March 2023


The great stock ’n’ coal swindle

By Nick Feik
Image of a coal terminal, south of Mackay, Queensland, with coal ships lined up in distance

Coal terminal south of Mackay, Queensland. © OZSHOTZ / Alamy Stock Photo

Australian climate policy has been reverse-engineered to protect the interests of the fossil-fuel industry

When the Albanese government was elected, it was widely proclaimed that climate policy was finally back on track in Australia. Eight bleak years of Coalition denialism and intransigence had been punished by the voting public; a responsible government was back in charge with a mandate for climate action, and its ambitions were broadcast loud and clear. An emissions target was promptly legislated, commitments were made for renewable energy projects around the country and a review of previous climate policies began. After two decades of arguments and excuses (“We’ll act when other countries act”, “We’re happy to act, but not if it means moving ahead of everyone else”, “We will meet and beat our targets”, “Our coal is cleaner” et cetera), Australia would finally play its part in reducing global emissions. It was full steam ahead for “net zero by 2050”.

Not quite. Just hours after she was sworn in as the new resources minister, Madeleine King announced the government’s strong support for Woodside’s massive new Scarborough gas project. Then, in the government’s first Senate estimates sitting, a spokesperson for the Department of the Prime Minister and Cabinet was asked about Australia’s ambitions: did the new government seek to increase production and export as much gas as possible? “Yes, we want all of it. We want more gas and we want it to be affordable. We also want to ensure that we continue to have, or continue to be one of the world’s leading, if not the leading, exporters of LNG.”

New coal and gas fields are clearly incompatible with an ambition to reduce global emissions. The notion that gas is a “transitional” fuel is a piece of rhetoric that belongs in the bin alongside “clean coal”. The carbon bombs of Scarborough, Carmichael, the Beetaloo Basin, Liverpool Plains and more than a hundred other proposed coal and gas projects – which will pump carbon dioxide and methane into the atmosphere for decades at a rate that dwarfs Australia’s current national emissions – are transitional only in the sense that you might transition away from a buffet via a larger helping from the dessert table.

So how is “net zero by 2050” consistent with opening new, larger fossil-fuel plants? Australia’s answer lies in an ingenious suite of “emissions reduction” policies first instituted by the Coalition government and since pursued by Labor: net zero isn’t zero, Australian-sourced coal and gas emissions aren’t counted towards Australian targets, and an apparatus of complex financial instruments – known as offsets – renders the entire edifice incomprehensible to most of us. What these policies protect the public from is the knowledge that Australian climate policy has been reverse-engineered to protect the interests of the fossil-fuel industry.

The rapid adoption of “net zero by 2050” targets is not simply a reflection of long-overdue commitments by governments and corporations to do the right thing. While it is admirable that a growing number of governments and nearly half of Australia’s ASX200 companies have voluntary “net zero” commitments, there’s an obvious problem when these targets are being adopted by the likes of Woodside and Shell, who are meanwhile expanding their fossil-fuel operations. Intrinsic to almost all “net zero” commitments are two key factors: only a subset of emissions will be counted, and any emissions can be offset.

Offsets have been linked with fossil-fuel expansion for more than 30 years. The first carbon offset program, created in 1989, was an agri-forest project in Guatemala set up by an American energy company to offset the emissions of its new coal-fired power plant in Connecticut. The project failed to offset the emissions from the power plant by a factor of approximately 50, by one account causing “land use conflicts, struggles for control over scarce forest, and legal changes that criminalised subsistence activities such as fuel wood gathering [that] undermined local farmer participation”. For all its good intentions, it was the perfect example of what offsets would become. Instead of reducing or abating emissions it justified them, while also creating a different suite of problems.

Improvements in the scientific modelling of climate change throughout the 1990s and 2000s showed that countries’ energy efficiency and emissions reduction efforts were failing to hit targets. They also indicated that greenhouse gases would need to be drawn down too – decreasing gases already in the atmosphere – if emissions weren’t cut fast enough. This unwitting realisation was manna from heaven both for governments struggling to cut emissions and for fossil-fuel companies: models could be constructed to show how drawn-down emissions could offset any failures to meet reduction targets. And there was no end to the potential of these models! Anything could be modelled. As a result, carbon capture and storage became all the rage for two decades, until it failed every time. And then came carbon farming. Planting trees and restoring soil to save the planet – what’s not to love?

