Is Australia's "carbon neutral" scheme being abandoned?

Australia will head to the polls in May. But in the rush to call the election, it appears the Albanese Government left at least one federal climate policy in a state of limbo.

After the Albanese government spent half the parliamentary term promising to overhaul Australia’s government-run carbon neutral certification scheme - data obtained by Tempests and Terawatts shows the Climate Active program is in a state of decline.

Climate Active, it appears, is being abandoned by corporate participants and the federal government alike, and with caretaker mode now in effect, the public remains in the dark as to what reforms the Albanese government may have made to the scheme.

This week, to assess the current status of Australia’s carbon neutral certification scheme, I submitted a request to the Department of Climate Change, Energy, the Environment and Water (DCCEEW) for data on corporate participation under the Climate Active program. The data requested included the volume of emissions offset by each participant and the types of carbon credits used.

DCCEEW declined to provide the data in a useful format and instead pointed to the 540 individual reports - all published in PDF format - for the data about each entity that has obtained a carbon neutral certification.

So, with some assistance, I have extracted and refined the latest data from these PDFs into a single, pivot table-friendly spreadsheet and hereby make this March 2025 update available for download.

This exercise is essentially an update to the same undertaking I completed in February 2023 and a link to the data from that exercise is available in the article I wrote at the time.

The high-level findings

As of March 2025, there are 540 organisations, buildings, services, products or events that have current carbon neutral certifications under the carbon neutral program.

There are some interesting and some troubling trends in the data:

• The total volume of emissions offset under Climate Active has fallen by around 10 per cent over the last two years.

• Just three companies represent more than half of all emissions offset under the Climate Active scheme; electricity retailers EnergyAustralia, Powershop and AGL Energy.

• Participants in the program still overwhelmingly rely on cheaper international carbon credits to achieve carbon neutral certification. International units represent 89% of all offset credits used.

• Concerningly, more than half (50.7%) of offsets used by companies with active Climate Active certifications were Certified Emissions Reductions generated under the troubled Clean Development Mechanism.

• Offsetters have shifted away from using Verified Carbon Units (VCUs) issued under the also troubled VERRA scheme, which has been hit with significant claims that most VCUs were not backed by real-world emissions reductions.

• Offsetters have shifted toward using more Voluntary Emission Reductions (VERs) issued under the Voluntary Gold Standard. The quality of these offsets, unfortunately, also isn’t much better.

• Australian-sourced carbon credits (ACCUs) represent just 11 per cent of carbon credits used under the Climate Active program. Even their effectiveness has come under question from a former industry watchdog.

The Climate Active program has experienced an exodus of many prominent brands, including several that had ranked amongst the top 10 largest offsetters in my 2023 analysis. This includes Telstra, the Brisbane City Council, Opal Australian Paper and Australia Post.

To its credit, Telstra announced its withdrawal from the Climate Active program alongside a commitment to make greater investments in directly reducing its emissions footprint, but many have withdrawn without making such commitments.

Other major brands have also withdrawn from the Climate Active program, including Afterpay, Jetstar, Ovo Energy and the federal government’s greenbank; the Clean Energy Finance Corporation.

Notably, several consultancies that trade carbon credits or advise on carbon offsetting strategies have withdrawn from Climate Active, including Pollination, Corporate Carbon Advisory, PathZero, ERM Energetics, and PwC Australia.

At a time when there is growing urgency and concern regarding the extent of corporate inaction in response to the climate crisis, falling participation in the Climate Active action could be cause for alarm. The trend may indicate that companies are re-evaluating where they direct their climate efforts. It could also be symptomatic of a broader abandonment of ESG commitments and an embrace of ‘green-hushing’.

But mounting evidence suggests that carbon offsetting regimes have done little to reduce emissions and have instead diverted investment away from more meaningful actions. So the exodus from the Climate Active program could also be indicative of the fact that the time to move on from carbon offsetting is approaching.

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Did the Albanese Government abandon plans to fix the Climate Active program?

