Australia’s Climate Change Authority (CCA) has concluded its fifth review of the Australian Carbon Credit Unit (ACCU) scheme with a verdict of “fundamentally sound”, paired with a pointed recommendation: revisit the rules that let credits from projects storing carbon for only 25 years offset industrial emissions that persist in the atmosphere far longer. Within days, Australia’s peak carbon industry body responded, urging permanence obligations that reflect “on-the-ground realities”. For compliance buyers under the Safeguard Mechanism, project developers holding land-sector methods, and investors pricing duration risk, the exchange opens the most consequential design debate the scheme has faced since the 2022 Chubb Review.
A Clean Bill of Health, With Footnotes
The CCA’s message, delivered by chief executive Kath Rowley, is that the scheme works but must evolve with its changing user base. “Most credits are now purchased by Australia’s biggest industrial emitters rather than the government,” Rowley said. “They use those credits to offset excess emissions under the Safeguard Mechanism. That raises new questions, including whether credits from some carbon storage projects are sufficiently durable to be used for Safeguard compliance.”
The headline numbers support the “sound” half of the verdict. A record 21.7 million credits were issued in 2025, representing avoided or sequestered emissions roughly equivalent to the annual emissions of Victoria’s entire transport sector. The review also notes that the government is making steady progress on the recommendations of the CCA’s 2023 review and the 2022 Chubb Review, and it explicitly does not call for a major overhaul, citing stakeholder warnings that policy instability is “a poison pill for investment”.
Instead, the Authority recommends six targeted improvements. Alongside the 25-year storage question, they include prioritising real public and First Nations benefits when the government buys credits, publishing a roadmap for new crediting methods to give developers and investors more certainty, and making information about credits and their attributes clearer and more accessible.
The 25-Year Problem
The sharpest recommendation goes to durability. Under current rules, some ACCU projects can opt for a 25-year permanence period rather than 100 years, in exchange for a discount on credited volume. The CCA wants those rules reviewed so that “the risks of storage being reversed are well understood, and credits align with the emissions they are used to offset”.
The arithmetic behind the concern is unforgiving. Carbon stored under a 25-year obligation begins facing release risk in the 2040s, while the fossil emissions it offsets under the Safeguard Mechanism persist in the atmosphere for centuries. As Crikey’s coverage of the review put it, big polluters are relying on short-term credits to neutralise long-term pollution. When the scheme’s dominant buyer was the government, purchasing abatement for national inventory purposes, that mismatch was a policy wrinkle. Now that the marginal buyer is a steel plant or a gas facility acquitting a compliance obligation, it becomes a market integrity question.
Industry Wants “Realistic” Permanence
The industry’s response came quickly. Australia’s peak carbon industry body has urged permanence requirements that reflect on-the-ground realities, pushing back against any reading of the CCA recommendations that would impose blanket long-duration obligations on land-sector projects.
The practical tension is real. Hundred-year commitments are difficult to underwrite on leased or jointly managed land, and tighter permanence terms raise project costs and reduce creditable volume, particularly for savanna, reforestation and soil projects in remote regions. Developers argue that an overly rigid durability rule would shrink supply precisely when Safeguard demand is growing, and would discriminate against nature-based methods relative to industrial abatement. The counterargument, implicit in the CCA’s framing, is that a credit used to cancel a compliance liability should carry a storage horizon commensurate with that liability, and that discounting volume does not fix a mismatched claim.
Safeguard Demand Is Raising the Stakes
The durability debate matters more now because of who is buying. Two pieces of analysis this week illustrate the shift. Research from the Institute for Energy Economics and Financial Analysis (IEEFA) found that Australia’s coal mines are increasingly reliant on carbon credits to offset their emissions. Separately, analysis of shale gas producers in the Beetaloo Basin found they will only need to offset a fraction of their overall emissions because some facilities sit below the Safeguard Mechanism’s compliance threshold, a design gap that concentrates offsetting obligations on the largest facilities while leaving others outside the net.
Together, these data points describe a market moving from government-offtake stability toward volatile industrial compliance demand, with integrity questions attached. If a growing share of ACCU demand comes from emitters using credits as a licence to exceed baselines, the atmospheric value of each credit, and its storage horizon, stops being an academic concern and becomes the core of the product.
What Buyers and Developers Should Watch
For compliance buyers, the immediate implication is procurement discipline. Until the government responds to the review, credits from 25-year storage projects remain fully usable under the Safeguard Mechanism, but they now carry a flagged policy risk: any rule change that restricts their eligibility or discounts their value against compliance obligations would reprice existing portfolios. Buyers building multi-year offset positions should map the permanence profile of their holdings, not just the vintage and method.
For developers, the signal runs the other way. A method roadmap and better credit-attribute transparency are both on the CCA’s list, and both would lower the cost of bringing new supply to market. But projects designed around the 25-year option should stress-test their economics against a scenario where that option tightens, and expect buyers to start asking durability questions in offtake negotiations before regulation forces the issue.
Three markers will show where this lands. First, the government’s formal response to the review, and whether it accepts the 25-year rule review as drafted. Second, any movement in the price spread between 100-year and 25-year permanence credits, which would indicate the market pricing durability risk ahead of policy. Third, whether the industry’s “realistic permanence” counterproposal produces a concrete alternative, such as buffer contributions or insurance mechanisms, or simply a defence of the status quo. Australia’s carbon credit scheme has passed its health check. The argument now is over what the medicine should be.
