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11 August 2022: The Climate Change Authority’s Review of International Offsets finds the international carbon market is still evolving in response to the Paris Agreement and calls for publication of a National Carbon Market Strategy that makes the most of this opportunity for Australia to accelerate ambition on emissions reduction.

The review finds that while carbon is priced and traded in Australia, the market is fragmented, inefficient and complicated.

Parts of the market that contribute to meeting Australia’s emissions reduction target, such as the Safeguard Mechanism, are isolated from the voluntary market used by companies and other organisations. And the voluntary market is largely remote from the high-quality, transparent emissions measurement systems that countries use in their national emissions inventories.

“It makes sense – and it is in Australia’s national interest – to play a leading role in the development of a liquid, high integrity and effective global carbon market,” said Climate Change Authority CEO Brad Archer.

“Bringing voluntary and compliance carbon markets together could help accelerate global decarbonisation and enhance the integrity of carbon offsets.”

The Authority is recommending the Government publish a National Carbon Market Strategy, including to:

• make Australia’s carbon price more visible, understandable, and certain, helping to embed decarbonisation in everyday decision-making;
• uphold the integrity of offsets – in both the ways they are generated and the ways they are used – to build confidence and trust in Australia’s approach; and
• clarify the role of domestic and international units in the mix of voluntary action and compliance mechanisms to help smooth and accelerate Australia’s decarbonisation.

In responding to the terms of reference, the Authority puts forward 18 recommendations for the Government to consider, relating to:

• the evolving rules for international carbon trading being put in place to achieve the goals set out in the Paris Agreement, the implications for compliance and voluntary action contributing to national emissions targets, and the opportunities presented to enhance the integrity of carbon offsets;
• setting out the Government’s strategy for the role of carbon markets in contributing to achieving Australia’s Nationally Determined Contribution (NDC) under the Paris Agreement; and
• the eligibility criteria for units accepted under Climate Active and the Indo-Pacific Carbon Offsets Scheme (IPCOS), including introducing a phase out of older units and reviewing others again by 2025.

“While achieving deep emissions reductions is critical, carbon offsets are an important and complementary part of the approach to reaching net zero emissions and beyond”, Mr Archer said.

“High integrity offsets allow nations and companies to set more ambitious targets and accelerate decarbonisation beyond what‘s achievable from direct emissions reductions.

“This is particularly the case for very hard-to-abate emissions. Offsets can help smooth the transition away from emissions intensive activities, and put the necessary ‘net’ in net zero emissions by 2050.

“Carbon markets also provide a means of channelling public and private finance to support our regional neighbours leapfrog the emissions-intensive economic development trajectories of industrialised nations.

“With Australia adopting a more ambitious 2030 emissions reduction target on the way to net zero emissions by 2050, we can turn our minds to how governments and businesses can collaborate to achieve those goals as soon as possible and ensure Australia’s future prosperity,” Mr Archer said.

“It’s important that offsets have integrity and that they are not double counted, for example. Our review of the criteria applied to international carbon offsets will provide confidence in the quality and integrity of carbon offsets being used here.”

Background

The Climate Change Authority’s Review of International Offsets responds to a request from the former Government to provide advice – in the context of the Paris Agreement rules – on the criteria that should be applied to international offsets under the Government’s Climate Active carbon neutral certification program, the Indo-Pacific Carbon Offsets Scheme, and for other uses.

Link to the Review of International Offsets report here

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The Climate Change Authority’s latest considerations in its Review of International Offsets are now available in the slide pack below.

The review will advise on the use of international carbon offsets in the context of the Paris Agreement, and in particular their use in Australia’s Climate Active(Opens in a new tab/window) and Indo-Pacific Carbon Offsets Scheme(Opens in a new tab/window).

The review follows agreement at the UN climate conference in Glasgow in 2021 (COP26) on the Article 6 rules for Paris Agreement carbon markets, and the increasing focus globally on implementation of emissions reduction targets.

In conducting this review, the Authority has engaged with stakeholders across governments, industry and advocacy groups while also undertaking its own research.

The Authority released a review consultation paper on 7 March, 2022 and considered the submissions received along with information provided at further consultations with stakeholders.

The Authority intends to submit its Review of International Offsets to the Minister Climate Change and Energy, Chris Bowen and publish it online by 31 July 2022. The Authority had originally indicated publication on 30 June 2022.

Review of International Offsets slides

Consultation

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The Climate Change Authority has today commenced public consultation (Opens in a new tab/window)on its review of the assessment principles for international offsets. The Authority has published a consultation paper (Opens in a new tab/window)and is inviting submissions from interested parties by 4 April 2022.

