Australia’s 2035 Climate Target

Implications for Key Sectors and Businesses 

Achieving a 62–70% cut in emissions within a decade will require rapid transformations across the economy. The most affected sectors – heavy industry, electricity, transport, and agriculture – face significant regulatory changes and opportunities for investment. 

Businesses in these sectors will be expected not only to reduce their carbon footprint in line with the national goals, but also to demonstrate transparency in emissions data and adapt to cleaner technologies to remain competitive.  

Heavy Industry and Resources 

Australia’s heavy industries – including manufacturing, mining, oil & gas, chemicals and processing facilities – are central to the success of the 2035 target. Approximately 215 industrial facilities are covered under the Safeguard Mechanism, contributing about 30% of Australia’s greenhouse gas emissions. The 2023 reform to this Mechanism mandates declining baselines (≈ 4.9% annual reductions) for these facilities. 

These rules require covered facilities to reduce their operational (Scope 1) emissions or to utilise credit mechanisms if emissions exceed their baselines. The newly announced A$5 billion Net Zero Fund is explicitly intended to aid heavy industry in decarbonising via investments in new equipment, low-emissions technologies and processes.  Priority pathways identified by government planning include green hydrogen, electrification of industrial heat and machinery, energy efficiency upgrades, and interest in carbon capture and storage (CCS). Emissions data reporting is already standard: under the National Greenhouse and Energy Reporting (NGER) scheme, major facilities report annually. As baselines shrink each year, many facilities will need continuous operational improvements or to purchase credit units to remain compliant. 

To support competitiveness and avoid carbon leakage, the government is conducting a Carbon Leakage Review. Trade-exposed facilities receive baseline adjustments under the Safeguard Mechanism. Internationally, exporters of steel, aluminium and fertiliser already face external pressure to supply verifiable emissions data; while formal requirements for other commodities like LNG remain under discussion. 

Electricity Sector 

Electricity remains Australia’s largest source of emissions, dominated by coal-fired generation. Decarbonising this sector is central to achieving the 2035 target. 

The Government has set an interim target of 82% renewable electricity by 2030, supported by the Capacity Investment Scheme and grid upgrades through Rewiring the Nation. Several coal plants are slated for retirement this decade, while those remaining will likely operate at lower capacity as renewables expand. 

Government modelling suggests that in an orderly transition, firmed renewables remain the cheapest form of new generation and can put downward pressure on power prices over time. The additional A$2 billion for the CEFC is intended to accelerate this shift and help stabilise costs. 

For large energy users, Scope 2 emissions will fall as the grid cleans up, but companies will also need to manage electricity sourcing more proactively. Renewable PPAs and on-site generation are becoming mainstream tools to hedge against cost and carbon risks.  

Transport Sector 

The transport sector is Australia’s third-largest emitter, driven mainly by road transport (passenger cars and freight). Emissions from transport have been rising with population and economic growth, so bending this curve is critical for the 2035 goal.  

The government’s newly released Transport Sector Plan emphasises vehicle electrification, fuel efficiency, and alternative fuels as key strategies.  

A cornerstone policy is the introduction of Australia’s first Fuel Efficiency Standard for new vehicles, which will set mandatory emissions ceilings for cars and light trucks to encourage the supply of more electric and fuel-efficient models.  

For businesses, this heralds a rapid increase in EV availability and eventual phase-out of high-emission vehicles. Fleet operators and logistics companies should be preparing to upgrade their fleets to EVs or zero-emission trucks as they become viable.  

Government support is underway – for example, $40 million has been allocated to accelerate EV charging infrastructure rollout in suburbs and regions, which will benefit companies electrifying their vehicle fleets. 

Beyond road transport, companies in aviation, shipping, and rail are expected to start transitioning to cleaner fuels. The government’s plan includes A$1.1 billion to boost clean fuel production domestically, targeting things like sustainable aviation fuel, renewable diesel, and green hydrogen for heavy transport. Businesses in these subsectors should explore pilot projects and partnerships for fuel switching, as well as improve efficiency in the interim.  

Demonstrating emissions reduction in transport will be increasingly important for accessing finance and contracts – for instance, airlines and freight companies may find that corporate customers prefer carriers with credible net-zero plans (including use of offsets or cleaner fuels).   

Agriculture and Land 

Agriculture contributes significantly to methane and nitrous oxide emissions, but also offers carbon sequestration opportunities. 

The Agriculture and Land Sector Plan sets pathways for low-emissions food and fibre, with support for methane-reducing feed additives, soil carbon projects, and expanded carbon farming. Programs such as MERiL and the ACCU scheme are designed to incentivise innovation and credit generation. 

For agribusinesses, emissions measurement and transparency are becoming essential. Global food companies are introducing emissions-based sourcing standards, and supermarkets are seeking low-carbon supply chains. Meeting these expectations will be key to market access and export competitiveness. 

Adaptation is also unavoidable: drought resilience, water efficiency and land stewardship will need investment alongside emissions cuts.