Proposed amendments to strengthen integrity and transparency in Australia's Carbon Credit Scheme

The Department of Climate Change, Energy, the Environment and Water (DCCEEW) recently released a consultation paper and an exposure draft of the Carbon Credits and Other Legislation Amendment (Integrity and Transparency) Bill, proposing substantial reforms to the Australian Carbon Credit Unit (ACCU) Scheme under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) and related amendments to the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act).

The exposure draft package responds to recent legislative reviews and is aimed at improving ACCU Scheme integrity, transparency, administrative efficiency and stakeholder participation as Australia advances toward net zero. Consultation closes on 22 May 2026.

Key proposed changes to the ACCU Scheme

1. Native Title Holder Consent

The Bill would expand consent requirements by recognising registered native title claimants as eligible interest holders, meaning that consent will be required from registered native title holders and claimants before ACCUs can be issued for a project. A two-stage consent process is also proposed to prevent projects being registered without affected First Nations stakeholders being notified or consulted. The proposed amendments also clarify that Crown lands Ministers do not have consent rights for projects conducted on exclusive possession native title land.

2. Establishment of the Carbon Abatement Integrity Committee (CAIC)

The current Emissions Reduction Assurance Committee would be re-established as the CAIC. This is to increase the emphasis on the Committee’s role in ensuring the integrity of the ACCUs issued as part of the ACCU Scheme. Membership requirements would also be updated, including representation by an Aboriginal or Torres Strait Islander person.

The CAIC will have a specific advisory function to the Minster on the priority for the development of new method proposals under a proponent led method development process. The CAIC will also be empowered to review expiring ACCU Scheme methods or methodology determinations, assessing whether the methods have achieved their policy objectives, whether they accurately reflect latest scientific developments and whether they have complied with legal requirements (or address any legal risks) during their time.

Where CAIC considers that there are compliance issues about methods under the Offsets Integrity Standards (OIS), the CAIC will now have an increased time limit (from 12 months to 18 months) to suspend a method so that the CAIC can undertake further reviews to confirm that it aligns with the OIS. This change aims to reduce the strain on the CAIC when dealing with technical or complex methods.

Additionally, to enhance the transparency of the entire CAIC process, the amendments would require the CAIC to publish certain advice given by the CAIC, as well as having related public consultations (including the outcomes of periodic reviews).

3. Integrity Risk Method Declaration

A new ministerial power would allow a method being used under an existing project to be declared an ‘integrity risk method’ where the method is considered inconsistent with the OIS and where projects utilising that method can reasonably transition to an alternative and suitable alternative method. If declared, affected projects could no longer earn ACCUs under that method. The Ministerial declaration process would require CAIC advice and public consultation, and the declaration would be phased in during the project.

4. Newness for research and development (R&D) participants

The amendments would also relax the ACCU Scheme’s “newness” requirement for R&D (which generally requires a project must not have begun to be implemented). To address a concern about R&D participation invalidating the newness requirement, R&D activities such as trials, pilots and early installation works that meet certain criteria would be disregarded when assessing whether a project has already commenced, reducing a barrier to proponent-led innovation in new methods and abatement technologies. The criteria would be that the R&D activity must (a) have contributed to the development of the ACCU method covering the project, (b) have ceased, and (c) be unlikely to resume unless the project is registered as an eligible offsets project. This means that where existing R&D activities have occurred but meet the three criteria, projects will still be registrable under the Scheme.

5. Government purchasing of ACCUs

Government purchasing arrangements would change, with responsibility for purchasing eligible carbon credits shifting from the Clean Energy Regulator (CER) to the Secretary of DCCEEW. The Secretary would further be empowered to delegate purchasing functions to senior officials or other Commonwealth agencies. This aims to enhance administrative flexibility and allow purchasing activities of specific areas of government to be tailored to their own objectives. The Secretary would be prohibited from delegating broader purchasing power to the CER itself. Importantly, the principle behind purchasing ACCUs will be shift to a ‘value for money’ approach, rather than the current ‘least cost abatement’. This is to recognise non-price factors like environmental and social benefits are also relevant when the Government is acquiring ACCUs.

6. Integrity and administrative improvements

Changes are numerous, but include the following.

• ACCU relinquishment: There would be new processes to relinquish ACCUs issued on incorrect information or where projected abatement is not achieved. There would also be an adjusted process for project proponents to voluntarily relinquish on project exit only where there is no alternative proponent to take over the project, and clarification that proponents do not need to relinquish ACCUs issued for emissions avoidance projects, only those issued for sequestration activities.
• Compliance: There would be some changes to the fit and proper person checks, including extending the test to designated agents and softening the insolvency-related prohibition; expanded powers for the CER to revisit decisions based on false or misleading information; new powers to issue infringement notices for lower-level breaches rather than relying only on court-based civil penalties.
• Administration: The Bill proposes more flexible permanence and crediting period arrangements, including transitions to 100-year permanence, allowing adjusted start dates for crediting periods, and, on advice from the CAIC, extensions to crediting periods when projects move to newer methods. There would be technical fixes to ensure permanence and crediting rules operate coherently. The Bill would also allow proponents more time to prepare offset reports from 6 months to 9 months, and make clear that the CER’s assessment of the “newness” test is at the date of the application, not the time the CER makes its decision (thereby allowing projects to begin being implemented in the interim assessment period).
• Miscellaneous amendments: Changes to allow parts of sequestration projects to be voluntarily removed from the ACCU Scheme if the number of ACCUs reflective of the land area being removed are also relinquished; improved rules for transfer of projects between emissions avoidance and sequestration projects; clearer consent settings for area-based emissions avoidance projects; and extending the Climate Change Authority’s statutory reviews of the CFI Act from every 3 years to every 5 years.

7. Dual emissions avoidance and sequestration projects

The emergence of methods such as ‘Integrated Farm and Land Management’ raises drafting questions for projects that combine both emissions avoidance and sequestration activities. This is against the legislative context where the CFI Act does not currently allow a single method to include both emissions avoidance and sequestration abatement from different activities. The government has not yet proposed a specific amendment and is instead seeking stakeholder feedback on whether the current legislative approach is workable.

8. Related amendments to the NGER Act

The Bill also proposes targeted amendments to the NGER Act. These would expand transparency requirements for releasing future prescribed NGER scheme data, and allowing the CER to deregister a corporation that is insolvent or in administration. The proposed amendments will also require corporations to report emissions for the period between first meeting (or being likely to meet) a reporting threshold and formal registration, aiming to close current reporting gaps.

Looking ahead

The consultation period closes on 22 May 2026. After this, the Government will consider the feedback from stakeholders and contributors. Parliamentary consideration of the Bill will be a matter for Government, with that timing in alignment with their legislative priorities. Any changes to the CFI Act will flow through to the Carbon Credits (Carbon Farming Initiative) Rule 2015 (Cth), which is due to be remade before its sunsetting date of 1 April 2027.

The proposed amendments to the CFI Act are substantial, with the consultation paper setting out a detailed suite of reforms. The tenor of the amendments follows the previous reviews, and many of the proposed amendments bolster the ‘under the hood’ operation of the CFI Act, with administrative streamlining, improving integrity of the ACCU Scheme and clarifying grey areas with the current legislation. While project proponents should consider the impact of these proposed changes, the broader practical impact will be clearer as the reforms are implemented.

With extensive amendments across the board, navigating the CFI Act and NGER Act can be complicated and a second opinion and expert advice can be invaluable.