The problem is not, of course, with using nature to help draw down carbon. It is when the main purpose of the activity becomes making money, and the tree-planting part becomes incidental (if not irrelevant or hypothetical) while still justifying growing greenhouse gas emissions. Carbon credits can be commercialised, made into financial instruments, and repackaged and resold. So farmers and other land and title holders have a new revenue source, the markets love it, the big polluters invest, and governments can celebrate the whole merry-go-round by paying off chosen constituents while boasting of their green credentials. Even environmental groups have bought in.

Due to the difficulty of calculating and regulating carbon-abatement programs, and the fact that trees cannot store carbon as permanently as coal, and that every credit justifies further fossil-fuel use, as well as myriad other greenwashing reasons, the United Nations and every scientific organisation worth its name have explicitly warned against relying on offsets to do the heavy lifting of emissions abatement. The practice of offsetting, even according to the federal government and industry, should be a last resort. First we should be avoiding, reducing and substituting fossil fuels. Some uses of fossil fuels are virtually unavoidable; most are not. Yet carbon offsetting has become the main game in many global climate-change mitigation efforts, including in Australia.

As the international carbon-credits market booms, estimates of its worth in coming years range into the many trillions. Every dollar spent pursuing it will be a dollar not spent on cutting emissions, and it will justify continued fossil-fuel use.

Academics have warned that there aren’t enough trees or arable regions in the world to offset growing emissions, and there never will be. “The Land Gap Report”, which was co-published in November by the University of Melbourne and included input from more than 20 international researchers, looked into the land-use pledges built into all countries’ climate commitments. It found that they would require the use of almost 1.2 billion hectares of land – almost the equivalent of the current total global land area used for crops.

Furthermore, how do we use land for carbon abatement without harming local populations or fragile ecosystems? How do we plant the right trees in the right places, and make sure they grow for decades and aren’t affected themselves by climate changes (or bushfires)? This needs to be done equitably, too. Yet these things are all secondary concerns, to put it politely, for international financiers and fossil-fuel company directors. In fact, the abatement of carbon is itself secondary in the creation of carbon credits.

In January, The Guardian reported that more than 90 per cent of offsets certified by the world’s biggest carbon standard body, Verra, were likely to be “phantom credits”. A nine-month investigation into Verra’s rainforest credit certification found it did not represent genuine carbon reductions. Verra “approves three-quarters of all voluntary offsets [globally] … and its rainforest protection programme makes up 40 per cent of the credits it approves”.

The investigation also revealed that Shell, one of the five largest oil companies in the world, had set aside $450 million for carbon offsetting projects, and that at least three Shell staff sit on advisory groups for Verra. (Shell is also the owner of an Australian firm, Select Carbon, which has 70 carbon farming projects across Australia.)

Verra is not involved in underpinning Australia’s legislated carbon offsets, but Verra-certified credits are nevertheless approved by Climate Active, the government initiative steering “an ongoing partnership” with Australian businesses “to drive voluntary climate action” by endorsing and approving corporate emissions reduction plans and claims. Polly Hemming, formerly of Climate Active and now at The Australia Institute, has a sharper description for operations like this: “state-sponsored green-washing”. Using Verra-certified credits (and others approved but also not checked by Climate Active), member companies such as AGL, Ampol, Alinta, Qantas, EnergyAustralia, Origin and Tokyo Gas have been able to make spurious “carbon neutral” claims using near-useless credits. All with the active support of successive federal governments, because carbon credits are what the “net zero” edifice is built on.

Whereas Australia once had an economy-wide price on carbon, courtesy of the Gillard government, now it has only an Emissions Reduction Fund and a Safeguard Mechanism, which applies to facilities that produce 100,000 tonnes or more of CO2-equivalent emissions a year – currently around 215 facilities but likely to rise. The former was established in 2014 as an expansion of prime minister Tony Abbott’s “direct action” policy. The latter, which came into effect in 2016, established a threshold for when companies had to buy carbon credits to offset emissions. The underlying principles of the Emissions Reduction Fund and Safeguard Mechanism are now ensconced as the only legislated national emissions reduction policy (not counting the emissions target, which is little more than an empty box with “43 per cent” written on the side).

