Climate emitters opt for cheap offsets, few real cuts
Cheap carbon credits dominate the country’s flagship industrial climate plan, as Australia’s biggest polluters appear to be hoarding credits earned by falling below emissions baselines.
The second set of figures under Labour’s reformed safeguard mechanism reveal modest cuts to on-site emissions of around two per cent, as well as increased reliance on offsets, up 45 per cent from 2023/2024.
While the plan, which targets Australia’s more than 200 mines, factories and other emissions-intensive facilities, was designed to ramp up gradually and give companies time to buy clean equipment, critics were concerned about an increased reliance on offsets.
The conservation mechanism forces polluters to reduce emissions according to legally binding limits (known as baselines), either through real cuts through electrification or efficiency, or by purchasing carbon credits to offset their pollution.
Companies have several different options to get around the cap.
Conservation mechanism credits can be purchased from other polluters who reduce their emissions at the site.
Alternatively, emitters can purchase Australian Carbon Credit Units (ACCUs), which absorb carbon, often involving land-based projects such as planting trees.
University of Melbourne researcher Kate Dooley said hedging loans had been created in the last few years but very few had changed hands between companies.
Instead, companies were purchasing carbon credit units on a large scale.
Beyond the integrity and effectiveness issues that have plagued the long-standing trading scheme, Dr Dooley said offsetting industrial emissions with land-based offsets was not scientifically sound.
Carbon stored by planting trees does not represent a permanent reduction in atmospheric carbon and cannot offset the additional long-term emissions created by burning fossil fuels that would otherwise remain underground for long periods of time.
Dr Dooley would prefer to see polluters continue to trade safeguard credits and carbon credit units to be phased out or at least limited.
“You’re doing similar trading with SMCs. To some extent you’re trading industrial emissions reductions for industrial emissions,” he told AAP.
The safeguard mechanism is expected to be reviewed in the next financial year.
Climate Change and Energy Minister Chris Bowen stated that work could start in late 2026 rather than mid-year.
Anticipating criticism of the use of offsets under the programme, Mr Bowen announced on Wednesday that on-site emissions cuts would be 5.8 million tonnes over two years.
“This is good policy that is working well,” he told reporters in Sydney.
Kurt Winter, director of corporate transition at the Carbon Market Institute, said the safeguard measure delivered moderate net and gross emissions cuts and was on track to meet statutory 2030 targets.
“The government’s review later this year provides an opportunity to strengthen investment signals towards meeting Australia’s 2035 target.”
He also highlighted that in 2025, the emissions covered are higher than the first-year base pollution permits, and suggested that the market incentive to invest in decarbonization is intensifying.
Claire Snyder, chief executive of Climate Integrity, said the safeguard mechanism allows emitters to “buy their way out of their obligations”; This view was also expressed by the Climate Council.
“Too many polluters treat our climate like a credit card, loading up on cheap offsets rather than actually reducing their pollution,” said senior advocacy consultant Ben McLeod.
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