Carbon Credits and Other Legislation Amendment (Integrity and Transparency) Bill 2026
Ms CLUTTERHAM (Sturt) (12:40): I rise today to speak in support of the Carbon Credits and Other Legislation Amendment (Integrity and Transparency) Bill 2026, which is a step in the continuous improvement journey of the Australian Carbon Credit Unit Scheme. What is the scheme? The Australian Carbon Credit Unit Scheme encourages people and businesses to run projects that reduce emissions or store carbon—for example, by using new technology, by upgrading equipment, by changing business practices to improve productivity or energy use, or by changing the way that vegetation is managed.
The Australian Carbon Credit Unit Scheme supports a wide range of projects that generate carbon credits, such as Indigenous fire management, coastal ecosystem restoration, forest regrowth and forest plantings. Carbon markets create a regulated space where carbon credits can be bought and sold. Carbon credit brokers and businesses that bundle carbon credits from multiple projects into one large package help connect buyers and sellers, making trading easier.
Australian carbon credit units are a tradable financial product. They incentivise carbon abatement activities through projects ranging from reforestation to energy efficiency. They present an additional income source for individuals and businesses running ACCU scheme projects.
One Australian carbon credit unit represents one tonne of carbon dioxide equivalent that would otherwise have been released into the atmosphere. Eligible projects include those associated with vegetation management, agriculture, forestry, energy consumption, waste, transport and industrial processes. Australian carbon credit units can be sold to private sector buyers or to the government to generate income, and the Australian government purchases the units through carbon abatement contracts.
This scheme contributes to meeting Australia's emissions reduction targets in a number of ways. Firstly, voluntary and government demand for the units makes a direct contribution towards meeting Australia's national targets over and above the reductions driven by the safeguard mechanism. Secondly, however, by encouraging innovation and the take-up of cleaner technologies, the scheme is directed at transforming some low-emission practices from 'nice to have' to 'business as usual'.
The scheme also makes an indirect contribution by allowing safeguard facilities to draw on abatement beyond their own operations, and what this does is increase flexibility, reduce compliance costs and help facilities better manage the timing and availability of onsite abatement. Over time, the role of the scheme has changed significantly. Initially, it was Australia's main emissions reduction policy, underpinned by large-scale government purchasing through the Emissions Reduction Fund.
But following significant policy reforms implemented in the last five years, since the Albanese Labor government came to power, the scheme is now part of a suite of measures that target emissions reduction and that will help drive Australia along the path to net zero. In this respect, the Australian government has made, and has rightly made, ambitious commitments to reducing greenhouse gas emissions, including setting targets of 43 per cent reductions below 2005 levels by 2030 and 62 to 70 per cent by 2035 as part of the pathway to achieving net zero by 2050.
This scheme is a part of it. It remains a world-leading carbon crediting scheme. As we move further along the journey to net zero, demand for Australian carbon credit units will grow, which means that this bill is critical in order to ensure that the scheme can continue to meet demand across the diverse range of applicable industries and that the public has trust and confidence that the scheme is not only fit for purpose but that it is effective.
The scheme is now part of the government's broad suite of climate policies which work in concert to drive emissions reductions across the economy. All of them have to be fit for purpose and be effective. This bill will amend a number of existing pieces of legislation: the Carbon Credits (Carbon Farming Initiative) Act 2011, the National Greenhouse and Energy Reporting Act 2007 and the New Vehicle Efficiency Standard Act 2024.
With respect to the first, the bill does a number of things. Importantly, it strengthens governance around methodology determinations in the scheme by replacing the Independent Emissions Reduction Assurance Committee with the independent Carbon Abatement Integrity Committee. Conflict-of-interest requirements will be improved, and relevant fields of expertise will be prescribed—including, rightly, requiring ongoing First Nations representation.
The independence and transparency of the committee will also be strengthened because it will enjoy new powers that enable it to obtain independent advice and information relevant to its work. The maximum time period for public consultation by the committee on methods will also be extended, and the committee will be under an obligation to publish more of its advice.
