The Albanese government has set a headline-making 2035 emissions target.
But independent analysts say the rate of cuts must triple,
industrial baselines remain too generous, and
$14.9 billion in annual fossil-fuel supports make the headline look hollow.

| Key
Points |
- Australia has set a 2035 target
of 62–70% below 2005 emissions levels, but the CCA says
the pace of cuts must triple by the early 2030s to achieve
it. 1
- Climate Action Tracker rates
Australia's 2030 NDC "Insufficient" for 1.5°C, noting
transport is projected to become the country's largest
source of emissions by 2030 without stronger intervention.
2
- The reformed Safeguard
Mechanism's first full compliance year, FY2024, saw 219
covered facilities reduce gross emissions to 136 Mt CO2-e,
with net emissions falling to 127.8 Mt CO2-e after offset
surrenders. 3
- Civil penalties for Safeguard
non-compliance are capped at AUD$330 per tonne as of July
2024, which critics say is too low to force genuine
capital investment in abatement. 4
- Total fossil-fuel subsidies
across all Australian governments reached $14.9 billion in
2024–25, equivalent to $28,381 per minute, driven mainly
by the Fuel Tax Credits Scheme. 5
- Australia gave final approval in
September 2025 to Woodside's North West Shelf LNG facility
to operate until 2070, with Climate Analytics estimating
up to 4.3 billion tonnes of lifetime carbon emissions. 6
|
In September 2025, Australia told the world it would cut greenhouse
gas emissions by 62 to 70 per cent below 2005 levels by 2035.
On the
same day, the Climate Change Authority warned that delivering even
the lower end of that range would require the current pace of cuts
to triple within a decade.1
That tension, between an ambitious headline target and the
structural barriers to achieving it, now defines the central
challenge of Australian climate policy.
Three interlocking problems
have converged:
- A target architecture that independent analysts say
falls short of 1.5°C Paris alignment.
- A reformed industrial
emissions scheme that is showing early results but carries serious
design weaknesses.
- A government that simultaneously champions
decarbonisation at home while subsidising fossil-fuel exports on a
scale few peer nations match.
The 2035 Target: How It Was
Set, and What It Will Take
The Climate Change Authority's final advice, submitted in September
2025, recommended a target range of 62 to 70 per cent below 2005
emissions levels by 2035.1
The
government accepted that advice in full, setting an identical range
and submitting it to the United Nations as Australia's third
Nationally Determined Contribution ahead of COP30 in Brazil.
The CCA's own annual progress report, released in November 2025,
contextualised what the target demands. Annual emissions fell by 10
million tonnes of CO2 equivalent in the year to June 2025, the
largest drop outside of the COVID-19 pandemic.1
But reaching the 2030 target
requires accelerating that annual reduction to 18 million tonnes.
Reaching the 2035 target will require cuts of 20 to 25 million
tonnes per year throughout the remainder of the decade. That means
the current pace must roughly triple.
The electricity sector has led the way. It contributed the majority
of national emissions reductions in the past year, as coal-fired
generation has been progressively displaced by large-scale solar and
wind.1
Renewables now make up
over 40 per cent of Australia's two largest electricity grids, up
from 13 per cent in 2015.
Transport is a different story. Climate Action Tracker projects
that, absent stronger intervention, transport will surpass
electricity to become Australia's largest single source of emissions
by 2030.2
Australia was among
the last developed economies to adopt a vehicle efficiency standard,
doing so only in 2024, alongside Russia. The government's own impact
assessment estimates the New Vehicle Efficiency Standard will reduce
cumulative emissions by 16 million tonnes between 2025 and 2030, or
about 11 per cent below 2025 levels. Analysts consider that figure
meaningful but insufficient.
