Jones hits back at BlueScope uncertainty on Safeguard Mechanism

But critics are calling the focus on offsets for the steel and cement sectors a "smokescreen" to protect the coal and gas industry.

Mr Jones spoke in parliament on Tuesday night as debate continued on the contentious mechanism, which seeks to impose a limit on the largest emitters in Australia, requiring them to progressively reduce emissions by 4.9 per cent each year.

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In February, BlueScope revealed in its half yearly earnings report that the safeguard mechanism, as currently proposed, would have a material impact on the company's plans to ensure steel production continues in the Illawarra beyond 2026, when the current blast furnace reaches the end of its life.

Mr Jones said measures built into the bill will protect the steel industry.

"The design proposed in this bill has mechanisms to adjust baseline decline for trade-exposed industries such as steel, and will offer additional funding support through the Powering the Regions fund," he said.

Mr Jones also revealed that BlueScope had the ear of the Prime Minister Anthony Albanese and minister for energy and Climate Change Chris Bowen on this topic.

"Both the Prime Minister and the Minister for Climate Change and Energy have met with Bluescope, and I thank them for that. They have shown a sincere and persistent concern for the people I represent in this place, founded on an understanding of how important this industry is to our part of the world."

Negotiations over the bill continue, with the Coalition opposed to the bill. Labor has been in negotiations with the Greens, however no outcome has yet been reached.

Mr Jones said in industries such as steel, where there are limited options for switching to carbon neutral production, offsets were a core feature of emissions reduction.

"Show me where we are going to get more abatement in the steel industry, or the cement industry, show me where it is," he said.

"You've got to have offsets, and we're going to push industry as hard and as far as we can, but we understand offsets are going to have to be a part of it."

Critics of the bill have highlighted the heavy reliance on offsets to achieve emission reduction targets, with Australia Institute executive director Richard Denniss saying these offsets are being used to protect the coal and gas industry.

"Manufacturing industries like cement and steel are being used as a smokescreen to conceal the Australian government's support for gas and coal expansion," he said.

"The government talks frequently about needing offsets for cement and steel. However, these sectors contribute a fraction of emissions covered by the Safeguard Mechanism. Emissions from gas and coal are enormous and increasing. Which raises the question of who the government is really trying to ensure has access to unlimited offsets."

Speaking against the bill, WA Liberal MP Rick Wilson said that if additional cost pressures on local steelmakers forced Australia to buy cheaper steel from overseas, the aim of reducing emissions would be undermined.

"We will simply see those emissions replaced and in fact increased, because that steel will simply be imported from North Asia, which is where the bulk of our steel currently comes from," he said.

BlueScope has targeted net zero emissions across the business by 2050, with an interim goal of a 12 per cent reduction in the emissions intensity of its steelmaking operations by 2030.

The company has described itself as a "fast follower" when it comes to producing carbon-free green steel, as early trials of zero emissions steel in Germany and Sweden are yet to produce in commercial quantities. Mr Jones said the design of the safeguard system would encourage further action locally.

"There are areas where we expect [BlueScope] to go faster than they've otherwise planned, but that's what the design of our scheme is ensuring, that we can push them as hard and as fast as possible."

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