A panel of government-appointed experts has uncovered "integrity issues" with the Coalition's flagship climate change policy, triggering a warning that some of the emission reductions claimed by Australia may not be genuine.
The findings relate to the Abbott-era Emissions Reduction Fund, established in 2014 to replace Labor's so-called "carbon tax". The Morrison government extended the fund in February with a $2 billion injection of taxpayer funds, and renamed it the Climate Solutions Fund.
The direct action initiative gives financial incentives, in the form of credits, to projects that reduce carbon emissions or draw them from the atmosphere, such as by revegetating land.
An official panel of experts has identified "integrity issues" with two revegetation methods under the fund. Among the committee's findings are that some projects may have received credits for carbon sequestration that has not yet occurred and may never occur - for example, because the land is not capable of growing forest cover.
In one sample cited in the panel's report, almost half the projects had not achieved the required vegetation seven years after they commenced.
The findings pose a concern because half the 193 million tonnes of emissions cuts claimed by the Coalition government under the fund relate to projects using one of the methods under a cloud.
The chair of the Emissions Reduction Assurance Committee, Australian National University law professor Andrew Macintosh, said there was no guarantee that all carbon credits issued to existing projects would accurately reflect the carbon abatement they achieved.
The methods under review, known as carbon farming, involve changes to farming practices such as limiting cattle grazing and managing feral animals, to allow native plants to regrow. The plants draw carbon dioxide from the atmosphere and sequester it as carbon.
Professor Macintosh said that the extent to which projects may have been forward-credited or over-credited could not yet be measured because some still had decades to run.
He said forward-crediting posed one of the greatest material risks to the scheme. This occurs when carbon credits are issued for sequestration that has not yet occurred. If it never occurs - for example if vegetation grows slowly - credits may be wrongly issued.
The government recently introduced changes to the scheme's guidelines. Professor Macintosh said the changes took a stricter approach to new projects than those that had already begun. This was because creating uncertainty in the rules might deter future participation in the scheme.
Proponents of existing projects, and their investors, were also opposed to retrospective changes.
Professor Macintosh said the changes ensured new projects were robust. However he said the government should have more flexibility, within reason, to change the rules for existing projects "to address integrity issues".
Professor Macintosh said projects that required the vegetation to remain intact for only 25 years presented an "elevated" risk because they were less likely to catch up in the case of forward-crediting, in which case "there's an over crediting problem".
"Can I sit here and say there is no chance that existing projects will be forward-credited or over-credited? No I can't. But we will just have to see how the projects perform over the next five or ten years," he said.
He added that the scheme was designed so over-credited projects would in most cases be balanced out by under-credited projects.
Australian Conservation Foundation chief executive Kelly O'Shanassy said the concerns identified in the review "aren't minor technical issues".
"It is further evidence the Morrison Government's climate plan is riddled with holes and cannot be relied upon to do the heavy lifting to cut Australia's growing climate pollution," she said.
Environment Minister Melissa Price said the committee raised concerns during the review process that have now been addressed.
"The report, and the changes that the government has already made to these methods, demonstrates the integrity of the Emissions Reduction Fund and its organisational and institutional arrangements," she said.
Labor's climate change and energy spokesman Mark Butler said the party "has been critical of the ERF for years".
"This is an ineffective policy that hasn't seen emissions fall, while costing taxpayers $2.5 billion," he said.
Labor will dump the fund if it wins office, but will continue with carbon farming methods, including improving their robustness, he said.