The Minister for Industry, Energy and Emissions Reduction, the Hon Angus Taylor MP (the Minister), has asked the Climate Change Authority to undertake a review of the principles and criteria to apply to assessing the use of international offsets under Commonwealth programs including Climate Active(Opens in a new tab/window) and Australia’s Indo-Pacific Carbon Offsets Scheme(Opens in a new tab/window) (IPCOS), in the context of the Paris Agreement. The resulting criteria may also have relevance to other policies and programs, and for accounting for Australia’s emission reduction targets.

“A review by the Climate Change Authority on emissions offsets is timely. International carbon markets are evolving rapidly and have the potential to reduce the cost of achieving emission reduction targets. However, their design must ensure they contribute to global decarbonisation efforts.” said CEO Brad Archer.

“The consultation paper released today gives interested parties the opportunity to provide their views on the criteria for accepting offsets for use in Climate Active and IPCOS.

“This review of the arrangements underpinning international offsets is important to ensuring that any offsets used in Australia represent real emissions reductions, make a genuine contribution to the goals of the Paris Agreement, and provide confidence in reported progress to emissions reduction targets by Australian companies,” Mr Archer said.

Responses to the consultation paper will inform the Authority’s final review report, which is due to be delivered to the Minister by 30 June 2022.

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The Minister for Industry, Energy and Emissions Reduction, the Hon Angus Taylor MP, has written to the Climate Change Authority requesting a review of the use of international carbon offsets in Australia in the context of the Paris Agreement. The request, made under section 59 of the Climate Change Authority Act 2011, seeks advice on the criteria for the future use of international offsets under Climate Active(Opens in a new tab/window) and for their creation and use under the Indo-Pacific Carbon Offset Scheme(Opens in a new tab/window).

Climate Active is an Australian Government program that provides a carbon neutral certification standard for use by businesses and organisations to demonstrate they have credibly reached net zero emissions. Climate Active supports Australian business to measure, reduce, and offset their carbon emissions.

The Indo-Pacific Carbon Offsets Scheme is an Australian-led initiative that aims to boost public and private investment in climate action and practical low-emissions projects in the Indo-Pacific region. The Australian Government intends to work with participating countries to generate and trade emissions offsets, ensuring high standards of environmental integrity and social and economic benefits for local communities.

The review is timely given the agreement reached at the international climate conference in Glasgow in November 2021 (COP26) on the ‘Article 6’ rules for Paris Agreement carbon markets, and the increasing focus globally on implementation of Paris Agreement targets.

As requested, the Authority will provide its advice by 30 June 2022. We anticipate commencing public consultation in March, with further details made available at that time. Please submit any questions to enquiries@climatechangeauthority.gov.au

Terms of reference [PDF(Opens in a new tab/window)]

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Net zero is the destination and data can light the way

Australia is committed to achieving net zero emissions by 2050. This is a massive undertaking for an emissions-intensive, trade-exposed economy and an opportunity that Australia is well-positioned to take. Governments, investors, businesses and communities all have a role to play in restructuring our economy to ensure Australia thrives in a net zero world.

The right data made widely available can show the way and steer us towards destination net zero. Climate data can show the physical risks we need to manage, emissions data can show us what needs to change; but only economic data can show us how regions, and the broader Australian economy, can best navigate this transition in terms of jobs, investment and trade.

The Climate Change Authority today releases its new Insights Paper Economic data for a decarbonising world, offering three key insights:

Zoom in, not out: Zooming out can help simplify information to guide investment and purchase decisions, but only granular data can help us understand and plan for the transformation of the economy. For example, the beef industry’s transition path could be better understood if we could zoom in on the broader ‘agriculture’ data bundle.

Bring datasets together: To make good decisions, businesses, governments and consumers need good information about the links between emissions, outputs and investment. Improving the alignment of economic, emissions and other data in a more detailed, comprehensive and timely way would be a sensible step.

Look ahead to plan ahead: As well as tracking economic impacts, economic data could yield insights about what might be to come for the economy. Electric vehicle import data and investment in low emissions research and development, for example, are leading indicators of emissions reductions to follow.

The Authority recommends that the Australian Government invest in the development of new economic data to help Australia identify and respond to the challenges and opportunities that lie ahead.

To accompany the release of Economic data for a decarbonising world, the Authority is publishing a supporting technical report by Accenture – Measuring the low-emissions economy in Australia – that considers how Australia could define and measure its ‘low emissions economy’.

CCA Insights Paper [PDF] [Word]

Accenture technical report [PDF]

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The Climate Change Authority and the Bureau of Meteorology have today entered into a Strategic Relationship Agreement to enhance and streamline the climate advice provided to Government.