The rise and rise of carbon credits as an emissions “reduction” scheme in Australia echoes developments abroad, but our system has been forged in instructive, significant ways. More than anything else, it reflects the hold that the resources industry has over our political system. Australia’s version emerged under a Coalition government that had little interest in reducing emissions. It created the market but was unscrupulous in its regulation, of both carbon credits themselves and the requirement to use them. One tonne of greenhouse gas emissions could be “abated” through the purchase of one Australian Carbon Credit Unit (ACCU), the official currency for Australian offsets.

The original Safeguard Mechanism was so badly designed that emissions by the major polluters weren’t constrained at all. (Or perhaps it was working as intended.) Emissions by the major polluters went up under it. More significantly, if polluters did happen to have emissions reduction obligations at all, they were allowed to use as many offsets as they wished, and the government designed a system in which ACCUs could be created as cheaply as possible, using as many methods as possible. These methods (tree planting, land-use changes, landfill gas burning, among many others) were often co-designed with industry stakeholders, and the agency responsible for regulating the credits and overseeing their probity, the Clean Energy Regulator, was also tasked with issuing as many permits as possible, as cheaply as possible. It was tasked with buying them back on behalf of the government as cheaply as possible too – a hopelessly conflicted set of responsibilities. The regulator also became a member and financial supporter of its own industry lobby group, the Carbon Market Institute, whose mission is “to help business manage the risks and capitalise on opportunities in the climate transition to a net zero emission economy”. The institute includes such members as AGL, Ampol, Anglo American, BP, Origin, Shell and Woodside.

Alongside the regulator, the Emissions Reduction Assurance Committee – the independent statutory body that assesses the compliance of offset methods – was stacked with the following people: David Byers, former chief executive of the Australian Petroleum Production and Exploration Association and carbon capture lobby group CO2CRC, and former deputy of the Minerals Council of Australia; Margie Thomson, chief executive of the Cement Industry Federation (one of Australia’s largest polluting industries); and Brian Fisher, long-time lobbyist for fossil-fuel interests, campaigner against strong government action on climate change, and author of the report for the Morrison government that claimed Labor’s modest 2019 climate policy would be a “wrecking ball” through the economy.

A handful of private companies now dominate the Australian carbon-credits market and they are increasingly influenced by fossil-fuel interests. In fact, all of the largest carbon aggregators dealing in the carbon-credits market are now either part-owned by companies with major gas interests or count ex-resources executives as directors and/or major shareholders. (The incentive for big polluters is obvious: if required by law to abate or offset emissions, why not find a way to profit from it?)

Worse, there is little incentive for the carbon-credit industry to produce a product (i.e. abatement) of any actual worth: the credits’ creators, traders and buyers have no genuine stake in the integrity of the credits. Polluters just need the piece of paper, farmers and traders want the cash and the government needs to meet its targets. Together, they have created a perfect, frictionless profit machine.

And, as the saying goes, the fish rots from the head: the chair of the Climate Change Authority (CCA), whose task is to provide independent advice to the government on climate policy, is also the chair of GreenCollar, the largest carbon-credits aggregator in Australia. Grant King is the former head of Origin Energy, former director of the Australian Petroleum Production and Exploration Association, former chair of the Energy Supply Association of Australia and former president of the Australian Gas Association, and is also on the board of GreenCollar’s parent company, Green Climate Co. This company, which King owns shares in, is also the ultimate owner of a share of the biggest soil-carbon credit trader in Australia, AgriProve. And AgriProve is linked by ownership with other major aggregator, Corporate Carbon.

The deputy chair of the CCA, Susie Smith, was a long-time manager at gas company Santos and is now chief executive of the Australian Industry Greenhouse Network, a lobby group for the fossil-fuel industry that appears to recognise the need for action on climate change but has been largely unsupportive of specific climate policies. (Although it does support “net-zero” policies!)

