Executive summary

  • The National Carbon Offset Standard (NCOS) was released yesterday (20 January 2010), to come into effect on 1 July 2010. It aims to guide consumers and businesses regarding the integrity of:
    • voluntary carbon offsets (outside of but in concert with the government’s proposed mandatory Carbon Pollution Reduction Scheme (CPRS)), and
    • ‘carbon neutral’ claims, including carbon footprint calculation.
  • The release of the NCOS provides greater certainty for the voluntary carbon market. Offsets which conform to its standards will now have enhanced commercial standing.
  • However, the future of the voluntary market still remains uncertain because the NCOS is designed to come into full effect in tandem with the CPRS and the future of the CRPS is uncertain. Further developments on the CPRS will happen shortly with the promised release of an Opposition policy and the reintroduction of the CPRS to Federal Parliament on 2 February 2010.  

Release of NCOS

The Federal Government issued its NCOS on 20 January 20101.

The NCOS is supported by Q&A sheets for:

  1. businesses2, and
  2. consumers3.

The 1 July 2010 commencement of the NCOS coincides with:

  1. the cessation of the government’s Greenhouse Friendly program, and
  2. the government’s intended commencement date for recognition of forestry carbon sequestration under the CPRS.

The final NCOS builds on a previously released draft version and discussion paper.

Voluntary carbon market offsets

The NCOS provides for the following acceptable offsets:

a.units that are acceptable under the CPRS, being:

  1. Australian Emissions Units (AEUs)
  2. recognised Kyoto Protocol units, including Certified Emissions Reductions (CERs) under the Clean Development Mechanism (CDM), except for certain types, and

b.internationally recognised voluntary carbon market units, being:

  1. Voluntary Emissions Reductions (VERs) issued by the Gold Standard4
  2. Voluntary Carbon Units (VCUs) issued by the Voluntary Carbon Standard5, including credits issued for agriculture, forestry and other land use (AFOLU) and reduced emissions from deforestation and degradation (REDD) projects, where they apply methodologies approved by the Commonwealth Department of Climate Change

c.offsets generated from emissions sources in Australia which are not counted toward Australia’s Kyoto Protocol target, where they meet eligibility criteria and use a methodology approved under the NCOS. There are three types of acceptable activities to do this:

  1. forest management activities in forests established before 1990
  2. revegetation through the establishment of woody biomass that does not meet Kyoto forest criteria, and
  3. cropland and grazing land management practices (net greenhouse gas emissions from soil, crops and vegetation).

These three activities are not recognised under Kyoto Protocol rules and therefore any abatement they deliver will be additional to reductions achieved by Australia to meet its protocol obligations.

Offsets from these three activities will be recognised if they are:

  • additional to those achieved through business-as-usual and not required in order to comply with regulatory obligations under any Australian laws or regulations
  • permanent
  • measurable
  • transparent
  • independently audited, and
  • registered and tracked in a publicly transparent registry.

GreenPower purchases and other renewable energy purchases (such as Renewable Energy Certificates) are not recognised as offsets under the NCOS. Those purchases are not greenhouse gas emission ‘offsets’ as such, but achieve different intentions in respect of supporting renewable energy projects and relate to emissions sources covered by the CPRS.

Similarly, abatement through the Greenhouse Friendly scheme is not recognised under the NCOS as it is generated in sectors covered by the CPRS.

Carbon neutrality

The standard includes principles for calculating the carbon footprint of an organisation or a product and sets out procedures for achieving carbon neutrality. This involves the preparation of an emissions management plan.

Entities that have the carbon footprint of their organisation or product independently audited and develop an emissions plan can apply to use the standard's carbon neutral logo.

Organisations wanting to use the logo must make information publicly available on their carbon footprint, their emissions reduction activities and their offsets.

Greenwash response

The aim of the NCOS to provide businesses and consumers with greater certainty is designed in part to deal with marketing ‘greenwash’ (unsubstantiated environmental claims) issues which have raised the attention of the Australian Competition & Consumer Commission (ACCC). The ACCC has recently:

  • successfully prosecuted GM Holden in late 2008 regarding Saab advertisements
  • released two guidance papers regarding carbon claims and green marketing, and
  • commenced a prosecution against Prime Carbon Pty Ltd for alleged false or misleading representations.