The Australia government has committed to greenhouse gas emission reduction targets of 43% below 2005 levels by 2030 and net zero by 2050 relative to 2005 levels.
One element of the policy is the Safeguard Mechanism that requires large emitters like manufacturers and mining companies, to keep their emissions below a baseline that reduces over time. The policy includes provision of a market for carbon credits that provides a means for these large emitters that cannot get their emissions down to their baseline to pay for their excess emissions. In theory the credits offset an equivalent amount of carbon emissions.
Companies that manage to do better than their reduction requirements can choose to be awarded Safeguard Mechanism credit units. These can be carried forward to future years or purchased by companies that need to offset their excess emissions.
The alternative is to purchase Australian Carbon Credit Units (ACCUs) from the government managed market. Providers of offsets earn one ACCU for every tonne of carbon dioxide equivalent (tCO₂-e) stored or avoided. The scheme is administered by the Clean Energy Regulator.
Under the Safeguard Mechanism several types of projects are defined that, in theory, reduce or offset emissions and earn ACCUs. The rules were widened in 2023 to provide that Safeguard facilities can also earn ACCUs by running their own projects.
Examples of carbon credit methods
Projects must follow strict federal legislative rules called ‘methods’ that define how carbon offset credits can be generated. Examples are:
- agriculture – animal waste management, soil carbon improvement
- industry – energy efficiency, equipment upgrade
- mining – carbon capture and storage
- landfill and waste – reducing methane emissions
- vegetation – tree planting, blue carbon restoration, converting a plantation to permanent forest
There has been much controversy about the vegetation methods of creating carbon credits. This article is about a new scheme called the Improved Native Forest Management (INFM) method. After a consultation process the Senate approved the use of this method on 10 September with support from the Greens apart from three Green senators who crossed the floor.
What is the INFM method — who dreamed it up?
Under the INFM method credits will be created in respect of forests on public land when the landowner (usually a state government) declares that it will cease or reduce logging in multiple-use native forests. In fact NSW is the only state to have proposed the scheme at the same time as they are currently considering stopping logging in some state forests.
There are various controls in place such as requiring the application to whole forest regions so that stopping logging in one area cannot be offset by transferring logging to another area.
Comprehensive carbon accounting
The accounting method was developed by the NSW DEECCW in partnership with ANU specialists. Abatement is calculated using an accounting model that measures changes caused by logging in forest and debris carbon, accounts for carbon stored in harvested wood products, and subtracts emissions generated by harvesting operations.
Then allowance is made for how long the level of logging would have occurred into the future at a sustainable level. This is assumed to be 15 years. So the ACCUs will be generated for 15 years but the forest is required to be maintained for 100 years.
What if there is a fire?
There are various technical provisions and buffer allowances in calculating the ACCUs to adjust for losses from fire if this occurs within 15 years. If the fire is a natural event (e.g. a wildfire caused by lightning) and the state government or proponent does not have to give back the ACCUs that have already been issued.
Arguments against the INFM
There has been strong arguments for and against the INFM method. There is a list of websites at the end of this article. Here is a brief outline of the arguments.
Offset schemes are required to meet standards of additionality and permanence. It is debatable whether the INFM meets these standards.
Additionality – is the change in management a new policy or was it going to happen anyway?
Permanence – the INFM scheme only requires that the forests are maintained for 100 years.
Other criticisms of the scheme include:
- The calculation methodology does not align with the harvesting process. Industry bodies like Forestry Australia criticise the design for assuming clearfall baseline harvesting which they argue overestimates carbon gains because selective harvesting is more common in practice. On the other hand the Nature Conservation Council argues that the conservative adjustments applied in the calculation methodology results in only about one quarter of the extra carbon saved by ending logging can be turned into carbon credits.
- The short-term accounting window. The method utilizes a 15-year accounting window, which critics claim fails to factor in long-term forest regrowth cycles.
