On 30 April 2026, the Australian Government released the Carbon Credits and Other Legislation Amendment (Integrity and Transparency) Bill 2026 Exposure Draft (Bill) for consultation.

The Bill marks the first amendments to the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) in over a decade and includes significant reforms to the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act).

The reforms respond to recommendations contained in the Independent Review of Australian Carbon Credit Units by Professor Ian Chubb (the Chubb Review) (See our commentary on the Chubb Review) and the Climate Change Authority's 2023 Review of the ACCU Scheme (the CCA Review).

This update unpacks the key reform areas addressed in the Bill, including new native title holder consents, the establishment of the Carbon Abatement Integrity Committee, what integrity risk method declarations are, as well as policy, integrity and administrative improvements.

In addition, we consider the Bill in the context of the rapidly maturing domestic carbon and environmental markets and what risks and opportunities are emerging.

Consultation is open for a relatively short window via the Department of Climate Change, Energy, the Environment and Water (DCCEEW) website, until 5:00pm AEST Friday 22 May 2026, see here.

Background

The CFI Act is the primary mechanism for Australia's carbon credit regime (the ACCU Scheme). Participants earn Australian Carbon Credit Units (ACCUs) via projects that avoid emissions or sequester carbon, with one ACCU representing one tonne of carbon dioxide equivalent abated or sequestered. ACCUs can be sold to entities needing to offset emissions, including Safeguard Mechanism-covered facilities.

Whilst the 2022 Chubb Review and the CCA Review found the ACCU Scheme to be fundamentally sound, both identified opportunities to strengthen governance, transparency and integrity, and made recommendations to the Government which were agreed or agreed in principle.

The Bill now seeks to implement those recommendations, alongside other regulatory improvements identified through over a decade of delivering the Scheme, through a package of legislative amendments, the key elements of which are outlined below.

Overview of reforms

The Bill introduces a suite of reforms spanning native title consent, governance, integrity risk management and administrative improvements.

Native title consent

The Bill introduces three key changes to native title consent requirements under the CFI Act — part of a growing wave of social licence reform reshaping how industry engages with First Nations rights holders across Australia's environmental markets. Importantly, the new consent requirements apply only to project applications made on or after commencement. Projects already conditionally registered or in the pipeline are unaffected.

First, registered native title claimants — not just registered native title bodies corporate — will be recognised as eligible interest holders. This aligns the ACCU Scheme with the Native Title Act 1993 (Cth), which already affords claimants procedural rights including the right to negotiate. In practice, project proponents will need to identify and engage a potentially wider class of First Nations stakeholders at the outset of project development. Given that native title claims can cover land not yet the subject of a determination, this change introduces a new layer of due diligence that proponents should build into their project scoping and timeline planning.

Second, the Bill introduces a mandatory two-stage up-front consent process for area-based projects on native title or claimed native title land:

• Stage 1 requires consent to the making of the project application from the outset; and
• Stage 2 requires consent to the manner in which the project will be carried out, prior to the issuing of any ACCUs.

At both stages, consent must be provided to the satisfaction of the Clean Energy Regulator (CER) and may be documented either in a form approved by the CER or set out in a registered Indigenous Land Use Agreement.

While a project may be conditionally registered once Stage 1 consent is obtained, ACCUs cannot be issued until Stage 2 consent is received before the end of the first reporting period. This reform aligns the ACCU Scheme more closely with the Nature Repair Market's consent framework and with best-practice Free, Prior and Informed Consent standards and underlines the importance of engaging early and often with First Nations stakeholders.

The Bill proposes that the Carbon Credits (Carbon Farming Initiative) Rule 2015 (CFI Rule) will be amended to set out the specific matters the CER must be satisfied of in deciding whether consent has been obtained. These are expected to include whether:

• a signed eligible interest holder consent form has been provided;
• native title holders and claimants have been notified of the Stage 1 consent agreement; and
• a protocol for negotiations to reach Stage 2 consent has been agreed with the relevant parties.

Third, the Bill reaffirms that State, Territory and Commonwealth Crown lands Ministers do not hold consent rights over projects on exclusive possession native title land that is Torrens system land or land rights land.

The Government has also committed $11.4 million to support native title eligible interest holders to participate in these consent processes. For project proponents, early, ongoing and genuine engagement with native title bodies and claimants will be essential to project timelines and bankability.

Carbon Abatement Integrity Committee (CAIC)

Currently, the Emissions Reduction Assurance Committee (ERAC) is an independent statutory committee that assesses whether methods comply with the Offsets Integrity Standards. The Bill replaces the ERAC with the Carbon Abatement Integrity Committee (CAIC), which will retain the existing structure of a full-time Chair and between four and eight part-time members, including at least one member who must be Aboriginal or Torres Strait Islander.

