Labor is addicted to carbon credits — no matter how rotten they are

This is part five in a series. For the full series, go here.

With Labor insistent that the lost decade of climate inaction is over and that there is now a federal government committed to serious climate action, the status of the human-induced regeneration (HIR) component of Australia’s carbon credit scheme leaves a huge question unresolved — along with the likelihood that a huge rort has been perpetrated on taxpayers.

Given there’s evidence that more than 90% of the 38 million carbon credits generated by HIR projects may be worthless on independent assessment and expert evidence, in addition to the scientific literature undermining the core theory behind the Clean Energy Regulator’s approval of HIR projects on non-cleared land, the Albanese government last year could have adopted a sceptical and forensic position toward the Coalition-era Emissions Reduction Fund.

Despite no lack of willingness to dismantle or investigate failed Coalition programs in other areas, however, the newly elected government appointed a review panel under Ian Chubb featuring two members — who work in the carbon credit sector — who appeared to have conflicts of interest and a third who urged the “potential” of carbon credits to investors mid-review. The panel rejected the science around the importance of rainfall versus grazing on uncleared land, and didn’t bother to investigate individual projects to check the extent of woodland regeneration.

But in delivering an endorsement of the existing Australia carbon credit unit (ACCU) system, the Chubb review helped Labor avoid, at least for the moment, one of the biggest problems it faces on climate policy.

Under Labor’s flagship safeguard mechanism, around 215 big carbon emitters face a hard carbon budget of 1,233 million tonnes of CO2 for this decade, and their collective emissions must be below 100 million tonnes in 2029-30. In practical terms, however, they only have to get their net emissions below a baseline that essentially starts at their current emission levels and declines by a maximum of 4.9% per year. Even so, many of those facilities — coal mines, gas plants, cement factories, steelworks — won’t be capable of achieving this, or the investment required to upgrade them in order to do so is too great for their owners. They’ll instead rely on surrendering carbon credits for the portion of emissions above the baseline (meaning the financial impact for the first five years or so won’t be significant for most facilities).

And from a climate perspective, even if the carbon credits are legitimate, all they will do is cancel out the warming effects of the emissions above the line — the planet still has to live with the majority of emissions that sit “below the line”. If the carbon credits do not represent real and additional abatement, or the sequestered carbon is later released into the atmosphere (via, say, drought or fire), not even the emissions above the line will be neutralised. The planet will have to live with the full warming effects of all the emissions from the facilities for centuries to millennia.

But for a government that wants to convey the impression of climate action while keeping our biggest emitters in business — particularly those in heavy manufacturing, a sector prized by Labor — ACCUs, regardless of integrity, are a crucial part of industry policy. They’re a form of carbon budget subsidy for heavy emitters, allowing them a cheap mechanism for avoiding reducing their emissions under the pretence of offsetting them.

Moreover, ACCUs and their production via HIR have spawned a substantial industry not merely of farmers and landholders but carbon project developers, investment firms, legal, engineering and consulting services, auditors, trading platforms and advisory services, all of whom also have a strong interest in the continuing success of the ACCU market. Indeed, landholders — many of whom manage otherwise marginal semi-arid land — at least re-invest cash from HIR projects in their properties, rather than clipping the ticket on the way through.

But many right across the industry understand the fraudulent nature of the bulk of HIR projects, and believe that, sooner or later, a genuinely independent assessment process will uncover how little regeneration has actually occurred as a result of reducing grazing pressure, and how much will die in the next drought, when the lack of foraging by cows and sheep will be trivial compared to the impact of a lack of rain. In the words of one industry veteran, they want to kick the can down the road — to the next financial year, the next electoral cycle, to 2030, to however long they can stave off the inevitable.

By that stage, however, the ACCU market may be so embedded in our climate action efforts that any remedial action will be too late. Unravelling the mess at that late stage is also likely to cause harm to a range of parties — some who have invested in HIR on the back of the assurances given by the government, the Clean Energy Regulator and the likes of Ian Chubb that all was fine.

What began as a figleaf for the Coalition’s climate denialism will have played a very real role in undermining real climate action decades later. And it will be one that taxpayers have spent billions of dollars creating.

How can Australia better address the climate crisis? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.