Significant new climate change requirements for NSW premises

Ambitious climate targets beyond federal standards 15 min read

From 2026, the NSW Environment Protection Authority (EPA) will play a significantly greater role in regulating greenhouse gas (GHG) emissions in NSW. Environment Protection Licences (EPLs) will become the primary tool for the regulation of GHG emissions in NSW.

The operator of any facility that is both licensed under an EPL and emits more than 25,000 tonnes carbon dioxide equivalent (CO₂-e) of scope 1 and 2 emissions per year is going to have to do more to assess and address its GHG emissions. This is likely to require additional action beyond what that facility is required to do to comply with federal emissions reporting legislation and the Safeguard Mechanism. The new requirements will also apply to numerous facilities not currently subject to emissions reporting or the Safeguard Mechanism.

In this Insight, we unpack the EPA's proposed climate change licensee requirements, including what operators will need to do, when the requirements will be implemented, how they'll be imposed, comparison to existing federal legislative requirements and next steps.  

Key takeaways 

• The NSW EPA has released Proposed Climate Change Licensee Requirements, Proposed Mitigation Requirements and a Mitigation Guide for NSW Coal Mines for public consultation. Public consultation on these documents will close on 7 October 2025.
• The EPA proposes to require the operators of facilities that both hold an EPL and emit more than 25,000 tonnes CO₂-e per annum of scope 1 and 2 emissions to report their emissions to the EPA and prepare Climate Change Mitigation and Adaption Plans (CCMAPs). These CCMAPS will need to set emission reduction targets and outline the steps the operator will take to meet those targets, with a focus on taking all reasonable and feasible measures to abate GHG emissions on site before relying on offsets.
• NSW's legislated GHG emissions reduction targets are more ambitious than the Federal Government's targets. Because of this, the NSW EPA is expecting NSW facilities to set more ambitious GHG reduction targets than they have to comply with under the Safeguard Mechanism or under any voluntary targets set in accordance with federal targets.
• Some of the facilities that will be subject to these new requirements are already required to report their emissions under the National Greenhouse and Energy Reporting (NGER) Scheme. However, the EPA's proposed requirements will apply to 40-50 facilities that do not currently report under the NGER Scheme, and around 150 facilities that are not currently subject to the Safeguard Mechanism (which only applies to facilities that emit more than 100,000 tonnes CO₂-e per annum of scope 1 emissions).
• The EPA will not immediately be imposing hard limits on GHG emissions as conditions on EPLs. However, the EPA still intends to do this in the future, once CCMAPs have been prepared and sector-based greenhouse gas budgets have been set. Licensees should assume that any information they provide to the EPA could be used by the EPA as a basis to impose GHG emission limits.
• The EPA will also introduce specific mitigation actions that must be adopted by licensees in particular sectors. It will initially release guides setting out the proposed measures, before requiring implementation of these measures (presumably under regulation or conditions imposed on EPLs). The EPA's first proposed Greenhouse Gas Mitigation Guide, which applies to NSW coal mines, has been released for comment as part of the current consultation package.
• Entities will not have a great deal of time to prepare for these new reporting requirements. Safeguard Mechanism facilities and coal mines that emit more than 25,000 tonnes of CO2-e (scope 1 and 2) per annum will need to provide their first Annual Climate Change Emissions Report to the EPA by 28 February 2026 and publish their first CCMAP by 31 October 2026. The remaining facilities that emit 25,000 tonnes or more of CO2-e (scope 1 and 2) per annum will need to publish their first CCMAP by 31 October 2027.
• All of this means that, for many operators, the NSW EPA may become the most important regulator they interact with as part of their management of GHG emissions.

EPA's proposed climate change licensee requirements

Background to requirements

These proposed requirements are not a surprise. We have been expecting the EPA to take a more active role in climate change regulation since August 2021, when the NSW Land and Environment Court held that the EPA was legally required to 'develop environmental quality objectives, guidelines and policies to ensure environment protection from climate change'.

