Australia’s 2035 Climate Commitment: a pragmatic path to net zero?

On 18 September 2025, the Australian Government unveiled a landmark climate policy package that includes:

• a new 2035 emissions reduction target;

• the release of Australia's Net Zero Plan;  and

• the Climate Change Authority’s (CCA) independent advice which informed the 2035 target.

This marks a pivotal shift in Australia’s climate journey, setting the tone for regulatory and economic transformation to 2050.

Australia’s 2035 target: 62–70% emissions cut from 2005 levels

Prime Minister Anthony Albanese announced that Australia will aim to reduce greenhouse gas emissions by 62% to 70% below 2005 levels by 2035. The target:

• will form part of Australia's Nationally Determined Contribution (NDC) under the Paris Agreement; and

• reflects a balance between ambition, economic realism, and political pragmatism.

The Government emphasised that the setting of a range allows flexibility as technologies evolve and economic conditions shift.

How Australia compares internationally

Australia’s target is above some regional peers but lags behind the UK and EU.

The announcement follows the release of Australia’s first National Climate Risk Assessment, forecasting:

• 1.5 million Australians at risk from sea level rise by 2050; and

• rising heat-related deaths and frequent flooding in major cities if global warming exceeds 2°C.

The Climate Change Authority’s influence

The CCA’s final advice revised its earlier 65-75% range recommendation to 62-70% which requires roughly halving Australia's current emissions in the next decade, and a per capita decline of 76-81% based on 2005 levels. This 2035 target, it said, could be met without the use of international offsets. It cited:

• Feasibility: achievable with current and emerging technologies. The transition to renewable energy, electrification of industry and transport and efficiency improvements, which are currently underway, will help in reaching the target.

• Economic modelling: Treasury found delayed action would result in lower growth and worse economic outcomes. The modelling concluded that an orderly transition to net zero will lead to higher wages, more jobs, and improved living standards, showing the Australian economy can keep growing by an average of 2.7% each year while achieving the target.

• Sectoral transformation: All sectors can contribute, with tailored pathways depending on their readiness and technological maturity.

The CCA also:

• recommended aiming for the top of the range and not rule out overachievement if greater emission reductions prove possible, in order to get to net-zero by 2050.

• warned that Australia is only on track for a 51% reduction by 2035 under current policy settings. Changes to existing policies and mechanisms, as well as new initiatives, will clearly be needed to achieve the announced target. Some of these are already in place but yet to deliver emission reductions, such as the New Vehicle Efficiency Standard, whereas further changes to the Safeguard Mechanism and Australian Carbon Credit Units scheme can be expected. For example, accelerating the decline rate out to 2035 for baselines set under the Safeguard Mechanism is identified by CCA as reducing emissions from the industry and resources sectors by almost a third.

The Net Zero Plan: the roadmap to 2050

Released alongside the target, the Net Zero Plan and six sector plans set out how Australia intends to meet the target, building on existing policies and introducing new initiatives to accelerate decarbonisation across all sectors. The key action areas are:

• Clean electricity across the economy: 82% renewable electricity by 2030 by expanding renewable energy generation and improve grid infrastructure; fast-tracking project approvals, particularly through reforms to the Environment Protection and Biodiversity Protection Act 1999.

• Electrification and efficiency: support households and businesses to switch to electric appliances and vehicles such as through programs like the Cheaper Home Batteries initiative and acceleration of the rollout of EV kerbside and fast charging.

• Clean fuels: invest in hydrogen and biofuels for sectors where electrification is challenging.

• New technologies: support for hard-to-abate sectors and clean tech manufacturing, including supporting major investments by large industrial facilities in decarbonisation and energy efficiency, and scale up manufacturing of low emissions technologies.

• Carbon removals: scale up nature-based and technological solutions to offset residual emissions. In addition to already implemented improvements to the ACCU scheme and funding towards carbon capture technologies, the government plans to work with the CSIRO to deliver a Carbon Dioxide Removal Roadmap.

Over $8 billion in funding was announced, including:

• $5bn Net Zero Fund

• $1.1bn for low-carbon fuel;

• Additional support for CEFC, Capacity Investment Scheme and Rewiring the Nation.

The Government also announced an update to the Clean Energy Finance Corporation's mandate to include a new focus on the rapid rollout of renewable projects, in addition to the $2bn increase in funding to CEFC announced earlier this year.

Safeguard Mechanism: tighter, broader, sooner

Although the Government makes clear in the plan its ongoing support for carbon markets, it clearly states that it will not introduce an economy-wide price on carbon and will maintain a suite of measures to achieve emissions reductions. Accordingly, ongoing improvements to the existing market mechanisms (ie. the ACCU scheme and Safeguard Mechanism) are contemplated. Consistent with the advice of the CCA, the Government sees the opportunity to recalibrate the Safeguard Mechanism to deliver significant emissions reductions in line with the 2035 target, committing to review the scheme's settings next financial year. Other aspects of the scheme to be considered include:

• The use of Safeguard Mechanism credits and offsets beyond 2030 to meet baselines;

• The treatment of flexibility mechanisms (such as multi-year averaging) beyond 2030; and

• Ongoing appropriateness of arrangements for emissions intensive, trade exposed activities.

Described in the Net Zero Plan as "a flexible and scalable" mechanism, there is the potential not only to accelerate the decline rate as suggested by the CCA, but also expand its coverage by reducing the emissions threshold to capture more facilities as was the case under the Carbon Price Mechanism.

Sectoral snapshots: immediate opportunities

The six industry sector plans include transition pathways and near-term actions for:

• Electricity & Energy;

• Resources;

• Transport;

• Industry;

• Agriculture; and

• Built Environment.

What happens next?

Australia’s 2035 target will be submitted to the United Nations as part of its updated NDC under the Paris Agreement. The international community will scrutinise the target, in particular Australia's Pacific neighbours who have demanded increased ambition. The announced target is likely to also influence the prospects of Australia's bid to host COP31 in 2026.

Domestically, the focus will shift to implementation, with a likely short-term focus on:

• strengthening the Safeguard Mechanism to reduce industrial emissions;

• accelerating renewable energy deployment, including through reforms to planning approval processes;and

• supporting vulnerable communities and industries through the transition.

What should organisations do now?

Compliance and risk

• Map your exposure under the Safeguard Mechanism to 2035.

• Model scenarios for tighter baselines or expanded coverage.

Strategy and Investment

• Reassess plans for electrification, clean fuels and offsets.

• Position for Net Zero Fund and CEFC support.

Governance and engagement

• Prepare for enhanced climate disclosure and stakeholder pressure.

• Align legal, ESG and operations on transition strategy.