How does carbon compensation work?

Alison Reeve, vice president of energy and climate programs at the Grattan Institute, says offsetting should not be a substitute for avoiding reducing emissions, but it has a place when dealing with emissions-heavy industries, such as cement production.

Australia has a voluntary government compensation scheme, overseen by the Clean Energy Regulator. An Australian CO2 credit unit, or ACCU, is created for every tonne of carbon dioxide equivalent stored or avoided by a project.

The federal government buys about 90 percent of these ACCUs, and about six percent is purchased voluntarily by companies that want to offset their emissions. Only 0.5 percent are bought by big emitters like gas or mining companies that have exceeded their generous pollution baseline and have to buy credits.


How they work

Some carbon compensations prevent emissions from being released initially through strategies such as avoiding deforestation, switching from fossil fuels to renewable energy, or feeding (methane-barking) dairy cows with additives in their diet.

One of the questions here is how to assess whether the activity would have taken place without a set-off scheme. A recent report by the Australian Conservation Foundation and the Australia Institute found that the government’s approach to issuing credits for “avoided deforestation” would likely result in projects being awarded credits for not clearing forests that were in fact never in danger of being destroyed. .

Deforestation in the Amazon.

Deforestation in the Amazon. Credit:AP

“We did this study that showed that 20 percent of all carbon credits are just junk because they rely on the theory that landowners would clear their land, but that would never happen,” says report author Polly Hemming, a climate and energy consultant at the Australia Institute.

The Clean Energy Regulator rejected these claims, saying that this report was based on a series of false assumptions and showed a “serious misunderstanding” of how the avoided deforestation shifts are calculated.

A CO2-compensating revegetation project on the Peniup property in Western Australia.

A CO2-compensating revegetation project on the Peniup property in Western Australia.Credit:

Controversial technology for large-scale CO2 capture and storage – where emissions are captured on site and pumped underground – has recently been added to the carbon credit scheme by Energy and Emission Reduction Minister Angus Taylor. To date, billions have been spent trying to make this technology work with little success.

Dr. Megan Evans, of UNSW Canberra, says Australian ACCUs have a reputation for integrity, but the inclusion of carbon capture and storage undermines this: “It does not have a lot of evidence behind it.”

“There’s a mix of quality in the different kinds of methods used to generate these credits, but once it’s turned into an ACCU, you can’t tell where they came from,” she says.

Some CO2 credits are issued when carbon is removed from the atmosphere – such as tree planting, reforestation and changing agricultural practices so that the soil absorbs more carbon. It can be difficult to estimate how much is absorbed because there are many variables. And carbon sinks like trees are also vulnerable to bush fires, which are increasing in frequency and intensity due to climate change.

The future of CO2 credits

Australia’s net zero plan for 2050 has been criticized for a lack of clarity or modeling of how its ‘technology does not tax’ approach will work.

It says Australia will work with other Indo-Pacific countries to build a “high-integrity” carbon offset scheme. About $ 60 million was committed to this in April, but there are few further details.

Most CO2 offsets offered to consumers – like these airline tickets – come from overseas CO2 offsetting projects – RepuTex says 90 per cent of the offsets purchased by Australian companies are from overseas projects.

These devices are inexpensive (as low as $ 1 per tonne in places like China, India, and Turkey), and their origins may be unclear, although some NGOs monitor their integrity.

Polly Hemming says Australia’s net zero plan is supported by a flawed assumption of what compensations are for. “They are not meant to be used to legitimize or expand fossil fuels,” she says. “It is a goal of last resort, and only in those areas that are very, very difficult to combat.”

Offsets at COP26

In Glasgow, one of the most complex tasks facing dealers is how to agree on a market-based mechanism that will allow countries to use international CO2 credits to meet their emission reduction targets in the Paris Agreement. Progress in reaching agreement on these rules collapsed in the last negotiations in 2019.


Mrs Reeve says equalization has a legitimate place, but only if countries have done everything they can to remove greenhouse gases first. If we want to stabilize the global climate, we will have to extract carbon dioxide from the atmosphere, she points out.

“We will have to do this even if we remove all sources of emissions. We will have ‘go negative’. And we will have to plant a lot of trees. “

Get daily updates on the climate summit that will shape our future. Sign up for our COP26 newsletter here.

Leave a Comment