30 Mar 2023

Safeguard Mechanism off the tracks when it comes to rail freight

Australia’s largest private rail freight company has warned current settings of the Safeguard Mechanism will result in more freight shifting from trains to trucks perversely increasing emissions, traffic congestion, and road trauma incidents in the nation’s transport network.

Pacific National CEO Paul Scurrah said under the current Safeguard Mechanism a major rail hauler of goods and commodities may incur significant additional costs, while tens of thousands of trucking companies are not required to comply with mandated emissions reduction targets.

“The quickest and most efficient way to decarbonise the national supply chain is to support the haulage of more freight by trains – the current Safeguard Mechanism does the opposite by tilting the playing field in favour of more freight being transported by bigger and heavier trucks,” he said.

Compared to road freight transport, rail haulage is up to four times more fuel efficient and so provides a low-emissions transport solution for the Australian supply chain. Rail freight transport also allows for reduced traffic congestion and better road safety outcomes.

Mr Scurrah said although rail freight represents less than four per cent of total transport emissions it is significantly over-represented in terms of the proportion of transport activity that is captured by the Safeguard Mechanism.

“Approximately 65 per cent of rail freight activity is captured under the Safeguard Mechanism against a mere 2 per cent for road freight transport,” he said.

Mr Scurrah said alternative-fuelled locomotives, like hydrogen fuel cell power, capable of long-distance heavy haulage operations are more than a decade away from being available commercially.

“In the meantime, to help comply with the Safeguard Mechanism to reduce emissions by 4.9 per cent year-on-year to 2030 and offset the need to buy a bundle of Australian carbon credit units capped at $75 a tonne, Pacific National has invested $330 million to purchase 50 new state-of-the-art freight locomotives which will yield a lower carbon footprint during operations,” he said.

The new freight locomotives are being locally manufactured and assembled in Newcastle and will be delivered to Pacific National starting in 2024.

Pacific National is also investing millions to procure new rollingstock, including 110 tandem well wagons which allow for the double-stacking of shipping containers. When placed end-to-end, these new wagons are equivalent to 4.7 kilometres of new rollingstock.

Mr Scurrah said if the Safeguard Mechanism is not carefully crafted, then technological constraints beyond the control of Australian companies will result in rail becoming less price competitive with road freight operations with are not captured under the Safeguard Mechanism.

“Large costs in procuring and deploying more technologically advanced locomotives and the need to offset any future emissions above mandated thresholds in the Safeguard Mechanism via the purchase of potentially millions-of-dollars of carbon credits each year will inevitably result in road freight operations becoming more cost competitive than rail haulage,” he said.

Mr Scurrah said the Australian rail freight sector is further boxed-in because electrification of the rail network nationally is cost-prohibitive and emissions intensity is influenced by the condition and alignment of track infrastructure, which is not owned or controlled by operators like Pacific National.

“Australian rail freight companies have no control over the condition of the track infrastructure they operate on or global technological developments in locomotives and rollingstock,” he said.

Each week across Australia, 2,300 Pacific National frontline workers deploy 570 diesel-powered locomotives to carry out 800 rail freight services for more than 340 customers.

These weekly services include the rail haulage of approximately 570,000 tonnes of bulk freight like grain and steel and 18,000 twenty-foot equivalent shipping containers filled with tinned and refrigerated food, beverages, white goods, electronics, furniture, and machinery parts.

Mr Scurrah said the result of more freight being transported by trucks is increased emissions, traffic congestion, and road accidents. It means taxpayers and ratepayers are forking out more money to repair and maintain roads and highways.

“It also means added costs in the national rail supply chain which are ultimately paid for by Australian families at the supermarket checkout, adding to the pain they are feeling from inflation and rising interest rates,” he said.

Mr Scurrah said the political class needs to do its homework when to comes to the unique and demanding characteristics of Australian supply chain operations.

“For instance, our vast continent is not like a small European nation – in Australia, we haul massive volumes of goods and commodities over some of the harshest, most remote landscapes on earth,” he said.

Mr Scurrah said politicians also fail to realise that you can’t just nip down to a local dealership and purchase a brand new $7 million 130-tonne freight locomotive off the lot.

“Freight locomotives are highly specialised pieces of equipment and compared to the demand for new freight locomotives in North America, Australia’s market is small.

“This means our nation faces both scaling and technological hurdles when it comes to procuring, field-testing and maintaining new freight locomotives for deployment under unique Australian infrastructure settings and operational conditions,” he said




To recognise the many and varied environmental and social benefits of hauling more freight by rail, Pacific National has recommended the Australian Government initiate the following reforms:

  • Provide additional government funding to improve the resilience and reliability of interstate and regional rail networks to enable more efficient and productive rail freight operations. This will result in reduced emissions in the national rail supply chain.

For instance, when a major section of an interstate network is subject to speed and/or axle load weight restrictions, the efficiency of above-rail operations is adversely impacted.  

  • Countries in North American, Europe and Asia (notably India) are increasingly developing and implementing mode shift incentive schemes to encourage more freight to be transported by trains, not trucks. These schemes are directly linked to national and state policy settings and programs to achieve emissions reduction targets.
  • International best practice emissions-intensity baselines and thresholds for rail freight operations and facilities must be tailored to Australian conditions.

For example, the European rail network is dominated by passenger services and light freight operations, while North American railways are vertically integrated with rail operators owning the track on which they operate.

Given the Australian rail freight industry for non-iron-ore operations is not vertically integrated, Pacific National, and other railway users are totally reliant on rail infrastructure managers like ARTC for changes that will enable more efficient operations, for example:

  • Increased axle load weights to enable the use of more fuel-efficient freight trains that are often heavier than those currently in use (i.e. less fuel burn and greater payload efficiency).
  • Passing loops that enable the use of longer, more productive freight trains. Passing loops are akin to overtaking lanes on highways.
  • Raising of road over rail bridges, to enable the double-stacking of shipping containers on freight trains (i.e. greater payload efficiency per tonne of freight hauled a kilometre).


  • Policy settings, including the Safeguard Mechanism, must recognise the contribution of rail freight to Australia’s export trade-exposed sectors (also referred to as Emissions-Intensive Trade-Exposed activities or EITE).

Countries in Europe and North America are now considering introducing ‘carbon tariffs’ which will likely include Scope 3 emissions, meaning Australian exporters will have to incorporate supply chain emissions into their overall carbon footprint calculations and targets.

As a case in point, rail freight is intrinsically involved in the supply chain for the transport of EITE commodities such as metallurgical coal used to make the coke used in steel making, and the transport for iron ore pellets, nickel, and paper manufacturing.

The potential for the costs to EITE facilities and other industries to increase, as the costs to provide rail-freight supply chain services may increase under the Safeguard Mechanism. Impacts to these key economic contributors to the Australian economy should be considered when developing the detail of the Safeguard Mechanism.


Pacific National Communications