Having grappled with harsh criticism, Climate Active is re-writing its rule book and wants your input.
The Climate Active program was initially introduced in 2010 as the National Carbon Offset Standard (NCOS). In 2019, it was rebranded as Climate Active to reflect its wider scope and relevance in addressing climate change. The program is overseen by the Australian Government Department of Climate Change, Energy, the Environment and Water.
To date, Climate Active has certified over 700 organisations across various sectors, including government agencies, businesses, and community groups. These certified organisations have taken substantive actions to measure, reduce, and offset their emissions, thereby contributing to Australia’s overall efforts to combat climate change.
After prolonged criticism and in the wake of the Chubb Review into Australia’s ACCU carbon credit scheme, Climate Active is seeking public consultation on the proposed changes to its standards and guidelines’. So, what exactly are the proposed changes and how would the impact certifying organisations?
Proposed Change 1: Near and Long-term target setting
Organisations will be required to set near-term (between 2025-2035) and long-term (between 2040 and 2050) gross emissions reduction targets aligned with Australia’s Nationally Determined Contribution (NDC). The near-term targets reflect the average annual emissions reduction needed to reach Australia’s 2030 target. These targets will apply to the item being certified, whether it is an organisation or a specific product. Additionally, participants will need to purchase offsets to achieve net-zero emissions.
The questions being asked in Proposal 1 include whether participants support the requirement for near-term and long-term gross emissions reduction targets, whether they agree with aligning the near-term target with Australia’s NDC, and whether they agree with the proposed calculation method for alignment to the NDC which is based on the average annual emissions reduction required to reach Australia’s 2030 target of a 43 percent reduction in emissions below 2005 levels. According to the latest National Inventory Report in 2021, this corresponds to businesses and organisations reducing total emissions by 2.7 percent each year until 2030.
Proposed Change 2: Enforcing reduction targets
Under this proposed change, certification will be limited to businesses and organisations that can demonstrate they are on track to meet their near-term gross emissions reduction targets. This requirement aims to distinguish organisations that have made progress in directly reducing their emissions from those who have only made commitments. Participants will need to show their emissions reduction progress through disclosures, such as the percentage of absolute emissions reductions achieved or key emissions intensity metrics. This progress will need to be regularly independently verified.
By strengthening the emission reduction strategy and certification requirements, the proposed changes aim to improve the credibility and robustness of certified claims, ensuring that organisations are actively working towards reducing their emissions and contributing to Australia’s climate targets, a move that distances Climate Active from the long lambasted offset and forget ethos that as dominated much of the criticism aimed at the scheme.
The question being asked for Proposal 2 is whether participants support limiting certification to businesses and organisations that have demonstrated they are on track to meet their near-term emissions reduction targets.
- Organisations may need to review existing emission reduction strategies and set targets aligned with Australia’s NDC.
- Ongoing third-party validation of emission inventories.
Proposed Change 3: Modifying emission boundaries to better capture scope 3 emissions.
This proposed change would involve the development of additional guidance to support organisations in establishing robust emissions boundaries. The aim is to improve the completeness, consistency, and comparability of claims made under the program. The guidance would include mandating specific indirect (scope 3) emissions sources, which are currently assessed for relevance by the business or organisation.
This proposed change is in response to feedback from stakeholders indicating that the current process of determining emissions boundaries can make emissions comparisons difficult and create confusion for consumers. There is also concern that some members have more comprehensive coverage of emissions than others, leading to a lack of understanding of carbon neutral claims. The proposed changes aim to address these issues and ensure that minimum program requirements consider the different decarbonization pathways of specific sectors.
The questions asked during this stage of consultation are:
- Do you support the development of additional guidance on emissions boundaries? Why or why not?
- Do you support mandating specific scope 3 emission sources for all certification types? Why or why not?
- If so, which scope 3 emission sources should be considered mandatory?
- Increased clarity and consistency in emissions reporting, making it easier for organisations to understand and compare their emissions with others.