The CAIC will also be afforded several new functions beyond those of the ERAC, including:

• advising the Minister on the development of new methods, the variation of existing ones and integrity risk method declarations (discussed in detail below);
• reviewing methods, at the Minister's request, before they expire to advise on any variation or the development of alternative methods; and
• the ability for the CAIC to seek assistance in support of CAIC functions, including Government bodies and external specialists with relevant experience or knowledge.

In addition, the Bill extends the maximum public consultation period for CAIC method assessments from 28 days to 45 days. A shorter period of no less than 14 days remains available where the CAIC considers it appropriate. Similarly, the maximum period for suspending the processing of new project applications under a method will increase from 12 to 18 months.

Any advice provided by the CAIC to the Minister or the Secretary must be published on the Department's website, including advice relating to the outcomes of periodic reviews, method development and variation and integrity risk method declarations.

Integrity risk method declarations

In response to recommendations in the Chubb Review and the CCA Review, the Bill introduces a new Ministerial power: the Integrity Risk Method Declaration (IRMD). IRMDs address circumstances where a method is subsequently found not to comply with the Offsets Integrity Standards.

Under the current ACCU Scheme, there is no mechanism to prevent ACCUs from being issued under a method where integrity issues are subsequently uncovered. The Bill addresses this gap by empowering the Minister to make an IRMD, preventing projects registered under that method from earning ACCUs until they transition to a suitable alternative method.

IRMDs are a mechanism of last resort. The existing suite of tools — method suspension, variation and revocation — address integrity concerns without affecting existing registered projects, but IRMDs go further by preventing existing projects from earning ACCUs under the relevant method. The Minister may only make an IRMD if the following integrity risk threshold criteria are met:

• the method does not comply with one or more of the Offsets Integrity Standards; and
• the issuance, or continued issuance, of ACCUs to projects registered under the relevant method would pose a material risk to the integrity of the ACCU Scheme.

Before making an IRMD, the Minister must also satisfy the following conditions:

• the CAIC must have advised that the integrity risk threshold criteria are met — the Minister cannot make an IRMD if the CAIC's latest advice is that the criteria are not met;
• the Minister must undertake public consultation, including by publishing a draft IRMD, a draft statement of reasons and a notice inviting submissions — if the Minister decides not to proceed, a statement of reasons must be published; and
• having regard to the CAIC's advice and submissions received, the Minister must be satisfied that:

• the integrity risk threshold criteria are met;
• making the IRMD would substantially mitigate the identified risk;
• a suitable alternative method exists for each affected project; and
• each such project meets, or is reasonably capable of being changed to meet, the key requirements of that alternative method, including having regard to transition costs.

Importantly, the process may be initiated either by the Minister requesting the CAIC's advice, or by the CAIC itself — the CAIC may self-initiate advice to the Minister if it forms the opinion that the integrity risk threshold criteria might be met in relation to a method.

Once an IRMD comes into effect, projects registered under the relevant method may continue to earn ACCUs during the applicable transition period. After that period expires, projects cannot earn further ACCUs under the integrity risk method — though all existing project conditions and obligations remain enforceable until transition to a suitable alternative method is completed. The transition period is:

• No more than 2 years for emissions avoidance offset projects
• No more than 5 years for sequestration offsets projects
• A shorter period, if specified by the Minister, that is no less than 6 months after the IRMD is made

These timeframes reflect the maximum and minimum reporting periods for each project type. After the transition period, projects may only resume earning ACCUs by transitioning to a suitable alternative method.

The transition provisions for IRMDs are broad in scope and the framework applies to methods and affected projects whether made or declared before, on or after commencement of the Bill.

From a practical and strategic perspective, the IRMD power — even if rarely exercised — sends a clear market signal that the Government is willing to intervene to protect scheme integrity. This may affect ACCU pricing and demand dynamics, particularly for ACCUs issued under older methods. Proponents should begin assessing now whether any method they use is at risk of an IRMD and whether a suitable alternative method exists to which they could transition within the applicable timeframe.

Changes to the "newness" requirement

Currently, to be registered as an eligible project, the CFI Act requires that a project must not have already begun to be implemented. This is referred to as the "newness" requirement. The intention is that emissions reductions that would have occurred anyway would fail the additionality principle.

The Bill proposes a carve out to the "newness" requirement for research and development (R&D) activities. R&D activities can run into snags with respect to the "newness" requirement where the testing or development of the R&D predates the commencement of the project. To qualify for this carve out, the following must be met:

• the activity must have contributed to the development of the method covering the project;
• the activity must have ceased; and
• it must be unlikely that the activity would be resumed unless the project is declared an eligible offsets project.

