Junk offsets rise like a rocket and wreck Australia’s biggest climate policy

As I wrote in the first part of this series on Australia’s industrial emissions policy (the ‘Safeguard Mechanism’), there is simply no real restriction on high-polluting companies (mostly fossil fuel companies) covered under the scheme.

While the Labor government ‘reformed’ the Liberal party’s scheme to ensure each facility’s targets actually fall in line with national climate targets, any company with persistently high emissions can just buy cheap offsets to “meet” that target.

The logic underpinning this is that if someone takes an action to reduce emissions (such as planting a tree, or not cutting one down, or burning the methane from landfill rather than dumping it into the atmosphere), you can purchase that moral quality and claim that it undoes or neutralises your own moral wrongdoing.

If that feels absurd to you, that’s because you are normal, and this concept is not. It doesn’t exist in any other sector of human society: you cannot murder someone and then save someone drowning at the beach to undo your criminal punishment.

As the Australia Institute’s Polly Hemming has written extensively, unlimited offsetting disables any chance this policy has of reducing real emissions. If you cheat on a test and get away with it, you win at the test, but you fail at education. It’s the same deal with climate: the laws of atmospheric physics cannot be tricked using these absurd constructions.

In this piece, we’re going to dig a little deeper into what the government’s latest data release shows about that reliance on offsets. We already know that facilities in the scheme only saw a slight drop in emissions: all of which was thanks to circumstantial stuff (like a big fire at a coal mine). But because the targets fell, it meant a large number of facilities simply bought a bunch of carbon offsets to comply.

The worst polluters and their addiction to carbon cheats

The chart below shows the percentage of all emissions under the scheme that were ‘neutralised’ using an offset of some kind. These were either ‘Australian carbon credit units’, or ACCU (essentially Australian carbon offsets you buy freely from any company that sells their claimed climate action), or ‘Safeguard mechanism credits’ (SMCs) – essentially the same thing, but the claimed climate action has to come from another facility in the scheme (we’ll dig into these in a future post).

The least-reliable offsets fill the largest space in the scheme

The government also shares the types of carbon offsets used in this scheme. As you can see below, the use offsets grew from FY24 to FY25. But the most controversial claims grew the most – in particular, the “human-induced regeneration” (HIR) carbon offset, which was closed to new participants three years ago.

HIR offsets basically claim that someone managing land decided to leave that land alone. That meant vegetation regrew, and because a human chose to do that, they can claim the carbon that vegetation sucks up as a climate action, and sell it as an offset (again: you are not the crazy one. It is the concept that is crazy).

But as recent research showed, the chances are that most of this regrowth simply would have happened anyway. “What this means is that the projects are not actually sequestering the amount of carbon claimed, and we’ve got a whole bunch of carbon credits in the system that don’t represent one tonne of CO2,” University of New South Wales researcher Megan Evans said.

Most companies that buy this offset increased their use of it, but the fossil fuel industry in particular increased its use of these ultra-dodgy claims nearly three times, between FY24 and FY25.

“Landfill gas” is now the number one carbon offset type in the Safeguard Mechanism, beating HIR by a hair. Landfill tends to produce methane, which, when dumped into the air, causes much more of a warming effect than carbon dioxide. So capturing it, and burning it instead of dumping it, is theoretically lower emissions. The difference between the two is claimed as a carbon offset.

A 2024 criticism of this scheme by ANU professor Andrew McIntosh highlighted the fact that most of these credits are being granted despite the fact most of these companies would’ve captured and burned that gas off anyway, thanks to state and territory regulatory requirements. Pretty sweet deal.

The third largest group above is “avoided deforestation”. The idea here is that someone who was planning to chop down trees decided not to, and so gets granted carbon offsets for the carbon that the tree sucks up during its life. As Polly Hemming and Richie Merzian found a few years back, this method is riddled with errors and bad assumptions, too – most of these offsets are likely junk.

You can sense the theme here, right? This policy fails thanks to these cheap, suspicious and fundamentally absurd “offsetting” claims. They are riddled with controversies and confusing logic because none of this is meant to make sense. This pollution regulation scheme only works if it regulates pollution, and currently, it does not.