Australia's largest greenhouse gas polluter, AGL, says it is keen to work with the federal government to reduce emissions.
The government has released a consultation paper setting out how it could reform the safeguard mechanism, a policy introduced by the Abbott government in 2016 to prevent increases in industrial emissions.
The policy reforms could have major implications for the Hunter's power generation and heavy industry sectors.
Under proposed changes to start next July, 215 major polluting facilities covered by the scheme will have to either cut emissions onsite or buy carbon credits to help reach the government's national emissions targets - a 43 per cent reduction by 2030 and net zero by 2030.
Impacted industries and businesses include coal mines, gas production sites, aluminium smelters, steel plants, manufacturing sites and airlines.
The government has been clear it doesn't want to disadvantage emissions-intensive and trade-exposed sectors through changes to the scheme.
One option canvassed in the discussion paper is for the government to provide financial support to facilities to help them reduce their emissions.
AGL Energy, which operates Bayswater and Liddell Power Stations, is Australia's largest emitter of scope-one greenhouse gases (direct emissions), accounting for about 8 per cent of the country's emissions.
A spokesman said the company supported consideration of the way that large emitters across all sectors of the economy could contribute to emissions reduction.
"Changes to the Safeguard Mechanism should help provide some certainty to other large emitters on the trajectory of emissions reductions that are expected," he said.
"We will work with the federal government to understand the detail of any proposed changes including their impact on the electricity sector."
Origin Energy, which announced earlier this year that it was closing Eraring Power Station, did not comment.
Tomago Aluminium, the state's largest electricity consumer, also did not comment.
The Australian Conservation Foundation said it welcomed the release of the consultation paper and looked forward to engaging in the process to turn the safeguard mechanism from a broken tool into an effective scheme to cut emissions.
Among other changes, ACF wants the safeguard mechanism to be amended to remove the multi-year monitoring period as an option for facilities that exceed their emissions limits, and make sure baselines reduce over time in line with a 1.5° to 2° pathway.
"There is no room for new coal and gas projects if we want a safe climate for all," ACF climate program manager Gavan McFadzean said.
"Amendments should also remove renewable energy generators from the sectoral baseline calculation for electricity generators.
"If all electricity generators are lumped together, coal and gas get a free ride by hiding behind renewables' low emissions profile."
"This prolongs the life of old power stations, delaying the transition to clean energy and increasing reliability risks as old generators go offline unexpectedly at peak demand times.
"ACF looks forward to participating in the consultation process to turn the safeguard mechanism into an effective tool to cut emissions from industry."
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