How Companies Can Combat Climate Change Amid Integrity Challenges in Australia’s Carbon Offset Industry

Australia’s leading carbon market player, GreenCollar, has exited the government’s voluntary carbon neutral program, Climate Active. Over 100 companies have followed suit in the last two years, raising concerns about the program’s integrity.

Climate Active certifies organizations as carbon neutral, meaning they offset their greenhouse gas emissions by purchasing carbon credits. Each credit is designed to represent one ton of carbon reduction achieved somewhere else. However, many experts now question the validity of these offsets.

James Schultz, co-founder of GreenCollar, highlighted that Climate Active has become too risky, largely because environmental criticisms suggest that many carbon offsets may be unreliable. This sentiment echoes among others, including EnergyAustralia, which has acknowledged public worries about the legitimacy of carbon offsets.

Research shows that while effective carbon offset projects exist in Australia, many lack integrity. A recent study indicated that over 84% of carbon credits assessed globally did not lead to tangible emissions reductions. Such issues aren’t unique to Australia; they affect carbon offset schemes worldwide.

But why are so many companies stepping back from these programs? The main problem is the credibility of carbon credits. Companies often purchase older, cheaper credits from overseas projects that might not deliver real benefits. A comprehensive review in 2016 pointed out fundamental flaws in the credits issued under the Kyoto Protocol, raising serious doubts about their effectiveness.

The situation has historical roots, with many carbon credits used in Australia coming from these questionable sources. Consequently, businesses may find it more beneficial to invest directly in emissions reductions rather than relying on carbon offsets. For instance, companies can upgrade to low-emissions technologies or invest in renewable energy.

Leading researchers emphasize the importance of integrity in carbon markets. High-quality projects should be prioritized, but there is a lack of transparency in current systems. The Australian government could improve accountability by requiring more public information about offset projects.

In light of these issues, fixing the carbon offset landscape is essential. The government has acknowledged the need for reforms in the Climate Active program to enhance its credibility. They are reviewing ways to ensure that the certification continues to contribute effectively towards Australia’s climate goals, aiming for net-zero emissions by 2050.