Questions about the integrity of Australian Carbon Credit Units

Earlier this year, the Federal Government appointed an independent panel to review the integrity of Australian Carbon Credit Units (ACCUs) generated under the Emissions Reduction Fund (ERF).

The panel has, among other things, sought independent analysis and advice on the integrity of the human induced regeneration (HIR), avoided deforestation, landfill gas, and carbon capture and storage methods used to generate ACCUs.

The HIR method allows landholders to earn ACCUs for regenerating native forests by changing land management practices including managing the timing and extent of grazing. It is one of the most popular ERF methods and accounts for over 32% of all registered ERF projects and almost 28% of all issued ACCUs.

There are currently over 120 HIR projects registered in Queensland covering an area of over 2 million hectares and over 135 projects registered in New South Wales covering an area of over 1.3 million hectares.

In this past year, several well-known identities in the carbon market (including the former head of the Emissions Reduction Assurance Committee) have made disparaging remarks about the ERF market, saying that a significant number of ACCUs issued by the Clean Energy Regulator are a “sham” and fall short of integrity standards. Much criticism has been levelled at the HIR method and its administration including concerns around the accuracy of baseline data used to determine the effect of changed practices on carbon abatement.

Given the popularity of the HIR method, the Federal Government needs to act quickly to address the growing concerns and doubts about the integrity of this method and the ERF more broadly. The panel will provide its advice to the Federal Government by end of December 2022.

What the Federal Government does with this advice is obviously yet to be seen but it could range from measures as severe as revocation of the method in its entirety to further changes to the guidelines used to assess abatement for HIR projects. Current guidance from the Clean Energy Regulator indicates that where a project methodology is revoked, projects registered under the method may continue but no new projects may be registered. Changes to guidelines could result in a reduction in the number of ACCUs able to be generated by HIR projects.

Thynne + Macartney will continue to monitor the progress of the independent review and will keep our clients updated.