Published name
Upload 1
Review Panel
Independent Review of Australian Carbon Credit Units
Department of Climate Change, Energy, the Environment and Water
Online submission, cc: ACCUReview@dcceew.gov.au
3 October 2022
Dear Review Panel,
RE: Submission to the Independent Review of ACCUs
Greening Australia welcomes the opportunity to provide a submission to the Independent Review of
Australian Carbon Credit Units (ACCUs).
Greening Australia supports the Independent Review of ACCUs and the opportunity it presents to ensure the highest practical level of integrity in Australia’s carbon market. In line with statements by the Carbon Markets Institute (of which Greening Australia’s environmental credits business, Canopy is a member) for the market to serve its purpose of driving real and additional emissions reductions and removals, and directing finance to where it’s most needed, the priority must be to make sure carbon credits and their governance are fit for purpose.
Please note that Greening Australia agrees to this submission to be published in full.
Our experience with the ERF scheme
Greening Australia is an independent organisation focused on landscape restoration and delivers environmental credits under the Environmental Planting (EP) methodology which are administered by our environmental credits business Canopy. We will also soon to be registering a project under the
Blue Carbon methodology.
The largest ever Australian reforestation carbon aggregation (under EP methodology) has recently (in
2022) been registered with the Clean Energy Regulator by Canopy which will see approximately
546,000 native and biodiverse trees planted across 440-hectares.
Biodiverse carbon plantings produce significant benefits for biodiversity and the community which are outlined below.
Increasing the proportion of Australian Carbon Credit Units (ACCUs) produced through native reforestation is a critical step towards holistically supporting the more than 1,900 species and ecosystems threatened with extinction in Australia alone, while simultaneously tackling a warming climate.
Specific challenges that we have experienced with the ERF are identified below.
Challenges relating from disconnect between Federal and State legislation
Challenges resulting from the significant overlaps in Federal, and State (or Territory) legislation regarding market methods should be resolved in a more formalised and coordinated manner and with
Federal assistance on expected impacts on State-based (or Territory-based) implementation.
Greening Australia Ltd Tel: 1300 886 589 Email: info@greeningaustralia.org.au
ABN 40 002 963 788 Website: www.greeningaustralia.org.au
This is a South Australian example of the challenges this can pose:
Environmental Plantings fall under the definition of commercial forestry in the Landscapes South
Australia Act 2019 and the South Australian Planning and Design Code which raises a few challenges/issues:
- The definition ‘commercial forestry’ doesn’t adequately recognise the co-benefits that come
with a biodiverse environmental planting
- The definition increases regulatory ‘red tape’ in terms of the planning requirements and
referrals to the Minister for ‘commercial forestry’ activities where conservation work may not
- In some regions, e.g. the southeast of South Australia, no environmental planting projects
may take place as the limit for commercial forestry water licences has been reached
- It may mean development applications are viewed on less favourably by the community than
if our outcomes were more accurately reflected in the land use title
- It raises a risk that having the land use changed to ‘commercial forestry’ at these locations
paves the way for traditional commercial forestry (e.g. harvested radiata pine) to operate at
these locations after our projects are completed
Definitions:
Landscapes South Australia Act 2019
“commercial forest means a forest plantation where the forest vegetation is grown or maintained so that it can be harvested or used for commercial purposes (including through the commercial exploitation of the carbon absorption capacity of the forest vegetation)”
South Australian Planning and Design Code:
Commercial forestry means the practice of planting, managing, and caring for forests that are to be harvested (or intended to be harvested) or used for commercial purposes (including through the commercial exploitation of the carbon absorption capacity of the forest).
Carbon Credits Rule Eligibility Issue
An issue we have experienced relates to:
Subsection 20AA(1)(d) of the Carbon Credits (Carbon Farming Initiative) Rule 2015, which states
“… the following kinds of project are excluded offsets projects:
… (d) the establishment of vegetation on land that has been subject to illegal clearing of a native forest, or illegal draining of a wetland;”
Firstly, it is very difficult to empirically prove a negative, i.e. that a project area was not illegally cleared or drained which places an unworkable burden of proof on project proponents. We also understand from discussion with various state government agencies it is often likely to be unworkable for an auditor or the CER to prove an illegal activity in all but the most publicly visible prosecuted cases.
Greening Australia Ltd Tel: 1300 886 589 Email: info@greeningaustralia.org.au
ABN 40 002 963 788 Website: www.greeningaustralia.org.au
This same issue also therefore hampers efforts to repair these environments using carbon market mechanisms to fund the works. For example, under the Blue Carbon method and ‘illegal’ bund installed 70 years ago cannot be removed to restore a native estuary and mangrove under the banner of a carbon project. Likewise, sites cleared of native vegetation illegally (laws for which, and therefore illegal activity, are usually more recent) may have been subject to a vegetation offset in another location. The current Rule inhibits environmental restoration precisely because damage has been done in that location. Whilst we understand there are needs to protect the scheme against perverse outcomes such as clearing/draining and then claiming credits, we do see the current Rule as a very blunt instrument that could be better tuned to facilitate environmental improvement.
Relating to Subsection 20AA(1)(d) of the Carbon Credits (Carbon Farming Initiative) Rule 2015, we propose that an exemption to ‘excluded’ offsets projects be provided for owners of land that was previously illegally cleared of native vegetation, or was a wetland drained illegally by an unrelated entity.
