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Independent review into Australian Carbon Credit Units

27 March 2023

4 min read

#Government, #Corporate & Commercial Law, #Planning, Environment & Sustainability

Published by:

Aimee Cavanagh

Independent review into Australian Carbon Credit Units

In 2022, the Australian Government legislated targets of a minimum 43 per cent reduction in greenhouse gas emissions by 2030 (based on 2005 levels) and ‘net zero’ emissions by 2050. To achieve this, the Minister for Climate Change and Energy, the Hon Chris Bowen, emphasised the importance of having a strong and credible carbon crediting scheme and carbon market.

In July 2022, the Minister commissioned an independent panel led by former Chief Scientist, Professor Ian Chubb, to review the integrity of Australian Carbon Credit Units (ACCUs) under the Emissions Reduction Fund (ERF), Australia's carbon crediting scheme.

The ERF is the Australian Government’s primary initiative to reduce and remove greenhouse gases from the atmosphere through carbon farming projects that allocate one ACCU for each tonne of carbon abatement. This provides a financial incentive for businesses and landowners to reduce greenhouse gas emissions, principally carbon dioxide (CO₂), in return for ACCUs which can be sold to other entities on the carbon market.

ACCUs are established under the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) and the Carbon Credits (Carbon Farming Initiative) Rule 2015. This legislation is administered by the Minister for Climate Change and Energy, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and the Clean Energy Regulator (CER). The Emissions Reduction Assurance Committee (ERAC) is an independent statutory committee established to assess the integrity of methods made and administered under the CFI Act.

Objective of the ACCU review 

The independent review was commissioned to ensure that both ACCUs and the carbon crediting framework maintain a strong and credible reputation. In recent times, the ACCU scheme has been subject to claims that abatement has been overstated, and ACCUs are therefore not what they purport to be. The panel's task was to advise the Government on enhancing the scheme's integrity and transparency, instilling confidence in Australians, and enabling emission reduction targets to be met.

Outcome of the review

Over six months, the panel examined ACCU scheme architecture, governance arrangements, legislative requirements and integrity of key emission reduction methods. It considered the broader impacts of carbon projects on agriculture, biodiversity, participation of First Nations people, and regional communities. The panel concluded that the scheme was fundamentally well-designed when introduced 11 years ago, but recommended practical modifications to strengthen and align it with international best practice.

They made 16 recommendations to clarify governance, improve transparency through open data sharing, address issues associated with key methods, facilitate positive project outcomes and enhance public confidence and greater participation in the scheme.

The recommended improvements include:

  • clarify the intention of the scheme
  • clearly identify and separate key roles of integrity assurance, regulation and administration (recommendations 1 – 3):
    • replace the ERAC with a new Carbon Abatement Integrity Committee (CAIC), with a full-time chair, independent secretariat and at least one First Nations member, in recognition of the integral role of Indigenous participants in the carbon market.
  • improve transparency and remove unnecessary restrictions to the CER on data sharing (recommendation 4)
  • foster innovation and offset integrity standards in method development and project implementation (recommendations 5 – 10)
  • provide more support for regional communities and First Nations peoples to participate and benefit from the scheme (recommendations 11, 14, 15)
  • improve information incentives, including non-carbon benefits and attributes (recommendations 12, 13, 16).

On 9 January 2023, Minister Bowen released the Australian Government’s response to the review, accepting all 16 recommendations in principle and advising that implementation of the recommendations would commence as soon as practicable.

Notable next steps arising from the recommendations

In an effort to enhance scheme transparency, the review recommended the publication of Carbon Estimation Area data, used by researchers to analyse the impacts and effectiveness of projects. The review recommended the default should be that data is made public, and the Government should explore using a national platform to share information and data about the ACCU scheme.

Also worth noting is the proposed removal of conditional project registration. If legislated, projects would no longer be conditionally registered (or commenced) until consent is obtained from exclusive and non-exclusive native title holders.

Next steps and implementation

The proposed scheme reforms will have implications for market participants, government agencies, First Nations groups, rural communities and other stakeholders. The Government has committed to working closely with stakeholders and thoroughly consulting on the associated legislative amendments to the CFI Act, and releasing further information on the steps and timing for implementation of the review to the public.

If you have any questions about this article, please get in touch with a member of our team below.

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Aimee Cavanagh

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