Small business could be priced out of carbon offset schemes

The country’s small and medium sized businesses risk being locked out of Australia’s major carbon accreditation scheme if rules for the country’s offset scheme aren’t changed.

The $6bn Barangaroo precinct development in Sydney has been granted carbon neutral certification through Climate Active. Credit: Lendlease.

Small and medium sized businesses risk being locked out of Australia’s major carbon accreditation scheme if rules for the country’s offset scheme aren’t changed, according to the peak lobby group for market participants.

In its submission to a review of Australia’s carbon credit system, sparked by allegations of widespread rorting of the system earlier this year, the Carbon Market Institute said any reforms to the current system should open up trading in Australian Carbon Credit Units to small and medium sized businesses.

“Current market settings make it difficult to purchase smaller quantities of ACCUs, with the minimum market parcel being 5,000 ACCUs and limited mechanisms for, and much higher costs per tonne associated with, purchasing smaller quantities,” the institute said in its submission this week to the federal government’s review of the offset system.

Any move to clean up the quality of ACCUs is likely to lead to a sharp surge in pricing for the carbon credits, particularly as the federal government moves to extend its use of the safeguard mechanism to ratchet down carbon emissions by the biggest polluters.

Major industry lobby groups, including the Business Council and the Minerals Council, have argued for a cap on the price of ACCU’s if lower quality units are excluded from the market, fearing a sharp spike in the price of carbon offsets if demand outstrips supply.

While CMI has previously rejected calls for a cap on ACCU pricing, the lobby warned reforms were needed to ensure smaller businesses were not locked out of the certification system if the price of carbon credits spiked.

Under new rules due to kick off in mid-2023, businesses wanting to win carbon neutrality certification from the federal government’s Climate Active scheme – regarded as Australia’s most credible certification system – will need to make up at least 20 per cent of their offsets from the purchase of ACCUs if they claim more than 1000 tonnes of carbon dioxide emissions each year. Smaller players must meet the same guidelines by mid-2024.

More than 400 companies have so far gone through the arduous process of applying for carbon neutrality certification with Climate Active, from a suburban preschool in Brisbane to far larger companies such as Bendigo Bank. Developers of the $6bn Barangaroo precinct in Sydney have also won certification for the project and companies such as Boral and Australia Post have certified products through Climate Active.

But a spike in pricing from any exclusion of lower-quality units, combined with an expected rise in demand – the Minerals Council forecasts a 25 per cent shortfall of ACCU’s against predicted demand – could put the carbon offsets out of the reach of many smaller businesses, CMI said.

Originally published as Small business could be priced out of carbon offset schemes