Carbon offsets reduce sustainable manufacturing initiatives

The number of new renewable energy projects in Australia has halved since 2018 as the nation doubles its carbon offset projects.

The worry is that carbon offsets—and particularly land-based schemes—are coming under increasing scrutiny for allegations of corporate “greenwashing”.

And with Kazakhstan the only other country besides Australia adopting an unlimited approach to offsets, the trend risks damaging our international climate reputation, which had only just returned to the black.

There has been an uneasy shift in Australia’s energy focus, from policies that directly decarbonise the economy – such as the Renewable Energy Target (RET) – towards offsets, which reduce and delay decarbonisation.

A new discussion paper called Delay or Decarbonise? Australia’s climate policy trade-off, says climate policy can incentivise genuine emissions reduction, or delay decarbonisation by expanding the use of offsets.

Authors Alia Armistead, Eliza Littleton and Polly Hemming of the Australia Institute conclude that policies to increase supply of carbon credits actually work to reduce incentives for direct emissions reduction.

“The value of new renewable projects commenced peaked at $2.9 billion in the June quarter of 2019,” the authors report.

“It has since declined, reaching a six-year low of $259 million in the June quarter of 2022, a decline of 91 per cent relative to the 2019 peak.”

In other words, renewable commencements hit that six-year low at the same time as carbon credits issued were growing by a million tonnes per year.

In fact worldwide, the size of Voluntary Carbon Markets has been growing rapidly for some time, with the number of VCM credits issued rising by 30 percent to 2020.

Also in Cosmos: The carbon offsets conundrum

What’s so bad about offsets?

In a keynote address to a gathering of climate experts at the Climate Integrity Summit in Canberra on 15 February, physicist, climate scientist and CEO of Climate Analytics Professor Bill Hare canvassed the dangers of Australia’s growing over-reliance on carbon offsets.

In Australia, offsets in the land sector were very popular, he said, but presented some very difficult issues.

“It is well known that land-based offsets are reversible and particularly susceptible to integrity issues,” Hare said.

“Specifically, whether the emission reductions claimed are genuine, additional, and permanent.

“Independent experts have shown that several methods for generating offsets often don’t result in genuine emissions reductions at the levels claimed, or in some cases at all.

“Avoided deforestation and human-induced regeneration are two of the most popular methods in Australia but have been singled out as inadequate in independent assessments.”

Hare acknowledged significant progress on climate change reform made by the Albanese government since its election in 2022.

But he warned that offsets were potentially enabling ongoing fossil fuel production and growth.

How do land sector carbon offsets work?

Land sector offset schemes are about businesses investing in the storing of carbon in natural systems and are sometimes called carbon farming or nature-based solutions.

Under current Australian legislation, the land sector can participate in the Emissions Reduction Fund by either storing carbon or avoiding emissions from agriculture.

The ERF allows a business to earn carbon credit units for every tonne of carbon dioxide equivalent it stores, or avoids emitting, through new practices and technologies.

For example, sequestration projects remove carbon dioxide from the atmosphere and store it as carbon in plants as they grow.

What can go wrong?

In his address, Hare cited an example from California in the US, where about 30 megatonnes of CO2 equivalent in offsets valued at USD $410 million were found “not to represent genuine emissions”.

Noting that the EU Emissions Trading Scheme had discontinued use of international credits since 2021, Hare concluded with the following sobering prediction:

“The integrity of what Australia does at the next step is going to be the subject of great international scrutiny, not just by governments but by banks, financial institutions and those purchasing Australian commodities who need to clean up greenhouse gas emissions along their supply chains.”