Sustainable Views: Lack Of Integrity Undermines Australia's Carbon Markets

For Australia to meet its long-term climate targets, the success of the country’s carbon credit scheme will be vital. The government is relying on the contribution of both domestic and international carbon offsets to account for up to 20 per cent of emission abatements on the path to net zero. In this sense, Australia is not alone. The global growth of carbon credit markets underscores the important role they are playing in tackling the climate emergency.

“The world has a huge challenge in meeting the carbon reduction targets which are required to address the concerns [highlighted] by the Intergovernmental Panel on Climate Change’s most recent research. The reality is that for many organisations to meet their emissions targets, they won't be able to do that without some sort of abatement or offsetting,” says David Howard-Jones, a partner in Oliver Wyman’s global finance and risk practice, commenting on the IPCC’s report issued in April.

The creation of the Emissions Reduction Fund in 2015 crystallised Australia’s largely voluntary carbon market, in which businesses, landholders and others can obtain Australian carbon credit units (ACCUs) by engaging in eligible projects to reduce emissions. For each tonne of carbon dioxide either stored or avoided, one ACCU is earned. These units are acquired through reverse auctions and then either sold back to the country’s Clean Energy Regulator, which oversees the ERF, or on to a small but growing secondary market.

The carbon credit scheme has been expanding swiftly: in 2021, 17 million ACCUs were issued, representing an expansion of 6 per cent since 2020, while the number of ERF project registrations climbed to 198 in 2021 from 157 in 2020, according to Clean Energy Regulator data.

“I think at the highest level, Australian carbon credit units are seen as a credible science-based approach to carbon offset. The emissions reduction fund has been a really important part of building a carbon market in Australia,” says Oliver Kerr, a partner in Oliver Wyman’s energy and natural resources practice in Australia.

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