Agriculture, heavy industry and the resources sector have shown
little improvement. Emissions from fossil fuel production,
agriculture and waste continue to flatline, according to the most
recent national inventory data.2
The Climate Change Performance Index found in November 2025 that
Australia's government planning documents accompanying the 2035 NDC
indicated an aim at the lower end of the announced range, with no
measures in place to support delivery of the 70 per cent upper
bound.7
The 2035 target remains unlegislated. The 2030 target of 43 per
cent below 2005 levels was embedded in the Climate Change Act 2022,
providing regulatory certainty for business and investors. The 2035
equivalent has not received the same treatment, leaving its
enforceability dependent on successive governments' willingness to
honour it.
The Gap Between Australia's
Target and 1.5°C
Climate Action Tracker has rated Australia's 2030 target
"Insufficient" against modelled domestic pathways for limiting
warming to 1.5°C.2
The
assessment was issued after the government's December 2024
projections, which showed Australia tracking toward a 42.6 per cent
reduction by 2030.
The CAT has also noted that continuous recalculations of land-use,
land-use change and forestry projections have effectively reduced
the apparent emissions reduction task for the energy, industry,
agriculture and waste sectors.2
Government projections of land-sector removals quadrupled between
2021 and 2024. The CAT has called for full transparency in
land-sector modelling, cautioning that emissions reductions driven
by revised forestry estimates represent statistical adjustments
rather than structural economic change.
Climate Analytics, in a briefing published in August 2025, found
that net emissions had dropped 29 per cent between 2005 and 2024,
but that gross emissions had decreased by only two per cent over the
same period.8
The organisation
called for Australia to set separate targets for both net and gross
emissions in its NDC to clarify the level of abatement required from
the Australian economy.
The Climate Change Performance Index, published in November 2025,
ranked Australia 56th globally, four places lower than the previous
year, among the very low-performing countries.7
The index's national experts
called for Australia to manage a phase-out of coal and gas
extraction, and to end fossil-fuel subsidies.
The Safeguard Mechanism:
First Results, Persistent Weaknesses
The reformed Safeguard Mechanism, which took effect on 1 July 2023,
is Australia's primary tool for regulating emissions from large
industrial facilities. It covers around 220 facilities emitting more
than 100,000 tonnes of CO2 equivalent per year, together responsible
for a substantial share of national emissions.4
The mechanism sets declining baselines for each facility. The
default rate of reduction is 4.9 per cent per year to 2030, after
which baselines transition to industry-average benchmarks. Total net
emissions from all covered facilities must not exceed 100 million
tonnes in the 2030 financial year, against a cumulative cap of 1,233
million tonnes between 2021 and 2030.4
FY2024 was the first full compliance year under the reformed rules.
The Clean Energy Regulator's data confirmed that total gross
safeguard emissions fell from 138.7 Mt CO2-e in 2022–23 to 136.0 Mt
CO2-e in 2023–24, across 219 covered facilities.3
Following the surrender of
Australian Carbon Credit Units and Safeguard Mechanism Credits, net
safeguard emissions fell to 127.8 Mt CO2-e. The CER issued the first
Safeguard Mechanism Credits in February 2025, following that initial
compliance reporting cycle.
Compliance was high overall, with 98 per cent of the 219 facilities
not in an excess emissions situation by the April 2025 deadline.3
One notable exception was Fitzroy
(CQ) Pty Ltd, the responsible emitter for two Queensland coal mines,
which the Clean Energy Regulator confirmed was in an excess
emissions situation of 583,079 tonnes CO2-e and accepted an
enforceable undertaking after the company declared it lacked
immediate financial capacity to purchase the required credits.
The penalty regime underpins compliance. Facilities that exceed
their baseline without surrendering credits face a maximum civil
penalty of one penalty unit per tonne of excess emissions. As of
November 2024, one penalty unit equals AUD$330.4
Critics, including the Climate
Change Performance Index's national expert panel, argue that even at
that rate the penalty signal is too weak to compel large capital
investments in abatement technology for facilities with high
production values.
A structural concern centres on baselines for major gas facilities.
The CCPI national experts assessed in November 2025 that the first
public data released under the reformed mechanism showed emissions
baselines are, especially for major gas facilities, more permissive
than expected, with those facilities generating credits above what
analysts had anticipated.7
The
government committed to reviewing the mechanism's scope and design
in 2026–27, once two years of post-reform data are available.
