Heavy industry should be able to trade away emissions by investing in environmental projects overseas, a federal review has found.
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International carbon markets can "smooth the transition" for Australia, the Climate Change Authority advised in a report to government published on Thursday.
"It can be part of a plan for a faster, deeper transition to net zero and beyond," the review of international offsets found.
But the review found Australia's own carbon market to be "fragmented, inefficient and complicated".
Climate Change and Energy Minister Chris Bowen told AAP he is considering the recommendations, including the call for a national carbon market strategy.
"This report highlights that international carbon markets are still evolving, and provides recommendations for Australia's engagement with them," Mr Bowen said.
He said the government's immediate focus is on the integrity and growth of the domestic carbon market, and high-quality offsets that are good for the regions as well as the climate.
But critics say it is unclear how buying cheap carbon credits overseas will bring down emissions or help other countries meet their climate targets.
Carbon Market Institute head John Connor said the advice lands at an important time, with new climate laws in parliament and governments working out how to use credits to meet international commitments.
"A national strategy will ensure greater clarity and integrity," he said.
Labor's commitment to 43 per cent lower emissions by 2030, to get to net zero by 2050, does not indicate whether international offsets will be used to help meet the targets.
The fate of the former government's widely adopted Climate Active scheme that certifies carbon reduction projects is also unknown.
The authority recommends phasing out older units accepted under Climate Active, because the new Paris Agreement prevents any carry-over from the less ambitious Kyoto Protocol era.
"Other types of units should remain eligible for now, but should be reviewed regularly alongside other schemes entering the market," the report said.
The separate Indo-Pacific offsets scheme set up by the former government in November also faces scrutiny.
The authority's chief executive Brad Archer told AAP that Australia must ensure the domestic carbon market has integrity and that units represent genuine benefits.
He said Australia's emitters must also prepare for "net negative", where the economy is required to remove more carbon than it emits.
Limiting global warming to 1.5 degrees requires net zero carbon emissions by 2050 and net negative emissions in the second half of the century.
The review of international carbon offsets was commissioned by former energy minister Angus Taylor, but Mr Archer said the advice was "neutral", with the outcome of the review unchanged.
Set for a budget boost to meet a high-priority federal agenda, the authority plans to hire more staff after being reduced to less than a dozen under the prior government.
Australian Associated Press