Climate advocates have hit out at a new report, which claims a controversial federal government practice is "essentially sound".

Source: AAP / JEREMY NG/AAPIMAGE

• A new review found Australia's carbon credit market is 'sound'.
• The government accepts changes are needed to improve transparency.
• An independent report previously found the scheme equated to 'fraud' on the environment.

A whistleblower academic who claimed fraud is rife in Australia's controversial carbon credit scheme says he is "disappointed and really confused", after a new report rejected the worst of his accusations.

A review into A

ustralia Carbon Credit Units (ACCU)

, conducted by former Australian chief scientist Ian Chubb and released on Monday, found it remains "essentially sound", despite a greater need for transparency.

But it called for significant changes to the decade-old system, which allows companies to emit extra carbon dioxide for a price, including tougher integrity oversight for companies attempting to rort it.

Labor was spurred into implementing the review

after a report by ANU climate risk expert Andrew Macintosh

warned the scheme amounted to a "fraud on the environment", by funnelling millions of taxpayer dollars into carbon credits for projects with no environmental benefit.

'No idea'

Responding to the independent report on Monday, Professor Macintosh argued it was "illogical" to claim the system was fit-for-purpose while also overhauling its integrity safeguards.

"We're disappointed...

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