The mechanism currently applies to Scope 1 emissions only. It does
not cover Scope 2 emissions from purchased electricity, nor Scope 3
emissions embedded in exported coal and gas. This matters acutely
for Australia's LNG sector, where the combustion of exported gas by
overseas buyers generates emissions that dwarf the facility's own
operational footprint.
A carbon border adjustment mechanism is under active consideration.
Consultation papers were published in November 2023 and November
2024, examining how to prevent carbon leakage as Australian industry
faces competition from lower-regulation jurisdictions.4
Final recommendations are due to
government in the near term, with cement, lime and clinker exports
flagged as initial candidates for coverage.
The Subsidy Contradiction:
$14.9 Billion and Growing
Consider the economics facing a small Queensland coal haulage
company in 2024–25. Under the Fuel Tax Credits Scheme, the business
received a refund on the excise it paid for diesel used off public
roads. That refund is not incidental; it is the single largest item
in Australia's fossil-fuel subsidy portfolio, worth $10.8 billion in
2025–26 and mainly benefiting multinational mining companies.5
When all federal and state supports are aggregated, Australian
governments directed $14.9 billion in spending and tax concessions
toward fossil-fuel producers and major users in 2024–25, a three per
cent increase on the $14.5 billion recorded in 2023–24.5
The Australia Institute, which
compiles the annual estimate, calculates that figure equates to
$28,381 per minute, every minute of every day of the year.
The longer-term picture is starker. The forward-estimates value of
fossil-fuel subsidies across all federal programs reached $55.5
billion in 2024–25, an increase of $1.2 billion on the previous
year's estimate.5
The most
recent figure, incorporating 2025–26 data, has risen further still.
By March 2026, The Australia Institute calculated that total
subsidies had grown to $16.3 billion, a 9.4 per cent increase on the
prior year, growing faster than spending on the National Disability
Insurance Scheme.
The Petroleum Resource Rent Tax, which applies to offshore oil and
gas projects including those operated by Woodside, contributed a
further $2.1 billion in concessions at the federal level in 2024–25.5
The total forward-estimates value
of $55.5 billion is approximately 11.7 times the balance of
Australia's national disaster response fund.
The Woodside Decision: A
Defining Signal
On 12 September 2025, Environment Minister Murray Watt gave final
federal approval for Woodside Energy's North West Shelf LNG facility
to continue operating until 2070. The decision extended the plant's
life by 40 years beyond its originally scheduled closure.6
Climate Analytics estimated that the extension, including the
broader Woodside Burrup Hub development, could generate cumulative
greenhouse gas emissions of approximately 6.0 billion tonnes of CO2
equivalent between 2026 and 2070. That figure represents roughly 80
per cent of the total 1.5°C-aligned pathway emissions for Australia
as a whole.6
A separate
estimate, used in regulatory filings and cited by Mining Weekly, put
the lifetime carbon emissions from the NWS extension alone at up to
4.3 billion tonnes.
The scope 3 problem is acute. Woodside has indicated the project
extension would emit about 80 million tonnes of scope 3 emissions
annually when exported gas is combusted by overseas buyers. Those
emissions do not count toward Australia's national greenhouse gas
accounts but contribute substantially to global warming.9
Under Australian national
environment law, the federal government is not required to consider
the climate harm a project causes globally, a legal loophole that
continues to enable approvals.
The approval placed visible strain on Australia's bid to co-host
COP31 with Pacific nations in 2026. Climate Analytics CEO Bill Hare
described the decision as a "dangerous decision that gaslights the
nation" and warned it would qualify as a "wrongful act" under the
recent International Court of Justice advisory opinion on climate
change.6
The Climate Change
Performance Index noted that Australia's economic interests in
maintaining fossil-fuel trade ecosystems "continually undermine its
ambitions" in international climate diplomacy.7
What Credible Progress Would
Look Like
Independent analysts broadly agree on the direction of reforms
needed. The Safeguard Mechanism requires tighter baselines
post-2030, with stronger constraints on offset use in sectors where
on-site abatement is technically feasible.7
The CCPI experts specifically called for the mechanism to be
strengthened by tightening baselines and limiting offsets where
abatement is achievable, to secure deeper industrial cuts during
this decade.