Chief Executive of the Climate Change Authority Brad Archer welcomed the formalisation of the two organisations existing close working relationship.

“The data, analysis and advice we’ve received from the Bureau of Meteorology has helped us produce well-informed advice to Government. The ability to now seamlessly access the Bureau’s suite of data and insights will help us further as we produce the rigorous and independent advice required to help the Government ensure we reach net zero,” Mr Archer said.

The Bureau is Australia's national weather, climate and water agency. Through regular forecasts, warnings, monitoring and advice spanning the Australian region and Antarctic territory, the Bureau provides one of the most fundamental and widely used services of government. 

The Bureau of Meteorology, Geoscience Australia, CSIRO and Australian Bureau of Statistics have formed a partnership, the new Australian Climate Service, to bring the Commonwealth’s extensive climate and natural hazard information into a single national view.

The Climate Change Authority is Australia’s independent agency responsible for providing rigorous, independent and balanced advice to the Minister for Energy and Emissions Reduction and the Australian Parliament, to formulate climate policy and improve the quality of life for all Australians.

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An esteemed panel, comprised of Government, regulatory and corporate leaders from across the Asia Pacific, agreed on the need for a strong carbon trading system in a discussion hosted by the Climate Change Authority at the Australian Pavilion, COP26 in Glasgow.

With rules for the implementation(Opens in a new tab/window) of Article 6 of the Paris Agreement (relating to international carbon trading) currently being drafted at the Summit, the panel welcomed the establishment of an Indo Pacific Carbon Offset Scheme as a concrete way to help the globe, as well as individual nations, achieve net zero emissions.

Hosted by the Climate Change Authority Chair Grant King, panellists included senior representatives from the Governments of Papua New Guinea, Japan, the Republic of Korea and Australia together with the Chair of Australia’s Clean Energy Regulator and the CEO of Woodside Energy.

Australia’s recently announced agreements with Fiji(Opens in a new tab/window) and Papua New Guinea(Opens in a new tab/window) were welcomed by all participants.

Carbon offset trading schemes, provided they have strong integrity and transparency measures to ensure they are accounting for real abatement, were seen by all as having an important role to play in emissions reduction efforts. Such systems can produce benefits to both the country hosting abatement projects and the country or company funding them.

Speaking at the Australian Pavilion in Glasgow, The Hon Wera Mori MP, Minister for Environment, Conservation & Climate Change in Papua New Guinea, began the discussion by highlighting that the world has reached a state of emergency on climate change and the need for countries within the region to work together.

Shinichi Kihara, Deputy Director-General for Environmental Affairs, Ministry of Economy, Trade and Industry of Japan (METI) highlighted Japan’s strong commitments to achieving net zero. As a technology leader, he outlined Japan’s support for both domestic and international emissions reductions and the policies and funding instruments, including a 2 trillion yen (A$24 billion) Green Innovation Fund, they are implementing across the region and world.

Ms Minyoung Han, Deputy Director General, Ministry of Foreign Affairs and Trade, Republic of Korea outlined the emissions reductions ambitions of Korea as well as the status of several bilateral agreements being implemented, including with Vietnam and Peru, to trade in carbon offsets. Korea has had an emissions trading scheme since 2015 and its ambition is ultimately for regional and global carbon trading to be integrated with its domestic scheme. Ms Han stated that eventually nations will need to connect their carbon markets and that is why Article 6 is important.

James Larsen, Australia’s Climate Coordinator and Deputy Secretary at the Department of the Prime Minister and Cabinet, outlined Australia’s engagement with partners for high integrity elements and for emissions reductions that are real, permanent, conservatively measured and that provide real, positive impacts for communities.

The view that offset schemes need to be built on robust approaches to measurement, reporting and verification was strongly shared. All participants rejected the notion that carbon offsets trading was designed to replace domestic emissions reductions. The panel agreed emissions reduction at source is the “main game”, and because there are some emissions and processes that won’t be able to ever operate at absolute zero emissions, the goal of rapid global decarbonisation can be supported by the purchase of offsets.

Ensuring high levels of probity can be achieved through a range of bilateral, regional or global agreements – for example, from within the Indo Pacific carbon bubble framework as well the rules for Article 6. The panel was optimistic that the momentum towards net zero globally will result in a carbon trading architecture that provides the transparency, trust and integrity needed to ensure both efficient market function and social licence to operate.

