan, CEO, IEEFA Australia

Andrew Gorringe, Energy Finance Analyst, Australian Coal

Jonathan Teubner, Lead Analyst, Australian Coal