The Bill also defines an "R&D activity" for these purposes as an experimental activity whose outcome cannot be known in advance, conducted for the purpose of generating new knowledge. It must proceed from hypothesis to experiment, observation and evaluation, in accordance with established scientific principles.

Government purchasing of ACCUs

The Chubb Review recommended, in order to alleviate potential or perceived conflicts of interest, that the responsibility for purchasing ACCUs on behalf of the Government be moved from the CER to the Secretary of the Department. The Bill implements this recommendation through three related changes.

First, responsibility for purchasing ACCUs under the CFI Act is transferred from the CER to the Secretary of the Department of Climate Change, Energy, the Environment and Water. The Department is considered the appropriate host for this function given its responsibility for ACCU Scheme policy, Safeguard Mechanism policy and broader environmental markets, so it makes sense for the same entity that shapes those policies to also manage the Government's purchasing of ACCUs under them.

Second, the Secretary is empowered to delegate purchasing functions to Senior Executive Service employees within the Department or other Commonwealth agencies — though the Secretary is expressly prohibited from delegating the conduct of carbon abatement purchasing processes to the CER, preserving the separation of the regulatory and purchasing functions.

Finally, the existing principle requiring the Government to purchase "least cost abatement" is replaced with a "value for money" principle, aligning ACCU purchasing with the Commonwealth Procurement Rules and affording the Government greater flexibility to pursue a broader range of policy objectives — including non-carbon co-benefits — when acquiring ACCUs.

Integrity, administration and the NGER Act

The Bill proposes a suite of integrity and administrative amendments, including:

• Voluntary relinquishment pathway for incorrect information – where ACCUs have been issued on the basis of information that was false or misleading but provided inadvertently (without knowledge, recklessness or negligence), proponents may apply to the CER for a voluntary relinquishment notice. If the relevant ACCUs are not relinquished within 90 days, the CER may issue a compulsory relinquishment notice. A separate power also allows the CER to require relinquishment where updated information in later offsets reports reveals that total abatement credited exceeds total abatement actually achieved and existing mechanisms cannot address the discrepancy before the end of the crediting period.
• Powers to vary, revoke or set aside decisions based upon false or misleading information – the Bill makes explicit that the CER may vary, revoke or set aside any decision under the CFI Act where that decision was directly or indirectly attributable to false or misleading information. The CER must give written notice to affected persons, and substituted decisions remain reviewable.
• Infringement notices – the Bill introduces an infringement notice regime for lower-level contraventions of specified civil penalty provisions, including project reporting, record-keeping and notification obligations. Rather than commencing court proceedings, the CER may issue a notice giving recipients the opportunity to pay a fixed penalty (up to 60 penalty units for a body corporate) to discharge liability without admitting fault.
• Changes to the "fit and proper person" test – the Bill extends the fit and proper person test to designated agents who wholly or substantially prepare project applications or offsets reports on behalf of a proponent and amends the test so that insolvency is a relevant consideration rather than an automatic bar to crediting.
• Reporting and recordkeeping – the Bill extends the time limit for submitting offsets reports from 6 to 9 months after the end of a reporting period. It also clarifies that reporting, notification, record-keeping and project monitoring obligations do not extend beyond the end of the permanence period for sequestration projects, or beyond the end of the crediting period (or any extended accounting period) for emissions avoidance projects.
• Information sharing – the Bill implements a "tell us once" principle for proponents operating projects across both the Nature Repair Market and the ACCU Scheme, allowing the CER to use information provided by a project proponent under the Nature Repair Act 2023 (Cth) for ACCU Scheme purposes without requiring that information to be provided again under the CFI Act.
• NGER Act –The Bill introduces three amendments to the NGER Act. First, a new flexible regulation-making power will enable the CER to publish prescribed kinds of greenhouse and energy information (including at facility level and in time series). Second, the CER's deregistration powers are expanded to allow it to remove corporations from the NGER register on its own initiative where a corporation is in liquidation, administration or is no longer a controlling corporation. Third, reporting obligations are extended to cover financial years falling between a corporation's trigger year and its year of registration, closing a gap in the NGER dataset where corporations have delayed applying for registration.

Green shoots in Australia's carbon and environmental markets

The Bill does not sit in isolation. It forms part of a broader maturation of Australia's carbon and environmental markets, spanning carbon, biodiversity and emissions compliance frameworks that continue to accelerate.

