“As this becomes more and more serious, there is a role for governments to ensure these emissions reductions have integrity,” he said. “This is something we haven’t paid enough attention to, and it’s going to catch us out.”

As policies begin to drive demand for offsetting credits, governments should step back from being major buyers and focus on underwriting developing technologies to remove carbon dioxide from the atmosphere, Mr Wood said.

A recent report by the Australian Conservation Foundation and the Australia Institute suggested about one in five of the carbon credits created through the national Emissions Reduction Fund did not represent real carbon emissions cuts.

In most cases, the “avoided deforestation” projects were never going to be cleared, it found. The Clean Energy Regulator, which administers this fund, disputed these findings.

The Grattan Institute report said the import and export of offsetting units will become more important as all countries move towards net zero.