Consultants close to industry shaped Australia’s controversial carbon credit policy

The government commissioned advice from expensive consultants from EY, a company that had also worked with carbon offsetters and the fossil fuel industry.

EY is one of the big focur consultancy companies (Photo credit: Credit)


Consultants advising the Australian government on its carbon credit policy were simultaneously working with the carbon credit industry and an unnamed “natural gas producer”, documents obtained by Climate Home News reveal.

Bidding for a A$200,000 (US$133,000) contract to advise Australia’s climate change authority (CCA) on carbon credits, EY boasted of its unpaid work with carbon credit registries Verra and Gold Standard, the documents show.

The CCA required bidders to highlight any conflict of interest arising from their work. EY did not declare any competing interests, despite its previous engagement with the carbon credit registries.

In the end, the CCA awarded them the consultancy contract last year. They were tasked with preparing a report to help the country assess its carbon market schemes.

In the final 60-page report, EY concluded that Verra and Gold Standard were “the leading international offset schemes for governance”, and gave them both the highest evaluation score.

EY gave Gold Standard and Verra its highest scores (Photo credit: EY/Screenshot)

That recommendation could drive Australian companies to buy carbon offsets verified by these two organisations. Both will get fees if this happens.

But Verra’s credits in particular have recently come under fire. In January 2023, the Guardian reported that more than 90% of Verra’s rainforest based carbon offsets do not represent genuine carbon reductions. Verra disputes this.

Both the previous and the current Australian governments have promoted carbon offsets as a way to reduce the country’s emissions, but critics say it’s a way of avoiding politically difficult measures like reducing its coal and gas production or consumption of fossil fuels.

A United Nations-commissioned report last year said carbon offsets should only be used as a last resort, after a firm’s own emissions have been reduced.

A $200,000 report

Carbon offsets are projects that reduce the amount of greenhouse gas going into the atmosphere in one place. They are meant to offset increased emissions somewhere else.

Governments and companies often buy emissions reductions associated with those projects to compensate for their pollution.

For this to work, a third party – which includes organisations like Verra and Gold Standard – is supposed to verify the projects do what they say they do.

But offsets can lead to greenwashing. That’s why last year, the then Australian energy minister Angus Taylor asked the government’s independent climate advisers – the climate change authority (CCA) – to research how to best assess projects.

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The review would help select offsets under the government’s domestic “climate active programme“, a national carbon market, and its Indo-Pacific carbon offsets scheme, which aims to offset Australian emissions in countries like Fiji and Papua New Guinea.

The CCA had the equivalent of only twelve full-time staff members at the time so, to prepare the report, they hired the EY consultancy company (formerly known as Ernst and Young) in April, awarding them a $200,000 contract.

The report was supposed to do a “stocktake” on international offset schemes, come up with a “framework” for comparing the quality of offsets” and compare and rate shortlisted offset schemes.

The report’s key finding was that Gold Standard and Verra had the best offsets, but it could have been influenced by a conflict of interest with them, documents show.

Competing interests

Using a freedom of information request, Climate Home News obtained documents which show that EY had worked with Verra and Gold Standard before producing the carbon offsets report. It was not paid for this work.

EY’s bidding for the consultancy, obtained under FOI, runs to 54 pages – a similar length to the final report.

It claims that EY’s consultants, who charge up to A$1,650 ($1,104) an hour, would carry out “intensive desktop-based research, workshops and collaboration”.

It boasts that EY itself is “now carbon negative” because it buys offsets for more emissions than it produces and therefore has “first-hand experience”.

In a section outlining its “credentials”, EY said it worked with carbon credit verifier Gold Standard, advising on credits legal definition and preparing a survey for the organisation’s consultation group.

EY said their work with Gold Standard “will be continued” in a joint report on this issue.

EY’s bidding document boasted of its work with Gold Standard

Later in this section, EY said it had looked for carbon credits for an unnamed “major global natural gas producer” and formed relations with Verra, “one of the leading standards for voluntary carbon credits”.

The contract, which was also shared in the obtained documents, states that EY had to tell the CCA that “no conflict of interest exists or is likely to arise”.

A clause in the contract between the Australian government and EY

The CCA commissioned EY and, after bumping up the fee from A$198,000 to $206,000. Two months later, they published the 60-page report.

The report gave Gold Standard its top score followed by Verra. It concluded that “Verra and Gold Standard were the leading international offset schemes for governance”.

