Climate Change Authority calls review not major overhaul
The latest official review of the ACCU scheme by the Climate Change Authority has found it to be “fundamentally sound”, and not in need of major reforms. The review report does however recommend several targeted improvements, in order for the scheme to stay relevant to Australia’s climate strategy.
How three projects account for more than half the method’s ACCU issuance
The CCA’s Chief Executive Officer, Kath Rowley, says the scheme must continue to evolve:
“As Australia strengthens its emissions reduction efforts towards net zero, all sectors need to contribute. Carbon credits will remain important, but play a more targeted role. The government should signal where it considers credits the right tool, and where other policies are a better fit.”
The report, which was published on September 1, makes six key recommendations, across four main areas: project permanence; public value; transparency; and method development.
Project permanence
The majority of carbon offsets are now purchased by large emitters - rather than the Government - to offset emissions under the Safeguard Mechanism. An increasing number of these purchases are of projects with 25-year permanence. With this in mind, the report made two recommendations:
For the Government to complete and publish an assessment of the risk of reversal buffer and permanence period discount by the end of 2027;
And to examine whether ACCUs from 25-year permanence projects remain appropriate for Safeguard Mechanism compliance.
The report notes that project proponents are not required to maintain carbon stores beyond the nominated permanence period:
“This does not mean projects with 25-year permanence periods lack integrity. Where sequestration supports, rather than replaces, rapid emissions cuts, it helps reduce the risk of reaching dangerous climate tipping points.
“However, the Authority believes the growing role of ACCUs from projects with 25-year permanence periods in Safeguard compliance raises questions about durability that warrant further assessment.”
Public value
The review recognises that ACCU projects deliver benefits beyond emissions reductions, including support of:
First Nations communities;
Biodiversity;
Soil health;
Landscape resilience;
Cultural outcomes;
Regional employment;
Community resilience.
It notes that these broader benefits are not “explicitly recognised or rewarded” by the ACCU scheme, but that this could be addressed by targeted carbon credit purchases:
“If the Government decides to purchase ACCUs, the Authority recommends prioritising projects which demonstrate strong public and First Nations benefits. Clear purchasing criteria and protections would be needed to ensure public benefits are genuine, verifiable, and not double counted.”
Transparency
The review acknowledges that progress has been made by the Clean Energy Regulator and the Department of Climate Change, Energy, the Environment and Water in improving the transparency of the ACCU scheme. However, it says that forecasts of ACCU supply, demand and prices, remain uncertain:
“The Authority recommends improving transparency by providing more information and making it more accessible. This includes clearer project-level and unit-level information, more usable data, and consideration of registry inter-operability, where this can be done, while protecting privacy, commercial confidentiality, account integrity and fit-and-proper-person requirements.”
Method development
While the review did not seek to identify ACCU method gaps or priorities, it found no pressing need to expand the current method portfolio. However, the report says there is a compelling case for better planning, calling for the Government to publish a roadmap for future method development:
“It would provide a strategic planning layer to signal the characteristics of activities best suited to the ACCU scheme, key dependencies, timing of known decisions and processes, and risk-based triggers for review of methods over time.”
A complimentary recommendation is that the “efficiency, capacity and predicatability” of the ACCU method development process, needs to improve. This would involve:
Monitoring and reporting progress against method development project plans and indicative timeframes;
Addressing process, resourcing and coordination constraints in method development, variation and remake, as early as possible;
Improving coordination across agencies and proponents involved in the method development process;
Ensuring method development functions are adequately resourced, including considering the use of additional sources of qualified external legal drafting support, where appropriate.
Moving forward
Overall, the report calls for an evolution of the ACCU scheme, rather than a major overhaul. Indeed, Ms Rowley described policy instability as a “poison pill” for investment:
“Stakeholders across the board told us policy stability and predictability is crucial to making long-term, large-scale investments in reducing emissions. The Authority is recommending targeted and practical improvements to make sure carbon credits continue to play the right role in meeting Australia’s climate goals.”
For the Climate Change Authority’s summary of the review’s findings, follow this link. And for the full review report, see this link.
As always, we will continue tracking the underlying project data, register movements and policy developments shaping the Australian carbon market.
For more comprehensive market insights and analysis, please get in touch at info@carboneyes.io.
References
Carbon Eyes ACCU project register and project level analytics
Carbon Eyes market commentary on ACCU project activity and issuance trends
Climate Change Authority
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