Emissions Reduction Fund Update

Emissions Reduction Fund update March 2015

Welcome to the second edition of the Emissions Reduction Fund update for 2015.

In this edition New Emission Reduction Fund methods

Open for consultation—draft methods

Date set for first auction

Method prioritisation process

Emissions Reduction Fund legislative rule

Australian Financial Services Licence requirements

Expanding opportunities for land managers

Update to FullCAM—carbon storage modelling tool New Emissions Reduction Fund methods Four new methods have been released for use under the Emissions Reduction Fund, expanding the range of activities to include transport (aviation, land and sea) and coal mining. The fourth new method expands opportunities to allow broader participation in avoided land clearing activities and allows for earlier crediting of emissions reductions achieved through these activities.

The Avoided clearing of native regrowth method estimates the emissions avoided from protecting native regrowth on agricultural land from further clearing. Projects using this method need to demonstrate that regrowth has been cleared at least twice and can legally be cleared again. This method is based on an existing Carbon Farming Initiative method. A new approach to eligibility, based on clearing history, is expected to enable wider adoption of this method than the existing method. The method uses the Full Carbon Accounting Model (FullCAM), which is also used in estimating Australia’s national greenhouse gas emissions.

The Coal mine waste gas method could be used by companies specialising in flaring of waste coal mine electricity generation systems by operators of coal mines. It supports projects that destroy the methane component of coal mine waste gas. The method covers projects that install new or expanded methane destruction devices, including those that generate electricity.

The Aviation method calculates emissions reductions by comparing the emissions intensity of an aircraft before and after activities to reduce emissions. A broad range of activities are eligible under the method, including installing ground power units to reduce aircraft fuel burn in transit, replacing on-board components with lighter weight alternatives and improving terminal procedures to reduce on-ground movements. The Land and sea method could be used by owners and operators of existing vehicles (including cars, trucks, buses, trains, ships and mobile equipment) as well as aggregators (such as vehicle suppliers) who are interested in improving the emissions intensity of vehicle fleets. It provides a broad range of options to reduce emissions from vehicles by replacing existing vehicles with more efficient ones, increasing the use of bio-fuels, installing low rolling resistance tyres, or optimising vehicle load scheduling.

Applications for emissions reduction projects using these methods can be made to the Clean Energy Regulator.

For more information on the methods please see environment.gov.au/emissions-reduction-fund. Open for consultation—draft methods Comments are now invited on four draft Emissions Reduction Fund methods.

The Commercial and public lighting method is based on a similar method under the New South Wales Energy Savings Scheme. This method will support projects that upgrade lighting systems in commercial and industrial buildings, and public lighting such as pedestrian, street and traffic lighting.

Activities to improve the performance of a lighting system could involve modifying, installing, removing or replacing lighting equipment. Reducing the energy consumption through improvements in lighting systems will also help businesses and governments to save money on their energy bills.

The High-efficiency commercial appliances method is based largely on a similar method developed under the New South Wales Energy Savings Scheme. This method will apply to projects that install high-efficiency commercial appliances in commercial operations, with or without replacing existing appliances. The method covers refrigerated display cabinets, liquid-chilling packages, and close control air conditioners. The installation of high-efficiency commercial appliances can reduce emissions associated with electricity consumption.

The Refrigeration and ventilation fan upgrades method will apply to projects that upgrade a shaded pole or permanent split capacitor motor in a fan unit in a refrigeration or ventilation system with an electronically commutated motor. This method covers fan unit replacement and modification, either on its own or at the same time as reducing the number of fan units in a system. The replacing or upgrading of refrigeration and ventilation fan units will improve energy performance and reduce emissions associated with generation consumption.

The Oil and gas fugitives method will support projects that reduce fugitive emissions from flaring and venting at all oil and natural gas extraction, production, transport and processing facilities. The method sets out how abatement is to be estimated under two sub-methods: first, reducing continuous flaring of fugitive emissions through physical, behavioural or process changes, and second, re-routing fugitive emissions, which would otherwise have been released to the atmosphere, to a flare device.

You are welcome to write a response to the draft methods. The submission deadline is 5pm AEST 15 April 2015.

Further details about the methods and how to make a submission are available at the Emissions Reduction Fund methods web page. Date set for first auction The first Emissions Reduction Fund auction will open from 9am (AEST) on 15 April and close at 5pm (AEST) on 16 April 2015. This is the first in a series of opportunities for businesses across the economy to undertake emissions reduction activities and bid their reductions into an auction.

The Australian Government, through the Clean Energy Regulator, will buy the lowest-cost emissions reductions at auction. The auction will occur through AusTender as the online bidding platform.