The price cap on government-held Australian Carbon Credit Units,
set at $75 per tonne in FY2024 and indexed to CPI plus two per cent
annually, is due for formal review in 2026–27.4
Many analysts argue the effective
carbon price signal remains too low to drive deep decarbonisation in
heavy industry.
The 2035 target needs legislative protection. Without that step,
subsequent governments retain the legal authority to revise or
abandon the commitment. The CCA's 2025 annual progress report
recommended seven priority actions, including streamlining approvals
for renewable energy projects and extending the Capacity Investment
Scheme to maintain deployment momentum.1
Fossil-fuel subsidy reform presents a harder political challenge.
The Fuel Tax Credits Scheme has broad support from mining, farming
and transport sectors. A phased reduction, structured to protect
small operators and fund transition support for affected regional
communities, would require sustained political will that neither
major party has signalled.
The Australia Institute noted in March
2026 that the Australian government itself had signed the Belém
Declaration on the Transition Away from Fossil Fuels at COP30,
recognising "the need to phase-out inefficient fossil fuel subsidies
as soon as possible."5
On the international front, the government's Future Made in
Australia agenda, which commits $22.7 billion in clean industry
support over 10 years, offers a potential model for export
diversification. Green hydrogen, critical minerals processing and
low-emission manufacturing have been identified as areas where
Australia holds competitive advantages.
Analysts note, however, that
the total value of those commitments remains substantially smaller
than the forward-estimates value of fossil-fuel subsidies.
Conclusion
Australia's climate policy landscape in 2025 and 2026 is defined by
a gap between ambition and structure. The 2035 target of 62 to 70
per cent below 2005 levels is the most ambitious the country has
ever set.
The institutional architecture, including the reformed
Safeguard Mechanism, the Net Zero Plan and the Future Made in
Australia agenda, represents a more coherent policy framework than
Australia has previously assembled. Yet the pace of actual emissions
reduction remains well below what the targets require.
Two structural problems dominate. The first is enforcement:
baselines under the Safeguard Mechanism decline at 4.9 per cent per
year to 2030, a rate designed to meet that nearer-term objective but
not the steeper gradient needed in the years beyond it.
Civil
penalties remain modest relative to the capital costs involved in
industrial decarbonisation, and many facilities continue to meet
obligations through offset purchases rather than on-site abatement.
The second is the fossil-fuel subsidy architecture, which continues
to direct almost $15 billion per year toward the industries that
domestic climate policy is simultaneously trying to constrain.
The Woodside North West Shelf extension crystallised that
contradiction in its starkest form. A government that set a landmark
2035 target and a government that approved 40 more years of gas
processing are not two separate governments.
They are the same
government, and that tension will define Australia's climate
credibility for decades to come.
How the country resolves it,
through policy reform, legislative accountability or mounting
international and legal pressure, will matter not just for Australia
but for the Pacific communities and global climate trajectory
directly affected by the choices made in Canberra.
References
1. Climate Change Authority, 2025 Annual Progress
Report
2. Climate Action Tracker, Australia Country
Assessment
3. Clean Energy Regulator, 2023–24 Safeguard
Mechanism Data Insights
4. International Carbon Action Partnership,
Australian Safeguard Mechanism Profile
5. The Australia Institute, Fossil Fuel Subsidies in
Australia 2025
6. Climate Analytics, Australian Government Approves
Woodside North West Shelf to 2070, September 2025
7. Climate Change Performance Index, Australia
Assessment 2025
8. Climate Analytics, 1.5°C-Aligned Targets for
Australia, August 2025
9. The Conversation, Woodside's North West Shelf Gas
Extension Is Being Challenged in the Courts, February 2026
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