Key updates and implications 10 min read
Australia’s newly announced 2035 emissions reduction target, set at 62–70% below 2005 levels, marks a defining moment in the nation’s climate policy evolution.
Backed by the release of a national Net Zero Plan and six sector-specific decarbonisation strategies, this framework offers businesses clarity on the country’s pathway to net zero. The target signals a decisive shift in expectations for corporate climate action, regulatory reform, and investment planning.
Key takeaways
- The Australian Government recently announced its much-anticipated 2035 greenhouse gas reduction target of 62-70% (2035 Target). This announcement has been accompanied by the release of a national Net Zero Plan, and six sector decarbonisation plans.
- This suite of documents now presents business with a clearer understanding of the country's net zero pathway and complements the Climate Risk Assessment Report and the National Adaptation Plan, both released earlier in the month.
- While the 2035 Target is not as ambitious as some commentators were calling for, reaching even the lower end of the target range will require significant measures across the Australian economy.
- This Insight unpacks the implications of the 2035 Target for Australian businesses, including potential reforms to the Safeguard Mechanism, other potential environmental reforms and implications for corporate transition plans and mandatory climate reporting.
Key updates
There have been a number of key recent developments in national climate policy, including:
2035 National Emissions Target and Net Zero Plan - 18 September 2025
The 2035 Target and Net Zero Plan set out Australia's pathway to its 2050 net zero target. The Net Zero Plan includes two milestones, being the 2030 target of 43% below 2005 levels and the new 2035 Target of 62‑70% below 2005 levels. It also sets out the Government's five decarbonisation priorities, which are to increase renewable energy across the economy; lower emissions through electrification and efficiency; expand the use of 'clean fuels' (eg low carbon liquid fuels, biomethane, renewable hydrogen and renewable ammonia); accelerate new emissions reduction technologies; and increase the scale of carbon removals to balance emissions.
Sector Plans - 18 September 2025
Released alongside the Net Zero Plan, six sector-specific plans outline pathways, policies and investment priorities to meet the 2035 Target. Each plan addresses unique decarbonisation challenges and opportunities.
Key priorities by sector:
- Electricity and energy: efficient use of energy, electrification, fuel switching and scaling Australia's clean energy supply through renewables and grid upgrades.
- Resources: carbon capture and storage, scaling up methane drainage technology, increasing electrification, introducing heavy electric vehicles and switching to low carbon fuels.
- Agriculture and land: understanding emissions, leveraging carbon and biodiversity markets, increasing circular economy practices and enhancing the land's role in a net zero economy.
- Industry: optimising energy use, switching to alternative low-carbon fuels and investing in technology and innovation to drive future decarbonisation.
- Transport: low and zero emissions transport infrastructure, electric vehicles, the switch to low carbon alternatives (where electrification is not feasible), and the reduction of embodied emissions in transport infrastructure.
- Built environment: electrification, rooftop solar and battery systems, and the improved thermal performance of buildings.
Funding announcements - 18 September 2025
The Government also announced funding for numerous programs, including:
- a new $5 billion Net Zero Fund in the National Reconstruction Fund to assist decarbonisation in industrial facilities, increase renewable energy and lower emissions manufacturing.
- $2 billion for the Clean Energy Finance Corporation.
- $1.1 billion to encourage the production of clean fuels in Australia.1
National Climate Risk Assessment - 15 September 2025
The National Climate Risk Assessment provides a comprehensive review of current and future climate risks. It identifies 63 nationally significant risks, with 11 examined in detail, including threats to natural ecosystems, critical infrastructure, supply chains, the real economy and primary industries.
The report uses a risk-based approach across eight systems to determine who and what is most vulnerable to climate hazards, guiding adaptation and resilience planning.
National Adaptation Plan - 15 September 2025
The National Adaptation Plan (NAP) was designed to respond to the nationally significant climate risks identified in the National Climate Risk Assessment through the creation of a framework for government action on climate change.
Australia's 2035 Target: how does it compare?
