We have well and truly hit the ground running to start off 2023, kicking off the month with the much-awaited release of the Final Report of the Independent Review into ACCUs (Chubb Review).
The Chubb Review rightly called for significant strengthening of the Emissions Reduction and Assurance Committee as the premier guardian of integrity as well as separation of key purchasing, method development and other regulatory roles. These were key features of our submissions. Greater transparency of data and of the connection between changed management activities and climate outcomes is a vital response to current and future system challenges.
CMI’s foundational work of our Australian Carbon Industry Code of Conduct was also acknowledged as a best practice framework for engagement with stakeholders and consumers We will build on this to ensure continuing evolution of best practice climate solutions and outcomes for communities, including Indigenous Australians.
The Chubb Review found that the domestic carbon crediting framework is essentially ‘sound,’ whilst providing key recommendations around transparency and integrity. It is vital that this framework is fit-for-purpose as international governance frameworks evolve and as the Safeguard Mechanism, which it is plugged into, is strengthened.
Of equal importance was the release of the Draft Safeguard Mechanism Rules – and while a significant improvement, they will require further steps to ensure transparency and ambition in industrial decarbonisation efforts. While we argue for stronger decline rates, the impact of cumulative nearly 5% reductions in baseline is an important and perhaps not fully understood investment signal that yes, it starts at the margins but grows in materiality.
Recognising that heavy industry will soon overtake electricity as the heaviest-emitting sector in Australia, the importance of getting policy reforms right cannot be underestimated. It must be investible and scalable, threading the needle between concerns about the overall emissions trajectory and blowing up an initiative that is acknowledged by many as significant but not yet sufficient. The ecosystem of investment drivers in which the reforms will operate are also highly significant and perhaps critical to ensuring passage through parliament. Adjacent rules on climate disclosure, sectoral targets, approval triggers and more should rightly be in scope.
Internationally, an investigative piece published in the Guardian suggested that a substantial portion of REDD+ carbon credits endorsed by Verra did not represent genuine abatement. As we reinforced to the Guardian in response, while new standards, validation and disclosure rules continue to emerge and improvements are made, companies buying carbon credits must always do their due diligence, reviewing portfolios and pushing to providers to deliver high integrity abatement.
The integrity challenge is by no means new in these evolving voluntary and compliance carbon markets, and it will continue to be central in order to gain the social licence and scale required to make a meaningful contribution to climate goals under the Paris Agreement. This will include the need for ongoing improvements in governance, transparency and regulation, as well as calling out bad behaviour on both the demand and supply sides of the market.
Of course, work is afoot to make these improvements internationally and domestically, and we now sit at a critical juncture where these reforms are taking shape and beginning to be implemented. The stakes couldn’t be higher with the urgency of our climate and biodiversity crises, so we need to harness the solutions we have at our disposal, and prioritise at-source decarbonisation where possible.
Carbon Market Institute