(Bloomberg) -- Australia’s biggest polluters may be forced to reduce emissions by as much as 6% a year under proposals outlined on Thursday.

The country’s new Labor government plans to toughen up the “safeguard mechanism” that covers more than 200 facilities that together accounted for more than a quarter of the nation’s emissions last year, it said. Under the plan, the mechanism would become a “baseline-and-credit” system, a softer version of the cap-and-trade markets used in Europe, California and some Asian countries. Certain trade-exposed sectors could be granted concessions. 

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The new proposal would only price Scope 1 carbon emissions, from direct operations, above a certain level or “baseline” that would be reduced over time with emitters being giving tradable credits for beating their targets. The government will gather industry feedback on the consultation paper before releasing a more detailed proposal later this year. The new rules would take effect from July 1, 2023.

The paper sets out indicative annual rates to cut emissions by 3.5% to 6%. Emissions under the safeguard mechanism, which covers companies including Woodside Energy Ltd., Inpex Corp. and Chevron Corp., were 136.9 million tons in the 2020-2021 financial year, according to the Clean Energy Regulator.

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