As we reported at the time, in late 2022, the EPA released its Climate Change Policy and Action Plan which foreshadowed many of the regulatory actions the EPA now proposes to take—particularly the requirement for some EPL holders to prepare and implement CCMAPs.

Who will the proposed requirements apply to?

The proposed requirements will apply to facilities that hold an EPL issued by the EPA under the Protection of the Environment Operations Act 1997 (NSW) (POEO Act) and which emit 25,000 tonnes or more of carbon dioxide equivalent (CO₂-e) per year through:

• direct emissions from the premises (scope 1 emissions); and
• indirect emissions resulting from consumption of purchased or acquired energy (scope 2 emissions).

Notably, this threshold is significantly lower than the threshold for the federal Safeguard Mechanism, which regulates facilities that produce over 100,000 tonnes of CO₂-e per year of scope 1 emissions. As a result, many EPL holders that are not currently subject to the Safeguard Mechanism will be caught by the EPA's proposed requirements.

What will operators need to do?

The key requirements under the EPA's proposal include:

• Annual Climate Change Emissions Report: licensees will be required to provide the EPA with an annual report that discloses the facility's scope 1 and 2 emissions, energy consumption, energy production data, emission intensities and reasons for significant changes to emissions. This report is intended to capture the same data that is already provided to the Clean Energy Regulator under the NGER Scheme.
• Climate Change Mitigation and Adaption Plan (CCMAP): licensees will need to develop and publish a CCMAP every three years that details current and future emissions, mitigation measures (including those set out in the EPA's mitigation guidance published over time), and emission reduction goals.
  When preparing a CCMAP, licensees will need to balance the need to adopt GHG emission reduction targets and mitigation strategies that satisfy the EPA's expected levels of ambition with the need to have a reasonable basis for and appropriately qualify any targets or future claims set out in the CCMAP, to manage greenwashing risk.
• Specific mitigation actions: some licensees in particular sectors will be subject to specific mitigation requirements developed by the EPA over time. These requirements will be open to community and industry input prior to implementation. The first of these sector-specific mitigation requirements will focus on the coal mining industry, supported by the EPA's proposed Greenhouse Gas Mitigation Guide for NSW Coal Mines, which is also currently on exhibition and can be accessed here.
• Emissions measurement: over time, the EPA will require licensees to measure more of their on-site emissions rather than relying on estimates. As a first step, the EPA will establish regional greenhouse gas monitoring networks to improve data accuracy. In addition, underground coal mines will need to implement continuous monitoring for ventilation air methane, unless subject to planned closure within two years.

In the long term, the EPA intends to impose hard limits on the amount of GHG emissions that licensed premises in key industry sectors can emit. Licensees should assume that any information prepared to comply with reporting requirements could be relied on by the EPA to set those hard limits.

When will the requirements be implemented?

These requirements will be implemented over a phased timeline as follows:

How will the climate change requirements be imposed?

The proposed requirements will be imposed through EPL conditions and regulations.

Comparison with federal legislative requirements

Under the Climate Change (Net Zero Future) Act 2023 (NSW), the NSW Government is targeting emission reductions of:

• 50% of 2005 emission levels by June 2030
• 70% of 2005 emission levels by June 2035
• net zero emissions by June 2050.

This is more ambitious than the Federal Government's commitment to reach 43% of 2005 emission levels by 2030, and net zero by 2050.

Licensees will be expected to contribute to NSW's more ambitious targets under the EPA's proposed requirements. In particular, and consistent with the EPA's NSW Guide for Large Emitters (January 2025), when preparing CCMAPs, licensees should take into account NSW's emission reduction objectives when setting their own scope 1 emission reduction goals. This includes setting reduction levels that are consistent with the long-term (2050) and interim targets (2030/2035) legislated in NSW as a minimum.

In circumstances where a licensee's projected emissions do not align with the overall NSW net-zero timeline, a licensee will be required to explain why their emission reduction trajectory still represents a meaningful contribution to NSW's emission targets and/or decarbonisation goals.

Inability of licensees to rely on the Safeguard Mechanism

Given NSW's more ambitious targets, it comes as no surprise that licensees are expected to do more than what is already required under the federal Safeguard Mechanism to support those targets.