Next, the bill will provide for more flexible Australian carbon credit unit purchasing arrangements, with the goal being to ensure the appropriate separation of functions between the government, the regulator and the department. This is important in reducing criticism that conflicts of interest exist between purchasing and regulatory decisions. The bill will also amend the principles for conducting purchasing processes to replace the existing principle of purchasing carbon abatement on the least cost with the principle of receiving value for money.
Next, there are improvements to integrity, which are necessary because the scheme is only meaningful with respect to emissions reduction if abatement achieved through this scheme is genuine and actually contributing to Australia's emission reduction targets. Abatement is not genuine if it's on paper only. So, to do this, the bill will extend the fit-and-proper-person test to include agents acting on behalf of Australian carbon credit unit project applicants, increasing oversight and supporting improved compliance outcomes.
Matters that are relevant to the fit-and-proper-person test include whether a proponent has a history of insolvency or involvement with companies that have gone into administration or been liquidated; compliance with other relevant laws or schemes; compliance with industry codes of conduct; whether there has been engagement in unfair business practices, like unclear or unfair contract terms or failing to pay clients or landholders; whether there has been a failure to comply with audit obligations—for example, by failing to undertake a compliance audit when directed; whether there has been a failure to comply with an enforceable undertaking; or a failure to meet obligations under the Corporations Act 2001.
In addition, failing to have systems and processes in place that enable a proponent to meet its obligations under the scheme and a failure to deliver contractual obligations under carbon abatement contracts and also whether there is an indication of phoenix activity are all relevant to the fit-and-proper-person test. To be eligible for the scheme, a proponent must satisfy the fit-and-proper-person test, have the legal right to carry out the project activities in question and have the legal right to be issued the Australian carbon credit units from the project.
To qualify, and with some exceptions, projects must also be new, in that activities must not have started, not go beyond business-as-usual activities, not be required by law, not be receiving financial support from specified government programs and not be an excluded activity under the Carbon Credits (Carbon Farming Initiative) Rule 2015. Projects must also follow an approved method which sets out the rules for running the project and estimating emissions reductions. 'Method' means just that—the method for conducting the project and the use of approved methods are by design so that projects can effectively measure how much carbon they remove from the atmosphere or how much carbon they prevent from being released.
The scheme only has integrity when proper and effective measurement can take place. For example, in mining, oil and gas, method projects are those that reroute, flare or combust leaked facility emissions, and project activities include storing greenhouse gases underground and destroying or converting oil and gas leaks. Another example is landfill and waste method projects to upgrade or install facilities to reduce waste emissions.
Project activities for these methods include treating and destroying waste using eligible waste treatment equipment, converting waste into biomethane to produce electricity or separating organic waste from other waste. This bill seeks to support participation in the scheme by removing barriers to registering new projects at both the project registration and method design levels.
The bill will also make changes to the application of the newness requirement that the regulator must consider as part of the additionality test when assessing applications for projects to be registered under the scheme. These changes will increase flexibility for project proponents and support more projects entering the scheme. The amendments will allow the newness requirement to be assessed at the time an application to register a project is made, rather than when it's assessed by the regulator.
This enables projects to commence implementation while the regulator's review and approval process is underway, broadening the scope of the scheme and providing certainty. The bill will also introduce a targeted exception to the newness requirements for genuine research and development activities so that such activities can contribute to and proponents can participate in future methods.
This change is intended to support innovation and testing of emerging abatement technologies which contribute to method development by providing greater certainty for research and development participants with respect to pathways they could use to enter the scheme in the future. The reforms in the bill strengthen the integrity, transparency, governance and administration of the Australian Carbon Credit Unit Scheme and ensure ongoing confidence in its operation as Australia moves towards its emissions reduction targets.
The bill marks an important step in the continued development of Australia's carbon market. By strengthening and modernising the scheme, it helps maintain confidence in the integrity of the system while providing greater certainty for businesses and investors to support emissions reduction projects across the country. I commend the bill to the House.