Miners warn of carbon credit cliff, raising fears of shuttered plants and inflation

The Minerals Council also warned that a weak supply of carbon credits would raise the cost of the country’s transition to net zero.

Rio Tinto’s Kellie Parker, left, businessman Andrew Forrest, Anthony Albanese, BHP’s Geraldine Slattery and MCA chief Gerhard Veldsman in Shanghai. Picture: AAP

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The nation’s miners have warned Labor of potential plant closures, inflation and an expensive trans­ition to net zero as the industry faces a likely shortfall of carbon credits in five years.

Rio Tinto said the shortfall would put “significant pressure on market and price dynamics” while the peak mining industry body has said it would raise the risk of facility closures and inflation. The MCA also warned that a weak supply of carbon credits would raise the cost of the transition to net zero.

The Australian Carbon Credit Unit scheme operates in conjunction with the government’s safeguard mechanism, the Australian government’s key policy to reduce greenhouse gas emissions. It gives out credits for carbon reduction and abatement, and the nation’s largest emitters can buy these ACCUs to offset the emissions they release above their set baseline.

Rio Tinto, in its submission to the Productivity Commission’s five pillar productivity review, said industry analysts had “forecast a shortfall in the supply of ACCUs to meet demand around 2030”.

“Without redress, this outcome would place significant pressure on market and price ­dynamics,” it said.

“It is imperative that the ACCU scheme is conducive to the development of a liquid market of high-quality ACCUs at the scale that will be required by Australia’s harder-to-abate sectors.”

Rio Tinto, which backs the introduction of a market-based carbon price and Labor’s 82 per cent renewables target, called on the Albanese government to “accelerate the development and approval of new methods to increase the supply of high-­quality ACCUs”.

The government in the past year began receiving and implementing suggestions for ways to generate new ACCUs.

The Minerals Council of Australia, the peak industry body for Australian mining companies, also called on the Albanese government to ensure a “good supply of low-cost, high-quality offsets”.

Warning of higher demand in the next decade, the MCA said “failure to develop a strong supply of low-cost, high-integrity ACCUs risks raising the cost of compliance for safeguard facil­ities and raising the cost of the transition of the economy in ­general.

“This in turn raises the risk of facility closures (if they cannot ­afford the carbon cost and cannot pass it on) and/or domestic inflation.”

The MCA also warned of duplicative state and federal ­regulations.

“Projects are facing delay and confusion, with state approvals imposing emissions conditions and sometimes even seeking to specify that any ACCUs must be sourced from within the state,” it noted.

“This is neither least-cost abatement nor efficient regulation.

“Projects in the safeguard mechanism have their emissions regulated nationally, in accordance with the nation’s interim and 2050 net zero targets.”