The Independent Review of Carbon Credits led by former national chief scientist Professor Ian Chubb has found that the Australian Carbon Credit Unit scheme arrangements “are essentially sound,” while making 16 recommendations for reform.
The panel, appointed by the Australian federal government in July 2022 to assess the integrity of the country’s carbon crediting framework, said in its final report: “In recent times, the integrity of the scheme has been called into question – it has been argued that the level of abatement has been overstated, that ACCUs are therefore not what they are meant to be, so the policy is not effective.
“The panel does not share that view. Notwithstanding the criticisms advanced, the panel concludes that the ACCU scheme was fundamentally well designed when introduced. Nevertheless, after 11 years of operation, the scheme can be improved.”
The Australian government said it welcomed the findings of the report and that it accepted in principle all 16 recommendations made by the panel, which include measures to clarify the intention of the ACCUs scheme; more clearly identify and separate the roles of integrity assurance, regulation and administration and improve transparency.
It said it would consider funding arrangements for implementation of the recommendations in the 2023-24 Budget.
In remarks reported by Guardian Australia, Chubb told reporters at a media event in Sydney that the carbon market was “not as broken as has been suggested.”
“Our finding was [it] was basically sound, with all the safeguards, the checks, the reviews and all of the things going on. You’ve got a human-designed process, implemented by human beings, and it will be a bit frayed at the edges.”
The flaws in the scheme were “not so large you would toss it out and stop doing all the good things that are happening because of that,” he added.
‘Always room for improvement’
Among the findings of the panel were that a new body, differently constituted and supported than current bodies, should be established with the major responsibility of overseeing the integrity of methods used to generate ACCUs. It specifically recommended that the Emissions Reduction Assurance Committee should be re-established as the Carbon Abatement Integrity Committee as soon as possible, backed by more resources and the appointment of an independent chair.
It also recommended that the Clean Energy Regulator no longer be responsible for Australian government purchasing of ACCUs, with that responsibility moved into another Australian government body to avoid actual or perceived conflicts of interest. The CER would still be responsible for project monitoring, compliance and enforcement.
On methodology, the panel found that the human-induced regeneration method for generating ACCUs was “sound” while acknowledging “there is always room for improvement.” The panel did not accept that a correlation between rainfall and vegetation growth undermined the HIR method.
However, it found that no new project registrations should be allowed under the avoided forestation method. “The length of time that has elapsed since the issue of any remaining unused land clearing permits imply that it would be hard to establish intent to clear land, raising questions about the additionality of any new projects that might be registered under the current method,” the panel said.
As part of its recommendation related to the deforestation method, the panel said: “Consideration should be given to developing new methods that incentivize the maintenance of native vegetation that has the potential to become a forest, as well as maintaining existing forests at risk of land-use conversion.”
Among its broader findings, the panel said: “Carbon farming activities bring benefits to regional Australia through their implementation. Consideration should be given to appropriate steps to enhance regional income and business opportunities associated with the scheme.”
The panel also recommended that carbon service providers and carbon market advisers, including agents, should be accredited and regulated, in a step up from the Carbon Market Institute’s current voluntary Carbon Industry Code of Conduct.
Resourcing needed
The review was commissioned in 2022 after the former chair of the Emissions Reduction Fund’s integrity committee, Professor Andrew Macintosh of the Australian National University, labeled the scheme an “environmental and taxpayer fraud” in a series of papers published with colleagues.
The panel said in its final report it did not share Macintosh’s view, saying: “While the panel was provided with some evidence supporting that position, it was also provided with evidence to the contrary. There may be several reasons for the polar-opposite views. One is likely to be a lack of transparency, meaning that third parties cannot access the relevant data and so different conclusions can be drawn, and all genuinely held.”
Several investors made submissions to the panel, including New Forests, the QIC-owned Northern Australia Pastoral Company, and Pollination.
On its recommendations, the panel said: “Given the important role of ACCUs in the suite of climate mitigation policies, and the essential need for their integrity to be unarguable, all the links in the chain need to be able to do the job required of them – and that means resourcing. There is no practical or cheap alternative.”
RESPONSES TO THE CHUBB REVIEW
Chris Bowen, minister for climate change and energy: “The panel’s recommendations will help ensure Australia’s carbon crediting scheme has the highest integrity, and contributes to achieving Australia’s emission targets.
“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.”
Andrew Macintosh, former chair of ERAC (reported by ABC News): “On the one hand, the panel has found there’s a need to fight for sweeping governance changes. On the other hand, they’re saying the projects and credits are largely fine.
“That’s a source of great confusion for us. That leaves us scratching our heads to say, ‘How on earth could there be no problems with the scheme when all the available evidence and all the key scientists have reached the conclusion that there are problems and there’s a need for change?'”
Cambell Klose, strategy director, Farmers for Climate Action: “Farmers for Climate Action welcomes recommendations made by the Chubb Review to end the multiple conflicting roles of the Clean Energy Regulator, give new life to the integrity committee, and to end new projects claiming carbon credits under avoided deforestation.
“The review puts forward sensible recommendations which are a step forward in fixing the problems yet fails to acknowledge any problems.
“It is contradictory to offer solutions without acknowledging the problem. This review skates over the idea that there are any issues with the current market. Australian farmers who have invested in growing carbon crops are the ones who pay the price when integrity issues with carbon credits are revealed because it reduces confidence in the market and the price paid for carbon credits.”
John Connor, CEO, Carbon Market Institute: “This is a scheme that has developed and evolved over more than a decade, and investors and the community should be encouraged by the Independent Review Panel’s findings that its framework is sound, and the proposed improvements can also now be embedded to ensure a more transparent, robust system that can be scaled up.”
“As the panel made clear, scheme improvements will require significant resourcing in the forthcoming May budget. CMI looks forward to consulting with our members on more detailed recommendations and working with the government on appropriate implementation.”
Kelly O’Shanassy, CEO, Australian Conservation Foundation: “ACF welcomes structural changes to the regulator and the inclusion of an integrity commission but the governance remains murky. It is essential that the new integrity commission is fully independent and prohibits the appointment of people who have ties to the carbon credit industry.
“ACF welcomes the move to prohibit new credits under the deeply flawed ‘avoided deforestation’ method but further assessment of existing projects is needed. The carbon credits previously approved under this method, which is one in five credits issued under the ERF, do not represent real abatement and are essentially junk credits. The CER should now commit to an audit of these projects which we fear are not producing real-world carbon abatement.”
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