Australia backs carbon credits, criticized for failing climate

(Bloomberg) — Australia’s carbon credit market will continue without a major overhaul after a government-backed study largely dismissed claims the system fails to deliver promised emissions reduction.

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A panel led by the country’s former chief scientist Ian Chubb on Monday proposed changes to boost transparency, governance and data sharing, though concluded the system was “essentially sound” and “fundamentally well-designed” when established in 2011.

Critics, including a former regulator, have questioned the role of the credits — largely generated by the land sector through sequestration projects — in abating greenhouse gases, and described the system as a fraud and a waste of taxpayer money.

“It has been argued that the level of abatement has been overstated,” Chubb said in a report, following the six-month study. “The panel does not share this view.”

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Australia’s government pledged to take up all 16 recommendations from the panel, including plans for greater division between regulatory and reporting roles, and the removal of new projects that rely on flawed methods to avoid deforestation. It also proposed that “human-induced regeneration” methods — such as native regrowth management projects — be subject to stricter regulation requiring more frequent publishing of data.

The Chubb-led review won’t help persuade polluters to reduce emissions rather than rely on credits, according to the Climate Council, a climate science advocacy group. “Cheap and easy offsets on paper do little to tackle the climate crisis,” said Jennifer Rayner, the council’s head of advocacy.

And while there may be “some positive support” for carbon credits following the government’s announcement, a sharp price jump is unlikely due to plentiful supplies in the forward market, according to a note from RepuTex, a provider of data and analysis.

It added that the Safeguard Mechanism — Australia’s key instrument for controlling emissions from large polluters — will have a more material impact on driving prices higher as industry players seek to secure offsets early to meet compliance requirements.

(Additional chart and comments from analysts comments in the last paragraphs.

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