David Parker AM, Chair of Australia’s Clean Energy Regulator, spoke of his organisation’s purpose as accelerating carbon abatement in Australia to net zero by 2050 with integrity. He noted that international cooperation can benefit all the parties, be a mechanism for transferring funds for the purposes of development, and reduce the costs of the transition.

Highlighting the panel’s commitment to real emissions reductions, David Parker stated that a tonne of emissions genuinely reduced is a tonne regardless of how and where those emissions are reduced. Ultimately if the goal is emissions reduction then we should be seeking the most immediate, effective and efficient reductions possible.

Mr Parker spoke of the growth of 20 per cent per annum in Australia’s carbon trading market, and a trend emerging whereby buyers are discerning between offsets with different characteristics – an example being higher prices going to emissions reduction units such as savanna burning, which has benefits to local Aboriginal people as well as environmental benefits. This trend signals a market growing in maturity and sophistication.

Woodside Energy CEO Meg O’Neill indicated that high quality credits that can be correctly accounted for internationally is a real business opportunity that companies are interested in. She noted that Woodside customers are currently seeking to purchase LNG with carbon credits included to cover the emissions produced when used. However, these are not yet able to be accounted for in the domestic emissions trading or accounting systems of their customers.

The panel identified a need for more in-depth exploration of issues relating to the fungibility, harmonisation and connection of carbon trading schemes. Article 6, which is about voluntary collaboration, can provides a vehicle for carbon clubs to emerge, bringing together countries with likeminded institutions. An Indo Pacific carbon bubble is one such grouping which could form rules that promote the emergence of a deep and liquid, high-integrity global carbon offset market.

A recording of the panel discussion is available for download here(Opens in a new tab/window).

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The need for strong ambition, global action, transparency, integrity and the commercialisation of early-stage emissions reductions technologies. These were the themes from a virtual panel hosted at the Australian Pavilion at COP26, by Climate Change Authority Chair Grant King, last night (AEDT). Following on from the Authority’s recent papers: Paris Plus: From cost to competitive advantage, and Trade and investment trends in a decarbonising world, the Authority brought together the perspectives of the Reserve Bank of Australia, business and investors, with Climate Change Authority CEO, Brad Archer.

Mr Archer set the scene for the panel focusing on the extent of emissions embedded throughout the Australian economy. Almost 40 per cent of Australia’s domestic emissions are generated through production of exports, yet the fossil fuels purchased and burnt overseas produce three times as high emissions as those generated within Australia. We are also carbon exposed as a net importer of investment, with more than a third of net direct investment in Australia being in the mining sector. 

Guy Debelle, Deputy Governor of the Reserve Bank of Australia, discussed the macro risks of climate change including both the physical risks to the country and the risks of transition, especially the impact of our major trading partners moving quickly to net zero emissions. He highlighted how there is an early mover advantage and that Australia has significant opportunities to remain an energy exporter, but this will need to be in renewable energy.

In speaking of the cost to local communities of the impacts of transition, he highlighted that those regions where costs may be borne, such as coal mining communities, can be areas where the opportunities are greatest. He cited Port Augusta as an example, which has moved effectively into renewables from an emissions intensive base.

On the opportunities side, he opened the conversation to the need for information and transparency around emissions. In particular, the use of the guide from the Task Force on Climate-Related Financial Disclosures (TCFD) as the most appropriate way to disclose climate risk, noting the speed with which it is being brought into global accounting standards.

Jennifer Westacott AO, CEO of the Business Council of Australia, spoke of the increase in momentum and the level of ambition across industry. She spoke to the Business Council of Australia’s recent report, based on consultation with 70 of Australia’s top companies, which urges a more ambitious 2030 emissions reduction target of between 46 to 50 per cent below 2005 levels.

The two challenges she sees for Australia are to decarbonise our domestic economy, and to grow exports. Ms Westacott sees good news for Australia with reports that we can scale up investment and production in areas currently highly emissions intensive. As an example, Tesla has indicated it will move to purchase $1 billion a year in Australia’s rare earth minerals. She also quoted the Grattan Institute’s estimate that the revenue for rare earths could be 2.5 times the value of coal today.

Stephen Fitzgerald AO, Chairman and Founding Partner of Affirmative Investment Management, highlighted the extent to which the finance sector has a critical role to play and has accelerated its focus through organs like the United Nations Principles for Responsible Investment. With such strong momentum he reflected that Governments that lack ambition, or the metrics required to participate in such investment, will be excluded from one of the biggest opportunities in debt and equity in our lifetime – $120 trillion.

The impact bond market saw $1 trillion in new issuances in 2020-21, with the recent Spanish green bond 12 times oversubscribed, and the UK’s inaugural Green Gilt, just closed, was the most subscribed ever in its class.

