Australia faces the challenge of reducing its dependence on carbon credit subsidies as it works toward achieving net-zero emissions by 2050, according to advice from the Climate Change Authority (CCA). In its recent review, the CCA found the Australian Carbon Credit Unit (ACCU) scheme to be robust but recommended that the federal government place greater emphasis on alternative measures to cut emissions across all sectors.

The ACCU program, which allows landholders to earn income by converting farmland to carbon sequestration projects or improving soil carbon storage, currently plays a role in the nation’s emissions reduction framework. However, the CCA cautioned that it should primarily serve as a supplementary tool designed to fill gaps where other policies fall short. Instead, it urged expanded use of stronger Safeguard Mechanism settings—a regulatory framework requiring large emitters to meet emissions targets—and clean technology standards as more direct approaches to reducing greenhouse gases.

Meeting Australia’s net-zero goal will likely require significant increases in carbon sequestration on agricultural land. The CCA estimated that up to 18 million hectares—or roughly 4 percent of the country’s total farmland—might need to be dedicated to carbon projects by 2050. This shift could generate approximately A$9 billion in annual revenues for landholders, with about 55 percent of new carbon initiatives expected in wheat-sheep and high rainfall zones, and the remainder in pastoral regions. Notably, the majority of these areas would continue to support some form of agricultural production.

The authority highlighted the importance of carefully assessing how expanded use of farmland for carbon activities would interact with other national priorities, including food production, biodiversity conservation, energy infrastructure, and regional development. While current carbon credit activities have mostly avoided overlapping with high-value agricultural lands, scaling up sequestration efforts is expected to require more substantial land-use adjustments. The CCA called for a comprehensive evaluation of cumulative land-use trade-offs across the transition to ensure that economic development opportunities are maximized while minimizing adverse impacts.

The growth in demand for ACCUs has been driven by large corporate polluters subject to the government’s Safeguard Mechanism, which obliges them to purchase carbon offsets if emissions reduction targets are not met, with penalties applying for non-compliance. Under the current policy framework led by the Albanese government, farmers increasingly participate in carbon markets by entering carbon credit projects, reflecting broader efforts to balance emissions reductions with economic incentives in rural communities.

Overall, the CCA’s findings suggest that Australia’s pathway to net zero will require a diversified policy mix that relies less on carbon credit subsidies alone and more on a suite of regulatory and market measures designed to achieve deep and sustained emissions cuts.