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Despite being seen by some as the unproven and unethical wild west of sustainability, carbon offsets continue to hold a key place in Australia’s net zero strategy and in driving change so far 

A new report from think tank the Grattan institute asserts that carbon offsets can be part of a “low-cost climate change policy”, but that the Australian government should introduce clearer rules to improve the integrity of the system and environmental outcomes. 

Be sector specific with your offset approaches 

The report recommends applying sector-specific offset approaches to emissions reduction policy, including whether offsetting is allowed as an alternative to reducing emissions in different scenarios, as well as limits on the amount of offsetting and the types of units used.

It also recommended more stringent methods for the creation of Australian Carbon Credit Units, including an ongoing independent review process overseen by the federal government. 

“Our governments should be clear about the role of offsetting in each policy they implement in pursuit of net zero,” the report’s authors stated. 

“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.”

With more international focus on net zero, demand for offsets will increase including the import and export credit market, requiring policy guidance from the federal government report, the report said. 

This includes introducing rules to prevent double-counting of offsetting activities that take place in Australia but are used to offset emissions overseas.

The report also suggests that as demand for offsetting units grows with greater policy focus, governments should take a step back from being the major buyers to focus more on underwriting research and development in better offsetting practices, and technologies that remove carbon dioxide from the atmosphere, such as direct air carbon capture and storage, and large-scale mineralisation.

“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,” the report stated. 

Other recommendations included introducing an “upside-downside” clause in government contracts to encourage the move to updated carbon offsetting methods, and placing time limits on the use of units from outdated offsetting methods.

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