Another CCA board member with carbon-trading interests – but not the only other one – is Mark Lewis, director and a shareholder in Australian Integrated Carbon, which is part-owned by Japanese companies Mitsubishi and Osaka Gas, shareholders in large Australian gas projects.

How has all this worked out for the integrity of Australian carbon credits? As you might expect.

In March last year, an Australian National University research team, headed by professors Don Butler and Andrew Macintosh (who was also the former chair of the Emissions Reduction Assurance Committee), raised serious concerns about the Australian carbon credits scheme. In a series of papers, the team outlined systemic flaws in the way credits were issued, finding serious governance problems, and revealed that a large number of low integrity credits were wasting billions of taxpayer dollars: “Our analysis focused on three of the fund’s most popular methods – avoiding deforestation, human-induced regeneration of native forests and combusting methane from landfills. These account for 75% of the credits issued under the scheme. We found that more than 70% of the credits issued under these methods do not represent genuine emissions abatement.”

The ANU team’s analysis, which has since been echoed by other organisations including the Wentworth Group of Concerned Scientists and CSIRO, found that the scheme was flawed from the outset. The “human-induced regeneration” method, for example, allocates carbon credits for projects that remove vegetation “suppressors” (such as cattle and weeds) from land to allow the return of native forest. The analysis found that this method is likely allowing credits to be issued for areas that were already covered in mature trees and shrubs; what’s more, it appeared to be crediting abatement for the return of forest cover that was in fact driven by rainfall. Further research found that in areas where millions of carbon credits had been allocated to projects to store carbon, the overall tree and shrub cover had actually declined.

The “landfill gas” method issues carbon credits to projects that capture methane emitted from landfill sites and combust it using either a flare or an electricity generator. The ANU team found that two-thirds of the abatement credited under this method would have occurred anyway: landfill gas companies were already doing it. This “non-additional” abatement earnt “approximately 19.5 million Australian carbon credit units (ACCUs), or almost 20% of the total number of ACCUs issued under the ERF to the end of 2021”. Even companies making money from the scheme issued a statement drawing attention to the ridiculousness of the situation. The Clean Energy Regulator, on the other hand, continued to defend the integrity of the system.

The “avoided deforestation method” issues credits to projects for not clearing specific areas of forest predominantly in western New South Wales that could theoretically otherwise be cleared (i.e. that were eligible to be cleared under a particular type of permit). Analysis by The Australia Institute of historical clearing rates in these areas demonstrated it would have implied a land-clearing rate at least 750 per cent higher than the already high historical state average. Put simply, the avoided deforestation method awarded credits for not clearing land that was never going to be cleared, because a bunch of enterprising carbon aggregators convinced a bunch of farmers to attest that they were going to clear their land, but now they weren’t. That is, they were rewarded for doing nothing.

Farmers and other landholders can count the hectares of land on which they don’t cut down trees, but no one’s handing them a debit if they do. One farmer told ABC’s Background Briefing that he was using the profit he gained from moving cattle off one piece of land to buy and clear another piece of land next door. Unsurprisingly, land-clearing rates have risen to record highs in Queensland over the past five years.

Everyone thinks carbon credits are about trees being planted, but this activity in fact represents just 2.5 per cent of all credits issued by the government, according to Andrew Macintosh and the official ERF register. The vast, vast majority of credits created are perversions (or cheats) of officially approved methods. This is the natural consequence of the architecture of the system. The government asks carbon traders to deliver credits at the lowest possible price. And what’s the cheapest way to deliver something? By doing nothing at all.

Last year, amid rising criticisms of the original Safeguard Mechanism and the carbon credits system, the new minister for climate change and energy, Chris Bowen, announced a re-evaluation of both. The Safeguard Mechanism would be tightened, and Professor Ian Chubb, a respected academic and former chief scientist, was appointed to run an independent review of the controversial carbon credits scheme.

This re-evaluation was long overdue, and would tell us once and for all how the new government really intended to approach climate policy, beyond the aspirational “net zero” rhetoric and the push for more renewable energy. During its final year in Opposition, Albanese’s Labor Party had played a sensible, if overly safe, game on the climate issue, not wanting to alarm the business community but also offering the public a point of difference from a Coalition government now recognised as wilfully negligent.

