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Permanence obligations

31 October 2016
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.

What do permanence obligations require?

The 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 5 per cent risk of reversal buffer (a total reduction of 25 per cent).

Examples for the 25 year permanence period

The examples below show how the relinquishment of ACCUs earned may apply to your situation.

Example 1 – starting 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 ACCUs – they will be reduced by 20 per cent for the permanence obligation and by an additional 5 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.

Example 2 – Existing projects (integrated from the Carbon Farming Initiative)

Sam's project has been running since January 2014. The project has already received 100,000 ACCUs for abatement achieved. Sam nominates to reduce her project's permanence period from 100 years to 25 years. As Sam's project has already received ACCUs, the Clean Energy Regulator issues her with a relinquishment notice requiring her to return 20,000 ACCUs which is 20 per cent of the ACCUs already issued to her project.

Sam's Australian National Registry of Emissions Units (ANREU) account still holds all 100,000 ACCUs issued for her project so she transfers the required 20,000 units to meet the obligations under the relinquishment notice within 90 days.

Example 3 - Existing projects (integrated from the Carbon Farming Initiative)

Mark's project has been running since February 2014. The project has already received 100,000 ACCUs for abatement achieved. Mark nominates to reduce his project's permanence period from 100 years to 25 years.

As Mark's project has already received ACCUs, the Clean Energy Regulator issues him with a relinquishment notice requiring him to return 20,000 ACCUs which is 20 per cent of the ACCUs already issued to his project.

Mark sold all of his ACCUs to another company and he is unable to immediately source 20,000 additional ACCUs to meet the obligations of the relinquishment notice. He asks the Clean Energy Regulator to agree to an alternative relinquishment schedule. He proposes that as he intends to claim ACCUs for his next reporting period in 120 days that ACCUs claimed then can be used to meet the requirements of the relinquishment obligation.

Abatement achieved in Mark's next reporting period equates to 50,000 tCO2-e and therefore 50,000 ACCUs. From this, a 20 per cent reduction will occur to discount for the 25 year permanence period, and a further 5 per cent reduction will occur to cover the risk of reversal buffer (a total reduction of 25 per cent), leaving a total of 37,500 ACCUs.

To meet the obligations of the relinquishment notice, a further 20,000 ACCUs are deducted from the remaining volume. The final number of ACCUs issued to Mark for this reporting period is 17,500 ACCUs.

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 project and would like to keep the 100 year permanence period, you do not need to do anything.

If you would like to change the permanence period from 100 years to 25 years, you can apply to do so before December 2016.

To apply, send an email to erf@cleanenergyregulator.gov.au with 'Change to permanence period' in the subject line and include in your email the following information:

  • Project registration number
  • Project title
  • A statement indicating that you wish to change the permanence period for your project from 100 years to 25 years.

Following receipt of the email, the Clean Energy Regulator will send you details on the implications for your project and a declaration that must be signed to activate the change.

Projects moving to the 25 year permanence period that have already received ACCUs will be issued with a relinquishment notice. This notice specifies the number of ACCUs you will need to relinquish or return to the Clean Energy Regulator (20 per cent of those issued) within 90 days.  You can approach the Clean Energy Regulator to seek an alternative schedule to relinquish the ACCUs.

If you fail to relinquish the required ACCUs within the 90 day period, or alternative relinquishment schedule, you will be charged an administrative penalty.

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