For more information visit the Clean Energy Regulator’s website. Method prioritisation process Emissions Reduction Fund methods will be developed in a priority order to ensure they offer the greatest opportunity for uptake and potential abatement. Methods will be prioritised with reference to the following five criteria:

1. Is there broad business support for the method and what is the likely volume of emissions reduced or avoided?

2. Can emissions reductions be easily estimated with a reasonable degree of certainty?

3. Is the technology involved proven and commercially ready?

4. Could the activity have adverse social, environmental or economic impacts?

5. Could the activity be promoted more efficiently through alternative measures?

The Emissions Reduction Assurance Committee will review the list of methods recommended for prioritisation and the ERAC submit a work plan for the Minister for the Environment’s consideration. The Minister will approve the priority list which will be available on the Department’s website.

The Department is reviewing submissions and thanks those who have already provided input. Emissions Reduction Fund legislative rule On 13 February the Government made a new set of rules to support the operation of the Emissions Reduction Fund: the Carbon Credits (Carbon Farming Initiative) Rule 2015.

The rule covers matters that will support the conduct of the first auction including applying for and receiving credits; purchasing rules; contract length; eligible offsets project applications; and reporting, notification and audit requirements.

The final rule was informed by public consultation on an exposure draft, which closed on 19 December 2014.

A copy of the rule, its explanatory statement and details about the consultation are available at www.environment.gov.au/climate-change/emissions-reduction-fund/carbon-credits-carbon- farming-initiative-rule-2015-under-emissions-reduction-fund.

A number of regulations that existed under the Carbon Farming Initiative will continue to apply under the Emissions Reduction Fund until further notice. These regulations will be transferred to the rule over time. Australian Financial Services Licence requirements A number of proposed amendments to the Corporations Act 2001 for Emissions Reduction Fund participants were consulted on by Treasury from 21 January to 13 February this year. The Australian Government has now made the Corporations Amendment (Emissions Reduction Fund Participants) Regulation 2015, which excludes Carbon Abatement Contracts from the definition of ‘derivative’ and ‘financial product’ as set out in the Corporations Act 2001. The Australian Government has decided to progress this exemption separately from the other exemptions for aggregators and carbon service providers proposed during the consultation. The effect of the amendment is that participants do not need to hold an Australian Financial Services Licence to provide advice about, or enter into, a Carbon Abatement Contract. Where an exemption was proposed during consultation but not made, the Corporations Act 2001 continues to apply. This means that if you are providing certain financial advice or operating certain types of aggregated Emissions Reduction Fund projects, you may be subject to the requirements of the Corporations Act 2001, including the need to hold an Australian Financial Services Licence. If you are seeking to participate in the Emissions Reduction Fund, you should undertake your own independent research into what participating will mean for you. You should also seek independent legal and/or financial advice that will allow you to make an informed assessment of the potential benefits and risks of participating in the Emissions Reduction Fund. For more information, please refer to: the amendment regulation and Explanatory Statement on the ComLaw website

Treasury’s consultation website the Australian Securities and Investment Commission’s website. Expanding opportunities for land managers

CSIRO are leading a project that aims to expand the opportunities for land managers to participate in carbon farming projects that meet the requirements of the Emissions Reduction Fund. The project is developing cost-effective approaches to the estimation of change in biomass carbon in complex woody systems, for example biodiverse woodlands and other forests.

Project elements either completed or nearing completion include: guidelines for project-level calibration of FullCAM for estimating change in biomass carbon in woody systems development of a comprehensive database of above- and below-ground biomass to support the use of generalised allometric equations development of a project analysis tool to estimate uncertainty in carbon stock estimates and facilitate appropriate discounting guidance to support cost-effective stratification, sampling, development of allometric equations and analysis of the economic viability of projects.

The ultimate outcome will be a new Emissions Reduction Fund reforestation method, covering several existing project activities and allowing for both modelled and measured estimates of carbon stocks. This three-year project is the last to be completed by the end of 2015 under the Methodology Development Program. Update to FullCAM—carbon storage modelling tool An updated version of FullCAM is due for public release in April.

Participants running projects under methods that use FullCAM to model carbon storage must use the latest version for their offsets reports. Anyone planning to submit an offsets report during or after April 2015 must ensure they use the updated version of FullCAM to generate sequestration estimations (which will include the latest underlying climatic data).

FullCAM is available for download on the Department’s website. Subscribe to get the latest Emissions Reduction Fund news If you’re not already subscribed to receive each edition of the Emissions Reduction Fund update you can subscribe here. Further information Read more about the Australian Government’s broader environmental policies at www.environment.gov.au.

Disclaimer

The information included in the publication remains in development and parties are advised not to initiate any projects based on the content of the newsletter. While the Commonwealth has made reasonable efforts to ensure the accuracy and correctness of the material at the time of publication, the Commonwealth does not guarantee, and accepts no liability whatsoever arising from or connected to, the accuracy, reliability, currency or completeness of this material.