The fact that Australia’s second- and third-largest exports, coal and gas, were critical contributors to the global climate crisis was an inconvenience that Bowen, Albanese and colleagues could ill afford to discuss. So, with great diligence and discipline, they responded to every campaign-trail question about climate change by pivoting, unfailingly, to renewable energy and Labor’s plan for net zero, skating over the fact that climate-change mitigation also requires that fossil-fuel extraction (and exportation) be rapidly reduced, which they never intended to do.

The draft of the new safeguard legislation was released before the Chubb review was even due to report, and, as under the Coalition, its conception of mitigating emissions rested heavily of the use of offsets. In fact, while the big polluters would theoretically need to reduce their emissions by 4.9 per cent per year until 2030, the “reduction” could still be done entirely through offsets. This would, after all, be the cheapest way to meet their targets. Just how seriously was the Albanese government planning to review the integrity of its offsets if its entire climate policy framework rested on them?

Bowen also attended industry events while the review was taking place, talking up the importance of carbon credits and encouraging participation in the market. Of the three other members appointed to the Chubb review panel, two were linked to companies that profited from current carbon offsetting arrangements, another was touting the potential of carbon credits on behalf of her investment fund, and the review’s secretariat staff had been seconded from agencies responsible for the original design of the credits.

The Chubb review was released in early January and found, as its critics predicted, that the whole system was essentially sound. “In recent times,” the review said, “the integrity of the scheme has been called into question – it has been argued that the level of abatement has been overstated, that ACCUs are therefore not what they are meant to be, so that the policy is not effective. The Panel does not share this view… The Panel concludes that the scheme was fundamentally well-designed when introduced.” As also predicted, it proposed some small changes “to improve the scheme: to clarify intention where necessary; to clearly identify (and separate) the key roles of integrity assurance, regulation and administration; to remove unnecessary restrictions on data sharing; to enable free prior and informed consent; and to improve information and incentives”.

Just a few tweaks. Please move along now.

Even though problems had been identified, all existing credits would be honoured, and while the “avoided deforestation method” was recommended to cease (for reasons relating to the age and limited remaining number of land-clearing permits in the relevant land areas), the tens of millions of existing credits generated under this method would continue to generate offsets.

It’s difficult to understand how the Chubb panel had reached its conclusions because it didn’t provide evidence to support them, or much detail or analysis at all. To inform its considerations, it had commissioned the Australian Academy of Science to review the various credit-generating methods. Yet there was no sign Chubb’s panel had even considered the resultant findings, which, as it turned out, were very critical. In one strange paragraph, the Chubb review cites the criticisms levelled at the scheme, but rejects them as follows: “While the Panel was provided with some evidence supporting that position, it was also provided with evidence to the contrary.” And that’s it. What was that contrary evidence? You’ll just have to take their word that it was convincing.

This, of course, has been the problem all along: carbon credits are complex. The measurements and calculations are difficult, it all requires great expertise, time and investment, and it’s essentially something that only experts can truly understand. One needs to be both an accountant and a scientific specialist, with a sideline in environmental policy, who is happy to spend many hours wading through applications, studying methodologies and algorithms, and measuring and reporting one’s findings. The system is dominated by a few well-connected players. They conclude; we believe. And did I mention it’s all very complex, and quite boring? If you’ve made it to this point in the essay I have already partially succeeded, because the fundamental point of the system’s complexity is to disengage and obfuscate.

So let’s look at a case study to see how the proposed Safeguard Mechanism would affect Woodside and its major new project, taking into consideration the tweaks to the carbon-credit scheme that will be introduced as a result of the Chubb review. Let’s see how these new and improved versions of the policies are likely to affect future emissions.

With the support of both current and former federal governments, Woodside is developing its Scarborough project, an offshore gas field on the Pilbara coast in Western Australia, and expanding the associated Pluto LNG processing plant onshore near Karratha. If it all proceeds, the combined greenhouse emissions from the Scarborough/Pluto development will total approximately 1.4 billion tonnes over the estimated 25-year lifetime of the project. This figure includes both direct and indirect emissions. That is, both “scope 1” emissions from the extraction, processing and transport of the gas by Woodside, and “scope 3” emissions from the burning of that LNG by those who purchase it.

