Last month, the Albanese government announced it was scrapping its Climate Active program, which had allowed companies such as EnergyAustralia, Telstra and Jetstar to claim they were “carbon neutral”.
The move followed EnergyAustralia’s admission last year that “offsets do not prevent or undo the harms caused by burning fossil fuels for a customer’s energy use. Even with carbon offsetting, the emissions released from burning fossil fuels for a customer’s energy use still contribute to climate change.” The power provider made this statement as part of a legally binding settlement with Parents for Climate, who had accused the company of trying to greenwash its 1.6 million customers.
Ever since, companies had been quietly quitting the scheme in droves.
Climate Active was established in 2019 and described itself as “an Australian Government program that supports national climate policy by driving voluntary climate action by Australian businesses.” The scheme’s fundamental flaw was that, in exchange for a small fee, it allowed companies to “make a government-certified carbon neutral claim”.
These claims about carbon neutrality were the scheme’s undoing. While it’s not illegal for the Albanese government to mislead voters or journalists about the effectiveness of carbon offsets, it is illegal for companies to mislead their customers. The big problem for the companies making the “carbon neutral” claims was it’s the courts, not the government’s spin doctors, that would decide whether consumers were being greenwashed or not. EnergyAustralia decided to settle rather than hear from the judge.
Awareness of how consumers are being misled by “carbon neutral” claims has grown since my colleague Polly Hemming first raised integrity concerns about Climate Active on these pages back in 2022. Last month, the New South Wales government announced a ban on coal and gas companies buying offsets tied to the trees protected by the newly established Great Koala National Park – though broader industries would be allowed to do so.
Despite the rapidly mounting concerns, the federal minister for climate change, Chris Bowen, seems determined to try to hold back the rising tide with a broom. His commitment to the offsets script goes hand in glove with his determination to keep approving and subsidising new gas and coal projects.
Not only did the Albanese government rush to approve the enormous North West Shelf gas project straight after winning the 2025 election, the prime minister has spent the past year arguing he couldn’t possibly increase taxes on gas exporters because doing so might deter the foreign-owned gas industry from investing in even more of the new gas wells that climate scientists say we absolutely cannot afford to build.
Carbon offsets are at the centre of the Albanese government’s strategy to pretend it is taking climate change seriously while simultaneously encouraging new investment in gas and coal. In reality, both cannot be true at the same time. In the topsy-turvy world of Australian politics, however, where power is the ability to talk nonsense and get away with it, the idea we can subsidise fossil fuels expansion while pretending to reduce greenhouse gas emissions is par for the course. It’s a rare journalist who asks questions designed to highlight this clear contradiction.
Climate science makes clear that when fossil fuels are burnt, a large proportion of the carbon dioxide they release stays in the atmosphere for centuries … Climate scientists know that no promise made by a farmer or a state government to not chop a tree down can last that long.
The term “carbon offset” is more widely used than it is widely understood. In short, the idea is that the harm of doing something such as burning fossil fuels can be negated if someone else does something beneficial, such as not chopping down a tree. There are obvious moral complexities in letting some groups do harm because another group does some good. (Would asbestos mining be fine if someone promised to spend more on lung cancer research?) The real problem with so-called carbon offsets, though, is that they simply don’t work.
In settling its case with Parents for Climate, EnergyAustralia said: “Some carbon offsets claim to remove carbon dioxide from the atmosphere by planting trees or forest regeneration. However, EnergyAustralia today accepts the scientific consensus that these ‘offsets’ do not indefinitely remove greenhouse gas emissions from burning fossil fuels, because carbon is stored in plants for a substantially shorter time than those emissions remain in the atmosphere.”
Climate science makes clear that when fossil fuels are burnt, a large proportion of the carbon dioxide they release stays in the atmosphere for centuries. Indeed, about a fifth of the emissions from the coal and gas we burn today will still be in the atmosphere in 1000 years. Climate scientists know that no promise made by a farmer or a state government to not chop a tree down can last that long. Likewise, no regulator or politician can meaningfully promise that bushfires or droughts won’t destroy the trees that are supposed to be doing the offsetting.
Which brings me back to problems the Albanese government, and Chris Bowen in particular, have to deal with between now and the minister’s stint as “President of Negotiations” at this year’s big United Nations climate conference, COP31.
In the coming weeks, Bowen is due to begin a review of his key climate policy, the safeguard mechanism. This tool is based almost entirely on the same carbon offsets used by the recently abandoned Climate Active scheme. The review will start just weeks after NSW Premier Chris Minns made it clear that he, like EnergyAustralia, thinks it is somewhat inappropriate to claim that saving trees can offset fossil fuels emissions.
Labor’s safeguard mechanism was introduced in 2023 and requires about 200 of Australia’s biggest polluters to either gradually reduce their greenhouse gas emissions or, if they prefer, buy as many carbon offsets as they need to meet their “emissions reduction” obligations. While these options provide “flexibility” for major polluters, the inconvenient truth of the scheme’s design was recently exposed by the ABC’s Four Corners. The program spelt out how mining giants such as BHP were choosing to abandon their existing plans to replace their fleets of diesel trucks with electric ones, because it was cheaper to buy carbon credits instead.
While it’s obvious why BHP’s shareholders might prefer the bigger dividends that come from simply paying someone to promise to not chop down some trees, this reliance on accounting tricks is bad not just for the environment but for the economy as well.
The scientific advice about what countries such as Australia need to do to avoid the worst climate scenarios is quite simple. We need to rapidly reduce use of fossil fuels and store as much carbon in our trees and soils as possible. Both are essential. The whole point of offsets is they ignore the “and”, pretending it’s fine to keep burning fossil fuels as long as we save some trees.
The economic advice is just as simple. For every billion dollars companies spend buying offsets, a billion dollars can’t be spent on actually reducing greenhouse gas emissions by investing in electrification or energy efficiency. Put simply, a company that buys offsets this year is not setting itself up to pollute less next year – on the contrary, next year it will still have to buy more offsets. It’s easy to see why the companies that make and sell the offsets are making so much money.
As EnergyAustralia says: “Carbon offsets should not be used to delay or diminish the important work that needs to be done to actively decarbonise. EnergyAustralia is now focused on more effective ways of helping its customers to directly reduce the emissions associated with their energy use.”
In the four years since Anthony Albanese became prime minister, Australia has approved more than 25 new gas fields and coalmines and has spent more than $10 billion a year on fossil fuel subsidies. While Labor has committed to reduce Australia’s emissions by 43 per cent from 2005 levels by 2030, since coming to office actual emissions from burning fossil fuels have fallen by only 2.9 per cent, less than 1 percentage point a year. Luckily for the greenwashers, the number of offsets being printed is at an all-time high. The greater the supply of carbon offsets, the lower their price, and in turn the more companies that will follow BHP’s lead and abandon their efforts to reduce actual emissions.
The combination of EnergyAustralia’s admissions, the NSW government’s hostility to selling offsets to the fossil fuel industry and Bowen’s own abandonment of Climate Active are all ramping up the pressure on the Albanese government to drop the offsets charade.
Yet the prime minister is not for turning. If he won’t pick a fight with the gas industry in order to collect an extra $17 billion a year in tax, why on earth would he pick a fight with the fossil fuel industry over something as easy to ignore as climate science?