Emissions Reduction Fund

The Emissions Reduction Fund has three key elements, including crediting, purchasing and safeguarding emissions reductions.

The safeguard mechanism was established as part of the Emissions Reduction Fund. The Emissions Reduction Fund provides an incentive for activities that count towards meeting Australia’s international climate commitments. The safeguard mechanism complements the emissions reduction elements of the Emissions Reduction Fund by sending a signal to businesses to avoid increases in emissions beyond business-as-usual levels. It achieves this by placing a legislated obligation on Australia’s largest greenhouse gas emitters to keep net emissions below their emissions limit (or baseline).

The safeguard mechanism operates under the framework of the National Greenhouse and Energy Reporting scheme and applies to facilities with direct scope 1 emissions of more than 100,000 tonnes of carbon dioxide equivalent (t CO2-e) per year. This extends to businesses across a broad range of industry sectors, including electricity generation, mining, oil and gas, manufacturing, transport, construction and waste. Collectively, these facilities account for about half of Australia’s emissions.

Safeguard facilities will be able to surrender Australian carbon credit units (ACCUs) to offset emissions over their baseline. For more information see Buying ACCUs.

The safeguard mechanism came into effect on 1 July 2016.

Following the 2017 review of climate change policies, and extensive consultation during 2018, the safeguard mechanism was amended in March 2019. The amendments were designed to make the mechanism fairer and simpler. Changes apply to baselines that commence from 1 July 2018.

Read more about the safeguard mechanism.