The government is charging ahead with creating a new class of carbon offsets under its proposed revamp of the safeguard mechanism, while serious questions remain over the integrity of existing offsets — and with no guarantee that the long list of new fossil fuel projects slated for approval won’t undermine the emissions reductions to be notionally achieved by the mechanism.
A draft Safeguard Mechanism Reforms (Crediting) Amendment Bill 2022 — currently the subject of consultation — would create a new class of tradeable carbon credit for firms within the mechanism (firms that produce more than 100,000 tonnes a year of CO2-equivalent) if they generate emissions below a falling baseline. Firms that produce above their baseline would be required to purchase offsets.
As the Australia Institute points out in a submission on the draft bill, a whole new class of offsets is being created while problems remain unresolved with the existing class of offsets, the Australian Carbon Credit Unit (ACCU), currently under review via a panel led by Professor Ian Chubb. The integrity of ACCUs was wrecked by the Coalition’s fraudulent Emissions Reduction Fund and its administration by the discredited Clean Energy Regulator.
Moreover, the integrity of the new safeguard mechanism credits (SMCs) isn’t guaranteed given the lack of protections against large polluters gaming the system — particularly large polluters who would have closed even without the safeguard mechanism, who would be able to generate SMCs without any actual additional reduction in emissions.
This problem of additionality is at the heart of the near-worthless ACCUs, of which up to 80% may have been generated with no additional emission reduction beyond what would have occurred anyway.
But the biggest problem for the new SMCs is that there is no proposed way of preventing the overall number of mechanism firms from expanding. “Currently there is no limit to new high-polluting facilities entering the safeguard mechanism,” the Australia Institute says. “The introduction of SMCs turns the mechanism into effectively a cap-and-trade scheme with no cap.”
The extent to which this is a fundamental problem for the revamped safeguard mechanism becomes clear from the Australia Institute’s figures for the direct emissions of projects on the government’s Resource and Energy Major Projects list. Currently, the government hopes to reduce emissions via the mechanism by 170 million tonnes by 2030. Two major offshore gas projects — the North West Shelf expansion and Scarborough-Pluto — would increase domestic emissions (that is, emissions produced in the actual production process — not Scope 3 emissions created by the burning of the exported gas overseas) by an extra 72 million tonnes. Approval of another 22 coal mines currently proposed for development would generate an extra 44 million tonnes.
Much of the attention around the issue of new gas and coal projects has focused on their Scope 3 impacts — that is, Australia would be exporting a massive increase in carbon emissions while claiming that it was reducing its own emissions. But as the Australian Institute figures show, even the domestic emission impacts of new projects are a major problem.
The underlying problem of offsets is that they’re a distraction — quite a deliberate one, by both policymakers and fossil fuel interests — from the real task of decarbonisation. The fact that offsets continue to be used to plug major fossil fuel policy failures like the now-discredited Chevron Gorgon carbon capture and storage project illustrates how they’ve come to replace real climate action with theatre and greenwashing.
“Australia’s climate policy needs to move away from debate about carbon credits and offsets and towards actions that will actually decarbonise the economy,” the Australia Institute concludes. It’s not a message the government seems overly keen on.
