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Permanence obligations

30 November 2017
CFI ERF

Permanence obligations for land-based projects

Carbon stored in vegetation and soils can be released back into the atmosphere by man-made or natural events, thereby reversing the environmental benefit of the sequestration project. Sequestration is regarded as permanent if it is maintained on a net basis for 100 years.

For this reason, all sequestration projects are subject to permanence obligations. A permanence obligation maintains carbon stores for which Australian carbon credit units (ACCUs) have been issued.

The Emissions Reduction Fund requires sequestration projects to choose a permanence period of either 25 or 100 years. Once you have nominated a permanence period, you will not be able to vary that period.

The Clean Energy Regulator will publish information in relation to permanence periods on the Emissions Reduction Fund Register. Anyone buying land can check whether the land is covered by a 25 year or 100 year permanence obligation.

Permanence obligation requirements

A permanence obligation means the carbon stored by a project must be maintained for the chosen period, either 100 or 25 years.

If a fire or other disturbance occurs in the area during the project, causing a decline in the amount of carbon stored, regrowth must be managed to allow the carbon stock to return to previously reported values. Alternatively, ACCUs equivalent to the loss of carbon caused by the disturbance can be returned, or relinquished, to the Clean Energy Regulator.

If you choose the 25 year option, there will be a 20 per cent reduction in the number of ACCUs issued for your project. This is to cover the potential cost to the Government of replacing carbon stores after the project ends. This reduction is in addition to the five per cent risk of reversal buffer (a total reduction of 25 per cent).

Examples for the 25 year permanence period

The example below shows how the relinquishment of ACCUs earned may apply to your situation.

Example 1starting a new project

John started a new land-based Emissions Reduction Fund project. He chose a 25 year permanence period. At the end of the first reporting period he calculated that his project achieved a net abatement of 10 000 tCO2-e.

As the project has been registered with a 25 year permanence period, John will not actually receive 10 000 ACCUsthey will be reduced by 20 per cent for the permanence obligation and by an additional five per cent for the risk of reversal buffer (a total reduction of 25 per cent). John will receive 7 500 ACCUs for the reporting period.

Nominating a permanence period

New sequestration projects

For a new sequestration project, you can nominate a 100 or 25 year permanence period in the application form when you apply to register your project.

Existing (already registered) sequestration projects

If you are already running a registered sequestration project, your permanence period commences once ACCUs have been issued for the project, and continue to be issued based on the nominated period you chose when you applied to register your project. The nominated permanence period cannot be changed after registration. However, participation in the Emissions Reduction Fund is voluntary and if you wish to cancel (revoke) your project you may do so at any time. Any ACCUs issued for a sequestration project will need to be returned before the project is revoked.

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