Climate advocates are insisting changes be made to one of the federal government's key emissions-reduction tools, warning it currently risks perversely allowing emissions to increase.
The Australian Conservation Foundation and other climate advocacy groups have raised concerns about the role carbon credits will play in the reshaped "safeguard mechanism", which will be used to force heavy emitters to cut their pollution.
The safeguard mechanism will cap the emissions of the 215 heaviest-polluting companies — like coal producers, steelmakers and airlines — and force those who breach their cap to either trade emissions with other companies or buy carbon credits.
The use of carbon credits is not limited by the scheme, so companies can theoretically operate as normal and buy credits to cover their emissions over the cap.
The ACF is pointing to new analysis it commissioned from global research firm Climate Analytics, which found allowing those companies unlimited use of carbon credits would "very likely fail to reduce emissions".
The analysis raises fresh concerns about the usefulness of carbon credits in reducing emissions, arguing forcing companies to actually reduce emissions is highly preferable.
"The proposal … would only serve to enable the continued extraction and burning of fossil fuels," the report finds.
"Instead of reducing emissions, as is urgently needed, this proposal would provide an avenue for fossil fuel companies to continue polluting at the expense of Australians – and indeed the world — facing worsening climate change impacts."
Controversial credits
The use and usefulness of carbon credits is highly contested within climate policy discussion.
Carbon credits effectively aim to counterbalance emissions.
Credits are created by either avoiding emissions (for example, through burning landfill gas), or removing carbon dioxide from the atmosphere (through tree-planting and regenerating forest on cleared land).
Those credits can then be sold to companies to counteract the pollution they create.
Significant criticisms of Australia's carbon crediting scheme prompted a major review, led by former chief scientist Ian Chubb, which found the scheme is fundamentally sound.
It did make a number of recommendations for change, going to better oversight of the scheme and its integrity, changing rules for those burning landfill gas, and abandoning the "avoided deforestation" method of creating credits.
While the changes have been broadly welcomed, the Chubb review has done little to satisfy many of the carbon credit scheme's strongest critics.
Bill Hare, one of the authors of the Climate Analytics study, said he did not think the review dealt fully with questions around "additionality" — that is, whether or not the action creating the carbon credit would have simply happened anyway.
He said there was enough available evidence to hold significant doubts.
"A significant fraction of the human-induced regeneration credits would probably have happened in the absence of a carbon-unit generating scheme," he said.
Energy Minister Chris Bowen has previously defended the integrity of carbon credits, and their role in the safeguard mechanism.
He argues the credits provide necessary flexibility for companies that will struggle to cut emissions dramatically until new technology is developed.
"Carbon credits are important, they are a complement to emissions reduction at the facility level, at the coal face, if you will," he said.
"They will not ever replace that, but they are an important part of the journey, and I'm absolutely determined that there will be rigour."
Emissions offset, but for how long?
The analysis also raises questions about how long emissions have to be offset for.
Under the current Australian carbon credit unit (ACCU) scheme, credits either last 25 years or 100 years depending on their design.
After that period, stored carbon (carbon captured in trees or soil, for example) no longer has to be maintained — it can simply be released back into the atmosphere.
But Climate Analytics argues that those time frames are far too short.
It points to research suggesting that for every tonne of carbon dioxide released into the atmosphere, 40 per cent will remain a century on, and more than 20 per cent will remain after 1,000 years.
The report argues that means carbon credits cannot permanently offset emissions over the long term.
"After [either 25 or 100 years], when carbon is ultimately lost from ACCU projects, as is likely over longer time frames, the atmospheric carbon dioxide concentration would be higher than if the offset scheme had not been used in the first place, and instead an emission reduction was made at its source."
Strengthening the safeguard
The Albanese Government wants its revamped safeguard mechanism working from July this year.
That's when the emissions caps will start to be lowered, falling each year by 5 per cent, forcing companies to begin reducing emissions.
Between now and 2030, the total emissions of all the companies covered by the mechanism will be cut by roughly 28 per cent.
But the government also wants to pass legislation before then, setting up "safeguard mechanism credits", which will allow companies involved to trade emissions amongst one another.
So if one company can reduce its emissions to well below its cap, it can sell that surplus to another company that has breached its cap.
Mr Hare said that kind of trading was similar to cap-and-trade schemes overseas, and is a far better method of encouraging companies to make genuine emissions cuts.
"If the government did focus on making that the central measure, that would be a great outcome," he said.
The ACF wants to see changes to the safeguard mechanism plans that limit the use of external carbon credits, and reduce the number available to companies over time.
It argues companies should be required to try to cut their emissions in the first instance, before turning to either safeguard mechanism credits or carbon credits.
The government will soon begin trying to negotiate its legislation through parliament, facing opposition from the Coalition, which argues the scheme is too punitive, and the Greens, who want a ban on new coal and gas projects.
Mr Hare said that changing the scheme along the lines the ACF has suggested might help take some of the heat out of the argument.
"If the government had a policy that was strictly limiting the use of offsets, you know to 5 per cent or something like that, I doubt whether there would be so much concern as we're seeing now about this," he said.