- Market leakage, economists and agricultural groups point out that excluding international timber market data could hide ‘invisible’ carbon leakage if domestic timber reductions are offset by overseas logging imports.
- Scientifically, there is the difference in impacts and timer scales between emissions released when fossil fuels are burned (known as black carbon) and the carbon absorbed or sequestered by the growth of a tree.
Will this new method flood the ACCU market?
It is argued that the scheme does not have the potential to create a large number of ACCUs that are likely to expand the market and reduce their cost. If the method was applied to all state forests in NSW the new ACCUs would be only around 5% of total of annual issuances. There are around 60 million unused ACCUs on hold. In 2024-25 around 13.7 million equivalent of these were surrendered.
Will there be limits in the use of these ACCUs?
The NSW government has stated that coal and gas projects will not be allowed to use these INFM credits. There remains the issue where the supply of cheap ACCUs create a disincentive for companies to take action to reduce emissions from their own operations. An example is where BHP decided not to convert its iron ore operations to using electric trucks instead of diesel because it is cheaper to buy offsets plus the benefit of the diesel fuel rebate.
So far it appears that there is no limit on the use of other types of offset credits. However if a company uses more 30% of its baseline in offsets then this has to be publicly disclosed. Big deal!
Grab of opportunity — the Great Koala National Park
Negotiations over the creation of the Great Koala National Park (GKNP) have been going on over many years. The NSW Labor Government agreed to create the GKNP back in 2015 and renewed this promise while they were in opposition during the 2023 election but the actual size of the park was still under negotiation. Creation of the GKNP involves a commitment to cease logging in several state forests in the mid-north coast in order to preserve the forests as habitat particularly for koalas that are now determined to be a threatened species. There are also over 100 threatened species in these forests. The final announcement of the intention to reserve 176,000 hectares was subject to availability of a carbon offset.
The GKNP was originally justified by its conservation of biodiversity and the increased opportunities for jobs and revenue from tourism. But behind the scenes the government was looking into the offsetting opportunities to gain funding for managing the park.
The NSW government is being criticised for making protection of the habitat of an endangered species conditional on its monetisation as an offset commodity. This calls into question whether the plan meets the requirement of additionality.
The use of offset credits creates a huge quandary for the conservation groups that have been advocating for the GKNP for so many years and thought the park would go ahead. They feel betrayed by the caveat being applied that offset credits are a condition for approval.
However this is a once-in-a-lifetime opportunity to create an essential national park and to stop the destructive logging practices that threaten the future of native forests when there the alternative of plantation forestry provides for our timber needs. Native forest logging is a loss-making operation that has had to be subsidised by the state government for many years.
Will a precedent be set that will apply to stopping all logging of native forests?
An alliance of conservation groups has been calling for an end to logging of native forests in line with actions in Victoria and WA. Many groups have taken the pragmatic view that the INFM method should be approved in order to provide that logging of native forests on public land is terminated and management costs have a source of funding.
Previously we wrote about the proposal for the Great Southern Forest National Park that would involve the end of logging of several state forests along the southern coastal area of NSW. It now appears that success of the scheme will be contingent on the use of INFM offsets.
There are also many other areas where native forest logging is occurring on public land. There are economic reasons as well as environmental reasons to cease native forest logging.
Will the INFM become a major means of copping out from making meaningful reductions in greenhouse gas emissions by major industrial companies? At the very least there has to be a limit imposed on the use of carbon offsets so the companies will genuinely reduce their carbon emissions from their day-to-day operations to meet their baseline commitments.
The Safeguard Mechanism is currently being reviewed. One particular issue that is relevant to the use of offsets is how they are affecting incentives for onsite abatement. Submissions have closed.
Further reading
Different views on the INFM
The case for the improved native forest method
Wilderness Australia
INFM ACCU method – a dangerous precedent for Australia
Coalition of conservation groups
Forest groups urge Greens to back pathway to end native forest logging