As pointed out by Bill Hare, a climate scientist and member of a UN expert group on net-zero commitments, 1.4 billion tonnes is more than three times Australia’s current annual emissions. From a single new development. (And remember, Australia has more than 100 new gas and coal projects in the development pipeline.)

How will this be manageable under Labor’s new Safeguard Mechanism? The law will still require companies to count only their scope 1 emissions, which in the case of gas projects typically comprise just 10 per cent of total emissions. For the Scarborough project, this equates to around 3 million tonnes. And Woodside can buy offsets to cover its emissions reduction obligations, which in the project’s first year of operations would equate to 4.9 per cent of its scope 1 emissions: 147,000 tonnes. In other words, just half a percent of the total annual emissions.

At today’s prices, this would cost roughly $5 million. In truth, it probably won’t even cost that because the government has already flagged “flexible compliance arrangements” and “tailored treatment for emissions intensive, trade-exposed facilities”, and has offered an initial $600 million of taxpayer funds from the $1.9 billion “Powering the Regions” fund to subsidise companies’ costs in cutting emissions. And also because Woodside has been accumulating carbon credits over the past few years, presumably whenever prices were low.

In fact, Woodside chief executive Meg O’Neill recently announced that the company has already acquired nearly all the carbon offset credits it needs for its 2030 emissions reduction target, meaning it has already covered the cost of business as usual, and has no need to actually reduce its emissions.

Of course it’s not reducing emissions; it’s a fossil-fuel company that is actively expanding its operations, with the encouragement of the government.

The Safeguard Mechanism aims to deliver a total (for the 215 major polluters) of 205 million tonnes of greenhouse-gas abatement by 2030. This, averaged out, is less per year than Scarborough alone will add to the atmosphere. And if the 215 largest polluters covered by the mechanism wish to achieve such “abatement” entirely by buying offsets, at current prices and averaged over the years to 2030, this would cost approximately $900 million per year – between all 215 of them.

If you think that sounds like a heavy impost, consider this: the federal government currently subsidises fossil fuels to the value of $11 billion per year. It has also promised $1.9 billion to the Northern Territory’s Middle Arm Petrochemicals plant, which will convert fracked gas from the Beetaloo Basin. Consider too, as recently pointed out by energy and financial analyst Tim Buckley, that the fossil-fuel corporations operating in Australia (a subset of the 215 major emitters) made $120 to $140 billion gross profit last year on exports of Australian LNG and coal.

The Safeguard Mechanism, in both its existing and proposed forms, will only safeguard corporate profits and provide “certainty” for fossil-fuel companies to continue to expand, without reducing real emissions, for the foreseeable future. The relief from heavy industry when the draft Safeguard Mechanism bill was released in January was palpable.

Because, as Greens senator Mehreen Faruqi put it, “Buying offsets is just coins down the back of the couch for them.”

Over time, the pressure of 4.9 per cent emissions abatement each year will become a more significant financial penalty, even if it is only done via cheap offsets. One danger, apart from the obvious one that heavy polluters will continue to heavily pollute, is that any future government could loosen the law again. After all, the policy only runs until 2030. Another is that the international community may twig to the fact that Australia is gaming the system and justifiably impose a carbon-border adjustment tax on our exports. But, in the meantime, offsets are here to stay – if the Albanese government can get its legislation through parliament. And this is where things will become interesting.

Opposition Leader Peter Dutton has already flagged the Coalition’s disapproval, so the government will likely need the combined votes of the Greens and two other senators (such as Lidia Thorpe, who has indicated she will vote with the Greens on climate bills, and David Pocock).

The old catch-cries have already emerged: the Greens mustn’t let “the perfect be the enemy of the good”, and the independent senators will “need to be realistic about not getting everything they want”, and all the rest. Both the Greens and Pocock have already indicated their strong opposition to any new coal or gas projects, and to the unlimited use of offsets to achieve abatement goals – and they will fight for amendments that limit their use. Their central point is eminently reasonable: the growing market for carbon offsets is not producing lower emissions.