Clean Energy Regulator Safeguard Mechanism Performance Data for 2024-25

On 15 April 2026, the CER published the performance data for the Safeguard Mechanism over the previous year, headlined by:

• a 2.3% reduction in total covered emissions from the previous year;
• the surrendering of 10.8 million ACCUs and 2.6 million Safeguard Mechanism Credits (SMCs) to meet compliance obligations, an increase of 49%; and
• a total reduction in net emissions (emissions minus offsets) of 5.5%.

Notably, the data indicated that — for the first time since the Safeguard Mechanism reforms — total covered emissions exceeded total baselines across the scheme. As baselines continue to decline at 4.9% per year toward the 2029-30 target of 100 Mt CO2-e, the downward pressure on Safeguard facilities to decarbonise will intensify. This structural dynamic will progressively increase demand for ACCUs and SMCs, regardless of whether individual facilities invest in on-site abatement, as the cost of compliance through unit surrender rises commensurately.

For sectors where commercially viable decarbonisation technologies are available the transition pathway is clearer, though capital-intensive. For hard-to-abate sectors where such technologies remain unproven, the cost of Safeguard compliance will increase materially as baselines decline, making ACCU procurement a structural feature of compliance strategy rather than a transitional measure.

The Government has confirmed it will review the Safeguard Mechanism's policy settings in 2026-27. The review will consider matters including baseline calculation methodologies, options for managing excess emissions, flexibility mechanisms, trade-exposed industry treatment, SMC availability and overall scheme coverage. Clients with Safeguard-covered facilities should monitor the review closely, as its outcomes may materially affect compliance costs and ACCU demand dynamics beyond 2027.

Interlinking ACCUs and biodiversity certificates

The Government has recently consulted on policy settings to enable Nature Repair Market biodiversity certificates to supply environmental offsets. A key outcome of that consultation is the confirmation that non-offset biodiversity certificates can be stacked with ACCUs — effectively enabling separate carbon and biodiversity benefits to be generated from the same project. It is important to note, however, that offset-eligible biodiversity certificates (including under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act)) or Restoration Contributions Holder projects cannot be stacked with ACCUs, as the ACCU Scheme's additionality requirements exclude activities that are mandated by law, such as environmental offsets.

This may provide added opportunity for biodiversity and carbon project proponents, who now have dual crediting, and therefore dual revenue, opportunities with carbon and biodiversity benefits that can be traded separately in addition to a likely increased demand from new market participants. However, whether the market prefers separate Nature Repair Act 2023 (Cth) projects compared to ACCU projects developed in accordance with biodiversity-focussed benchmarks (such as the Accounting for Nature framework) remains to be seen.

Carbon and environmental markets in the Federal Budget 2026-27

More broadly, the Commonwealth Budget, delivered on 12 May 2026, allocates:

• $23.3 million to strengthen Australia's carbon crediting and emissions reporting — including supporting National Greenhouse Accounts data collation and tracking services, boosting ACCU method development as well as ongoing reforms to the ACCU scheme, and climate risk management in the public service;
• $36.9 million over two years to the DCCEEW and the Clean Energy Regulator to continue administering the Nature Repair Market and develop additional methods to support environmental offsets;
• $13.2 million over two years from 2026–27 for DCCEEW to establish the Restoration Contributions Holder to deliver environmental offsets on behalf of proponents; and
• more than $500 million over four years to implement new environmental protection architecture as part of last year's EPBC Act reforms.

Overall, the Budget confirms the Government's commitment to developing market architecture by investing in integrity and regulatory infrastructure while leaving the heavy lifting of demand generation to the Safeguard Mechanism and the private sector.

Australia's carbon and environmental markets are undergoing their most significant structural evolution in over a decade. The Bill, the Safeguard Mechanism data and the emerging Nature Repair Market framework are converging to reshape the risk and opportunity landscape for project proponents, Safeguard-covered facilities, investors and landholders alike.

The window to input into the Bill is very short (closing at 5:00pm AEST on Friday 22 May 2026). Submissions can be made via the DCCEEW Have Your Say page. Stakeholders should also keep an eye on:

• The concurrent Environment Protection and Biodiversity Conservation Act 1999 (Cth) reforms, and in particular the exposure draft of the National Environmental Standard for Environmental Offsets, which was released for public consultation on 8 May 2026, with submissions closing on 9 June 2026. This is expected to be a further catalyst for conservation and restoration works moving forward.
• The Government's 2026–27 Review of Safeguard Mechanism policy settings is scheduled to commence in July 2026 and will consider baseline methodologies, flexibility mechanisms and overall scheme coverage.
• Potential future legislative changes to enable integrated methods combining emissions avoidance and sequestration activities in a single offset project remain under active consideration by the Department.

If you would like to discuss how these reforms may affect your business, project portfolio or compliance strategy, please contact one of our experts.