Commission Suggests Bringing More Industries Under Emissions Cap to Fast-Track Net Zero

The Australian government should consider lowering the threshold for the Safeguard Mechanism to capture more industries as a way to help speed up the push to net zero.

That recommendation forms part of the Productivity Commission’s interim report into how Australia can improve its pursuit of net zero.

The Commission suggests dropping the Safeguard Mechanism emissions threshold for industrial facilities from 100,000 tonnes to 25,000 tonnes of carbon dioxide equivalent per year.

Under the mechanism, facilites emitting above the threshold are required to manage those excess emissions through the purchase of carbon credits or other methods.

Yet an analysis by the Institute of Public Affairs (IPA) argued the Safeguard Mechanism was a self-imposed tariff, and could cost affected facilities around $1.7 billion every year—higher than the projected cost of Trump tariffs, estimated to be $1.2 billion.

“The cost of the Safeguard Mechanism—already exceeds the cost to Australians of the Trump tariffs, which reinforces policymakers should focus on domestic policy rather than shifting blame to international events which are largely uncontrollable,” IPA Chief Economist Adam Creighton said.

It also found that 80 percent of affected facilities are involved in exporting goods.

“Net zero is one of the single biggest cost imposts on the Australian economy, and the government shouldn’t expect to improve productivity with this massive energy millstone hanging around our necks,” Creighton said.

Incorporate Net Zero into Environmental Planning

Among other recommendations from the Commission’s “Investing in Cheaper, Cleaner Energy and the Net Zero Transformation” is to amend the Environment Protection and Biodiversity Conservation (EPBC) Act 1999.

Under the recommended changes, ministers would “consider the needs of the energy transition when deciding whether to approve an energy project that will have a significant impact on a matter of national environmental significance.”

“Reducing emissions from greenhouse gases is an important national priority. It comes with costs, but these can be minimised with careful policy design, freeing up resources for more productive activities and enabling gains in productivity and living standards,” the report said.

During its first term, Labor shelved its proposed Nature Positive laws, despite the reforms nearing passage in Parliament, after pressure from Western Australian Premier Roger Cook ahead of a state election.

The legislation would have expanded the powers of the federal Environmental Protection Agency to oversee environmental assessments, approve projects, and issue permits and licences—affecting sectors such as mining, recycling, waste management, and cultural and environmental preservation.

The new environment minister, Murray Watt, is now reassessing the legislation.

The report also recommends introducing national environmental standards, regional planning for renewable energy zones, and stricter statutory deadlines for project assessments in designated “go zones.”

It further calls for improved access to environmental data, streamlined offset arrangements via a government fund, and clearer expectations for community and Indigenous engagement.

Provide the Right Incentives

The commission said that to meet net zero targets at the lowest possible cost, governments must provide consistent and comprehensive emissions-reduction incentives.

To ensure long-term grid reliability and cost efficiency, it advised governments to implement enduring market settings in the electricity sector beyond 2030. These should offer nationally consistent incentives for clean energy and embed investment signals for system reliability.

Climate Change Minister Chris Bowen recently expanded taxpayer support for clean energy through the Capacity Investment Scheme (CIS).

However, the Commission called on the government to shift away from subsidy-based programs like the CIS and the Small-scale Renewable Energy Scheme, which let households earn certificates for installing systems like rooftop solar. It recommends replacing these short-term schemes—set to end in 2030—with long-term, market-based incentives to cut emissions at lower cost.

Streamline Transport Emissions Policy

The Australian government should also introduce a new incentive to cut heavy vehicle emissions, according to the commission.

The scheme should support all viable technologies, including low-carbon liquid fuels and electric alternatives.

The Albanese government in its first term introduced several schemes to make electric vehicles (EVs) more affordable, such as the Electric Car Discount, CEFC financing, and a national EV strategy.

But with the new Vehicle Efficiency Standard (VES) now in place, the Commission says extra incentives—like tax breaks and registration discounts—should gradually be phased out.

Under the new VES, car makers face incentives and penalties based on how well they meet annual emissions targets for new vehicles. The rules apply only to new cars sold in Australia.

Create a Renewable Strike Team

To fast-track high-priority renewable energy projects, the commission has recommended the Department of Climate Change and Energy set up a specialist strike team.

It also proposes appointing an independent Clean Energy Coordinator-General to monitor approvals, resolve delays, and advise on renewable energy priorities.

It calls for a centralised climate risk database to support stakeholders in construction, and urges governments to use a consistent framework, guided by independently set national carbon values, to assess climate policy cost-effectiveness and shape future emissions strategies.

Rate Housing Climate Resilience

The Commission has recommended a national star rating system to show how well homes can cope with climate risks like floods, fires, and heatwaves.

It would build on the existing NatHERS scheme, which gives homes a star rating out of ten based on factors like construction, local climate, and how the house is positioned on the block.

The new system would also consider climate-related risks in different locations and offer simple guidance to help homeowners and builders strengthen property resilience.

Changes should be rolled out gradually and only where the long-term benefits clearly outweigh the costs.

Track and Improve Adaptation Policy

Finally, the commission recommended that the Climate Change Authority be legislatively tasked with monitoring and evaluating climate adaptation measures.

It said this would improve accountability and ensure governments receive regular, evidence-based updates on whether current policies are working and where changes are needed.

Progress reports should be published every two years, with clear recommendations to strengthen adaptation efforts and support Australia’s resilience in a changing climate.