Another difficulty the Greens and Senator Pocock face in convincing both the government and the public to reduce the use of carbon offsets, is that they are doing so in the face of a policy environment dominated by investors in environmental markets.

The slow creep of resources companies ­and their executives into carbon-trading businesses in Australia has been accompanied by the incursion of other carbon-credit investors onto the boards of not just the Climate Change Authority but also the Australian Renewable Energy Agency and Clean Energy Finance Corporation, promoting investment in each other’s businesses.

In another twist, many of Australia’s biggest environmental organisations also have countless links to the carbon markets: WWF Australia’s president is Martijn Wilder, the founder and chief executive of Pollination, which has a commercial interest in carbon trading; Australian Conservation Foundation’s former chairs, executives and directors include Don Henry (Natural Carbon), John Connor (Carbon Market Institute) and Mara Bun (GreenCollar); and The Nature Conservancy, Bush Heritage Australia, Australian Wildlife Conservancy, Pew and Greening Australia have all been involved in carbon-offset projects. This is not to imply any wrongdoing on their part, only that it has had the effect of quieting criticism of offsets generally.

Many former environmental policymakers and departmental staff members have moved into carbon trading and related environmental advisory firms, and major financiers and private equity players, led by the likes of Macquarie and HSBC, have come to see environmental offsets and other related derivatives as a new investment class: “natural assets”.

This in turn has yielded entities such as Xpansiv, a global-trading platform for environmental assets, which was born out of Australian firm CBL Markets in 2019. Xpansiv lets investors trade digital assets such as renewable-energy credits and it “executes at least 90% of all exchange-traded voluntary carbon credit transactions globally”. It is valued at around $1.8 billion and backers include Macquarie Group, Occidental Petroleum and BP Ventures.

Former Treasury secretary Ken Henry is working with a private venture called Accounting for Nature, which aims to build “the world’s most scientifically credible and trusted environmental accounting standard” in order to open “new markets for natural capital … Our vision will be achieved when every farm, every conservation reserve, every fishery, every forest, every region, every nation has access to an affordable, scientifically robust way of measuring, verifying and certifying changes in the condition of environmental assets.” That’s right: to incorporate every living thing into the market.

Environment Minister Tanya Plibersek recently called for a “Green Wall Street”, and has been busily planning a biodiversity offsets market, in which every endangered species of flora and fauna will be protected not by regulation but by a price on its head. This should be the subject of a whole other investigation because it’s entirely unclear how a market of financial instruments designed similarly to Catholic “indulgences” (in this case, for property developers and miners paying for their sins) could possibly save fragile ecologies.

Having said that, perhaps we should be relieved that big money is moving into environmental action. Everything is driven by the market now anyway, right? Why fight it?

The problem, in a nutshell, is that fossil-fuel companies can keep expanding and polluting, and buy the necessary offsets without breaking stride. The expansion of this industry is not consistent with our survival.

Planting trees and restoring ecosystems are good for the environment, undoubtedly. But counting on these credits to entrench and expand the fossil-fuel industry – which, by definition, offsets are doing – is self-evidently not good. And not planting trees at all, while claiming credits, is even worse. Climate Analytics recently reported that for every carbon credit unit generated to offset 1 tonne of CO2 equivalent emissions from LNG production in Australia, around 8.4 tonnes are going into the atmosphere, once the gas is exported and burned overseas. And that figure is even worse when we consider that many carbon credits are being generated illegitimately.

The proposed Safeguard Mechanism and carbon-trading system will ensure that the biggest profit that can be made from land-use changes (theoretical or not) is by generating carbon credits, and then selling them to allow more dirty emissions.

There would be no market for carbon credits at all if there wasn’t a fossil fuel–driven demand for offsets, and the reason the market for carbon credits is booming is that companies are using their profits to offset more and more emissions; that is, emissions they aren’t cutting. And gas exporters only need to account for 10 per cent of the emissions they create. And the wealthiest 20 fossil-fuel companies in Australia make profits of tens of billions in a year, but in 2020–21 the income tax they paid was, collectively, $30. Thirty bucks.

