The biggest generator of Australian carbon credits has joined critics in calling for a revamp of the scheme’s governance, saying it has “fundamental problems”.

GreenCollar, which describes itself as the country’s largest environmental markets investor, natural resource manager and conservation-for-profit organisation, has made a joint submission to a government review of the carbon credit system with academics including Prof Andrew Macintosh, who used to be responsible for the scheme’s integrity.

The submission stresses they do not agree on all points and support the use of carbon offsets to help a “timely transition to a low carbon economy”. But both believe the scheme needs to be overhauled to improve measurement of how much carbon dioxide is being drawn from the atmosphere and stored in vegetation, and to improve the governance of the system overseen by the Clean Energy Regulator.

It is the biggest intervention to date by a major player in the carbon credit market supporting calls for changes in how it operates. It follows several companies that run projects to cut emissions from landfill sites backing analysis by Macintosh and his colleagues that the system was generating meaningless credits and resulted in emissions increasing.


What are carbon credits?


Carbon credits are used by the government and polluting companies as an alternative to cutting carbon dioxide emissions.

Instead of reducing their own pollution, they can choose to buy carbon credits that are meant to represent a reduction in emissions elsewhere.

Each carbon credit represents one tonne of carbon dioxide that has either been stopped from going in the atmosphere, or sucked out of it.

Methods approved to generate carbon credits in Australia include regenerating native forest that has been cleared, protecting a forest that would otherwise have been cleared (known as “avoided deforestation”) and capturing and using emissions that leak from landfill sites to generate electricity.

Credits are bought by the government through the $4.5bn taxpayer-funded emissions reduction scheme or by polluters on the private market. 

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Macintosh, an environment law and policy professor and the former head of the government’s Emissions Reduction Assurance Committee, said in March the growing carbon credit market was “largely a sham” and a fraud on taxpayers and the environment, as regulation failures meant up to 80% credits approved might not represent real or new cuts in emissions.

GreenCollar’s chief executive, James Schultz, said the company did not agree with that, but had long called for changes to strengthen the scheme. He said he was confident his company’s projects regrowing native forests in cleared areas were generating real emissions reductions, but there were issues with measurement and integrity that should be addressed.

“We’ve agreed with a lot of the criticisms and we were on the record on most of this stuff before,” he said. “We don’t agree with it all, but we agree with a lot.”

The joint submission said both parties had deep experience in carbon and environmental markets and supported the use of carbon offsets, preferably in conjunction with an effective carbon pricing scheme. Both said land-based projects could also have environmental and social benefits, including improving biodiversity and employment in regional areas.

But they identified three “fundamental problems”.

First, they said the legislation overseeing carbon credits, which was relaxed under the Coalition, did not ensure all methods used to create carbon offsets met high integrity standards.

Second, the two parties said the Clean Energy Regulator had too many roles and was potentially conflicted, and called for its powers to advise government and prepare methods under which carbon credits were created to be given to other agencies.

Third, they said the model used to estimate how much carbon dioxide was stored in regenerating forests was not calibrated for use in areas that already had significant amounts of vegetation and could lead to overestimation of emissions reductions.

GreenCollar said this could be addressed by excluding areas with more than 5% of their maximum vegetation and using direct measurement, not modelling. The academics said direct measurement would be better, but argued it would be “challenging and risky” to do it in a way that ensured growth was due to changes in management and not just rainfall. They said it would be better if uncleared rangelands were restored through biodiversity markets and straight payments for stewardship of the land, not carbon credits.

Macintosh said the joint statement “reflected very well” on GreenCollar and, after the statement by major landfill gas project owners, was the latest in a string of big players that “had the courage and character” to publicly acknowledge change was needed. He said it reflected “very poorly” on the Clean Energy Regulator and the Emissions Reduction Assurance Committee.

“There really is no argument now for the government not to act,” he said. “We know there are multiple other market participants and scientists that agree with what we are saying and what GreenCollar is now saying. It is now time for them to lend their voices to the calls for change.”

The climate change minister, Chris Bowen, has said carbon credits were vital to reduce emissions and appointed a former chief scientist, Prof Ian Chubb, to oversee a review of the system.

The Clean Energy Regulator has rejected the criticisms. In a statement in June, the regulator and the Emissions Reduction Assurance Committee said Macintosh and his colleagues had failed to present robust evidence of a lack of integrity in the system and – as the precise areas of land where carbon credit projects took place could not be released due to legal restrictions – had based their analysis on an incomplete dataset.

Chubb is due to report back by the end of the year.

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