In 2024, the Climate Change Authority (CCA) released its Targets, Pathways and Progress Report, which proposed an emissions reductions target range of 65-75%, proposing it as ambitious but achievable, provided that 'sustainable action [was] taken by governments, business, investors and households to achieve it'.2 The newly announced 2035 Target sits at the lower end of this range and reflects the CCA's more recent advice that a goal of 62-70% is Australia's highest possible ambition.3
Looking overseas, Australia's 2035 Target is not as ambitious as the 2035 targets adopted by the UK and Norway. However, it is relatively ambitious in comparison to 2035 targets adopted by a number of other OECD nations, including Japan, New Zealand, Canada and the US. European Union countries have not announced their new 2035 targets.
| Country | 2030 target | 2035 target | 2050 target |
|---|---|---|---|
| Australia | 43% below 2005 levels | 62-70% below 2005 levels | Net zero |
| UK | 68% below 1990 levels | 81% below 1990 levsls | Net zero |
| Norway | 55% below 1990 levels | 70-75% below 1990 levels | 90-95% below 1990 levels |
| Switzerland | 50% below 1990 levels | 65% below 1990 levels | Net zero |
| Brazil (COP30 host) | 50% below 2005 levels | 59-67% below 2005 levels | Carbon neutrality |
| Japan | 46% below 2013 levels | 60% below 2013 levels | Carbon neutrality |
| NZ | 50% below 2005 levels | 51-55% below 2005 levels | Net zero (excluding methane) |
| Canada | 40-45% below 2005 levels | 45-50% below 2005 levels | Net zero |
| USA | 50-52% below 2005 levels | Was 61-66% below 2005 levels but US has since pulled out of UN climate process under Trump. | Net zero |
| Russia | 30% below 1990 levels | 65-67% below 1990 levels | Net zero by 2060 |
| Iceland | 41% below 2005 levels | 50-55% below 2005 levels | Carbon neutral by 2040 |
| China |
65% CO2 emissions reduction per unit of GDP, from 2005 levels. |
7-10% below peak levels* | Net zero by 2060 |
Source: See footnotes 4-15
*This target has not officially been submitted.
Australia’s 2035 Target is less ambitious than those legislated by several states, including Queensland (75%), New South Wales (70%) and Victoria (75-80% respectively).16 However, the Government has proposed a target which it views as achievable with regard to Australia's national and economic interest, and has not sought to set an overly ambitious target which, as the CCA previously suggested, may risk significant levels of economic and social disruption, and put progress achieved to date at risk.17
Leaving aside the level of ambition, the announcements provide much-desired clarity on the country's policy trajectory. The Investor Group on Climate Change, which represents superannuation funds, fund managers, asset consultants and investment and industry associations highlights that the sector pathways provide detail that can give investors 'useful and actional information that allows them to allocate capital with confidence'.18 The Business Council of Australia has stated that a clear plan and ambitious achievable targets 'give business investment certainty and enable the continued delivery of affordable and reliable energy, as we move towards net zero'.19
Key implications of the new 2035 Target
The 2035 Target has a number of implications for businesses. Potential implications could include:
- reforms to the Safeguard Mechanism, including lowering of the threshold for coverage and/or imposing a steeper annual decline rate.
- increased environmental compliance and performance expectations for projects, including requiring projects to align with national climate ambitions.
- the need to align company transition plans and mandatory climate reporting with updated government policies, sector pathways, risk assessments and scenario analyses informed by new data.
- other impacts, including increased electrification of the transport sector, greater emphasis on circular economy and greater climate ambition in state-level climate policies.
The Safeguard Mechanism requires large industrial facilities (over 100,000 tonnes CO₂‑e of scope 1 emissions annually) to cut emissions in line with national targets—currently 43% below 2005 levels by 2030 and net zero by 2050. Most facilities must reduce emissions by 4.9% each year to 2030, then 3.285% annually to 2050, subject to five‑year reviews.
