New research reveals that climate and energy policy in Australia is driving investment towards carbon credits of questionable integrity and away from investment in renewables and genuine decarbonisation of industry.

Official data shows that investment in new renewable energy generation in Australia has declined by 50% compared to 2018, while the volume of carbon offsets projects registered in 2022 was roughly double the numbers in 2020 and 2021.

Key points

• Renewable generation projects worth $8 billion commenced in 2018 as the electricity sector prepared to meet the Renewable Energy Target (RET). This number crashed to around $4 billion in 2020, 2021 and 2022.
• The number of projects registered to produce Australian Carbon Credit Units (ACCUs) reached 385 in 2022, up from 199 in 2021 and 158 in 2020. Early numbers suggest even higher numbers in 2023.
• This shift in focus from direct decarbonisation policies such as the RET, towards offsets reduces and delays decarbonisation – in 2022 the RET achieved 45 million tonnes of emissions reduction, compared to at best 18 million tonnes by the Emissions Reduction Fund’s ACCU purchases.

Figure 1 : Renewable generation commencements vs number of ACCU projects

Sources: ABS (2022) Value of renewable energy construction; Emissions Reduction Fund (2023) Emissions Reduction Fund project register. Note: 2022 data for renewable energy starts is only available for March and June quarters.

The Federal Government is now at the policy crossroads between investment in renewables and genuine decarbonisation, or the previous Government’s creative accounting tricks,” said Polly Hemming, Director of Climate & Energy at the Australia Institute.

“Currently Australia has no policies that drive investment into real decarbonisation projects. The Safeguard Mechanism and the Powering the Regions fund offer enormous opportunities for genuine emissions reduction, but are poised to syphon money to the carbon offset industry.

“Policies like the Renewable Energy Target drive permanent decarbonisation in industry, while offset purchases simply allow polluters to delay this change.

“But the Renewable Energy Target hasn’t been renewed and there is no policy to incentivise more investment in clean energy, resulting in the slowdown of new renewable energy generation.

“It’s no accident that the carbon credit industry is booming in Australia – the Federal Government encourages offsetting through various policies.

“When industry or government buys carbon credits to offset emissions – even if they are of high integrity – they are not spending money on technology that permanently displaces fossil fuel use and permanently reduces emissions.

“Every day we prevaricate is a day further away from Australia meeting its climate target. This data shows offsets are obstructing climate action in Australia.”