The Emissions Reduction Fund (ERF) – an overview

The Emissions Reduction Fund (ERF) has been put in place to provide incentives for emissions reduction activities across the Australian economy. It is a large part of the government’s Direct Action policy, aimed at assisting Australia to meet its emissions reduction target of five percent below 2000 levels by 2020.

Below is a basic overview of how participation in the scheme works.

The Emissions Reduction Fund (ERF) has been in operation for just over a month after formally commencing on 12 December 2014. This fund provides the opportunity for both individuals and organisations to sell carbon credits to the federal government through a reverse auction process. Broadly there are four steps to successfully participating in the program.

Included in the ‘Market Entry’ step, however, are the participant and project registration stages that are most likely the most onerous components of the process particularly for new participants. Project registration requires a detailed proposal that satisfies both the basic qualification test and follows the rules within the applicable method for calculating carbon abatement, referred to as the methods, in ERF jargon. The basic qualification test is geared around ensuring that the additionality of the project beyond business as usual or regulatory requirements.

Projects that meets all the eligibility criteria are then included in the ERF Register, the basis of the auction process. Project owners will need to submit a bid price, that is the amount per carbon credit unit  (ACCU = 1 tonne carbon dioxide equivalent)  that they would be prepared to accept. Auctions will occur periodically following a notification period and auction outcomes will be purely based on price.

If a contract is entered into, payment will only occur once ACCU have been generated.

Who is eligible?

Participation in the ERF is open to a broad range of participants including:

• individuals
• sole traders
• companies
• local, state and territory government bodies and trusts

Eligible projects

Eligible projects can be classified as either: sequestration or avoidance. Where:

Sequestration  =  storage of carbon in growing vegetation including carbon storage in soil

Avoidance =  agricultural (dietary controls and treatment of animal waste) and landfill emissions from legacy waste.

Only projects based on available methods can be proposed for registration.

Currently available methods are directly comparable with the Carbon Farming Initiative (CFI), a natural progression given that the ERF now encompasses the CFI. Additional methods are a continuously evolving component of the program with a number currently under consideration, such as energy efficiency, waste coal mine gas, cleaning up power stations, the transport sector and large industrial facilities.

Methods, just released include:

• Commercial buildings
• Alternative waste treatment
• Landfill gas

There are a series of draft methods that are currently closed for comment and undergoing further review, a full listing of these can be accessed on the ERF website.

Get involved

With the ERF in its infancy now is a great time to get involved, understand and influence the opportunities that may exist within your operations. There are limited funds currently associated with the program, so getting in early will likely be the best strategy.

If you are unsure of how to progress or would appreciate a helping hand we can help you to put together a comprehensive carbon management strategy including evaluation of project related carbon abatement compared to business as usual and simple economic modelling to develop your own personal Marginal Abatement Cost Curve (or MACC) that provides a neat pictorial representation of projects and their potential viability against a virtual ACCU price.

Further information

Further and more detailed information is available on the ERF website: http://www.environment.gov.au/climate-change/emissions-reduction-fund.

Alternatively give Lisa a call on 3369 3699 or contact us via email to save yourself some time and effort on your ERF participation.