Framework supporting net zero

Australia’s resources sector will undergo a significant transformation towards a net zero economy. This transition benefits from a strong foundation of existing policies, but will require coordinated action across governments, industry and communities. Together, these actions will ensure that proponents contribute to emissions reductions while maintaining energy security and economic resilience.

To guide future policy and investment, the Australian Government will consider core objectives to drive economic transformation, alongside emissions reduction. 

• Position Australia as a leading global supplier of low‑emissions commodities and commodities needed for the global net zero transition
• Accelerate technology development and attract strategic investment across the resources sector
• Lead a fair and equitable transition, with benefits for all Australians.

These objectives will shape the next phase of the sector’s transition and ensure that future actions build on existing momentum.

They complement existing government policies such as the Safeguard Mechanism and the Future Gas Strategy, which encourage the resources sector to reduce emissions. State and territory governments also play a critical role, working alongside the Australian Government to achieve national climate targets. The objectives are also aligned with the Critical Minerals Strategy, which outline the government’s ambition to grow the resources sector and provide a secure and diversified supply of critical minerals needed for net zero.

The Safeguard Mechanism

The Safeguard Mechanism (SGM) will play a central role in driving emissions reductions in the resources sector. The scheme applies to most of the sector, with 87% of emissions from the sector covered in 2023–24 (see figure below). It gives industry, including the resources sector, a clear and enduring incentive to undertake cost‑effective emissions reductions. 

The SGM sets limits on scope 1 emissions, known as baselines, on industrial facilities emitting more than 100,000 tonnes of CO2‑e per year. Baselines will decline predictably and gradually on a trajectory aligned to Australia’s 2030 and 2035 emissions reduction targets and net zero by 2050. Over time, declining baselines will provide facilities with increasing incentive to develop and pursue decarbonisation pathways to reach net zero by 2050. The best practice arrangements for new entrants help ensure that the expansion of the resources sector does not compromise the achievement of Australia’s emissions reduction targets. These include net zero baselines for new shale gas facilities and for reservoir carbon dioxide emissions from new gas fields. 

Where new projects are approved under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), information about their emissions is provided to the Climate Change Authority and Secretary of the Department of Climate Change, Energy, the Environment and Water for assessment of their impacts on the delivery of the Safeguard Mechanism objectives. These objectives include a cumulative emissions budget for the 10 years to 2030, a 100 Mt net emissions target for 2030 and a requirement for gross emissions of all facilities to decline over time (assessed on a 5-year rolling average basis).

The resources sector makes up the majority of facilities covered under the Safeguard Mechanism (64% in 2023–24). 

To ensure the SGM is appropriately calibrated to help Australia reach its emissions reduction targets, including the 2035 target of 62–70% below 2005 levels, the government will conduct a review of the Safeguard Mechanism in 2026-27. In addition to the targets, the Safeguard Mechanism also has a number of legislated outcomes that must continue to be met, including ongoing reduction in total on-site emissions across all facilities and maintaining a material incentive for on-site emissions reductions. 

The Future Gas Strategy

The Future Gas Strategy (FGS) is the Australian Government’s plan for how gas can support the energy transition to net zero by 2050 and beyond. The FGS outlines guiding principles to underpin government policies and actions as we move towards a net zero economy, and signals the government’s commitment to reducing and, where possible, eliminating venting and flaring of gas, unless required for safety purposes.

The FGS also acknowledges the important role geological storage of carbon dioxide through CCS will play to support our region’s transition to net zero, by enabling transboundary carbon storage. It also helps ensure that emissions are managed to help achieve net zero, while allowing consumer choice in selecting sources of energy for Australian homes and businesses.

Coordination with state and territory governments

State and territory governments play a key role in the transition, as they each regulate resources activities within their jurisdictions and strive to meet their own climate targets. There is opportunity to work across all levels of government to streamline project approvals, giving proponents more certainty. This would result in increased productivity while striving for a common net zero goal, with benefits shared with local communities. Cooperation on methane abatement, including safe deployment of new technology, is another focus of activity.

Unlocking investment and innovation

To accelerate the transition towards a net zero economy while strengthening Australia’s global competitiveness, the government has deployed a diverse array of initiatives to crowd‑in private investment and stimulate innovation across the economy, with a direct impact on the resources sector. These include targeted funding programs, tax incentives, and specialist investment vehicles that support emerging industries such as low‑carbon fuels and critical minerals processing.

Complementary initiatives like the Capacity Investment Scheme and Australian Renewable Energy Agency (ARENA) are accelerating innovation and renewable electricity uptake across the resources sector. Export Finance Australia’s Critical Minerals Facility, the Northern Australia Infrastructure Facility, the Critical Mineral Production Tax Incentive and the newly announced Critical Minerals Strategic Reserve will help unlock investment into the strategic growth of the critical minerals sector. The Safeguard Transformation Stream of the Powering the Regions Fund provides additional support for emissions abatement, including reductions in fugitive emissions in the coal sub‑sector. The Industrial Transformation Stream of the Powering the Regions Fund administered by ARENA has also funded a range of resources sector projects, including electrification of mining operations. 

These initiatives alongside the Future Made in Australia agenda enable Australia to grow and leverage opportunities in the resources sector towards a net zero economy.

The role of industry and the research and development system

Offsetting is available where on‑site abatement is not yet technically or economically viable. Industry recognises that reliance on offsets is not a long‑term solution. As policy settings evolve and technology costs fall, a shift toward direct emissions reduction is increasingly economic, underscoring the importance of identifying and investing in commercially viable abatement solutions sooner rather than later.

Industry‑led initiatives, often in collaboration with research institutions look to innovate in emissions abatement technologies (ACARP 2025). These have reached various levels of technology readiness, and it is imperative that private investment continues to support these innovations to scale up and commercialise. 

Accelerating the commercialisation of low‑emissions technologies will rely on continued industry innovation in close collaboration with energy providers, original equipment manufacturers, the mining equipment, technology and services (METS) sector, universities, and private equity. These partnerships are essential to move promising innovations from pilot to scale.

The METS sector plays an important role in decarbonising the resources sector by deploying more energy‑efficient machinery as well as electric equipment to replace machinery powered by diesel. It also contributes expertise to optimise processes and plan the transition to low‑emissions technology at individual sites.

Links with other sector plans

The Australian Government recognises that not all sectors within the economy will achieve the same rate of decarbonisation at the same time. There are significant dependencies between the different sectors, which need careful coordination and sequencing to meet national targets in a cost‑effective way. 

The 6 sector plans have been informed by engagement with industry, the community, experts and governments. Collaboration between agencies gives whole‑of‑government coverage on aspects of mutual interest. 

Outcomes from the Electricity and Energy Sector Plan will have a direct impact on the pace of decarbonisation in the resources sector. Expanded electricity networks, with increased capacity to power heavy industries, will enable electrification of resources operations. The availability of low‑carbon fuels at a competitive price will reduce reliance on diesel for activities that cannot be electrified.

The resources sector will provide the critical minerals and iron ore required to produce renewable energy, and the gas to firm supply. These are direct enablers of the Electricity and Energy Sector Plan. In addition, iron and other metal ores will be the foundation to produce green metals, contributing to the Industrial Sector Plan. Australia will need to increase production of these resources, which represent an important economic opportunity as they are essential inputs for a decarbonised world.