Energy Minister Chris Bowen has been warned the nation must cut its reliance on carbon credit subsidies to reach net zero by 2050 with the clampdown meaning 4 per cent of Australian farmland may be tapped to offset emissions.
The Climate Change Authority described the Australian Carbon Credit Unit scheme as robust following a review but delivered advice stating the federal government must rely less on carbon subsidies and instead expand measures including using farmland for carbon projects.
“The ACCU Scheme is now best suited to filling gaps where other policy tools are not suitable,” the CCA said. “Over time, Australia will need to rely more on measures that drive down emissions from all sources, including stronger Safeguard Mechanism settings, clean technology standards and other policies, and less on ACCU subsidies.”
Up to 18 million hectares of farmland was required for carbon sequestration, equivalent to 4 per cent of agricultural land in Australia, if Australia is to meet its net zero emissions goals by 2050.
The move would generate landholder profits of around $9bn annually in 2050 with 55 per cent of carbon projects to be established in wheat-sheep and high rainfall zones and the balance in pastoral areas. Nearly 60 per cent of the rural areas would retain some agricultural production.
The CCA recommended analysis of how much land may be needed, where pressures are likely to arise and how food production, carbon sequestration, biodiversity, energy infrastructure and regional development objectives can be managed together.
While carbon credit projects have had limited national-scale overlap with high-value agricultural land to date, achieving net zero at least cost was expected to require substantially more sequestration of carbon on land to balance emissions elsewhere in the economy.
“A broader assessment is needed to understand the cumulative land-use trade-offs across the transition and the opportunities available for new economic development,” the CCA concluded.
Farmers are increasingly developing or selling land for carbon credit projects, underpinned by Albanese government net-zero policy settings. Income is generated under carbon credit units by converting land to revegetation or changing farm practices to improve carbon sequestration in soil.
Demand for ACCUs is being driven by large corporate polluters, which under the government’s Safeguard Mechanism must buy carbon offsets if they are unable to meet emissions reduction targets, or else face penalties.
However, the spread of carbon schemes on farmland has triggered a political backlash with the Coalition introducing legislation to prohibit the Clean Energy Finance Corporation from providing funding to buy agricultural land in Australia.
One Nation has also criticised foreign investors buying agricultural land for carbon credit projects.
Carbon market companies recently formed a new lobby group – Growing Australia’s Nature Economy – to counter what they say is “misinformation” and “scaremongering”.
While some carbon projects involved revegetation, others maintained production but with altered practices that enhanced carbon sequestration in soil.
Australia’s largest developer of carbon market projects, GreenCollar, said the ACCU scheme was largely working well and many in the sector were concerned about false information over industry methods.
”This is actually driving revenue back through farm gates and improving productivity, and yet the politics says let’s turn it into a bogeyman so that we can use it to score political points,” GreenCollar co-founder James Schultz said.
The CCA cautioned project-based crediting was not well suited to all abatement opportunities and stronger Safeguard Mechanism settings were also needed to hit green goals.
Australia’s biggest industrial companies already face the prospect of steeper emissions cuts after 2030 under a government review of whether its flagship safeguard mechanism should place greater emphasis on reducing emissions at the source rather than relying on carbon offsets.
Under the current framework, companies can comply by cutting emissions at their own facilities, purchasing Safeguard Mechanism Credits from businesses that outperform their baselines or buying Australian Carbon Credit Units.
The Safeguard Mechanism review asks whether those arrangements provide the right incentive for companies to reduce emissions at the source.
Under a 2023 review by Labor, facilities must reduce their emissions intensity by 4.9 per cent a year until 2030 while retaining flexibility for companies to use carbon markets to comply. Rather than fundamentally redesigning the scheme, the current review will determine how it should operate between 2030 and 2035, including whether emissions limits should tighten and whether the existing compliance options are appropriate.
Read related topics:Climate ChangeEnergy
Perry WilliamsChief Business Correspondent