Labor could offload billions’ worth of its carbon credits to big polluters: analysts

The Albanese government could be planning to offload billions of dollars’ worth of its own carbon credits to big polluters as the Greens’ extraordinary broadside threatens to derail Labor’s key climate policy, climate analysts have said.

The draft safeguard mechanism legislation, which will almost certainly need the support of all 12 Greens senators to pass, outlines Labor reforms to a Morrison-era policy that would require the 215 big emitters to keep their emissions below 5% a year, or face a hefty fine.

But the Greens have taken issue with a caveat that allows businesses to purchase an infinite amount of Australian carbon credit units (ACCUs) to offset their emissions, which could mean business as usual for the dirtiest corporations in Australia.

The bill also includes lines that outline the government’s intention to offload its own ACCUs as a “cost containment measure to prevent excessive prices”, and energy and climate analyst Michael Mazengarb said the total take for the government could total billions.

“If the new Labor government decides to sell these ACCUs to major emitters at $75 each — as it is suggesting it might do — it will provide a huge windfall profit for the government,” he told Crikey.

Climate and Energy Minister Chris Bowen’s office told Crikey the government was looking at selling only ACCUs it collected after January 11 2023, and that units that had been delivered to the government in the past “would not be sold” under the draft changes.

Even so, Mazengarb said, the government holds contracts to buy 217 million units in total, according to the Clean Energy Regulator, a “decent potential future stream of ACCUs that they could still tap”.

“So there’s still the potential for the government to raise billions in additional revenue should ACCU prices rise in the future,” he said.

But Climate Energy Finance director Tim Buckley said Labor parting with ACCUs was not necessarily a bad thing. Bowen was taking a classic “carrot-and-stick approach” to get industry over the line, he said, “particularly the fossil fuel export sector that is half the safeguard mechanism’s 215 facilities”.

“It is not about getting the teals and Greens onside, it is about bringing along industry and creating jobs so middle Australia, which is currently being smashed by the fossil fuel hyperinflation and cost of living impacts, supports the new government so we can get it embedded by an act of Parliament, and the ALP secures multiple terms,” he said.

However, without the Greens’ support, the safeguard mechanism reforms could be dead in the water. At the recent Smart Energy Council, fired-up Greens Leader Adam Bandt slammed Labor’s “reheating of the Liberals’ climate policy” as 57% of the emissions covered in the mechanism were coal, oil and gas facilities.

All “big corporations have to do is buy a few tree-planting permits”, Bandt said, which he declared was “greenwashing of the highest order” — echoing UN top climate scientist Bill Hare’s words last year that Australia risked becoming “a state sponsoring greenwashing” by allowing offsets without strict parameters.

It follows former chief scientist Ian Chubb’s warning that polluters must make deep cuts in their emissions rather than relying on the get-out-of-jail-free offsets.

But Buckley said the safeguard mechanism — despite its criticism — was a crucial initiative that can get Australia a price on carbon emissions, “which was next to impossible in light of the toxic political agenda that has been running over the last decade”.

“I think it is excellent that Bowen managed to shift the discussion on carbon pricing overnight by talking about a A$75/t cap (indexed at CPI+2% pa). That is double our current level, and changes the narrative brilliantly.”

So where would the money go? Bowen’s office said somewhat cryptically that “any funds from their sale would fund further emissions reductions and support industry decarbonisation via the Powering the Regions Fund”.

Taxpayers deserve more information, Mazengarb said, considering the legislation is the government’s crowning jewel in its climate action reform.

“Given the safeguard mechanism is one of the key pillars of Labor’s plan to reach their 2030 target, the government should outline what investments it intends to make to ensure Australia actually achieves rapid and meaningful reductions in emissions,” he said.