Energy Minister Chris Bowen says a new emissions reduction objective for the country's national energy measure will make a "material difference" to how the market operates.
The objective was added following a meeting of Mr Bowen with state and territory counterparts on Friday.
It's the first time in 15 years the national energy objectives have been updated, which will now prompt energy bodies, such as the market operator, to consider reducing emissions.
"We've fixed it, and it will make a material difference to how (the energy regulator, operator and commission) do their work, because they can only comply with the objective," Mr Bowen told the ABC's Insiders program.
"It puts it in the heart of their decision making, it should have happened a long, long time ago."
Mr Bowen said the move had sent a clear message to the industry and to energy companies about the importance of increased action on emissions reduction.
"I don't think it'll change the way the Australian Energy Market Operator runs its day-to-day, five-minute operations," he said.
"It just gives them another opportunity to be really sensible in the way they make the decisions and makes it legally possible for them to consider emissions reduction in the decisions they make."
Mr Bowen said it was critical for emissions reduction to be addressed in the sector, with energy generation responsible for the largest amounts of Australia's emissions.
It comes as the minister plans to introduce a safeguard mechanism that would apply to more than 200 of the biggest emitters in the country.
The mechanism would allow for incentives for large emitters to decarbonise, through the awarding of carbon credits, while penalties would also apply for those that don't reduce their emissions.
It's hoped the mechanism will be put in place by 2023, with Mr Bowen flagging the release of a discussion paper in the next week.
"You don't reduce emissions as a country unless you reduce them from your biggest emitters," Mr Bowen said.
"We're putting these emitters on a pathway to net zero by 2050. As you would expect, that's the nation's objective ... it's a very sensible approach in the same, methodical way the new government's setting about all our big reform agenda."
However, Mr Bowen said the safeguard mechanism would not stop the creation of new coal and gas projects.
The minister said the mechanism would force facilities, whether they are old or new, to reduce their emissions.
"The safeguard mechanism is taking our biggest 215 biggest emitters and working with them to reduce emissions," he said.
"Because if we don't we're just going to continue (to have) 10 years of no reduction in emissions from those facilities, and it's not going to cut the mustard."