The new 2035 target (62–70%) will influence the 2030–2035 baseline process, and further reforms may be needed. Options include lowering the 100,000‑tonne threshold to capture more facilities and maintaining the 4.9% annual decline rate beyond 2030. Both measures have been recommended by the Productivity Commission and the Climate Change Authority, and align with NSW’s proposal to regulate facilities emitting over 25,000 tonnes. More clarity is expected after the scheduled Safeguard review in 2026–27.
Current policy settings are likely only to bring emissions reductions down by 50-51% by 2035, so meeting a 62%-70% 2035 Target will likely require broader federal reform, although the nature of that reform has not been made clear.
The 2035 Target may influence the long anticipated overhaul of the EPBC Act, which is due to progress in the balance of this year. While those reforms are unlikely to introduce a formal ‘climate trigger’, climate policy will likely influence the design of those reforms, with the removal of barriers to low emissions energy projects set to be a key area of focus.
Transport reform is also critical. The New Vehicle Efficiency Standard, released in January 2025, sets tailpipe emissions limits for new passenger and light commercial vehicles. The CCA advises that half of all light vehicles sold to 2035 must be electric to meet the lower end of the target. The Electric Vehicle Council stresses equal focus on heavy vehicle decarbonisation and emerging technologies such as vehicle to home and vehicle to grid.
Electricity will bear much of the load. Although the Government has not set a 2035 renewable energy target, it maintains its 82% renewables goal for 2030. Achieving the 2035 target will require an accelerated rollout of renewables to meet rising demand from electrification across multiple sectors.
At this stage, there is no indication the Government is planning to seek to enshrine the target in legislation, as it has done for the 2030 target in the Climate Change Act 2022.
Many Australian companies have adopted net zero targets and are developing climate transition plans—strategic documents outlining targets, actions and resources for decarbonisation. Until recently, most relied on voluntary or overseas frameworks. This is changing, with Treasury releasing draft corporate climate‑related transition planning guidelines in August 2025.
The draft guidelines recognise the importance of considering government adaptation and transition policies when identifying a business' adaptation risks and opportunities, at a federal, state and territory, and local level.20 They also emphasise that implementation strategies should map decarbonisation levers across sectors and regions, making the new sector pathways critical references.21 The Transition Planning Consultation Paper also encourages organisations to consider the NAP and any other relevant government policies, 'to identify synergies with the overarching approach governments are taking to address climate risk in Australia'.22
These documents provide actionable inputs for corporate transition plans. Businesses should re‑test key assumptions and interdependencies in existing or new plans against the latest government policies, analysis and data to mitigate misleading or deceptive conduct risk (eg validating grid‑decarbonisation assumptions in light of the Electricity and Energy Sector Plan).
Many businesses are well underway in their preparation for the first year of mandatory climate reporting under the Corporations Act 2001 (see our earlier Insight).
The 2035 Target, National Climate Risk Assessment and related documents provide important context, data and analysis to inform these disclosures. They also set a benchmark against which reports may be scrutinised.
For example, sector pathways may constitute 'reasonable and supportable information' for companies in covered sectors, while the Net Zero Plan’s focus on a circular economy and low‑carbon fuels could strengthen assessments of climate‑related opportunities. Similarly, data from the National Adaptation Plan can inform scenario analysis and risk assessments.
Organisations should critically assess the materiality of these developments for their own reporting and integrate relevant insights into data‑gathering ahead of their first sustainability report.
Australia’s heightened climate ambition places greater emphasis on the circular economy as a decarbonisation lever—reducing emissions from material extraction and manufacturing, diverting waste from landfill, cutting methane, improving efficiency and extending product lifecycles.
The Net Zero Plan highlights the Government’s goal to double Australia’s circularity by 2035, supported by the new National Circular Economy Framework, which sets three targets:
- reduce per capita material footprint by 10%
- increase material productivity by 30%
- recover 80% of resources safely.
Circular initiatives are particularly relevant to the industrial, built environment, agriculture, food and resources sectors. CSIRO modelling suggests doubling circularity could deliver a $26 billion GDP boost by 2035.23 Companies should expect increased funding, investment incentives and regulatory reform, including stricter compliance obligations and harmonised standards for recycled materials and traceability. Businesses offering recycling, resource recovery and product stewardship solutions may benefit from growing demand for secondary materials, biofuels and waste‑to‑value innovations.
