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Operating environment

We operate in a dynamic environment and must be prepared for and capable of proactively responding to the challenges and opportunities this presents. We are attuned to developments in our operating environment through continuous engagement across the Australian Government and with states and territories; through regular consultation with industry, experts, stakeholders and clients; and by assessing and analysing data and market intelligence. We look beyond our schemes to events and developments in the broader political and economic arenas as well as what is happening in the climate change and energy space internationally. A discussion of the key drivers of change which could demonstrate a significant impact to the agency’s administration of its schemes is provided below.

Energy policy shift

The agency continues to play an important role in the ongoing integration of domestic energy and climate change policy. The energy market is evolving from primarily large, fossil-fuel based generation to more distributed variable renewable generation, primarily wind and solar. Over the next two decades, progressive retiring of old synchronous power stations is expected as they reach the end of their life. The government has a clear focus on ensuring that this transition to lower emissions generation is orderly and has a strong focus on maintaining reliability.

As the custodian of Australia’s key emissions, energy and abatement data, we are in a unique position to provide trusted, reliable data and advice to state, territory and Australian Government agencies to inform policy and energy market reforms and to support Australia reaching its emissions targets.

We have put a great deal of effort in recent years to lift the reporting burden from industry and to build on data quality checks through an online registry. Our data has been successfully repurposed in the past to support the integrity of the government’s safeguard mechanism. The Energy Security Board’s proposal for the National Energy Guarantee (the Guarantee) foreshadows the National Greenhouse and Energy Reporting data being used for the emissions intensity component of the Guarantee. For the agency, this means continuing to develop new and diverse relationships with agencies beyond the many industry groups, regulatory partners and community groups with which we already engage regularly, and to increase awareness of our greenhouse and energy data resources.

Increasing investment in renewable energy

Australian homes and businesses installed more renewable energy capacity in 2017 than ever before. Capacity of both large-scale and small-scale renewable energy is expected to double in 2018 and increase further in 2019, driving even greater demand in the work of the agency. For us, this means continuing to streamline accreditation and validation processes and leverage off technological advances to automate and realise efficiencies wherever possible.

We have a number of initiatives underway to automate certificate claims using Australian Energy Market Operator data. We piloted an innovative supply chain initiative that ensures the quality of solar photovoltaic panels for consumers while providing us with evidence to validate the integrity of certificate claims. Initiatives being rolled out will not only make it easier and more efficient for clients to deal with us but should also reduce the time it takes to process some applications.

Market forces

The agency is an economic regulator and the effective operation of unit and certificate markets is crucial to our schemes’ success. We are already making inroads in informing market participants to ensure that the primary and secondary markets that support our schemes remain active and liquid. For example, we have commenced several activities to further develop the market for Australian carbon credit units including enhanced Emissions Reduction Fund markets reporting and publishing, conducting client workshops, releasing a Statement of Opportunities for the market, and building relationships with agencies such as the Australian Energy Market Operator.

Policy and scheme reviews

In the changing political environment, we remain agile and responsive to changes and continue to work closely with the Department of the Environment and Energy, and other entities, to not only improve on our existing schemes but also inform new policy design. Last year saw two major reviews into schemes administered by the Clean Energy Regulator–the government’s 2017 Climate Change Policy Review and the Climate Change Authority’s review of the Emissions Reduction Fund. In 2018—19, the agency will continue to take an active role in cooperating on scheme reviews as the Climate Change Authority completes its review into the National Greenhouse and Energy Reporting Scheme and the Australian National Audit Office undertakes its Performance Audit into the Renewable Energy Target.

Impact of technological changes on our schemes

We continue to be proactive in dealing with the challenges that new and emerging technologies and business models present to the ongoing success and integrity of our schemes. Our expertise and past experience of client behaviour allows us to make consistent, robust decisions in line with the intent and spirit of scheme legislation and use the range of enforcement tools at our disposal. With the agency marking its sixth anniversary in 2018, we are maturing our holistic compliance approach and posture to influence client behaviour and respond quickly and actively with instances of non-compliance. In turn, this may see an increase in the action we take and reviews of our decisions as we take a firmer stance against those who fail to comply with their obligations.

Under the Emissions Reduction Fund, regrowth methods have proven to be popular and can involve individual carbon estimation areas of 30,000 hectares or more. To verify eligibility, satellite imagery is applied, with a high level of human input. We are working with Geoscience Australia, states and territories, and the carbon farming industry, to improve imagery quality by developing a land layer in Digital Earth Australia. In the future, this will assist the industry to find new emissions reduction opportunities, reduce the cost of making claims for Australian carbon credit units, streamline the verification process and provide a higher level of integrity in claims.

Consistent with the government’s digital transformation agenda, we continue to evolve our Client Portal, online forms and registries to enable greater self-service and efficiency for clients. Our registries allow the creation and trading of entitlements, in the form of certificates and units, which traded in the billions of dollars last year. Hence, we continue to focus on our integrity controls and governance and ensure that our IT security framework meets Commonwealth standards.

International developments

In a global environment, we are increasingly aware that developments in international markets and actions by international players will impact our schemes and markets. Changes to international policy, such as the replacement of the Kyoto Protocol as previewed in the Paris Agreement, could have direct implications for Australian carbon markets. Australia’s landmass provides sizeable opportunities for the abatement and sequestration of carbon on a large scale for many years to come. In time we may see the units and certificates that we issue in high demand internationally due to our strong accounting methods and standards of additionality and permanence.

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