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Up to $5000 advance payment to help with soil sampling costs for Emissions Reduction Fund projects

02 October 2020
ERF

An advance payment worth up to $5,000 is available through a pilot program for eligible Emissions Reduction Fund (ERF) projects to help with upfront costs of soil sampling.

The sequestration of carbon in Australian soils can reduce emissions and enhance agricultural productivity, but the costs of soil sampling for projects under the ERF’s measured soil method has been identified as a key barrier to more soil projects participating in the scheme. The advance payment assists project proponents with meeting the costs of baseline soil sampling required under the measured soil method.

Key Features

  • Advance payment for Australian carbon credit units (ACCUs) to assist with meeting the costs of required baseline soil sampling
  • ACCUs, subject to the advance payment, must be provided within five (5) years
  • One advance payment per eligible project
  • Available to projects under the Carbon Credits (Carbon Farming Initiative - Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018
  • For new baseline soil sampling only;
  • Data from soil sampling will need to be provided to the Commonwealth to help inform method development
  • Project must be connected to a relevant Commonwealth contract;
  • Contract holder will receive the payment:
    • Where the landholder is not the Contract holder arrangements will need to be agreed between these parties.

Projects seeking the advance payment of up to $5,000 will need to confirm their eligibility with the Clean Energy Regulator, which includes the project being linked to a Carbon Abatement Contract. If approved, the payment will be made to the contract holder once evidence that the soil sampling that has been undertaken is provided to the Clean Energy Regulator. The contract holder must deliver ACCUs against the contract within 5 years to pay back the advance payment – these ACCUs would likely be provided from the supported project but may come from elsewhere (the private market for ACCUs or another project).

To help inform and develop future soil-based ERF methods, recipients of the advance payment must provide soil data collected through sampling rounds already required by the method to the Clean Energy Regulator in an agreed format.

Further details on eligibility requirements, payments, the application process and data requirements follow.

The Clean Energy Regulator will assess the pilot of the advance payment for soil sampling to inform whether any changes are required to eligibility requirements and other settings. Any such changes will not affect existing contracts for the advance payments.

Eligibility

1) Project requirements

To be eligible, a project must be registered under the Carbon Credits (Carbon Farming Initiative - Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018 (measured Soil Carbon method). Both conditionally and unconditionally registered projects may be eligible. An individual soil project will only be eligible to receive one advance payment.

The project proponent or agent must not have done the baseline soil sampling prior to the announcement of the advance payment on 23 July 2020. Where a project has not previously received an advance payment and has already conducted baseline soil sampling, the project may still be eligible if it is expanding soil carbon activities to a new area of land that requires new baseline soil sampling.

Data and reporting

The Government intends to build on the existing soil carbon methods and in time develop a new soil method, which will aim to lower project costs by avoiding or reducing the need for sampling. To do so, the government needs a broader evidence base on how soil carbon responds to management actions. The data requirement for the soil carbon advance payment will help bridge this data gap.

Under the measured Soil Carbon method, project proponents are already required to prepare a baseline soil sampling plan and provide it to the Clean Energy Regulator. The data requirement for the advance payments for soil projects will, to the extent possible, build on this existing data requirement.

If projects receive the advance payment, contract holders will need to ensure either they or the proponents provide soil data from baseline and subsequent soil carbon testing and share specific site management information and changed management practices with the Clean Energy Regulator. This data will need to be provided in an agreed format until the Carbon Abatement Contract has been fulfilled and will be shared with the Department of Industry, Science, Energy and Resources and the Department of Agriculture, Water and the Environment to help inform the development of new soil carbon ERF methods and other soil carbon activities.

Baseline soil sampling plans are a requirement of the method and detail where and how you plan to sample, including details of carbon estimation areas (CEAs), mapping, and how sample points are selected.

Providing this information to the Clean Energy Regulator prior to conducting baseline testing, will result in earlier identification of the CEA and will help to fast track assessment of crediting applications. This may result in proponents receiving their ACCUs more quickly than would otherwise be the case. