In response to the federal government’s Future Gas Strategy, announced by the Department of Industry, Science and Resources, the Carbon Market Institute (CMI) said that carbon markets should not be used as a substitute for industrial decarbonisation, while highlighting that well-designed carbon markets can serve to accelerate the transition to net zero and net negative emissions.
In line with its latest policy positions and membership policy, CMI re-iterated its calls for a regulated, planned approach to phasing out fossil fuels. Importantly, it noted that carbon markets should facilitate a high integrity approach to net zero transition that prioritises decarbonisation and incentivises complementary investment in effective carbon removals.
It also highlighted that a national carbon market strategy, underpinning the government’s sectoral plans and Net Zero economy wide plan, will provide an opportunity to clarify the direction of travel and put Australia on a path towards greater climate ambition.
CMI CEO John Connor said that Future Gas Strategy needed to be more explicit around a planned phase-out, with a focus on demand management to drive electrification and the complementary role that a high-integrity carbon market can play within it:
“While gas will play a limited role as we move away from traditional energy sources and industrial feedstock, the Future Gas Strategy falls short in articulating necessary transformative policies that will be required to transition toward net zero and net negative emissions.”
“Alongside the reformed Safeguard Mechanism that established an efficient market-based approach to support industrial decarbonisation, greater attention is required on the deeper structural transition of Australia’s economy away from fossil fuels in order to meet our international climate commitments.”
“While continued investment in carbon markets is an important complement to deep decarbonisation, the strategy risks inappropriate use of carbon markets that could delay decarbonisation of Australia’s industrial and energy sectors.”
“To guide appropriate investment at the scale needed, government should chart a clear pathway towards phasing out fossil fuels in partnership with our key trading partners. A greater focus on demand management to drive electrification will be a key element of this,” he said.
“Continued reform is also required to establish a consistent carbon constraint for all sectors of the Australian economy and ensure that Australia’s market-based frameworks drive robust outcomes. At a state of net zero, only residual emissions should be offset and only with high integrity carbon removals.”
“The sectoral plans and Net Zero economy-wide plan will provide another opportunity for government to clarify that direction of travel to facilitate deep decarbonisation and investment in effective carbon removals. A national carbon market strategy, that clarifies the enabling role of market-based mechanisms, would put Australia on a path towards greater ambition,” he added.
About the Carbon Market Institute
The Carbon Market Institute (CMI) is a member-based institute accelerating the transition towards a negative emissions, nature positive world. It champions best practice in carbon markets and climate policy, and its around 150 members include primary producers, carbon project developers, Indigenous organisations, legal, technology and advisory services, insurers, banks, investors, corporate entities and emission intensive industries. The positions put forward constitute CMI’s independent view and do not purport to represent any CMI individual, member company, or industry sector.