By way of example, under the new requirements, licensed facilities will need to detail in their CCMAPs exactly how they are going to meet GHG emissions targets. This is not currently a requirement under the Safeguard Mechanism, although may be necessary to comply with the new climate-related financial disclosure requirements.

NSW entities will also need to demonstrate they have made genuine efforts to first avoid and then reduce emissions on site before offsetting residual emissions to meet their reduction goals. This proposed NSW requirement is more onerous than what is currently required under the Safeguard Mechanism which, as we explained in an earlier Insight from April 2023, only requires facilities that rely on offsets to meet more than 30% of their reduction requirements, to publicly report on their use of offsets and explain their reasons for doing so.

In practice, this expectation to go beyond the Safeguard Mechanism is already applied in the assessment of new developments in NSW, particularly developments subject to the EPA's NSW Guide for Large Emitters. Our September 2022 Insight discussed how NSW development consents for high-emitting projects already commonly impose conditions enforcing emissions targets reported by proponents in the assessment process, the preparation of mitigation and adaptation plans, and reporting requirements.

Under the EPA's proposal, these requirements will now also apply to existing facilities.

Significant new work for licensees 

The table below sets out, at a high level, the main differences between the existing requirements under the federal NGER Scheme and Safeguard Mechanism and the additional requirements proposed by the EPA.

Ability to rely on reports prepared for other schemes

To avoid duplication, when satisfying the new obligations imposed by the EPA, it is proposed that a licensee can rely on reports and plans they have prepared in order to comply with other schemes. However, the licensee will need to prepare an addendum report that addresses any NSW-specific requirements not addressed in those other reports.

For example, a licensee can satisfy its obligation to prepare a draft CCMAP by relying on material it has disclosed under the mandatory climate-related financial disclosures regime or existing voluntary emissions reduction / climate transition plans. However, the licensee would also need to submit an addendum report that addresses the following matters that are not required by the Australian Sustainability Reporting Standard (AASB S2 Climate-related Disclosures):

• a description of the source of scope 1 and 2 GHG emissions.
• plans and timeframes for mitigating future emissions, including how those mitigation measures will not compromise other pollution controls on the premises, and how they compare to best-practice.
• an estimate of future scope 1 and 2 emissions for each financial year over the next 10 years.
• long-term (to 2050) and interim (2030 and 2035) scope 1 and 2 emissions goals and how each will be achieved.

Further details on the types of additional information required under each reporting requirement are outlined in the EPA's Draft CCMAP Proposed Mitigation Requirements.

Proposed Greenhouse Gas Mitigation Guide for NSW Coal Mines

The NSW EPA has also published a draft Proposed Greenhouse Gas Mitigation Guide for NSW Coal Mines.

This document sets out a number of mitigation measures the EPA expects the operators of some coal mines (that exceed prescribed emissions thresholds) to implement.

While these measures are currently framed as 'expectations', the EPA has stated it ultimately proposes to impose them as legally binding requirements.

The requirements are extremely prescriptive, both in terms of the measures that must be implemented and the timeframes within which they must be implemented. The EPA recognises that some of these requirements might not be feasible in some circumstances and may be prepared to grant exemptions or extensions in particular cases where an operator provides a pre-feasibility assessment that includes both qualitative and quantitative data and which has been independently verified by an appropriate expert. It is not clear whether the EPA will be prepared to grant a total exemption from a requirement that is not time limited.

While these requirements only apply to coal mines, other industries should be firmly on notice that the EPA has foreshadowed rolling out similarly prescriptive requirements for those industries.  

The EPA's requirements for coal mines are:

Next steps

Given the significance of the proposed changes, it is important that licensees take the opportunity to comment on any aspects of the proposed changes that are not workable or that could benefit from refinement to reduce the regulatory burden on licensees. The period for making submissions on the EPA's proposed changes closes on 7 October 2025.

Please contact us if you would like more information about the proposed changes or if you would like assistance in preparing a submission.