A review of Australia’s controversial carbon credit system has recommended significant changes to how it is managed, but dismissed claims the scheme lacks integrity and is not delivering real cuts in greenhouse gas emissions.
The review panel, led by the former national chief scientist Prof Ian Chubb, found government agency the Clean Energy Regulator should be stripped of some of its roles running and overseeing the system to “enhance confidence and transparency”.
It also recommended the abolition of the emissions reduction assurance committee, the integrity body responsible for approving the methods used to create carbon credits. The panel said it should be replaced with a new body – it proposed a carbon abatement integrity committee – that would have increased responsibility and independence.
But the report released on Monday rejected detailed allegations by a team of academics led by Prof Andrew Macintosh, an environment law professor at the Australian National University and former head of the emissions reduction assurance committee, that failures in the system mean more than 70% of carbon credits approved might not represent new or real cuts in emissions.
The panel said it did not share the view that the integrity of the scheme was in doubt, that the level of emissions reduction had been overstated, or that the carbon credits policy was not effective.
Carbon credits are issued for projects that use government-approved methods to store or avoid greenhouse gas emissions. One carbon credit is meant to represent one tonne of carbon dioxide. Credits can then be sold to the government or polluting businesses, which use them to offset their onsite emissions.
The climate change minister, Chris Bowen, promised to review the carbon credit system as part of Labor’s policy before the 2022 election.
Q&AWhat are carbon credits?
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Carbon offsets are used by the government and polluting companies as an alternative to cutting carbon dioxide emissions.
Instead of reducing their own pollution, they can choose to buy offsets - known as Australian carbon credit units (ACCUs) - that are meant to represent a reduction in emissions elsewhere.
Each carbon credit represents one tonne of carbon dioxide that has either been stopped from going in the atmosphere, or sucked out of it.
Methods approved to generate carbon credits in Australia include regenerating native forest that has been cleared, protecting a forest that would otherwise have been cleared (known as “avoided deforestation”) and capturing and using emissions that leak from landfill sites to generate electricity.
Credits were bought by the government through the $4.5bn taxpayer-funded emissions reduction scheme or, increasingly, by polluters on the private market.
What the review found
In a press conference with Bowen on Monday, Chubb said the scheme was “not as broken as has been suggested”. He said it was a “human-designed process, implemented by human beings, and it will be a bit frayed at the edges”, but the system was “basically sound” with safeguards in place.
The Chubb review suggested some changes to methods used to create carbon credits that had been criticised – notably avoided deforestation, which rewards landowners for protecting forest they could have bulldozed. It said the existing method should no longer be used as the length of time since land-clearing permits had been issued for western New South Wales meant it would be hard to establish the landholders still genuinely intended to kill the trees.
The panel did not find major fault with the most popular method used to create credits, which rewards regrowing native forests in cleared outback areas. Landholders using this method, known as “human-induced regeneration”, have signed contracts with the federal government worth an estimated $1.5bn.
Macintosh and his colleagues said some human-induced regeneration projects had been awarded carbon credits for managed forest regeneration when it had not occurred, and others for regeneration that would have occurred anyway because it was mostly just due to rainfall. They estimated that 165 projects had received 24.5m carbon credits, despite the combined area of forest and sparse woody vegetation cover going backwards by more than 60,000 hectares.
The Chubb review did not directly address that claim. The panel said the method was largely sound, but steps should be taken to ensure all projects conformed to what was intended – that the project areas would become native forest and permanently store carbon dioxide. It also suggested the regulator publish results of five-yearly project assessments.
The review also recommended making it progressively harder for projects that capture leaking methane at landfill sites to earn credits, a step that has been backed as by most companies in that industry.
Chubb was not critical of the current governance model, but recommended taking some powers off the Clean Energy Regulator to improve confidence in the scheme. It suggested the regulator keep responsibility for compliance and enforcement while a new independent body – the proposed committee – be set up to oversee approval and integrity, and a separate existing government body be given responsibility for buying carbon credits using taxpayer funds.
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The panel suggested the government make more data about carbon credit projects publicly available and consider cancelling a percentage of all credits to improve confidence that the cuts being rewarded were “appropriately conservative”.
Reaction to the review
Macintosh said the team of academics that alleged problems with the scheme were “disappointed and confused” by the review as the panel recommended sweeping governance changes while also arguing the carbon credit system was “apparently working fine”. “It’s illogical,” he said.
He said his team’s findings received support from some of the country’s most esteemed scientific organisations, including the Australian Academy of Science, the Wentworth Group of Concerned Scientists and CSIRO. He said the review appeared to have ignored a report it commissioned from the Academy of Science that found significant problems with some methods.
Bowen said the government had accepted in principle the review’s 16 recommendations, and would implement some changes immediately. He said the panel “not only got the balance right, but they applied a rigorous process, based on all the evidence”.
Carbon credits are expected to be central to the government’s promise to reduce industrial emissions using the safeguard mechanism, a policy introduced by the Coalition that to date has failed to stop pollution increasing. Further details of how Labor plans to change the safeguard mechanism are expected on Tuesday.
The extent to which credits should be made available to help meet government and corporate emissions reduction targets is contested. A UN group set up to crack down on the greenwashing of net zero pledges last year argued commitments must prioritise cuts in absolute emissions by 2030 in line with limiting global heating to 1.5C, with offsets to be used only for further reductions above and beyond that.
The Carbon Market Institute, which represents businesses that generate credits and companies that buy them, said the review had backed a “sound” framework while outlining improvements that could boost confidence in the scheme.
“Hopefully we can overcome the divisions of recent months and years and urgently move on to deliver a policy framework that is not only credible, sustainable and investable, but also capable of achieving at least 50% emission reductions by 2030 and negative emissions by 2050,” the institute’s chief executive, John Connor, said.
The Australian Conservation Foundation welcomed Chubb’s recommendations but said it had “serious concerns” about the failure to address existing problems. It called for on ground assessment of credits already issued using the avoided deforestation method – about 20% of the total created – to test whether they were “essentially junk”.