Live speech - Carbon Market Institute 2026
Kath Rowley
CEO - Climate Change Authority
Check against delivery.
I acknowledge the Traditional Owners of the Kaurna land where we meet today, and pay my respects to elders, past and present.
Before I begin, I’d like to thank the Carbon Market Institute for the role they play as a strong business voice for the transition to net zero.
And Sasha - I’d like to congratulate you on your first Summit as CEO.
Australia’s climate challenge is becoming more demanding.
For all the progress Australia has made with
…emissions down 25% against the 2005 baseline
…renewables now meeting over half the demand on the main national grid on a regular basis
…electrification surging across households and transport
…the task of preserving our planet is more pressing than ever.
We need to do more, faster, to reach our emissions reduction targets.
We’re racing the clock to meet the goals set by the Parliament, and our commitment under the Paris Agreement.
Consider where we started.
In 2005, Australia’s net emissions were over 610 million tonnes of CO2 equivalent.
Latest figures indicate they have fallen by a quarter – to around 455 million tonnes in March 2026.
But to achieve the targets Australia has set, emissions need to fall by almost as much again in just the next 4 years, to around 350 million tonnes by 2030 and sustain that pace to 2035, on the path to net zero by 2050.
As the Authority reported last year, that means that the rate of emissions reduction needs to more than double to meet that 2030 target and more than triple to meet the top of our 2035 target range
So pulling every lever available to us is non-negotiable.
But being stronger does not simply mean doing more.
It means deploying the right tools, designed in the right way, at the right time.
And for all the debate over the best pathway to reduce emissions, Australia has always leant into market-based mechanisms.
The Renewable Energy Target started in 2001 as a modest but meaningful market-based policy.
The Australian Carbon Credit Unit (ACCU) scheme started in 2011, and the Safeguard Mechanism in 2016. While their details have changed over time, they have served as important vehicles to encourage investment in carbon abatement across the economy.
In 2025, the market-based New Vehicle Efficiency Standard joined the mix.
All these schemes have a common design principle.
They clearly articulate the end goal but offer flexibility in how that is achieved.
Stronger over time has been the trend.
And that’s how the Authority approached the policy advice we recently gave the Government on ACCUs, and what’s ahead with our advice on the post-2030 settings for the Safeguard Mechanism.
I was asked to speak about the role of carbon markets in Australia’s decarbonisation pathway – and think the evolution of the ACCU scheme provides valuable insights.
The Scheme has provided a financial incentive to mobilise private investment in emissions reduction and removals since it began in 2011.
Australia’s climate policy architecture looked very different at that time. But market-based measures were prominent.
Renewable energy costs were beginning to come down, and the Renewable Energy Target was scaling up – from its initial goal of adding 2% by 2010 to targeting 20% of electricity from renewable sources by 2020.
The Carbon Pricing Mechanism was coming into force, to drive the industrial transition.
But some of today’s industrial decarbonisation technologies didn’t exist, and others were prohibitively expensive.
The ACCU scheme played an important complementary role, by giving industrial facilities access to cost-effective abatement elsewhere in the economy, rather than forcing immediate take-up of high-cost onsite options.
When the Carbon Pricing Scheme was abolished in 2014, ACCUs remained. They took centre stage as the main driver of emissions reduction, sustaining important investment in things like revegetation of the landscape, methane capture and use at landfills, improving agricultural soils, and First Nations management of Country.
The government was the dominant purchaser through the Emissions Reduction Fund, and committed over $4.5 billion over the coming years.
ACCU issuance in this period grew to 17 million tonnes a year, making a significant contribution to the (admittedly, relatively modest) national targets at the time.
Skip forward to 2022, and Australia adopted bolder climate targets, starting with the commitment to a 43% reduction in emissions by 2030.
With higher ambition came a broader policy toolkit, and an expanded role for markets.
The Safeguard Mechanism reforms of 2023 re-established emission reduction obligations for Australia’s big industrial facilities.
The Mechanism’s decline rates aligned industrial emissions with Australia’s 2030 targets – in net terms.
ACCUs provided the ‘net’. Once again, they are playing a complementary role to industrial decarbonisation.
And the primary demand for ACCUs has reverted from government to the private sector.
Throughout this whole period, the ACCU scheme has provided a sustained incentive to find – and unlock – cost effective abatement.
It has stimulated investment in these activities.
And it has achieved real scale – with the Clean Energy Regulator’s latest data showing almost 26 million ACCUs issued in the 12 months to September 2026.
ACCUs will continue to play an important role in driving investment in abatement as the Safeguard Mechanism baselines ratchet down.
This chart – from the 2025 Emissions Projections – shows the split of onsite and offsite abatement for Safeguard facilities.
It aligns with the Authority’s analysis that shows Australia still has plenty of cost-effective abatement potential in the land and agriculture sector.
