Diplomacy the solution to impasse over Australia's use of carryover credits, officials say

Australian officials have told major business groups there will have to be a diplomatic solution to a stand-off between the Morrison government and other nations about whether the government can use carryover credits from the Kyoto period to meet its Paris target.

Guardian Australia understands diplomats from the British high commission signalled their objection to Australia using carryover credits during a recent meeting of the Australian Greenhouse Industry Network, which includes major emitters such as BHP and Woodside, and industry associations.

Australian officials responded by saying the government intended to use carryover credits despite the opposition, and there would need to be a diplomatic solution at the looming United Nations climate talks in Madrid.

British officials, according to sources with knowledge of the meeting, said everything was negotiable in the context of the UN talks, but using carryover credits should not become a substitute for climate action. The British high commission in Canberra declined to comment on a presentation delivered during a private meeting.

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Carryover credits are an accounting system that allows countries to count credits from exceeding their targets under the soon-to-be-obsolete Kyoto protocol periods against their Paris commitment for 2030.

Australia will need to cut emissions by 695m tonnes cumulatively across the next decade to meet its 2030 target. The Morrison government said more than half of that cut, 367m tonnes, would come from accounting and not from practical emissions reduction.

Australia’s stance is controversial, and a number of countries have objected, including the European Union, Pacific nations and Canada. Environment department officials recently told Senate estimates they were unaware of any countries other than Australia planning to use the controversial credits to meet their international climate commitments.

The Australian Greenhouse Industry Network meets regularly. The most recent conversation, including diplomats and Australian officials, is scheduled as a precursor to the UN climate talks in Madrid starting on 2 December. Officials from the foreign affairs department have been briefing stakeholders ahead of the meeting.

Foreign affairs officials told stakeholders that Australia would not discuss an increase in its headline commitment – a 26-28% emissions cut by 2030 compared with 2005 – in Madrid and did not expect carryover credits to be a major focus at the meeting.

They said the environment department was working on a long-term climate strategy that would be released for feedback early next year.

This is consistent with a commitment Morrison made at the Pacific Islands forum in Tuvalu in August, when – after rejecting heavy criticism by island nations of Australia’s support for coal – he signed Australia up to pursuing efforts to limit global warming to 1.5C and produce a 2050 strategy by 2020. His statement said the strategy “may include commitments and strategies to achieve net zero carbon by 2050”.

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The context for the conversation at the network meeting was rising concern in the business community about the continuing lack of resolution to article 6 of the Paris rulebook, which is the section of the agreement promoting international cooperation, including allowing countries to trade their emissions allowances, or credits.

Despite Scott Morrison’s frequent, strident criticisms during the May election of a plan by Labor to allow high emitting businesses to use international permits to reduce their pollution at least cost, Australia’s official position in the UN negotiations is it supports the use of permits.

But it remains unclear whether a consensus on the rules will be reached in Madrid. The issue of whether Australia can use carryover credits from the Kyoto period is a separate but related issue to the disputes about article 6.

Carryover credits are not mentioned in the Paris agreement, under which countries nominate their own targets (known as nationally determined commitments) and explain how they plan to reach them. It means there is nothing in the text that prevents Australia from using them, despite the objections. They could be banned only through consensus, which would require Australia to agree.

The government said Australia was entitled to use the carryover credits as they reflect ed its efforts in “beating” the targets set under the Kyoto protocol. Critics say Australia has access to the credits only because it has made unexacting commitments, including allowing its emissions to continue to increase under the protocol’s first stage, and the point of the Paris deal is to significantly ramp up action over time, not just loopholes.