- Reduced confusion for consumers, as emissions boundaries become more standardized and comprehensive across different organisations.
- Potentially increased reporting requirements for some organizations if additional scope 3 emission sources are mandated.
- Increased understanding and awareness of the different decarbonization pathways for specific sectors. This could lead to more targeted and effective emission reduction strategies.
Proposed Change 4: Max 5 year vintage for offset units
This change would implement a 5-year rolling vintage rule for eligible international carbon offsets under the Climate Active program. This means that all units must have been issued no more than 5 years prior to their cancellation and use under the program. The goal of this proposal is to bring the program’s rules closer to the standards and rules of the Paris Agreement and discourage speculative “unit banking,” which diverts units away from their primary purpose of enabling greenhouse gas mitigation.
During this stage of consultation, stakeholders are asked whether they support the introduction of the 5-year rolling vintage rule for eligible international carbon offsets and why or why not.
- Organisations currently relying on older vintage and generally cheaper carbon offsets, or engaging in unit banking, would need to adjust their offsetting strategies and may get stuck with illegible 5+ year old units. They would need to ensure that the carbon offsets they purchase align with the 5-year rolling vintage requirement, which may require evaluating their current offset projects and potentially sourcing new projects.
- It could also potentially affect the availability and cost of eligible carbon offsets in the market.
Proposed Change 5: Mandated min % of renewable energy
The 5th proposed change to the Climate Active standard for organisations focuses on electricity emissions and would require businesses and organisations seeking certification to source a minimum percentage of renewable electricity and use the market-based method to calculate their emissions liability.
Currently, Climate Active allows participants to report their electricity emissions using both a location-based approach (based on state-based emissions factors) and a market-based approach (based on investments in renewable electricity generation). However, there is no requirement for participants to source a minimum amount of renewable electricity or use the market-based approach. This can be achieved through matching electricity consumption with onsite and offsite renewable electricity sources such as behind-the-meter generation, Large-scale Generation Certificates, and GreenPower.
Stakeholders have expressed the need for accurate and consistent accounting of electricity emissions and stronger requirements around sourcing renewable electricity to support grid decarbonisation and promote emissions reductions within a member’s value chain.
The questions being asked during this stage of consultation are as follows:
5.1 Do you support introducing a requirement for businesses and organisations to source a minimum percentage of renewable electricity under the market-based method? Why/why not?
5.2 What minimum percentage of renewable electricity should be required (i.e. percent by year)?
5.3 Should all businesses and organisations be required to use the market-based method to calculate their electricity emissions liability? Why/why not?
- This could lead to increased costs for some organisations, especially if they need to purchase renewable electricity certificates or invest in renewable energy infrastructure.
- It would also contribute to the decarbonisation of the electricity grid and support the transition to cleaner energy sources.
Proposed Change 6: Wrapping organisation’s abated emissions into our national reduction targets.
The 6th proposed change under the Climate Active standard is for abatement from all Australian Carbon Credit Units (ACCUs) used under the program to count towards meeting Australia’s emissions reduction target under the Paris Agreement. Currently, the ACCUs used under the program are treated as ‘additional’ to Australia’s target through accounting under the Kyoto Protocol.
“In the future, abatement from all ACCUs used under Climate Active would count toward meeting Australia’s emissions reduction target under the Paris Agreement.”
6.1 Do you support this proposal? Why/why not?”
Some stakeholders believe that the emissions reduction actions taken by businesses and organisations should be included in Australia’s emissions reduction target, as they contribute to reducing overall emissions. However, there is disagreement among stakeholders regarding the inclusion of abatement from international offset purchases, as they believe it could lead to double counting.
- Actions to reduce emissions, such as investing in renewables or using ACCUs, would count towards Australia’s emissions reduction target.
- This would provide consistent treatment with onsite abatement and reflect the end of the Kyoto accounting arrangements.
- It would align with Australia’s updated Nationally Determined Contribution under the Paris Agreement, which emphasizes the collective contributions of all levels of government, industries, and communities towards emissions reductions.
