One-fifth of carbon credits under Australia’s main climate policy are ‘junk’ cuts

This story was originally published by The Guardian and appears here as part of the Climate Desk collaboration.

About 20 per cent of carbon credits created under the federal Coalition’s main climate change policy do not represent real cuts in carbon dioxide and are essentially “junk,” new research suggests.

The report by the Australian Conservation Foundation (ACF) and the Australia Institute found “avoided deforestation” projects do not represent genuine abatement as in most cases the areas were never going to be cleared.

The projects involve landholders being issued with carbon credits and paid from the government’s $4.5-billion emissions reduction fund for not removing vegetation from their land.

Analysts from the two groups estimated taxpayers had spent about $310 million buying more than 26 million carbon credits generated through projects unlikely to have helped the climate. The credits had been used to help meet climate targets, but in reality, were likely to represent “hot air,” the report said.

Annica Schoo, the ACF’s lead environmental investigator, said the organization wrote to government regulators two years ago raising concerns about the integrity of avoided deforestation projects. The Emissions Reduction Assurance Committee launched a review, but the results have not been released.

“Our findings demonstrate that the avoided deforestation method — which makes up one in five of all Australian carbon credits — is deeply flawed,” she said. “The Morrison government should be embarrassed by its flagship climate policy. Australians want real climate action, not cheap tricks and hot air.”

The analysis examined carbon credits issued to landholders in New South Wales who promised not to clear parts of their property. The landholders in question had previously received a state permit to clear certain types of native forest and convert it into grassland or cropland.

Between 2005 and June 2010, the state issued permits giving landholders the green light to clear 2.09 million hectares of forest over the subsequent 15 years. Carbon credits were issued to landholders with this type of permit on the assumption all planned to clear their land within the allotted time.

The report found this was implausible as it would have required the state’s rate of land-clearing to increase by at least 750 per cent, and possibly more than 12,000 per cent.

Richie Merzian, the Australia Institute’s climate and energy policy director, said it showed landholders were being issued with credits, and being paid by taxpayers, to retain forests that they could not have cleared had they wanted to. “You would be hard-pressed to find enough bulldozers in the state,” he said.

Merzian said the problem was not with the landholders receiving the credits, many of whom were likely to be operating in good faith, but with a system that rewarded an unrealistic number of avoided deforestation projects.

He said a well-designed offsets market would become increasingly important as the country moved towards a net-zero target, and called on Emissions Reduction Minister Angus Taylor to “hit pause” on rewarding avoided deforestation projects “until the integrity issues can be resolved.” Taylor did not respond before publication.

The ACF-Australia Institute report was criticized by the Clean Energy Regulator, which runs the emissions reduction fund, and the Carbon Market Institute.

A statement from the regulator said it had only had the report for a short time, but it appeared to be “based on some highly questionable assumptions.” It said it was not aware of “robust evidence” that the avoided deforestation method was paying to protect land that was never going to be cleared, and it was reasonable to assume farmers with land-clearing permits had intended to clear their property given they had spent time applying for a permit and dealing with “accompanying red tape.”

It said farmers did not know they would be eligible for carbon credits when they applied for a land-clearing permit. “The (emissions reduction fund) avoided deforestation projects are preventing land clearing that would otherwise take place,” the regulator said.

John Connor, the chief executive of the Carbon Market Institute, which represents businesses that buy and sell credits, said he shared the frustration of the report’s authors about a lack of policy in Australia to drive industrial decarbonization, but he said their analysis contained errors and undermined “credible nature-based climate solutions.”

He said he had visited landowners in the state’s west who had permits to clear land but had not used them due to carbon credit revenue. “These are farmers who are not clearing because of this very method,” Connor said.

The emissions reduction fund allows landowners and businesses to bid for funding for climate-friendly projects. It has so far operated with limited success in reducing national emissions. The government has paid $831 million for emissions cuts and signed contracts for another $1.7 billion.

Despite this, national emissions dipped only slightly under the Coalition government before the COVID-19 shutdown. Government data shows the reduction was overwhelmingly due to the rise of solar and wind energy, which are not supported through the fund.

Guardian Australia revealed earlier this year the government had appointed fossil fuel industry leaders to a committee responsible for ensuring the integrity of emissions reduction fund projects.

It is planning to expand the range of projects that can generate carbon credits to include carbon storage, soil carbon, blue carbon (storing CO2 in coastal ocean ecosystems), plantation forestry, and biomethane, also known as biogas.

Merzian said the support for avoided deforestation projects from the emissions reduction fund had not slowed the total amount of forest cleared in New South Wales. Official data showed it had increased for the years covered due to a rise in destruction elsewhere.