Questionable methodology claims

Market participants claim the integrity of Australian carbon credit units (ACCUs) remains high despite a series of potentially damaging exposés. In turn, the Carbon Market Institute (CMI) rejects allegations of fraud and highlights concerns with the assumptions that back them.

On 24 March, Andrew Macintosh, a professor at Australian National University and former chair of the emissions reduction assurance committee, published a research paper claiming Australia’s carbon market is a fraud.

He identified the three main types of projects – avoided deforestation, human-induced regeneration (HIR) and the combustion of methane from landfills – within the Emissions Reduction Fund (ERF) as lacking environmental integrity.

“The available data suggest 70-80 per cent of the ACCUs issued to these projects are devoid of integrity – they do not represent real and additional abatement,” Macintosh said. “All the major emission reduction methods have serious integrity issues, either in their design or the way they are being administered.”

He continued: “People are getting ACCUs for not clearing forests that were never going to be cleared, they are getting credits for growing trees that are already there, they are getting credits for growing forests in places that will never sustain permanent forests and they are getting credits for operating electricity generators at large landfills that would have operated anyway.”

Macintosh called for the breaking up of the Clean Energy Regulator (CER) and for the immediate repeal of the offending low integrity methods under the ERF, as well as stopping existing low-integrity projects from receiving any further credits.

The CMI claims the accusations have been sensationalised and risk undermining Australia’s world-leading framework for carbon credit generation.

In a working paper reviewing the Macintosh research, CMI’s HIR method review subcommittee says inaccurate foundational assumptions in Macintosh’s work are leading to overstatements of the potential for, and the widespread nature of, any HIR method integrity concern. The committee says detailed analysis does not support the public statement that 70-80 per cent of the ACCUs issued to these projects are “devoid of integrity”.

The committee’s working paper states: “Instead, the papers identify potential technical issues [that] are acknowledged as either stemming from challenges with access to project-level data, or the analysis highlights that the problems relate only to a small subset of projects or parts of projects, rather than all projects.”

The committee highlights several main concerns with Macintosh’s analytical approach and foundational assumptions: an inaccurate focus on an assessment of whether projects have already achieved forest cover, and the suggestions that regenerating projects are being credited for pre-existing forest, that management activities are non-additional and that grazing does not affect regeneration. Carbon market sources tell KangaNews Sustainable Finance the Clean Energy Regulator’s methodologies are not perfect but say the industry is transparent about problems and is constructively working toward improvement.

Placing it in the context of its commodity peers, Brad Kerin, general manager and company secretary at CMI, points out the carbon market is still nascent. “It has been around for 10-15 years so understanding of how we measure, report and verify what it is doing is still growing and changing.”

Defining features of the carbon market in Australia are the institutional systems and frameworks established to measure, report and verify offsets, Kerin says. As well as an independent process to approve new and constantly review methodologies, and independent assurance of ACCU issuance claims, he points out ACCUs are a regulated financial product overseen by the Australian Securities and Investments Commission.