Carbon credits have become a lifeline for Australia’s biggest polluters, allowing them to avoid cutting emissions directly. The Safeguard Mechanism permits companies to purchase unlimited credits instead of reducing their carbon footprint. Critics argue this system creates financial incentives to keep polluting while appearing environmentally responsible on paper. Meanwhile, actual pollution levels continue to rise across the country. What really happens when climate policy relies on market-based solutions rather than enforced reductions?
While Australia reports considerable emissions reductions on paper, new evidence suggests carbon credits may be masking rather than solving the country’s pollution problems. The nation’s carbon credit system, centered around Australian Carbon Credit Units (ACCUs), allows companies to offset their emissions instead of reducing them directly.
These credits represent permits for one tonne of carbon dioxide or equivalent greenhouse gases. In 2024, 18.8 million new ACCUs entered the market, with about 60% held by companies under the Safeguard Mechanism, Australia’s main tool for limiting industrial emissions.
However, studies raise serious concerns about these credits’ effectiveness. A systematic review found only 12% of 2,000 global offset projects led to real emissions reductions. In Australia, $763 million worth of credits from Human-Induced Regeneration (HIR) projects resulted in minimal or negative tree cover change.
Despite these integrity issues, Australia’s emissions reduction strategy relies heavily on carbon credits. The country reported 69.2 million tonnes of CO2-equivalent reductions in 2024, up 8% from the previous year. But critics say this approach enables major polluters, especially in fossil fuel industries, to continue or even expand high-emission activities.
The Safeguard Mechanism allows heavy polluters to buy unlimited carbon credits instead of cutting emissions directly. LNG production facilities using ACCUs are particularly problematic, with each offset tonne actually leading to 8.4 tonnes of emissions in the atmosphere. This policy creates strong market demand for credits, with increased trading activity observed in late 2024 as companies prepared for compliance deadlines.
The carbon credit market, now valued in the hundreds of millions of dollars, remains robust with substantial funds flowing toward credits with questionable climate impact. This market liquidity further supports offset-based compliance strategies rather than genuine emissions reduction.
Experts warn that “junk” carbon credits undermine Australia’s emissions accounting and climate targets. As the global carbon market is projected to reach $50 billion by 2030, Australia’s participation raises serious questions about effectiveness versus profit motives. If credits don’t represent actual carbon reduction, the country’s reported progress may be greatly overstated, allowing pollution to continue rising behind a veil of paper compliance. The fundamental premise of offsetting has been criticized as an honesty system with built-in financial incentives for dishonesty, as money directed toward offsets often fails to achieve real emissions reductions.