In addition to solution suggested above, it would benefit the restoration of Australian landscapes if a timeframe was included in Subsection 20AA(1)(d) of the Carbon Credits (Carbon Farming Initiative)
Rule 2015, to provide a period after which a project could be undertaken at a site that had undergone the illegal clearing of a native forest, or illegal draining of a wetland. Without this, land that has undergone illegal clearance of native vegetation or illegal drainage of a wetland could never be restored under a market driven mechanism which, in some cases, could mean that the project is not otherwise financially desirable or feasible.
Non-discriminatory market access
Market access should not be fettered except where it is in the clear national interest to limit/prevent access. This means that the legislation should adopt an agnostic, non-discriminatory approach to the classes of landholders who will be able to supply the market.
Consideration should be given to equitable benefit sharing for landholders, including Indigenous landholders and native title holders.
Currently no one is trading small volumes of ACCUs in the market, and this disadvantages small business because of the lack of retail ACCUs available for carbon sequestration which in turn creates a barrier to market access. This can be attributed to a number of factors, but primarily we see this linked to ACCUs being classified as a financial product by ASIC. This means transaction costs are very high due to significant pre-sales vetting being required in order to meet Corporations Act and Anti-
Money Laundering and Counter-Terrorism Financing Act requirements. This makes small volume purchases too expensive for most small volume buyers if the cost is passed on, or not viable for small volume sellers who do not pass on those costs. Outside ACCU brokers who hold a retail Australian
Financial Services Licence (who are currently a very small minority in the market), it also means that for potential purchasers who are not classified as “sophisticated investors” they are unable to buy
ACCUs. Removing or varying the financial product classification of ACCUs would remove a major barrier to trading in smaller volumes and increase the accessibility of the commodity within Australia.
Greening Australia Ltd Tel: 1300 886 589 Email: info@greeningaustralia.org.au
ABN 40 002 963 788 Website: www.greeningaustralia.org.au
Governance of the ERF
It is recognised that Parliament does and should retain primacy regarding the legislative and regulatory operation of any legislated Australian carbon market.
However, recent examples from Australia’s carbon market serve to highlight the importance of ensuring Government-regulated markets are not subject to interventions that undermines certainty and confidence in a market and would not be acceptable in high-volume markets such as most stock exchanges.
For example, a carbon market should be regulated to similar standards of probity as the regulation of the Australian Stock Exchange, and at arms-length from Ministerial intervention.
This means, where appropriate, delegating Ministerial authority to independent officers or committees, rather than a Minister acting on the advice of independent officers or committees.
Rigour and integrity of ERF methods and projects
Greening Australia believes in the importance of a strong, robust and transparent market.
The focus on minimising the cost impact to business in reducing and offsetting emissions by governments has the potential to undermine the market by creating pathways that may do little to reduce/sequester carbon. It is important that the real costs of pollution are borne by industry and the full cost of carbon reduction and/or sequestration is paid.
The Environmental Planting Methodology provides appropriate rigour and integrity relating to carbon claims. The integrity of other methodologies is not something for Greening Australia to comment on, however criticisms of other methodologies have a significant knock-on effect for the wider market and therefore an impact on the Environmental Planting Methodology.
Co-benefits and other impacts
As outlined above, biodiverse carbon plantings produce significant benefits for biodiversity and the community. With less than one percent of Australia’s carbon market made up by native environmental plantings, Greening Australia’s 2022 aggregation is a significant step towards tackling the twin crises of climate change and biodiversity loss through a scalable market-based solution.
Environmental Planting ACCUs have a low market volume and higher in market price (compared to other units) and therefore service the voluntary (Net Zero / Carbon Neutral) market and not the compliance (Safeguard) market. If the co-benefits EP ACCUs generate were prioritised under the ERF they would grow in significance. Environmental plantings also provide the opportunity for landholder income generation and diversification.
Internationally other carbon schemes such as the Californian Air Resources ARB Offset Credit Issuance scheme provide a premium value to carbon projects that include co-benefits and this approach should be considered.
Consideration should be given to alignment of biodiversity co-benefits if they become a recognised prioritised category under the ERF, with the proposed National Biodiversity Market.
Greening Australia Ltd Tel: 1300 886 589 Email: info@greeningaustralia.org.au
ABN 40 002 963 788 Website: www.greeningaustralia.org.au
Relationship to voluntary Climate Active certification
The present arrangement, whereby all Climate Active carbon neutral certifications will be required to use a minimum of 20% ACCUs from 1 July 2023 is the preferred approach and is supported. We are aware of the current work by Climate Active considering an insetting approach to carbon accounting, which we broadly support, and should this eventuate we support a minimum proportion of ACCUs remaining as a principle of the Climate Active certification, regardless of the extent of domestic insetting.
Market access comments are covered above under Non-discriminatory market access.
Future
Improved reporting of projects under the ERF (similar to leading voluntary standards) to the project level would assist in providing more integrity to the market.
Thank you again for the opportunity to contribute to the Independent Review of ACCUs. Greening
Australia looks forward to ongoing engagement with the Review Panel as it progresses this work.
If you have questions regarding this submission, please do not hesitate to contact Greening Australia via Hugh Wareham E: hwareham@greeningaustralia.org.au or M: 0417 139 809.
Greening Australia
Greening Australia Ltd Tel: 1300 886 589 Email: info@greeningaustralia.org.au
ABN 40 002 963 788 Website: www.greeningaustralia.org.au
