An Australian government proposal to allow big polluters to use unlimited carbon offsets as an alternative to cutting their own greenhouse gases would likely greenlight new coal and gas developments and lead to a rise in emissions, a new analysis says.
The report by Climate Analytics found land-based offsets – created through projects including tree planting and forest regeneration – had fundamental scientific problems that meant they would not deliver what was promised of them.
Carbon offsets are key to the Albanese government’s plan to revamp a failed Coalition policy, known as the safeguard mechanism, and require the country’s 215 biggest emitting facilities to cut emissions by 4.9% a year.
Under Labor’s proposal, businesses would be able to meet emissions limits by buying an unlimited number of carbon offsets, known as credits, as well as directly cutting emissions onsite. Each credit represents a tonne of carbon dioxide reduced or avoided somewhere else.
A government-ordered review of Australian carbon credits led by the former chief scientist Prof Ian Chubb last month did not accept allegations the crediting system lacked integrity, but recommended significant changes in how the scheme is managed. Climate Analytics said the review had “effectively ignored well-grounded criticism on its key methodologies from prominent experts and scientists”.
Its analysis found most land-based offsets failed to deliver genuine, new or permanent emissions reductions. It said the problems were exacerbated when offsets were used to justify more fossil fuel mining, as that ultimately resulted in far more CO2 being released into the atmosphere than was stored in vegetation when the credits were created.
The Australian Conservation Foundation (ACF), which commissioned the report with the group Solutions for Climate, said it showed while offsets were a necessary emissions reduction tool “they should be a last resort and they are very risky”.
“They are no replacement for genuine emissions reduction on the ground,” ACF’s climate program manager, Gavan McFadzean, said.
McFadzean said a problem with the government’s plan for the safeguard mechanism was that it did not distinguish between high-emitting industries that should stay while cutting emissions, such as smelting and cement, and other industries like coal and gas which needed to be rapidly phased out.
He said the government should require businesses to follow an emissions reduction hierarchy from least to most effective ways to reduce pollution. “The best way to protect the climate is by stopping emissions going into the atmosphere in the first place. It’s not by planting trees,” he said.
The real world impact of offsets
Climate Analytics said that while companies under the safeguard mechanism could claim they were reducing their pollution by buying credits, in reality allowing unfettered use of offsets could lead to a rise in emissions and threaten the government’s ability to meet its targets, including a 43% cut by 2030 compared with 2005 levels.
“The likely result of the proposal for unlimited use of offsets is to provide a green light for new coal and gas production while allowing existing producers to continue polluting unchecked,” the report said.
In global terms, it calculated that every carbon credit used to offset one tonne of CO2 from liquified natural gas production in Australia led to about 8.4 tonnes of CO2 going into the atmosphere, once the gas was sold and burned overseas. In the case of coal, every Australian carbon credit used to offset a tonne of emissions from coalmining was associated with between 58 and 67 tonnes of CO2.
Ryan Wilson, the lead author of the report, said: “There’s a considerable real world impact of enabling fossil fuel companies to offset their emissions and continue – or even expand – production, rather than actually reduce their emissions.”
The report said forests and other natural ecosystems provided vital carbon stores that needed to be protected, but offsets from the land sector were “particularly susceptible to integrity issues” and could not be guaranteed as permanent carbon stores.
It said there was a difference between a tonne of CO2 emitted by fossil fuel industries and a tonne stored in vegetation, as the tonne in the atmosphere would have a far longer life.
The safeguard mechanism
Labor’s changes to the safeguard mechanism will become a major political focus in coming weeks. The government’s plan is backed by major business and industry groups, but is opposed by the Coalition.
It leaves the government likely needing support from the Greens and two crossbench senators to pass legislation to create a new “safeguard crediting mechanism” – a step that would allow companies that emit less than a newly set pollution limit to be rewarded.
These companies would earn a “safeguard credit” – different to existing Australian carbon credits – that could then be sold to polluters that emit more than their limit. The government says it will give businesses an incentive to cut emissions onsite.
John Connor, the chief executive of the Carbon Market Institute, which represents businesses that generate and invest in carbon credits, said the proposal would drive onsite emissions cuts, as it had to if it was to succeed.
He called on the government should require annual cuts to deliver at least a 50% reduction in national emissions by 2030, and at least 70% by 2035. But he said it would also take time before some industries could invest in the steps needed to cut pollution directly and offsets had a role to play.
“The safeguard mechanism has to pass the pub test – that it is driving decarbonisation at [its] source over time – but we can also not avoid the fact that properly regulated [credits] are climate solutions in themselves,” he said.
Connor said he did not disagree that there was a difference between absolute emissions, but said “I do despair that there’s a conflation that will mean we lose the opportunities from high integrity [credits].”
The climate change minister, Chris Bowen, has said Labor’s other proposed changes do not require legislation and can be made using regulation. The Greens leader, Adam Bandt, has sharply criticised the government’s plan, accusing Labor of “gaslighting” and “greenwashing” for allowing new coal and gas mines to open and offset their emissions.
The government wants the revamped scheme to start on 1 July.
