Some of the biggest players profiting from Australia's carbon market have spoken out for the first time, backing expert analysis saying the system is generating meaningless credits that actually result in Australia's emissions going up.
Companies that have collectively generated a majority of Australian Carbon Credit Units (ACCUs) through the so-called Landfill Gas methods have signed letters saying the credits are sometimes being issued for actions the industry would take anyway.
In addition, even more companies — which represent nearly 90 per cent of the Landfill Gas carbon credits generated and more than a quarter of all credits of all sorts — have called for fewer such credits to be given to the industry.
The letters say this scenario undermines the overall integrity of the carbon credit scheme, and have been sent to Ian Chubb, who is conducting an independent review of the scheme for government, and independent Senator for the ACT David Pocock.
Senator Pocock said he is considering trying to block some of the newest forms of credits in the Senate before projects are locked into using them for decades.
Industry leaves regulator on back foot
One of the major industry players calling for change is also the biggest generator of carbon credits through the destruction of methane emitted from landfill sites.
John Falzon is chairman of LMS Energy, and despite the short-term hit to his bottom line, he is in favour of a better system.
When rubbish decomposes, it releases the potent greenhouse gas methane. His company burns the methane, converting it to carbon dioxide (a less potent greenhouse gas) and uses the heat to generate electricity.
Mr Falzon, alongside bosses from a range of competitors including Cleanaway Waste Management and Veolia, have called for a change to the way credits are calculated, saying fewer carbon credits need to be handed out to companies like theirs, or else the integrity of the carbon market will be threatened.
"If the market doesn't have integrity it'll crash, so the business itself will collapse with that," he told the ABC.
"For us to have integrity is vitally important."
If implemented, the change would cost those companies significant returns in the short term, since they would receive fewer of the lucrative carbon credits.
"We would forgo some short-term revenue for the opportunity to participate in a market that is more robust and has more credibility and that provides a future," Mr Falzon said.
The industry letters back claims by former Clean Energy Regulator insider-turned-whistleblower Andrew Macintosh, who has criticised several types of carbon credits, including those made using the Landfill Gas methods.
"The government effectively was handing them a very large cheque for doing stuff that they would have done anyway," he said.
"And it takes big people with high integrity to say, 'No, I'm not going to accept that, I want the method to have integrity'."
The intervention by industry bosses marks a sharp turnaround in how Professor Macintosh's allegations have been treated. Until now, most industry players have remained silent, while others defended the system.
Despite the industry speaking out about the problems, the Clean Energy Regulator has continued to defend the system it oversees.
In response to questions by the ABC, the regulator criticised the work of Professor Macintosh, saying it was "not backed by data" and that he ignored some of the costs industry were exposed to, underestimating the incentives they required.
"[The Emissions Reduction Assurance Committee (ERAC)] criticised a previous Macintosh paper because the paper included no cost data in coming to conclusions on the financial additionality of projects," the regulator said in a statement.
"The new Macintosh paper also continues to use limited data to proxy revenue.
"No doubt when ERAC meets in future it will consider whether Professor Macintosh's new paper adds to the debate."
Meaningless credits mean emissions go up
According to a new paper by Professor Macintosh, the landfill gas industry sometimes receives carbon credits for eliminating methane, which they are already required to eliminate under state laws.
In addition, since the industry generates electricity in the process of burning that methane — electricity it then sells — some further gas was likely to be destroyed due to financial motives.
But regardless, some landfill sites get carbon credits for every tonne of methane they burn.
"Most landfill gas projects are fine, and the credits that come out of them have high integrity," Professor Macintosh said.
But in some cases, there's a problem, he said.
"These large, and in some cases medium-sized sites, are getting credits for doing things that they absolutely would be required to — or they would have done — anyway," he said.
The so-called low-integrity carbon credits are then bought by other companies, including big fossil fuel companies, to offset their own emissions, bringing down their own reported "net" emissions.
Because of that, low-integrity credits can cause an increase in overall emissions, by allowing big polluters to keep polluting without emissions cuts happening elsewhere in the economy.
Credits generated without real emissions cuts also bring Australia's claimed progress towards the 43 per cent emissions reduction target and net zero target into question, according to Professor Macintosh.
Pocock wants to force change
Senator Pocock said he was considering moves in parliament that could block or "disallow" some of the regulations allowing the low-integrity credits to be generated.
Two of the methods were "rushed through" in the last days of the previous government, he said, which meant there was still time to block them in the Senate.
"Once they are no longer disallowable, it's a lot harder to do that, and you can have projects registered that will then be generating these questionable credits for 25 years," he said.
While the landfill gas carbon industry has spoken out, there is another new method of producing credits from timber plantations that Professor Macintosh has said produces meaningless credits.
In a second paper, he argued the new timber plantation method awards carbon credits for actions that will be taken over the course of 100 years, but the operators are only required to keep the trees for 25 years.
The regulation actually assumes the plantations would not be viable without the carbon credits, he said, and so there is no reason to think they would continue for 100 years.
According to the Clean Energy Regulator, that possibility is accounted for by carbon sequestration over the 100 years being "discounted".
Mr Pocock wants Climate Change and Energy Minister Chris Bowen to alter the methods before they are locked in.
Professor Chubb will hand down his report into the market by the end of the year, but by then it will be too late to change these methods without additional legislation, Mr Pocock said.
"Lodging a notice of disallowance is obviously the next step if that doesn't happen," he said.
A spokeswoman for Mr Bowen said the government does not plan on intervening before the Chubb Review is complete.
"The Albanese Government is delivering on its election commitment to strengthen carbon trading, including its integrity, through the Independent review of ACCU's currently underway by Professor Ian Chubb," the spokeswoman said.
"Interventions in the carbon market outside of this review process would undermine its independence and integrity."