Proposed Change 7: Scrapping the term ‘carbon neutral’
The 7th proposed change is to discontinue the use of the term ‘carbon neutral’ to describe the certified claim and to use a different term. Currently, the certification provided by Climate Active is for ‘carbon neutral’ status. This has been a long contentious issue for Climate Active, with sharp criticism arising as a result of Oil & Gas organisations certifying their operations, that is their head office and business activities, while excluding emissions relating to their fossil fuel products which are known to be the largest driver of climate change. Oil and Gas exporters advertising themselves as Carbon Neutral have done immense damage to the brand and legitimacy of the Climate Active scheme.
Stakeholders have expressed that while there is value in maintaining certification to demonstrate action to reduce emissions, there is confusion around the term ‘carbon neutral’ for both business and retail consumers. There is also emerging international guidance cautioning businesses and organisations about the use of the term ‘carbon neutral’.
The proposed change, Proposal 7, suggests discontinuing the term ‘carbon neutral’ and replacing it with a new term. The new term should not be general or ambiguous to avoid consumer misunderstanding. It should be meaningful and reflect the achievements of participants through certification.
The questions being asked during this stage of consultation are as follows:
7.1 Do you support discontinuing ‘carbon neutral’ to describe the certified claim? Why/why not?
7.2 If you support discontinuing it, what claim should members be able to make once they have achieved certification?
7.3 If you do not support discontinuing it, why do you think that the term ‘carbon neutral’ should be retained?
- The material impacts that proposed changes could have on organisations certifying under the Climate Active Standard would depend on the new term chosen to replace ‘carbon neutral’.
- If the new term is effective in conveying the achievements of participants and is easily understood by consumers, it could potentially enhance the credibility and clarity of certification claims. However, if the new term is confusing or does not adequately communicate the environmental impact of participants, it may result in decreased value and understanding of the certification.
Proposed Change 8: Staged certification
The 8th proposed change to the Climate Active standard for organisations include introducing a certification pathway with three stages: ‘Starting out’, ‘Pending’, and ‘Certified’. The ‘Starting out’ stage would provide guidance materials for businesses and organisations to understand their emissions impact. The ‘Pending’ stage would require businesses to commit to measuring, disclosing, reporting, and offsetting their emissions, with a maximum of 3 years to demonstrate progress towards their reduction targets. The ‘Certified’ stage would be granted to organisations that can show they have achieved progress in reducing their emissions and are on track to meet their targets. The proposed pathway aims to support organisations at different stages of their climate journey and reserve formal recognition for those taking credible climate action.
- It would allow all Australian businesses and organisations, including small and medium-sized enterprises, to begin their decarbonisation journey and gain access to tools and calculators provided by Climate Active.
- It would provide a clear distinction between organisations starting out on their climate journey and those taking credible climate action. This tiered program could encourage more businesses to actively work towards reducing their emissions and contribute to Australia’s climate goals.
- Organisations would need to commit to measuring, reporting, and offsetting their emissions, which may require additional resources and expertise. Meeting the requirements for the ‘Certified’ stage would also involve regular third-party verifications, which could incur costs for organisations.
Overall, this proposed change aims to increase the number of organisations measuring and reducing their emissions while also ensuring credibility and accountability in climate action.
Questions being asked during this stage of consultation:
- Do you support the proposed certification pathway? Why/why not?
- What name should be given to the ‘Pending’ stage?
- Are the requirements to meet the ‘Pending’ stage appropriate?
- What claims, if any, should participants in the ‘Pending’ stage be able to make?
- Is 3 years an appropriate maximum timeframe for participation in the pending stage?
- Should a longer timeframe be considered for hard to abate sectors to demonstrate they are on track to meet their target (i.e. longer than 3 years)? Why/why not?
- To transition from ‘Pending’ to ‘Certified’ stages, what should be the minimum amount of time to demonstrate progress towards meeting reduction targets? For example, 1 or 3 years of reductions against their base year.