The documents list Steve Hatfield Dodds as one of the EY consultants who would advise on the report. The new Labor Australian government recently appointed him to an independent review of Australia’s carbon credits scheme.

The director of the Australia Institute’s climate programme, Polly Hemming, said the report was superficial. It “didn’t assess the efficacy of the projects or methodology in reducing emissions,” she said.

Instead “it assessed Verra’s stated commitment to integrity – not whether it actually has integrity.”

Bill Hare, climate scientist and CEO of the non-profit Climate Analytics said Australia’s push for carbon offsetting instead of actual emissions cuts is “a massive challenge”. “So far we have little confidence in (the country’s) ability to tackle the issue,” he added.

Outsourced climate policy

EY’s bidding document reveals the extent of their influence across Australia’s climate policy-making, advising governments, fossil fuel companies and climate campaigners.

Aside from the unnamed “global natural gas producer”, the CCA documents indicate that EY advised an unnamed “Australian energy company with global operations” on carbon markets.

EY has also worked for a British coal mining company called Simec. The Australia Institute accused them of over-stating the economic value of the company’s mines. This experience was not mentioned in EY’s bid for the CCA contract.

Hemming said the government “appears incapable of running any kind of truly independent review process. The default is not to turn to scientists or experts free from potential conflicts but to industry.”

While advising fossil fuel companies, EY was also drawing up regional governments’ climate policies. The consultancy also advised the Queensland region’s environment department “in a number of areas since 2018”, its bid to the CCA says.

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This includes helping set up a “carbon farming” project called the Land Restoration Fund which one farmer representative called a “disaster” where “the consultant has made the money and the producer is left behind again.

EY advised the regional governments of South Australia and New South Wales on how to reach net zero by 2050 and the Victoria government on how to reduce emissions.

But even climate campaign groups have forked out for consultants’ advice. The World Wildlife Fund and Farmers for Climate Action commissioned EY to write separate reports on how to reduce emissions from Australian agriculture – neither recommended reducing cow numbers.

And it’s not just EY. Rival consultancy Deloitte advised the government of the Northern Territory on the oil and gas industry.

Their report advised the province to speed up gas production, build gas pipelines and invest in carbon offsets and carbon capture to “meet the growing demand for low-carbon energy”.

Consultant crack-down

In May 2022, the right-wing government of Scott Morrison was replaced by Anthony Albanese’s Labor government. In October, they said they would look to cut the amount of money they spend on consultants, estimated at more than $2bn (US$1.3bn) a year.

As part of this policy, they have given the CCA more funding so that it can increase its staff from the dozen employees it had under Scott Morrison’s government to around 65 staff members.

The CCA’s Archer said the funding “will support the authority to enhance its internal capacity” but “there may still be some circumstances where we decide it is necessary to complement our own expertise by engaging external input”.

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Controversy over carbon offsets continues. The Australian Parliament passed on Thursday a new flagship climate policy known as the safeguard mechanism.

It will require the country’s biggest polluters to reduce emissions either through absolute cuts or by buying offsets.

Hare warned it could allow coal and gas industries to receive an unlimited supply of carbon credits to supposedly offset its emissions from production.

“The way things are headed in Australia it looks like it will be the first country with a government-sponsored greenwashing system at scale,” Hare said, “and a lot of this will be facilitated by reports from different consulting firms”.

In defence

The head of the CCA Brad Archer told Climate Home that consulting firms often balance work with governments and corporate clients. “While that raises the risk of conflicts, it also provides them with the knowledge to undertake the analysis required,” he added.

Archer said the CCA had “sought assurances that EY had no current conflict of interest and placed a positive duty on them to indicate if they did during the contract. They did not indicate a conflict on commencing or during the contract.”

He said the authority “maintains the highest standards of probity in engaging with consultants and complied with all relevant legislative, policy and procedural requirements when entering into the contract with EY”.

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A spokesperson for Gold Standard said that EY Law “were one of many organisations on our consultation group” and that EY was not paid for being in the group or for the paper that followed.

A spokesperson for EY said it is “proud” of the work it does supporting the Australian government and it is chosen for its “specialist knowledge and the skills of our staff”.

Asked if its relationship with Verra and Gold Standard was a conflict of interest, the spokesperson did not respond. But they said that managing potential conflicts of interest is “of utmost importance to EY”.

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