He stated that investment flow will see increasing benefits for low emissions companies from higher market share and more sustainable business models. Companies need to set net zero targets and set a plan on how to decarbonise, including scope 3 emissions, and through practical metrics such as by linking remuneration to carbon reduction.

In conversation, Grant King opened by asking how can we attract more funding for early stage research and development in low emissions technologies in Australia. The panel noted longstanding challenges with early stage R&D, but highlighted the intense appetite for low emissions investment opportunities. We need to ensure all parts of the R&D ecosystem, from early stage through to commercialisation, are working well together, and engage with companies with high ambition in hard-to-abate sectors which is where much of the innovation will come from. The funding mechanisms of the Australian Renewable Energy Agency and the Clean Energy Finance Corporation were raised as entities that can be leveraged for investments beyond the energy sector. The risks of public investment displacing private investment were raised, with the suggestion that governments should remain focused on funding early-stage technologies that aren’t currently commercially viable.

The discussions closed around the importance of upholding the integrity of carbon offsets, the need for accurate and consistent emissions measurement and the risks of greenwashing for environmental outcomes and corporate reputations. More work needs to be done on the development of taxonomies to guide sustainable investment in Australia, a challenging area given the need to achieve consistency with international approaches while tailoring them to Australia’s circumstances. 

The panel recognised the substantial magnitude of the challenges, but were united in their view that the opportunities for Australia in a net zero world are substantial and are only growing. 

A recording of the panel discussion is available for download here(Opens in a new tab/window).

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The Climate Change Authority, on the opening day of the COP26 climate summit in Glasgow, has joined climate councils around the world in announcing a new collaboration: the International Climate Councils Network (ICCN).

“As an Authority that has been providing independent advice since our establishment in 2012, we are pleased to join with a range of similar organisations around the world as we seek, within our jurisdictions and collaboratively across nations, to advise on reducing global emissions,” said Brad Archer, CEO, Climate Change Authority.

Participants in the ICCN provide evidence-based, expert advice and assessments to guide the delivery of effective Government-led action to reduce emissions and adapt to the impacts of climate change.  

“Australia has world class infrastructure that can be leveraged as part of the support we offer other nations. It comprises the various bodies that regulate, invest in, report against, and advise Government on climate change. They include the Emissions Reduction Fund/Climate Solutions Fund architecture, the Clean Energy Finance Corporation and the Australian Renewable Energy Agency, the National Greenhouse and Energy Reporting scheme, and the Clean Energy Regulator,” Mr Archer said.

Bringing together expertise on how to close the emissions and adaptation gaps, including by acting as focal points for consultation, ICCN Councils offer evidence-based analysis and advice in support of climate change action.

The open letter(Opens in a new tab/window), signed by Mr Archer on behalf of the Climate Change Authority, calls on governments who have not yet adopted the model of expert independent advisory climate bodies into their national climate change laws to do so; with ICCN members ready to assist and advise based on our collective experiences.

The ICCN is the first of its kind, with the Climate Change Authority joining climate councils from Chile and Costa Rica to Canada in the Americas to Sweden, Finland and the United Kingdom in Europe, to South Africa, and New Zealand, among others. A short video introducing the ICCN can be viewed here.(Opens in a new tab/window) 

For more information and to register for the Climate Change Authority’s livestreamed events at COP26, visit: /news/climate-change-authoritys-cop26-events.

Media Release [PDF] [Word]

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The Climate Change Authority today releases a new research report examining the reorientation in trade and investment that is underway globally as governments, regulators and markets begin transitioning to net zero emissions, and considers what these trends mean for Australia.

‘Trade and investment trends in a decarbonising world’, which is being launched with a panel discussion at COP26 in Glasgow, seeks to add context and clarity as Australian policy makers, companies and investors take steps to address climate change.

The report underpins the Authority’s Paris Plus: From cost to competitive advantage insights paper, and comprises three parts:

• Investment and finance,
• International trade and climate policy, and
• Challenges and opportunities for Australia.

The Authority is also releasing the Paris Plus: Summary presentation. This outlines at a high level the drivers of the low emissions transition and key insights to help build Australia’s competitive advantage in a net zero world.

The Climate Change Authority panel discussion at the Australia Pavilion at COP26 takes place on Wednesday 3 November, 8:00-9:00pm AEDT (Syd/Melb/CBR); 9:00-10:00am GMT (Glasgow). Further information: https://events.humanitix.com/climate-change-authority-at-cop26-australia-pavilion(Opens in a new tab/window)

Research report [PDF]

Summary presentation [PDF]

Media Release [PDF] [Word]

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