Australia Needs National Carbon Market Strategy

The government should publish a national strategy that upholds the integrity of carbon offsets, says Climate Change Authority.

Australia’s Climate Change Authority has called for the publication of a National Carbon Market Strategy that “makes the most” of the opportunity for the country to accelerate its emissions reduction ambitions.

The Authority says in a new report that the carbon market is “fragmented, inefficient and complicated”. The report, requested by Australia’s previous government, provides advice – in the context of the Paris Agreement rules – on the criteria that should be applied to international offsets.

“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,” the report says.

Meanwhile, the voluntary market is “largely remote” from the high-quality, transparent emissions measurement systems that countries use in their national emissions inventories.

The Authority recommends that the government publish a National Carbon Market Strategy which:

  • makes Australia’s carbon price more visible, understandable, and certain, helping to embed decarbonisation in everyday decision-making
  • upholds 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
  • clarifies the role of domestic and international units in the mix of voluntary action and compliance mechanisms to help smooth and accelerate Australia’s decarbonisation

The Authority also puts forward 18 other recommendations for the government to consider, relating to:

  • the evolving rules for international carbon trading being put in place, 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
  • 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

According to Climate Change Authority CEO Brad Archer, Australia should play a leading role in the development of a liquid, high integrity and effective global carbon market.

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

Archer said high integrity offsets allow nations and companies to set more ambitious targets and accelerate decarbonisation, beyond what is achievable from direct emissions reductions, particularly for very hard-to-abate emissions.

“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.”

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