Carbon credit ‘trickery’ would put climate target at risk, experts warn

Hugh Grossman, the managing director of modeling firm RepuTex, argued against industry averaging, warning it would in effect carbon issue credits by “accounting trickery”, putting the government’s climate target at risk.

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“The environmental integrity of the scheme – and Australia’s 2030 target – could collapse, which would require greater abatement efforts from other sectors,” Grossman said in an interview.

But Grattan Institute climate and energy director Tony Wood said the scheme would create winners and losers no matter how it was designed, setting off a race against the clock for the government to deliver the emissions cuts needed for its climate target.

“Government has imposed a big constraint on itself with its climate target. Australia has never had that before and the consequence is some very difficult problems for the minister,” Wood said.

Grattan’s submission said industry averaging would create a useful market for the credits earned by those below the emissions baseline.

“Industry averages are a more transparent and equitable way to set baselines… [they] will also improve over time the facilities respond to the signal to reduce emissions and as new, more efficient, facilities are built.”

However, Grossman said any credit issued to a company “must represent an emissions unit that can be used to meet Australia’s climate change targets”.

“If a credit does not represent one tonne of emissions or one tonne reduced, stakeholders would have little confidence that abatement reported by the industry is real,” he said.

Ten liquefied natural gas facilities are among the top 20 biggest polluters.

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Grossman said under the industry average proposal, five of these facilities would be deemed below average and issued credits that could be “banked or sold to realize a windfall gain”.

“These facilities would not be accountable for their emissions,” he said. “While this aims to reward ‘cleaner’ processes, in practice half of all fossil fuel producers could simply receive a financial benefit, instead of any emissions constraint.”

Climate campaigners are pushing to rule out any carve-outs from the mechanism, which was established by the Coalition in 2016 but lay dormant until the Albanian government went to the May election pledging lower pollution limits.

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