Coalition expands recycling, carbon credit scheme by $60m amid claims of climate ‘fraud’ by thinktank

The Coalition will put $60m into recycling initiatives and make tax changes to encourage farmers to reduce their carbon output, in a pair of pre-budget announcements as the government seeks to beef up its environmental credentials ahead of the federal election.

It comes as the Australia Institute thinktank launches a new television campaign accusing the government of using "dodgy carbon credits" and calling the Coalition's net zero by 2050 plan a "fraud".

The prime minister, Scott Morrison, will be in Brisbane on Monday to announce the boost to the Recycling Modernisation Fund. The new funding specifically focuses on plastics such as bread bags and chip packets, which can be difficult to recycle.

"This new funding stream, dedicated to helping solve the problem of hard to recycle plastic waste, demonstrates our determination to invest in Australian industry, to growing the recycling sector and to creating a stronger economy and stronger future for Australia," Morrison said.

The environment minister, Sussan Ley, said the new funding would also support the government's ReMade in Australia recycling initiative. That program is the focus of a major advertising campaign from the department of agriculture, water and the environment, with tens of thousands of dollars spent on Facebook ads saying the initiative is "turning your glass bottles into roads, plastic bottles into boardwalks and old shampoo bottles into new playgrounds".

Also on Monday, the federal government will announce cuts to tax rates on the sale of carbon credits for primary producers, in a bid to encourage farmers to cut their emissions.

The changes will see proceeds from selling Australian Carbon Credit Units (ACCUs) be treated as primary production income, meaning the revenue can be used under income tax averaging rules and the Farm Management Deposit scheme.

"Revenue from ACCUs will be recognised in the year of sale to support cashflow. The treatment of biodiversity certificates will be aligned with the new tax regime for ACCUs," said agriculture minister, David Littleproud.

The emissions reduction minister, Angus Taylor, called the federal safeguard mechanism - set up under Tony Abbott's government by then environment minister Greg Hunt - a "carbon tax". Labor's net zero plan includes gradually reducing the safeguard mechanism's emissions cap each year.

The Coalition faces stiff challenges in several prize Liberal seats from climate-focused independent candidates, who are targeting moderate MPs over a perceived lack of action on the environment. Long-held Liberal seats including Wentworth, Goldstein, North Sydney and Mackellar are in the sights of 'teal' independents calling for deeper emissions cuts and stronger climate policy.

On Sunday, the Australia Institute launched an advertising campaign criticising the government over what it claims are "false solutions to climate change currently perpetrated by the fossil fuel industry".

The progressive thinktank pointed to previous research claiming up to a quarter of Australian carbon credits do not represent real cuts to carbon dioxide, and voiced concern that the government used the term "clean hydrogen" to refer to energy created from fossil fuels.

"We are entering the great era of carbon fraud. Instead of rushing to end fossil-fuels, there is going to be a gold rush for false solutions: dodgy carbon credits being used to offset pollution, dirty hydrogen and costly carbon capture and storage," said Richie Merzian, the Australia Institute's climate and energy program director.

"Ensuring Australia's carbon credits system has integrity, and that the rush to hydrogen is based on genuine zero-emissions hydrogen - made with renewable energy not fossil fuels - is going to be key if Australia is to meet the climate challenge."

Merzian accused the government of "fuelling more net zero fraud". The advertisement will be broadcast nationally.