Offsetting carbon emissions will be an essential part of Australia's quest for net zero but must not become an excuse to delay cutting emissions, according to a new Grattan Institute report.
Towards net zero: Practical policies to offset carbon emissions shows that offsetting can be part of a low-cost climate change policy.
Offsetting is also controversial: some see it as an excuse to delay reductions, others identify problems with environmental integrity, and there is much uncertainty about its real potential.
But none of this changes the reality: in pursuit of net zero, offsetting will be required because there will be emissions we cannot eliminate, and some where we will not be willing to pay the price to do so.
The only option to deal with these emissions is to deliberately remove carbon dioxide from the atmosphere to offset them.
'Net zero without offsetting makes no sense - it would leave no room for any activity that produces emissions,' says the lead author, Grattan Institute's Energy and Climate Change Program Director Tony Wood.
Processes to permanently remove carbon dioxide from the atmosphere are uncertain, expensive, or both. But policies that create momentum towards net-zero emissions in Australia by 2050 can be more ambitious and achieved at lower cost if they include offsetting.
Australia's governments should be clear about the role of offsetting in each policy they implement in pursuit of net zero.
They should take an 'avoid emissions first' approach, set clear rules, maintain high standards of integrity, and be clear about why offsetting is necessary.
As policies begin to drive demand for offsetting, governments should step back from being the major buyers of offsetting units, and focus on underwriting the development of technologies and practices to remove carbon dioxide from the atmosphere.
Imports and exports of offsetting units will become more important as all countries move towards net zero.
The Federal Government should introduce rules to prevent double-counting of offsetting activities that take place in Australia but are used to offset emissions overseas.
This is the fourth in a series of five reports Grattan Institute is publishing in the lead-up to next month's international climate conference in Glasgow, showing how Australia can build momentum towards net-zero emissions.
The first three reports were on transport, industry, and agriculture. The final report - on coordinating a national policy including electricity - will be published in coming weeks.
