Major polluters would be required to cut emissions about 5 per cent each year through to 2030 under an Albanese government plan to help reach its climate targets.
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Climate Change and Energy Minister Chris Bowen has unveiled a proposed shakeup of the so-called safeguard mechanism, the scheme intended to restrict greenhouse gas emissions at 215 of the country's biggest polluting sites.
The government expects the proposed changes to deliver 205 million tonnes of abatement through to the end of this decade, the equivalent of cutting emissions from cars by two-thirds over the same period.
Mr Bowen has also announced an initial $600 million to help businesses in trade-exposed sectors decarbonise their operations.
The money will come from a $1.9 billion fund the government will use to support regional Australia through the shift to a clean-energy economy.
Established under the former Coalition government, the safeguard mechanism has largely failed to do its job as design flaws have allowed emissions across the facilities to rise.
Labor went to the election promising to gradually lower the emissions baselines for the facilities as part of its plan to cut emissions by 43 per cent by 2030 and reach net zero by 2050.
The redesign of the scheme is politically contentious and Labor can expect to face pressure from the political left and right.
The Coalition has likened changes to the safeguard mechanism to a "sneaky" carbon tax, while the Greens want the scheme's redesign to effectively ban new coal and gas projects.
Under the government's proposal, emissions baselines would decline 4.9 per cent each year to 2030.
The baselines would be site specific initially, giving the facilities time to transition to industry-wide benchmarks by 2030.
Mr Bowen said, "These proposed reforms have been carefully calibrated to deliver the policy certainty and support Australian industry needs through decarbonisation.
"Reforms to the safeguard will help create an effective, equitable and efficient trajectory to net zero.
"We know that 70 per cent of facilities, representing over 80 per cent of scheme emissions, already have corporate commitments to net zero by 2050 - this reform helps deliver the framework to get there."
The announcements follow the release of an independent review of Australia's carbon credits system, which is set to play a major role in helping the heavy emitters meet their obligations.
Facilities that exceed emissions baselines can purchase and surrender credits to offset emissions.
The Ian Chubb-led review rejected claims from experts that the majority of credits were a sham, but recommended a major overhaul of the scheme's governance.
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Dan Jervis-Bardy
Dan covers federal politics from Parliament House, with a special focus on climate policy and the NDIS. He has previously reported on ACT politics and urban affairs since joining the Canberra Times in 2018.
Dan covers federal politics from Parliament House, with a special focus on climate policy and the NDIS. He has previously reported on ACT politics and urban affairs since joining the Canberra Times in 2018.