In October 2023, recognising the need to evolve the program, Climate Active announced a review of its carbon neutral certification program via a statement titled ‘We're making changes’. Within a week, Climate Active had published a consultation paper and called for submissions on how the program could be reshaped to modernise it and ‘raise the level of climate ambition and action to get certified’.

In the consultation paper, Climate Active flagged potential changes to the certification process, including restrictions on the types of international carbon offsets that could be used. In an acknowledgement of the flaws with carbon offsetting, Climate Active went so far as proposing to abandon and replace the ‘carbon neutral’ terminology used by the scheme.

“The seventh proposal is to discontinue the term ‘carbon neutral’ to describe the certified claim and to use a different term. The current trade mark would be discontinued and replaced with a new trade mark, adopting a new term. It is important the new term does not risk consumer misunderstanding by being general or ambiguous. It also needs to be meaningful and reflect the achievements of participants through certification,” the consultation paper says.

The consultation paper was a positive indication that the Albanese government had taken seriously the concerns raised about the heavy reliance on carbon credits the scheme had encouraged, and the environmental integrity of carbon offsetting more generally.

However, that is where things stalled.

The last official update came in July 2024, when Climate Active said it was considering the submissions it had received in response to the consultation paper, and that it anticipated that “an announcement about program reforms will be made later in 2024”.

That announcement never came.

In response to my query about the status of the Climate Active program, a spokesperson for DCCEEW said “a decision about the future direction of the Climate Active program is yet to be made.”

“The Climate Active program continues to operate as usual, following the Climate Active Carbon Neutral Standard,” the spokesperson told Tempests and Terawatts.

“The Australian Government is carefully considering the future direction of the Climate Active program, including how to drive effective voluntary climate action and provide consumers with confidence about business’ climate claims.”

The Federal Government is now in caretaker mode and the fate of the Climate Active program (and all of Australia’s federal climate policy) now depends on the outcome of the federal election.

The problems with carbon offsetting

The problems with carbon offsetting are well documented. The problem is not so much with the underlying concept of offsetting - there is perhaps a time and a place for emissions offsetting to aid the overall decarbonisation of particularly hard to abate industries.

However, the real-world use of carbon offsets has proven problematic. Rather than being used to account for the last remaining carbon after all reasonable efforts to reduce emissions have been exhausted - the final tier of the greenhouse gas mitigation hierarchy - programs like Climate Active incentivise the use of offsets to mitigate a company’s entire carbon footprint.

In effect, offsets serve as an easy shortcut to carbon neutrality - why invest in transforming your pollutive business when you can just purchase credits to absolve your climate impact? Compounding the issue are the incredible volumes of carbon credits being generated under schemes where weak offset methodologies are prevalent. Junk credits abound and dominate most voluntary carbon offsetting schemes. The European Union has gone so far as to ban carbon neutral claims that overly rely on carbon offsetting.

In a landmark legal judgment, a Dutch court ruled that airline KLM had misled customers about the environmental benefits of its offsetting regime, finding that its claims that flights contributed to a “more sustainable future” were not backed up by reality. Australian group Climate Integrity has initiated a similar complaint to the ACCC against Qantas and its own carbon neutral claims.

The fact that the Climate Active program is administered by the federal government is significant as it provides the program - and the certifications it issues - a certain level of heft. If it is good enough for the government, why shouldn’t it be good enough for consumers and the courts?

EnergyAustralia has made this argument in its defence to a greenwashing claim brought against it by the group Parents for Climate Action. The group has alleged that EnergyAustralia’s marketing of ‘carbon neutral’ electricity and gas products is misleading and deceptive conduct, because the heavy reliance on carbon offsets means the products do not have a positive impact on the environment.

Hearings for Parents for Climate v EnergyAustralia will be held in May, and could have dramatic consequences for the Climate Active program - and carbon offsetting more broadly - if EnergyAustralia is found liable for greenwashing. Watch this space.