Grattan: Carbon offset rules must be tightened

Carbon offsets are viewed as a vital tool for Australia to reach net zero emissions.

However, a new report by the Grattan Institute notes that some industries may see carbon offsets as an excuse to delay reducing emissions, and that they should be left for processes that are difficult to decarbonise.

Grattan contends that the current carbon offset rules are somewhat opaque, and that their integrity needs to be tightened.

Below are the overview and recommendations from Grattan’s report, alongside key charts and figures:


Governments around the world are moving to ‘net zero’, to limit the impacts of climate change. All Australian state and territory governments have the goal of reaching net-zero carbon emissions by 2050 at the latest, and the Prime Minister says the national target is net
zero, preferably by 2050.

Australian governments can and should act now to create momentum towards the net-zero goal. Strong policies are required to reach net zero, but some sectors and individuals may be able to do more than others at different times. By offsetting over-achievement in one sector against under-achievement in another, effort can be shared across the economy and the goal achieved at lower cost.

This report, the fourth in a series of five on net zero, recommends policies to ensure Australia has access to high-quality offsetting units, both to act as a ‘safety valve’ if the cost of reducing emissions sector-by-sector is higher than anticipated, and for the ongoing task of
offsetting emissions that can’t be avoided.

Offsetting is a difficult part of the net-zero conversation. Some see it as an excuse to delay reductions, others as bringing about unacceptable social change, particularly in rural areas. It has been plagued by integrity problems, and there is understandable cynicism about its

None of this changes the reality: in pursuit of net zero, offsetting will be required because there will be emissions we cannot eliminate, and some where we will not be willing to pay the price to do so. The only option to deal with these emissions is to deliberately remove carbon dioxide from the atmosphere to offset them.

Processes to permanently remove carbon dioxide from the atmosphere are uncertain or expensive – or both. Emitting is certain: we know that every tonne of emissions in the atmosphere contributes to global temperature rise. For this reason, offsetting is not a direct substitute for avoiding or reducing emissions in other ways.

Australia has the structures in place to support offsetting. Our governments should be clear about the role of offsetting in each policy they implement in pursuit of net zero. They should also make sure certification for offsetting units maintains high integrity. Otherwise,
companies and individuals will bear costs with no corresponding drop in emissions.

As policies begin to drive demand for offsetting units, governments should step back from being the major buyers, and focus on underwriting the development of technologies and practices to remove carbon dioxide from the atmosphere. This includes acting more as a
buyer of last resort for high-quality Australian offsetting units; or buying units to offset government emissions.

There is still considerable uncertainty about the costs, permanence, and measurement of many offsetting activities. These are barriers to scaling up the offsetting market. Government should support R&D and early-stage deployment to help lower these barriers.

Imports and exports of offsetting units will become more important as all countries move towards net zero. There is no need to assume Australia must be self-sufficient in offsetting units, but local supply requires our governments to implement strong policies to drive
emissions reduction coupled with policies to encourage removal of carbon dioxide from the atmosphere. The Federal Government should introduce rules to support international trade in offsetting units, both for exports and imports.


1. Implement strong policies to reduce emissions consistent with a net-zero pathway…

2. Articulate the role of offsetting in each policy…

3. Bolster the integrity of offsetting units…

4. Get ready for an expanded international market in offsetting units…

5. Help create the market but do not dominate it…

6. Support the emergence of negative emissions technologies…

Full report downloadable here.

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