(Bloomberg) — An Australian proposal to offer free carbon credits to some of its biggest emitters risks undermining government efforts to restore confidence in the nation’s climate policies, according to an analyst.
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The country may miss its 2030 emissions target if credits don’t reflect real and additional abatements, according to RepuTex, a provider of data and analysis that helped model the goal. That adds to pressure to reform the system, which is under review following accusations that many policies don’t actually cut pollution.
“Integrity of crediting is key to any emissions market,” Hugh Grossman, a managing director at RepuTex, said in a statement. “If market integrity is not prioritized, Australia’s ability to meet its 2030 target, and realize the economic benefits of the low-carbon transition could be significantly undermined.”
Demand for credits has been strong since the Labor government took power in May on expectations that it will reform the Safeguard Mechanism, which requires about 215 large industrial polluters to offset emissions above a certain threshold. Spot prices have also been rising, with a record transaction of credits during the second quarter.
The government’s consultation paper for the reform of its central climate policy in August included a proposal to give out free credits to companies that emit below an industry average. That would effectively mean half the companies under the system could benefit from a financial windfall from selling the free credits or saving them to meet future requirements to cut emissions, RepuTex said.
“If credits used by industry do not represent 1 ton of emissions abatement, and that credit is used to offset emissions — as is the case here — then we would not see any real emissions reductions,” Grossman said.
Another option in the consultation paper that would provide every facility under the system its own trajectory to net zero emissions would be more effective, Reputex said.
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