The federal government sidelined independent experts and consulted "almost exclusively" with fossil fuel companies and big emitters on rules making carbon capture and storage projects eligible for emissions reduction credits, a new report claims.
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Questions about conflicts of interests involving members of the committee tasked with overseeing the scheme have also been raised in the report from progressive think tank The Australia Institute.
But the research has been labelled "highly misleading" by the government regulator, which insists scientists and technical experts were involved in the process.
A spokesman for Energy and Emissions Reduction Minister Angus Taylor has also taken aim at The Australia Institute, accusing it of being motivated by "personal political motivations" and saying it had "no credibility and little understanding of the matters it so frequently pontificates on".
The stoush comes as a former chair of the oversight committee, ANU professor Andrew Macintosh, claimed Australia's carbon market was a "fraud on the environment" and taxpayer.
Professor McIntosh said up to 80 per cent of carbon credits issued to projects were "devoid of integrity".
The new Australia Institute report is based on documents obtained under freedom of information, which the think tank says exposes the extent to which industry players influenced the design of rules which allow carbon capture and storage projects to be eligible for carbon credits under the government's emissions reduction fund.
Santos' $220 million hub in outback South Australia, which Australia promoted during the Glasgow climate summit, was the first project of its kind to be registered under the new regime.
The internal documents provide some insight into the consultation process used to develop the carbon capture and storage rules.
Emails show the Clean Energy Regulator invited stakeholders to a workshop in December 2020, held as part of the process to "co-design" the rules with "industry, subject matter experts and others".
The think tank's report claims that despite the regulator's claims that it would consult widely, attendees at the workshops were "almost exclusively" people linked to the fossil fuel industry, major emitters or government agencies.
A list of attendees at the workshop, obtained under freedom of information by the Australian Conservation Foundation and published in the report, appears to supports this claim.
The report claims that while fossil fuel groups had easy access to the sessions, including if they weren't initially invited, independent groups were excluded.
The Australia Institute asked to participate in the second workshop in early 2021 but the request was knocked, emails show.
In an email, the regulator told the think tank that the process was mainly for industry practitioners who intended to use carbon capture and storage.
The regulator suggested that the institute's experts weren't needed to keep an eye on the process, as the government's independent Emissions Reduction Assurance Committee was already there to provide oversight.
The committee, whose members are appointed by the government, monitor emissions reductions methods to ensure they meet integrity standards and provide advice to the minister.
The Australian Institute report raises questions about potential of conflicts of interests involving members of the oversight committee, including chair David Byers, who were also involved in carbon capture and storage technology.
The report shows Mr Byers participated in the co-design process while he was chief executive of carbon capture and storage research firm C02CRC, which lists industry giants BHP, Chevron and Santos among its members.
The committee's disclosure register from May 2021 show he managed the potential conflict by withdrawing from the research firm's policy group and abstaining from decision-making on carbon capture and storage.
Mr Byers stepped down from the research firm last July, but remains the committee's chair.
The think tank contacted Mr Byers for comment and his response was included in the report.
In his response, Mr Byers said it was clear from the documents that committee members had disclosed relevant interests and complied with their legal obligations.
The Canberra Times contacted Mr Byers to confirm his statement, but did not receive a response.
The think tank has made no allegations of illegality against Mr Byers or other committee members and nor has The Canberra Times.
Richie Merzian, who heads up The Australia Institute's climate and energy program, said the report called into question the integrity of Australia's carbon offsets system.
"This report raises serious conflict of interest concerns about the use of public money for fossil fuel projects and around the integrity of existing carbon credit rules," he said.
In a statement to The Canberra Times, a spokeswoman for the Clean Energy Regulator said the report contained false statements and was highly misleading.
The spokeswoman said scientists, technical experts and practitioners were involved in the co-design process, which was supported by advice from CSIRO and other research.
She said the regulator and committee had decided to only invite stakeholders with "directly relevant experience" to participate in the process.
"The Australia Institute has only limited expertise in this matter," she said, adding that other interested parties were able to lodge submissions during a separate public consultation process.
Mr Taylor's office went further in its criticism of the think tank, which is helmed by former Greens staffer Ben Oquist.
"The integrity of the emissions reduction fund is reflected in the market price for Australian Carbon Credit Units - which can be up to 10 times the price of lesser quality international units," he said.
"The reality is attacks by The Australia Institute and others on the fund and carbon capture and storage technologies reflect their personal political motivations.
"The Intergovernmental Panel on Climate Change and the International Energy Agency have both acknowledged carbon capture technologies as essential to meeting the world's climate goals.
"These bodies are the experts, not The Australia Institute, which is nothing but a front for the Greens and the left of the Labor party. It has no credibility and little understanding of the matters it so frequently pontificates on."
Mr Merzian brushed off the attack as he doubled down on his criticism of the Clean Energy Regulator.
"The facts are clear - the Clean Energy Regulator rolled out the red carpet for the fossil fuel industry to design carbon crediting methods while closing the door on others who might have concerns about the process," he said.
"Australia needs a credible carbon market and that won't happen while the CER designs credit methods with the fossil fuel industry, buys almost all the credits, all while serving as the regulator."