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CER response to claims by Professor Andrew MacIntosh

25 March 2022

The Clean Energy Regulator (CER) is aware that claims are being made by Prof Andrew Macintosh concerning several ERF methods.

The CER is proud to administer the Emissions Reduction Fund (ERF), which assists individuals and organisations undertaking projects to reduce emissions.

The ERF has:

  • supported over 1000 total projects across Australia to reduce emissions
  • supported over 500 projects specifically designed to protect and regenerate forests and native vegetation
  • supported projects in every state and territory working with individuals, organisations, and traditional owners

The ERF is a robust offsets scheme with a high degree of integrity. This derives from the fact that the ERF is established in legislation and is administered by the CER as an independent regulator with a raft of compliance tools at its disposal.

Issuance of Australian Carbon Credit Units (ACCUs) is underpinned by the CER’s rigorous assessment processes using Geographic Information Systems (GIS) and other “big data” and compliance is further assured with a comprehensive set of audit requirements.

Projects must be covered by methods, which are also disallowable legislative instruments. Methods cannot be made unless the Emissions Reduction Assurance Committee (ERAC) recommends to the Minister that they met the requirements of legislated offsets integrity standards.

Methods are subject to reviews by the ERAC and there are sun-setting arrangements for methods in the legislation. It is also notable that, with the exception of the landfill gas electricity method, none of the methods Prof Macintosh is making claims about were developed by the CER.

Human induced regeneration (HIR) method has high integrity standards

The HIR method allows landholders to earn ACCUs for regenerating native forests by changing land management practices. Grazing by livestock or feral animals, weeds or mechanical clearing suppresses natural regrowth so removing these “suppressors” facilitates the regeneration of vegetation.

Requirements under the HIR method and relevant legislation have been progressively tightened over time.

The CER has undertaken a review of project compliance with the HIR method and found a very high level of compliance.

As part of day-to-day practice, CER assesses crediting applications using a range of evidence that is required to be submitted from HIR project proponents. The CER uses GIS tools to ensure that abatement estimated using the FullCAM model matches tree growth and compliance on the ground.

All ERF HIR projects must undergo at least 3 audits, which also check abatement claims and regular regeneration checks.  If trees are not growing according to modelled growth paths, crediting can be suspended until tree growth catches up.  In extreme circumstances inadequate tree growth can result in ACCUs being relinquished – but this has never occurred. The intent of these measures is that if trees ultimately don’t grow then they are not credited. The CERs ability to implement these measures has improved over time using “big data” and individual projects that underperform are subject to in depth analysis, including audit.

It is claimed that the Beare and Chambers report shows that some ineligible projects were given the go ahead and that “a substantial proportion of projects in Queensland appear to have had a negative impact”.

The Beare/Chambers report shows forest cover attainment as a result of HIR projects has been positive in both NSW and Queensland and is exceeding expectations

The report’s statement “While almost all the projects have a positive impact in NSW, there are a substantial proportion of projects in Queensland that appear to have had a negative impact” has been misinterpreted to mean that vegetation cover or sequestration is going backwards, ie those projects are decreasing in vegetative cover or losing carbon. This is incorrect. Rather, some projects are simply progressing less quickly than the statistical control sites.

As the Beare/Chambers report notes, a number of factors beyond land management may be driving different changes in projects relative to their control sites, for example, soil type, topography and vegetation differences.

The peer reviewed Beare/Chambers also report identified 8 projects (out of 123 projects Beare and Chambers assessed in their analysis) that may not meet the requirements of the method and other legislation. This is a powerful statistical model that has helped the CER to focus its compliance work. The CER has conducted an in-depth assessment of these 8 projects using the range of GIS tools at its disposal. The agency is satisfied that 4 of these projects comply with the ongoing requirements of the method. There are questions about the remaining 4 projects and these projects are being subjected to an additional audit under the agency’s annual audit program. Under this program, the agency selects independent auditors to do an additional audit of the project, over and above the three audits scheme participants are already required to do. In summary, less than less than 3 per cent of those assessed by Beare and Chambers are still under investigation – again indicating the level of compliance with the HIR method is very high.

The CER has not yet had time to review the new analysis of satellite images cited by Professor Macintosh. Previous statistical material provided by Prof Macintosh has not been substantiated following investigation by the CER. These investigations led to the commissioning of the Beare/Chambers work which was peer reviewed and publicly released.

It is important to recognise that analysis of HIR project areas alone can give a highly misleading result. The method requires proponents to delineate areas of eligible project land into carbon estimation areas (CEAs), which are the areas of land subject to the project activity (in this case removing feral animals or stock). Only CEAs are eligible for crediting abatement in the form of ACCUs. The entire project area can be many times larger than the CEA (e.g. a number of hectares within a larger farm). Prof Macintosh does not have access to the CEA areas and the legislation prevents that data from being released.

It should also be noted that remote sensing images require significant interpretation. While there are a range of tools available that purport to show regeneration of vegetation, unless the tool uses sophisticated machine learning and has been “trained” to detect regenerating vegetation, the images can show, for example, flushes of temporary green leaf following rainfall, rather than genuine areas of forest.

Images that appear to show sparse or no vegetation at a certain GIS resolution may not be indicative of an area of land’s ability to regenerate vegetation over time to meet the requirements of the method. Conversely, not all clumps of trees are a so called “forest” as defined by the method.

CER considers the so-called FullCAM model is best calibrated to detecting regenerating vegetation. This model is also used to calculate abatement crediting.

Abatement from ACCUs has high integrity

The CER has not had time to review Prof Macintosh’s studies. Prof Macintosh acknowledged on ABC radio that he may be mistaken as to the amount of abatement that he claims has low integrity.

As stated above, all ERF projects have a high degree of assessment and we do not believe this assertion to be true.

The CER will carefully analyse the material in Prof Macintosh’s work now that it has become available.

CER commitment to strong governance

The functions of the CER are set by the Government.

The CER has well established and rigorous processes to address any potential conflicts of interest that may arise from developing ERF methods, issuing credits to projects under ERF methods, and purchasing credits resulting from ERF projects.

This includes maintaining the separation between the ‘rule maker’ and the agency. The CER is responsible for technical work to develop methods. Methods are made by the Minister for Energy, Industry and Emission Reduction, acting on the advice of the independent ERAC, the CER and the Department of Industry, Science, Energy and Resources, including with reference to the outcomes of public consultation.

There are separate decision makers for different ERF functions. The agency’s purchasing function through competitive auctions is subject to fire-walled decision making overseen by independent probity advisers. It is separate to the agency’s Australian carbon credit unit crediting functions.

Decisions to register and credit projects are made based on whether the projects meet the requirements laid out in legislation. These decisions are not based on supply considerations.

The Landfill gas method has integrity

In early 2021, ERAC found, based on industry, electricity and ACCU pricing and other data available at the time that generating electricity from landfill gas continues to result in additional abatement beyond the ordinary course of business.  On that basis, the ERAC advised the Minister that the landfill gas methods should receive an extension to the period for which the projects can get credits.

ERAC conducted a crediting period review of the landfill gas methods in 2018 and decided not to extend the crediting period for electricity generation from landfill gas because of concerns about a lack of additionality. However, after the review was completed, when Prof Macintosh was still the ERAC Chair, ERAC decided to revisit its decision on the crediting period extension and test further whether the landfill gas method for electricity generation is additional. ERAC sought new data from the landfill gas industry when it re-opened the review.

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