Australia’s carbon credit market is getting its most significant rulebook rewrite in years. The government introduced the Carbon Credits Integrity and Transparency Bill 2026 into Parliament on 20 August, amending the Carbon Credits (Carbon Farming Initiative) Act 2011. The headline change: for the first time, projects could stop earning Australian Carbon Credit Units (ACCUs) if the method underpinning them no longer meets the scheme’s integrity standards. For buyers, developers and the industrial facilities that rely on ACCUs for Safeguard Mechanism compliance, the bill redraws the risk map of the market’s supply side.

What the Bill Actually Changes

According to the Department of Climate Change, Energy, the Environment and Water (DCCEEW), the legislation strengthens transparency and integrity in the ACCU Scheme, simplifies and streamlines how it operates, and improves recognition of First Nations rights and interests, drawing on more than a decade of implementation. It also improves transparency of the National Greenhouse and Energy Reporting (NGER) Scheme and makes minor timetable changes to support the New Vehicle Efficiency Standard.

The sharpest provision concerns crediting methods. Under the current design, a project approved under a valid method can generally keep generating ACCUs under that method even if the science moves on. The reform introduces a mechanism that would prevent projects from continuing to earn credits after a specified transition period if the underlying method is found to no longer comply with the Offsets Integrity Standards. In effect, methods can lose their license to generate supply, and grandfathering stops being a safe assumption.

Governance changes accompany it. The bill replaces the Emissions Reduction Assurance Committee (ERAC) with a new Carbon Abatement Integrity Committee, and it tightens consent and native title settings. Assistant Minister for Climate Change and Energy Josh Wilson framed the package as continuity rather than rupture: “Integrity is the foundation stone of the ACCU Scheme. Over the past 6 years, we have made continuous improvements to strengthen the integrity, transparency, governance and administration of the Scheme.”

The government is leaning on scale to justify confidence. The scheme has delivered over 190 million tonnes of abatement from 2,631 projects, valued at more than $4 billion since 2011. Wilson also pointed to new Savanna Fire Management methods introduced earlier this year, which he said are set to deliver $7.7 billion for Northern Australia, with 75% of savanna fire businesses First Nations led.

Compliance Costs Are Climbing in Parallel

The bill lands while the cost of Australia’s carbon compliance architecture is becoming visible in corporate accounts. Fortescue disclosed this week that it paid $9 million in carbon compliance costs in FY2026, covering a Safeguard Mechanism requirement of approximately 300,000 tonnes of CO2 equivalent. Santos saw its costs for surrendering credits under the Safeguard Mechanism rise more than tenfold in the first half of 2026, according to Quantum Commodity Intelligence, which has also reported that BHP is expected to spend $23 million on carbon credits to meet its obligations.

These numbers matter for how the integrity bill will be received. The Safeguard Mechanism’s baselines decline each year, so covered facilities need either abatement or ACCUs in growing volumes. At the same time, the statutory Safeguard review opened on 7 August is openly considering caps on ACCU use and credit vintaging, with submissions closing on 18 September. The supply side is being asked to get cleaner just as the demand side considers rationing access to it.

The Supply Side Still Has Gaps

Integrity powers solve one problem but not another. At a conference this week, market participants warned that Australia’s carbon scheme is failing to capture the abatement potential of the agricultural sector, citing a lack of methods and low trust in the system. Beef producers have separately argued that design constraints on carbon farming limit the incentive to build soil carbon.

That tension cuts to the core of the reform. Switching off weak methods protects credit quality, but if new methods do not arrive to replace them, the scheme shrinks the pool of supply available to Safeguard facilities whose compliance bills are already multiplying. Method development, not just method discipline, will determine whether the market tightens or seizes.

What It Means for Buyers, Developers and Investors

  • Method risk is now a balance sheet item. Developers and investors holding projects under older methods should map exposure to the transition mechanism. A project whose method fails the Offsets Integrity Standards could see its crediting runway cut short after the transition period, which directly affects forward supply contracts and project valuations.
  • Compliance buyers face a two-sided squeeze. Safeguard facilities should model procurement on the assumption that ACCU eligibility rules tighten from both directions: fewer legacy credits from the supply side, and possible usage caps or vintaging from the Safeguard review on the demand side.
  • First Nations consent is moving from soft factor to legal design. The bill’s native title and consent provisions will shape project pipelines, particularly in Northern Australia, where savanna fire projects already show what First Nations led supply can look like at scale.

What to Watch

Three markers will show how the reform bites in practice: the final transition periods attached to the method-switch-off power as the bill moves through Parliament; how quickly the new Carbon Abatement Integrity Committee reviews existing methods once operational; and whether the Safeguard review’s September consultation produces ACCU usage limits that compound the supply tightening. For a market that has built its credibility on continuous integrity upgrades since the 2022 Chubb review era, this bill is the moment where integrity enforcement gets teeth, and where the volume consequences of that enforcement start to matter.