A report released at last year’s COP27 climate summit in Egypt, by German non-government organisation Urgewald and 50 NGO partners, found that 96 per cent of oil and gas companies have plans for expansion, and these plans including a doubling of exports of liquefied gas around the world. Again, none of these projects can go ahead if we are to actually reduce global emissions to limit global heating to 1.5 degrees Celsius.

Australia is the third-largest exporter of fossil fuels in the world, and global carbon dioxide emissions from all human activities hit record highs in 2022, rising above pre-pandemic levels, according to an analysis by the Global Carbon Project, an international body of scientists. Put two and two together.

Australia has objectively more, not less, of a responsibility to rapidly reduce the world’s use of these fuels. Yet our major party political leaders harbour the negligent justification that we’re just responding to global demand, and other nations need to be responsible for their own emissions.

“We just supply the product” and “it’s not our problem” are poor substitutes for moral responsibility. Look at them in other contexts. Governments don’t “offset” tobacco use among children under 16 – they ban sales to them. To stop bar fights, authorities don’t pay hotel patrons “avoided bar fight” credits – they arrest the violent drunks. Governments, it is collectively agreed, can regulate illicit drug use and gun control and asbestos production. Surely we can also assert that energy and resources companies can afford to transition away from fossil fuels, or must pay for the pollution they cause.

Nevertheless it seems easier for our federal government to contemplate the destruction of our planet than to impose laws that might crimp fossil-fuel company profits. The price of our survival is the rapid cessation of fossil-fuel use. The expansion of the industry is not consistent with our safety on Earth. How hard is this to understand?

Nick Feik

Nick Feik is a former editor of The Monthly.


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Dancing performers in ‘Manifesto’ at the Sydney Festival, with drummers on risers behind

Movers and shakers: Dance at the Sydney Festival

While Sydney Festival director Olivia Ansell’s program appeared dance-heavy, it revealed rich developments in collaboration across art forms

Brendan Fraser in ‘The Whale’

Body horror: Darren Aronofsky’s ‘The Whale’

The American director’s latest film rehashes well-worn tropes on fatness, and confuses sympathy with empathy

Headshot of Beth Spencer

Matters of life and Beth: Beth Spencer

The Australian author of ‘The Age of Fibs’ shares with Elena Ferrante and Annie Ernaux the desire to write truthfully of ordinary women’s lives

Jacinda Ardern leaves parliament surrounded by journalists and MPs

More than a feeling

The “hard decisions” of our political leaders too rarely emerge from a belief in our shared humanity

More in The Monthly Essays

Close-up photograph of Anne Summers, 2017

How to change a bad law

The campaign to repair the single parenting payment was a model of how research and advocacy can push government to face the cruel effects of a policy and change course

Photo of Animal Justice Party MP Georgie Purcell outside Parlament House with rescued greyhound Graham

Dog day afternoon

Animal welfare concerns have long plagued the greyhound racing industry, but in Victoria a campaign from covert investigators now has a parliamentarian leading the fight

Kakadu National Park

Park of the covenant

With the Ranger Uranium Mine now closed, Kakadu’s traditional owners want the government to make good on the original promise of a national park in their care

Ningaloo, Western Australia

Writing in nature

The laureate of the Western Australian surf break sees a task ahead for our essayists, our novelists and our poets alike in the fight against climate catastrophe

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Installation view of the Kandinsky exhibition at the Art Gallery of New South Wales, showing three framed abstract paintings hanging on a wall

Kandinsky at AGNSW

The exhibition of the Russian painter’s work at the Art Gallery of NSW provides a fascinating view of 20th-century art’s leap from representation to abstraction

Image of Margret RoadKnight playing guitar and singing.

The unsung career of Margret RoadKnight

Little-known outside the Melbourne folk scene for decades, singer Margret RoadKnight’s 60 years of music-making is celebrated in a new compilation

A woman rides her bike past the Australian flag, the Indigenous flag and the flag of the Torres Strait Islands, Canberra, October 13, 2023. Image © Lukas Coch / AAP Images

Beyond the Voice referendum

Looking towards the next 65,000 years

View of the High Court of Australia. Image © Mick Tsikas / AAP Images

Guarding the power of the court in our democracy

The hidden forces agitating at highest levels to undermine judicial independence