The 2026-27 review of the Safeguard Mechanism is the scheduled policy review of Australia's emissions limit on its largest industrial facilities. It commences in the second half of 2026 with a consultation paper, and the Department of Climate Change, Energy, the Environment and Water expects to release policy positions and any draft rule amendments in early 2027.
The headline question is what happens to baseline decline rates after 2030. Everything else on the agenda, from the role of ACCUs to carbon border measures, follows from it.
This guide covers what the review is, what sits on the table, who the scheme covers, what is already locked in for 2026-27, and what large emitters should have in order before the consultation paper lands.
What Is the Safeguard Mechanism 2026-27 Review?
The Safeguard Mechanism sets a declining limit on Scope 1 emissions from Australia's largest industrial facilities. It was reformed on 1 July 2023, and that reform package committed the government to a full policy review in the 2026-27 financial year. This is that review.
According to DCCEEW, the process runs in three stages. A consultation paper is released early in the second half of 2026. Stakeholder engagement follows to help industry respond to it. Policy positions and any draft amendments to the Safeguard Rules are expected in early 2027.
Running alongside it, the Climate Change Authority will advise government on the appropriate baseline decline rate for 2030-31 to 2034-35, on how much onsite abatement the reforms are actually driving, and on whether further incentives are needed.
Why Does This Review Matter More Than the Last One?
Baselines currently decline by 4.9% a year to 2029-30. Beyond that, nothing is set. The 2023 reform deliberately deferred post-2030 decline rates to this review so they could be calibrated against Australia's next international commitment.
That commitment now exists. Australia's 2035 target, announced in September 2025, is a 62 to 70% reduction on 2005 levels. The Climate Change Authority's advice to government noted that extending the Safeguard decline rate through to 2035 could cut emissions from industry and resources by close to a third.
For a covered facility, that is not an abstract policy debate. The decline rate sets the trajectory of your compliance liability for the next decade, and it decides whether the abatement project you are modelling today pays back inside its asset life. Facilities planning capital works in 2027 and 2028 are effectively pricing a number that has not been set yet.
What Is Actually on the Table?
DCCEEW has published the scope. Six areas carry the most weight for covered facilities.
Post-2030 baseline decline rates. The central question, informed by Climate Change Authority advice covering 2030-31 to 2034-35. A steeper rate raises the compliance cost of every tonne you do not abate onsite. A flatter one shifts the burden to later years.
The future role of credits and offsets. The review looks at Safeguard Mechanism Credits, Australian Carbon Credit Units, and the treatment of international units. Whether offshore units are ever admitted, and on what terms, changes the shape of the compliance market.
Whether the scheme is driving onsite abatement. The reform was designed to push real reductions at the facility, not just unit purchases. Facilities already have to explain themselves if they surrender ACCUs equal to 30% or more of their baseline in a year. Expect that mechanism, and the incentives around it, to be revisited.
Arrangements for trade-exposed facilities. Trade-Exposed Baseline-Adjusted status currently allows a discounted decline rate, as low as 1 to 2%, for facilities that meet cost-impact thresholds. Its scope and generosity are both in scope for the review.
Carbon leakage and border measures. The Carbon Leakage Review recommended a border carbon adjustment for commodities most exposed to import leakage, beginning with cement and clinker and staged toward ammonia and its derivatives, glass, lime, and steel. It also recommended that any such measure mirror the Safeguard Mechanism's scope and remove Trade-Exposed Baseline-Adjusted treatment for covered commodities. Those recommendations get considered here.
Flexibility mechanisms beyond 2030. Banking, borrowing, and multi-year monitoring periods were all built with a 2030 horizon. Multi-year monitoring periods currently cannot extend past 30 June 2030 at all. The review decides what replaces them, and whether the cost containment measure remains a sufficient ceiling.
Who Does the Safeguard Mechanism Cover?
The scheme applies to facilities emitting more than 100,000 tonnes of carbon dioxide equivalent in Scope 1 emissions in a financial year. That captures mining, oil and gas, manufacturing, heavy transport, and waste. Grid-connected electricity generators sit under a separate sectoral baseline.
The Clean Energy Regulator reported 208 covered facilities in 2024-25, with total covered emissions of 132.8 Mt CO2-e, down 2.3% on the 136.0 Mt recorded in 2023-24. Facilities surrendered 10.8 million ACCUs and 2.6 million Safeguard Mechanism Credits, both well up on the prior year, and 6.7 million credits were issued to 54 facilities. Compliance ran at 98.6%, or 205 of 208 facilities.
Read those numbers together and the direction is clear. Covered emissions fell, but credit issuance fell faster and surrenders rose. The scheme is tightening, and more facilities are buying their way to compliance rather than earning credits.
What Is Already Locked In for 2026-27?
The review is forward-looking, but several settings change on their own schedule regardless of what it concludes.