States and territories—which approve and condition new projects and regulate existing facilities—will materially shape progress toward the 2035 Target. National and state targets can inform state decision‑making, and any changes to the Safeguard Mechanism may indirectly influence how planning and environmental approvals are administered. In July 2025, the NSW, South Australian and Victorian EPAs issued the Guiding Principles for Alignment with the National Greenhouse and Energy Reporting Scheme and the Safeguard Mechanism, signalling that states may adopt complementary approaches that draw on federal frameworks.
On the ground, requirements are tightening. Queensland now expects environmental authority applicants to assess emissions impacts for each activity and outline controls (including GHG abatement plans). From 2026, the NSW EPA will require licensed facilities emitting more than 25,000 t CO2‑e (scope 1 and 2) annually to report emissions, publish Climate Change Mitigation and Adaptation Plans, and prioritise on‑site abatement over offsets—affecting about 200 facilities, including some outside Safeguard/NGER coverage.
The Victorian EPA also recently released a Statement of Regulatory Intent on Climate Change for 2025–2027. This strategy clarifies the Victorian EPA’s approach to regulating the causes and consequences of climate change under the Environment Protection Act 2017 (Vic). Beyond approvals, state energy policy will continue to drive decarbonisation—for example, Victoria has re‑established the State Electricity Commission and legislated a 95% renewables target by 2035.
Clarity, scrutiny and opportunity for business
Taken together, the 2035 Target and Net Zero Plan, sector pathways and the National Climate Risk Assessment provide a clearer policy compass and a richer evidence base, even as ambition varies relative to leading states and peers.
For businesses, this means:
- aligning transition plans with Treasury’s draft guidelines, the sector pathways and the NAP
- re‑testing key assumptions—especially grid decarbonisation—against new government data; and
- preparing for greater scrutiny in the first year of mandatory climate reporting, where sector pathways may constitute 'reasonable and supportable information'.
Also expect possible Safeguard Mechanism reforms (including coverage and decline rates) following the 2026-27 review, parallel EPBC Act changes and tightening state regimes (eg NSW EPA requirements from 2026, Queensland abatement planning and Victoria’s regulatory intent). The circular economy agenda, underpinned by the National Circular Economy Framework and its targets, signals growing funding, standards and procurement pull for resource efficiency, recovery and waste‑to‑value solutions.
Businesses that integrate these signals now will be best placed to secure capital, approvals and competitive advantage on the path to 2035.
Footnotes
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https://www.pm.gov.au/media/setting-australias-2035-climate-change-target
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2035 Targets Advice.pdf pg 14
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Australian Government, Australia's Net Zero Plan (2025); Australia's 2035 Nationally Determined Contribution (18 September 2025)
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The UK's Plans and Progress to Reach Net Zero by 2050 (House of Commons Library, Research Briefing), United Kingdom of Great Britain and Northern Ireland’s 2035 Nationally Determined Contribution (January 2025)
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Climate Action Tracker, 'Norway'; Norway's nationally determined contribution for 2035 (26 June 2025)
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Federative Republic of Brazil Nationally Determined Contribution (NDC) (21 March 2022); BRAZIL’S NDC, National determination to contribute and transform (13 November 2024)
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Japan’s Nationally Determined Contribution (NDC) (18 February 2025)
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Canada’s 2035 Nationally Determined Contribution (12 February 2025)
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Climate Action Tracker; China's 'soft' 2035 climate target frustrates experts amid rapid renewable growth - ABC News; China pledges to cut emissions by 2035: what does that mean for the climate?
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https://unfccc.int/sites/default/files/2025-09/Iceland%27s 2035 NDC.pdf
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The current government has pledged to repeal that state's target
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https://igcc.org.au/2035-target-and-plans-investors-call-for-ambition-beyond-achievable/
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Business Council statement on 2035 emissions reduction target - Business Council of Australia
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https://www.dcceew.gov.au/sites/default/files/documents/australias-circular-economy-framework.pdf Pg 10