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Australian government approves review of carbon credits scheme

© Shutterstock / Taras VyshnyaPost Thumbnail

The Australian government has approved a review of the integrity of Australian Carbon Credit Units (ACCUs), a carbon credit scheme under the Emissions Reduction Fund (ERF).

  • A government-appointed independent panel has issued recommendations on improving the oversight and governance of carbon credits as part of the ACCU system.
  • The review was conducted to ensure that the carbon crediting framework was credible and had the support of the stakeholders and the wider community.
  • It is a signal of Australia’s intentions in improving the ACCU market, which it sees as an important tool in achieving its greenhouse reduction target.

Why was a review of the ACCUs necessary?

The Australian government set up the latest review in response to a submission to an independent review of the ACCU marketplace made by GreenCollar, an environmental markets investor and project developer. The company called for the adoption of international best practices from the likes of Verra and Gold Standard to improve the Australian system of credit issuance.

GreenCollar expressed concerns over a lack of transparency in the credit issuance process and over governance of the ERF, which operates the ACCU marketplace. Indeed, critics of the ACCU market have questioned the integrity of what the ERF calls human-induced regeneration (HIR) methodologies. The HIR method allows landholders to earn ACCUs for regenerating native forests by changing land management practices.

According to the Clean Energy Regulator (CER), which manages the ERF, practices such as grazing by livestock or feral animals, weeds or mechanical clearing suppresses natural regrowth. The idea is that removing such ‘suppressors’ will facilitate the regeneration of vegetation. 

The integrity of the ACCU market, and the quality of the credits themselves, have been criticised by market participants and researchers alike. An October 2022 analysis of the ACCUs by a group of academics led by Professor Andrew Macintosh, the former credit scheme integrity chair, found problems with the methods used to award carbon credits for forest regeneration projects.

Panel recommendations accepted by the government

The expert panel, led by former Chief Scientist Professor Ian Chubb AC, looked at the way the current legislative processes were providing governance of the carbon crediting scheme, including the wider impact of carbon projects on agriculture, biodiversity, and on participation by indigenous and local communities. It found that the system needs to be improved, even though its arrangements have been “sound” across its 11 years of operations, and provided 16 recommendations to the government. These include: 

  • clearly identifying and separating the key roles of integrity assurance, regulation and administration;
  • improving transparency and removing unnecessary restrictions on data sharing;
  • improving the administration of three ACCU methods;
  • clarifying the intention of the scheme;
  • providing more support for regional communities and First Nations people to participate in and benefit from the scheme;
  • improving information and incentives, including in relation to non-carbon benefits and attributes.

Besides a public consultation and engagement with stakeholders, the panel’s opinion was also informed by an independent analysis from the Australian Academy of Science on the integrity of the current HIR, avoiding deforestation, landfill gas, and carbon capture and storage methods. The government has responded positively to the panel’s review and has accepted, in principle, all the recommendations. 

“The Panel’s recommendations will help ensure Australia’s carbon crediting scheme has the highest integrity, and contributes to achieving Australia’s emission targets,”  said Minister for Industry, Energy and Emissions Reduction Chris Bowen. “I am pleased to agree in principle to all the recommendations and I would like to thank Professor Chubb and the members of the Panel for their thorough and transparent review.”

The relationship between ACCUs and the safeguard mechanism

Australia’s Safeguard Mechanism intends to limit the amount of greenhouse gas (GHG) emissions by providing a framework for the heaviest polluters. The mechanism has been in place since 2016 and applies to all facilities that emit more than 100,000 tons of Scope 1 emissions per year. Any facility that exceeds its emissions limit, or baseline, will be required to purchase ACCUs, which equate to 1 ton of CO2 that has been stored or avoided.

Meeting Australia’s goal of reducing national GHG emissions by 43% by 2030, however, will likely require the use of carbon credits by heavy emitters in the mining, oil and gas, and transport sectors.

ACCUs are also being mandated under the Climate Active initiative, a partnership between the Australian Government and Australian businesses, to drive voluntary climate action. Under this initiative, businesses with carbon-neutral certifications will be required to use a minimum of 20% ACCUs to meet their goals. The requirement will take effect from 1 July 2023 for new and ongoing certifications equal to or greater than 1,000 tonnes of CO2 equivalent, and from 1 July 2024 for certifications less than 1,000 tonnes of CO2 equivalent.

Recommendations may provide more fodder for criticism

Some recommendations by the panel may have appeared confusing to the system’s critics. For example, while not critical of current governance, the panel called for improving confidence in ACCUs by reducing the powers of the CER.

As an independent statutory authority, responsible for implementing legislation to reduce carbon emissions and increase the use of clean energy, enhancing the role of the CER may have seemed like a more plausible recommendation.

Another recommendation that may invite scrutiny referred to the Emissions Reduction Assurance Committee (ERAC), which is responsible for the methods by which carbon credits are issued. Specifically, it recommends that the (ERAC) is “re-established as the Carbon Abatement Integrity Committee (the CAIC) as soon as practicable with adjusted terms of reference, membership and functions, and that it be well-resourced and supported by an independent secretariat”. 

There was also no mention of verifying or testing existing credits which may have been issued by what critics such as Professor Macintosh and GreenCollar have argued are flawed methodologies.

Kelly O’Shanassy, chief executive of the Australian Conservation Foundation, said: “ACF welcomes structural changes to the regulator and the inclusion of an integrity commission but the governance remains murky.”

“The carbon credits previously approved under this method, which is one in five credits issued under the Emission Reduction Fund, do not represent real abatement and are essentially junk credits.

“The Clean Energy Regulator should now commit to an audit of these projects which we fear are not producing real-world carbon abatement.”

The review signals the Australian government’s intentions in improving the ACCU market, which it sees as an important tool to achieve its GHG reduction target. Critics will be watching the implementation of these recommendations to see whether any of their criticisms have been dealt with, or whether further review and changes are needed.

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