Borrowing gets materially more expensive. A facility can borrow up to 10% of the following year's baseline to cover a shortfall. The interest charge was 2% for 2024-25 and 2025-26. From 2026-27 it rises to 10%. Borrowing stops being a cheap timing tool and starts being a real cost. Applications close 28 February.
The cost containment price keeps climbing. The measure lets facilities over baseline buy ACCUs from the Clean Energy Regulator at a capped price. It started at $75 per tonne in 2023-24 and indexes annually at CPI plus 2%, reaching $82.68 in 2025-26. Whether that ceiling is set at the right level is itself a review topic.
The compliance calendar does not move. NGER data is due 31 October. Trade-exposed baseline applications and exemption applications close 31 October. Multi-year monitoring period applications close 15 November. Borrowing closes 28 February. The excess emissions deadline is 1 April, and missing it attracts a penalty unit for every tonne of excess plus 100 penalty units for each day it persists.
Every one of those deadlines depends on the same thing: knowing your facility's actual energy and emissions position early enough to act on it. A facility that discovers a shortfall in March has already lost access to every flexibility option except surrendering units at market price.
What Should Large Emitters Do Before the Consultation Paper Lands?
The consultation paper is the moment to have a position, not to start forming one. Five things are worth having ready.
- Model your baseline under multiple decline rates. Run 2030-31 to 2034-35 at the current 4.9%, and at steeper and flatter cases. The gap between them is the number your abatement business case hinges on.
- Quantify how much of your compliance comes from units. If a large share of your position is met by surrendering ACCUs rather than reducing onsite, you are exposed to exactly the behaviour the review is examining.
- Check whether a border measure would reach your inputs. Cement, clinker, ammonia, glass, lime, and steel are the named candidates. If you buy them in volume, a border carbon adjustment shows up in your input costs, not just your compliance costs.
- Test your emissions data against assurance-grade scrutiny. Safeguard positions are built on NGER data, and the same energy consumption records now feed mandatory climate reporting. Two regimes, one dataset, and a widening gap if it is assembled by hand each year.
- Decide whether you are making a submission. Trade-exposed treatment and flexibility mechanisms beyond 2030 are the areas where industry evidence has historically moved the settings. A submission needs facility-level numbers behind it.
How Utilified Supports Safeguard and NGER Reporting
Safeguard compliance rests on NGER data, and NGER data rests on energy consumption records: electricity across every NMI, gas across every MIRN, and the fuels burned onsite. For most covered operators that data arrives from several retailers, in several formats, across sites that do not share a naming convention. The annual scramble to reconcile it is where errors enter.
Utilified brings every utility type into one unified system, with facility and site hierarchies that match how you report rather than how your retailers bill. Invoice and interval data is collected automatically, validated against contract terms and tariffs, and held as a continuous record rather than an annual reconstruction. Joule flags consumption anomalies as they appear, so a data problem surfaces in the month it happens instead of in October.
That produces utility intelligence a compliance team can defend: consumption that traces back to a validated invoice, at facility level, ready for NGER submission and for the assurance that now sits over mandatory climate reporting. The same records support the modelling you need to form a view on the review.
Book a demo to see how facility-level energy data feeds NGER and Safeguard reporting, or explore the Utilified platform.
Frequently Asked Questions
When does the Safeguard Mechanism 2026-27 review start?
The review commences in the second half of 2026, opening with a consultation paper. Stakeholder engagement follows, and DCCEEW expects to release policy positions and any draft rule amendments in early 2027.
Will the baseline decline rate change after 2030?
Almost certainly, because no rate is currently set beyond 2029-30. Baselines decline by 4.9% a year to that point. The Climate Change Authority is advising government on the rate for 2030-31 to 2034-35, calibrated against Australia's 2035 target of a 62 to 70% reduction on 2005 levels.
Which facilities are covered by the Safeguard Mechanism?
Facilities emitting more than 100,000 tonnes of CO2-e in Scope 1 emissions in a financial year, across mining, oil and gas, manufacturing, transport, and waste. The Clean Energy Regulator reported 208 covered facilities in 2024-25.
Is Australia introducing a carbon border adjustment mechanism?
No decision has been made. The Carbon Leakage Review recommended a border carbon adjustment covering cement and clinker first, with staged expansion to ammonia and its derivatives, glass, lime, and steel. Those recommendations are being considered as part of this review.
What is the Safeguard Mechanism compliance deadline?
For reporting periods from 2023-24 onward, excess emissions must be managed by 1 April. NGER data itself is due by 31 October. Missing the April deadline attracts a penalty unit for each tonne of excess plus 100 penalty units for every day the excess remains.
Does the review change anything for the 2026-27 compliance year?
Not directly, since outcomes are not expected before early 2027. One change lands anyway: the interest charge on borrowing against next year's baseline rises from 2% to 10% from 2026-27.