Agriculture exempt from safeguard mechanism tightening, but benefits from carbon credit demand

The proposal will annually lower the amount companies can emit before being penalised and is a key policy in the Albanese government's goal to reduce emissions by 43 per cent by 2030.

Agriculture Minister Murray Watt said the safeguard mechanism does not apply to any agricultural operations "and that won't change".

"It applies to 215 heavy emitters around the country, none of them agricultural operations and there's no change to who people will apply to," Senator Watt said.

READ MORE: 'Unlock rural phone towers so signal can be used regardless of telco'

The tighter regulations will require the bigger polluters to offset more of their emissions, primarily through Australian Carbon Credit Units.

The surge in demand for carbon credits will give landholders another revenue stream if they participated in carbon farming, the Agriculture Minister said.

"This works hand-in-hand with the carbon credit scheme.... all of those big smelters and mines, and other heavy industry, will have to buy carbon credits to help them meet their safeguards requirements," Senator Watt said.

"They could very well end up buying those carbon credits from farmers.

"If farmers either plant trees on their properties or if they decide to preserve current vegetation, or if they come up with other ways of generating emissions reduction on farm, then they can monetise that and develop a new income stream."

This week, an independent review of Australia's carbon trading market made 16 recommendations to improve and strengthen the scheme, all of which the federal government has accepted in-principle.

Lowering the limit the safeguard mechanism will also protect Australia's international trade interests. The European Union recently introduced a carbon border adjustment tariff, which taxes imports based on the greenhouse gases emitted in making them.

READ ALSO: Leather ban move by Sydney council an insult to cattle producers

A number of Australia's large trade partners, including the United States and Japan, are considering introducing their own carbon tariffs.

"This is another step by the Albanese government to shield the agriculture sector from carbon tariffs being imposed by other countries," Senator Watt said.

"The reality is that agriculture, heavy industry and others need to continue becoming more sustainable in order to keep those export markets open well into the future."