This chapter reports on our performance administering our schemes and the results in 2015-16 towards achieving our purpose of accelerating carbon abatement for Australia.
This analysis expands on the comments in Chapter 3, which presents our annual performance statement as required by the
Public Governance, Performance and Accountability Act 2013, summarising results against all our key performance indicators, including those related to administering our schemes.
Accelerating carbon abatement for Australia by providing incentives for projects that reduce emissions
The Emissions Reduction Fund contributes to a reduction in Australia's net greenhouse gas emissions by providing incentives to reduce emissions or sequester carbon. The scheme is the central carbon abatement policy to help Australia meet its international emission reduction obligations.
In 2015-16 the Emissions Reduction Fund results exceeded expectations, with a total of 361 Emissions Reduction Fund projects registered, bringing the overall total to 639 projects. A total of 10 713 498 Australian carbon credit units (ACCUs) were issued during the year, bringing the overall total to 26 162 256.
The Emissions Reduction Fund is a voluntary scheme that provides incentives for industry, businesses, land owners, state and local governments, and other organisations to adopt new practices and technologies to reduce emissions.
We are responsible for administering the Emissions Reduction Fund, which involves registering projects, issuing ACCUs, running purchasing processes (to date these have been auctions) and managing carbon abatement contracts. There are three main components to the scheme:
crediting—we issue ACCUs for carbon abatement achieved through registered projects using approved methods
purchasing—we purchase ACCUs from participants who hold a contract through an auction process, and
safeguarding emissions reductions—to be introduced from 1 July 2016, we set baselines and check compliance with them so that emissions reductions are not offset by significant emissions increases above business-as-usual levels elsewhere in the economy (see the feature on the NGER page).
Different activities for accelerating carbon abatement are eligible under the Emissions Reduction Fund. The range of possible methods for projects includes vegetation, energy efficiency, transport, waste, agriculture, industry and mining. Participants apply to register their project under an approved method, and indicate the amount of abatement they expect to achieve through that project. Once registered, participants implement their project and will periodically earn ACCUs for the abatement achieved, based on a project report that is subject to assurance from an independent audit at regular intervals. Participants can then choose to sell their ACCUs on the secondary market or opt to participate in an auction. If successful at auction, we award them with a carbon abatement contract, which pays for ACCUs on delivery over a fixed contract term.
The Emissions Reduction Fund includes both contracted and non-contracted projects.
In 2015-16, a total of 361 new projects were declared eligible under the Emissions Reduction Fund, bringing the total number of projects registered in the scheme to 639. The number of registered projects more than doubled in 2015-16, as the scheme completed its first full year of operation and more methods were made available.
a Including livestock and soil carbon b One project registered in 2015-16 was subsequently revoked in 2015-16 c Five projects registered in 2015-16 were subsequently revoked in 2015-16 d Includes nine revoked projects
In April 2016 we launched an interactive map of Emissions Reduction Fund projects. Based on data in the project register we are required to maintain and publish, the map incorporates a wealth of information about the projects registered with the Emissions Reduction Fund. The register and map are updated weekly.
Easy to navigate, the map encourages visitors to explore the data using filters that sort and translate information. For example, filters give users options to sort the data by:
The map also allows users to filter by contracted and non-contracted projects.
The landing page displays a pie chart on each state and territory, the size of the pie reflects the number of projects. The different colours within the pie charts indicate different project methods.
Hovering over the pie charts reveals the underlying data as well as the total quantity of ACCUs issued per project method. Each ACCU issued equals one tonne of carbon dioxide equivalent stored or avoided by a project.
Clicking the charts presents a new view with postcode locations for all projects within the state or territory.
This interactive and engaging way of presenting the data provides an overall picture of the full scope of the Emissions Reduction Fund and its reach into various sectors and regions across Australia.
The map showcases useful information to our partners, stakeholders, clients and the general public about what projects are eligible and already underway, as well as illustrating trends and geographical areas with significant activity. The map is valuable for agency staff, allowing us to better target education and promotion efforts regarding the Emissions Reduction Fund.
This initiative is a demonstration of the data we collect, and the innovative ways in which we share that data to inform decision-making at local and national levels.
In 2015-16 there was an increase in activity in the Emission Reduction Fund as the scheme moved into its second year of operations. While the number of project applications decreased, the number of crediting applications almost doubled.
The decrease in project applications, from 358 in 2014-15 to 218 in 2015-16, was due to the 2014-15 number including 209 project applications in the final week of that reporting year (linked to changes to eligibility requirements under certain methods).
The number of abatement statement (crediting) applications increased from 187 in 2014-15 to 325 in 2015-16.5
One ACCU is the equivalent of one tonne of carbon dioxide prevented from entering the atmosphere.
We issued a total of 10 713 498 ACCUs in 2015-16, representing 10 713 498 tonnes of carbon dioxide equivalent abated through the Emissions Reduction Fund. This is an increase compared with 9 318 106 ACCUs issued in 2014-15.
A cumulative total of 26 162 256 tonnes of carbon dioxide equivalent abatement has been delivered by projects, including under the preceding Carbon Farming Initiative, since December 2011.
As seen in Table 3, carbon abatement is accelerating year-on-year, as the number of ACCUs issued each year increases. Many projects will take time to deliver carbon abatement, and we expect the acceleration to continue in future years.
This year we introduced an online application process for projects applying for ACCUs. As a result our projects, contractual arrangements and issuances of certificates are better integrated, with the new form using data already known about the client. This provides efficiencies and data quality benefits for our clients and our scheme administration (see the feature on the ANREU page).
Almost 60% of the ACCUs issued in 2015-16 related to vegetation projects.
MORE THAN 10 MILLION AUSTRALIAN CARBON CREDIT UNITS WERE ISSUED IN 2015-16 UNDER THE EMISSIONS REDUCTION FUND.