Tree planting, restoring native vegetation, improving agricultural soils, managing fire in the landscape – and a range of other activities – could sustain strong ACCU supply over the coming years and decades.
That needs to be balanced against practical constraints, including the competing demands on land use and the impacts of climate change itself.
And ACCUs will increasingly be competing against opportunities for onsite abatement at Safeguard facilities.
Our sector pathways work showed the trajectory to net zero looks different for each industrial sector.
Some have feasible opportunities now – such as efficiency upgrades, fuel switching and electrification. We expect these to be taken up in the near term.
Options will expand over time, as clean fuels and technologies mature and scale up, and as enabling infrastructure such as the Pilbara grid is established.
But some sectors are likely to remain hard-to-abate over the medium and longer term.
That’s why the interplay between ACCUs and onsite abatement is critical.
Access to the pre-existing ACCU market has helped the Safeguard reforms get up and running.
But where Safeguard facilities can reduce their own emissions at a lower cost than buying an ACCU, they now have a clear incentive to do so.
As baselines ratchet down, that incentive will strengthen.
And through trade, a contemporary ACCU framework enables all sectors and facilities to contribute to Australia’s decarbonisation, even where onsite opportunities are unavailable.
Zooming out to the national task shows how the ACCUs scheme’s role in meeting our national targets has changed with the Safeguard reforms.
The Safeguard policy settings – especially the baseline decline rate – determine its overall contribution. As the previous chart showed, some of that will be delivered onsite, and some through ACCUs.
For any given Safeguard setting, increasing the supply of ACCUs – through more methods, and more projects – won’t change the overall position. Instead, it will change the mix of abatement within this Safeguard task – more ACCUs means more offsite abatement, and less onsite at Safeguard facilities.
But that doesn’t mean ACCU supply is not important.
A stronger Safeguard decline rate makes a greater overall contribution.
And ACCUs are an important consideration here. By expanding compliance options, they make more ambitious settings achievable at reasonable cost.
The Authority is currently finalising its advice to government on the Safeguard’s post-2030 decline rate. Alignment with a 62-70% reduction by 2035 would imply stronger rates than the indicative rate of 3.285% per year.
We estimate a rate aligned with 70% would deliver an extra 17 million tonnes of abatement in 2035 compared to the indicative rate.
And ACCUs continue to play a role beyond the Safeguard.
Government and voluntary purchases drive additional emissions reductions – contributing directly to the achievement of Australia’s emission reduction goals.
Which suggests carbon markets will make a growing contribution to Australia’s decarbonisation pathway over time.
So – where to next for the ACCU scheme?
The Authority’s latest review recognised that a project-based crediting scheme is a good fit for some, but not all, abatement opportunities.
Other measures will be needed to unlock the full potential of Australia’s land and agriculture sector.
But where ACCUs are the right fit, we should make best use of them.
That requires market confidence, transparency and integrity, and it requires stable and predictable policy settings.
Our review observed that past recommendations to strengthen transparency and integrity are still being implemented, and need time to mature.
So we looked for targeted opportunities to sustain the improvement trajectory.
Evolution, not revolution, was our motto.
We put a spotlight on 3 areas.
The first goes to permanence settings.
Twenty-five-year permanence periods for sequestration projects were introduced in 2014, to encourage participation by landholders unwilling or unable to take on 100-year obligations.
This has stimulated action to remove and store more carbon now – which helps slow the pace of warming.
But it also brings elevated risks of that storage being reversed. So it makes sense to ensure the risks are well understood, and well managed.
We recommended the government examine whether the risk of reversal buffer and permanence period discount remain appropriate in light of climate risks, and specifically consider the appropriate discount for projects with 25-year permanence periods.
Related to this is how projects with 25-year permanence obligations sit in the new policy context, where Safeguard compliance is the main source of ACCU demand.
We recommended the government assess whether those 25-year credits are durable enough to be used to offset industrial emissions.
The durability of carbon removal is only going to become more important as Australia pursues increasingly ambitious emissions reduction goals.
Our desire for market confidence also informed the recommendation to give buyers clearer information about the carbon credits they buy.
More accessible, comparable and reusable information will foster confidence in the integrity of the ACCU market.
Likewise, better visibility on future method development would help project proponents and investors identify future opportunities and better direct their effort and investment.
Understanding which methods are likely to progress, why they have been prioritised and when key decisions are expected will strengthen confidence in future supply conditions.
Carbon markets have played a central role in Australia’s climate response to date – and a primed to scale up their contribution.
Stronger Safeguard and ACCU settings will drive more investment and greater abatement to support net zero by 2050.
So getting the settings right for today and tomorrow matters.
I look forward to continuing to work with you as the Authority strives to do just that.
Further reading