Image acknowledgment: Clean Energy Regulator. Mugga Lane Landfill, Australian Capital Territory, Emissions Reduction Fund.
Ensuring the integrity of our schemes is a high priority.
In accordance with the Government's Fraud Control Framework, we assessed the risk of fraud and other criminal activity to protect the significant public funds being invested in the Emissions Reduction Fund.
During 2015-16 we seconded a staff member to work with the Australian Crime Commission on a project to identify potential areas of exploitation that could occur within the scheme. This joint project combined our agency's understanding of the scheme with the Australian Crime Commission's expertise in serious and organised crime and extensive criminal intelligence data holdings.
The resulting strategic assessment has enabled us to understand, and implement robust measures to prevent and manage potential vulnerabilities early in the life cycle of the scheme.
Also during 2015-16, we engaged with relevant state and territory agencies to share information about Emissions Reduction Fund projects, in order to identify and manage any potential risks arising from the scheme.
To secure a carbon abatement contract, Emissions Reduction Fund participants participate in an auction. Each auction so far has been a single-round, pay-as-bid, sealed-bid auction format.
We select projects to contract solely on the basis of bid price. Participants with the most competitive prices are successful.
We held two auctions during 2015-16 and purchased between 50 and 100 per cent of emissions reductions offered below the benchmark price (the maximum amount we would pay for emissions reductions) at each auction. Digitisation of forms and improved processes meant a more efficient auction from both a client and agency perspective (see the feature on the ANREU page).
To ensure the integrity of the scheme, we do not publish the individual contract amounts, individual contract price per ACCU, or the benchmark price.
Combined results from the auctions held this financial year (on 4-5 November 2015 and 27-28 April 2016) are:
Across all three auctions held to-date, the total contracted abatement is 143 million tonnes. The majority has come from the land sector, at more 98.5 million tonnes of abatement under contract. This represents the maturity of the land sector in participating in this scheme. More recently, we have also seen an increase in the diversity of the source of abatement as more methods have been made available.
Overall, through the three auctions, we have awarded 309 contracts for 348 projects, with a standard duration of seven to 10 years. Contracted abatement amounts range from 5 000 tonnes to 15 million tonnes, and the average price per tonne of abatement is $12.10.
202 contracts were awarded to 110 contractors in 2015-16.
At the April 2016 auction, we awarded two of our biggest contracts to date.
GreenCollar has been contracted for more than 20.5 million ACCUs over the next 10 years, from two Emissions Reduction Fund projects within the Great Barrier Reef catchment, Moreton Bay Catchment and other key catchments in Queensland.
The projects are being conducted under the Catchment Conservation Alliance with the Queensland Government using the human-induced regeneration method. This method allows for activities that normally suppress forest regrowth—like the impact of feral animals, invasive plant species and livestock grazing—to be reduced or managed so that regeneration occurs.
The projects aims to protect approximately 500 000 hectares of native forest and woodlands throughout the catchments of the Great Barrier Reef by either halting clearing or assisting ecosystem restoration.
The projects will also assist native forest regrowth by managing the timing and extent of grazing to allow germination and development of native forests.
These projects provide an opportunity for landholders to participate in natural resource management and carbon farming.
In addition to significant volumes of carbon abatement, these projects will deliver critical environmental benefits to Queensland.
This will include restoration and protection of high value terrestrial ecosystems, with the aim of building more resilience at the landscape level. The projects are in areas that will lead to a positive impact on Queensland's freshwater and marine health, with a particular focus on the Great Barrier Reef.
Restoration of degraded riparian ecosystems should also reduce nutrient, pesticide and sediment content in the run-off from land-based activities, which is anticipated to improve the water quality in the Great Barrier Reef inshore areas.
Each carbon abatement contract established by an auction includes a delivery schedule, where the seller nominates when they will deliver their ACCUs. Payment occurs on delivery, which is when the sellers' ACCUs are transferred to our agency for the price agreed per ACCU in the contract.
During 2015-16, a total of 8 431 699 eligible carbon credit units were delivered to our agency, out of a total of 9 051 846 carbon credit units originally scheduled to be delivered.
This result means 93 per cent of carbon abatement contracted under the Emissions Reduction Fund was delivered as originally scheduled. Inbuilt flexibility within carbon abatement contracts means that some participants will deliver early and others will make use of being able to vary individual milestones by 20 per cent. This makes precise forecasting difficult. We may, in certain circumstances, agree to vary the timing of contracted delivery schedules and will continue to monitor contract compliance.
We are now preparing for future purchasing processes and contract deliveries, and will continue to enhance the capabilities that support the Emissions Reduction Fund. The introduction of new methods will broaden opportunities within the scheme for new industries and increase the number of project registrations.
In addition, we will implement the safeguard mechanism from 1 July 2016. This aims to ensure purchased emissions reductions under the Emissions Reduction Fund are not displaced by significant emissions increases elsewhere in the economy. Under the safeguard mechanism, Australia's largest emitters will be required to keep their emissions below a set baseline. While the safeguard mechanism is the third component of the Emissions Reduction Fund it will work through the National Greenhouse and Energy Reporting scheme, with baselines set using data reported under that scheme.
93 PER CENT OF CARBON ABATEMENT CONTRACTED UNDER THE EMISSIONS REDUCTION FUND WAS DELIVERED AS SCHEDULED.
Image acknowledgment: Clean Energy Regulator. Adelaide Brighton Cement, South Australia, multiple scheme participant.
5 Abatement statements are also known as certificates of entitlement. The total of 187 is corrected from last year's reported figure of 185.
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The Clean Energy Regulator is a Government body responsible for accelerating carbon abatement for Australia.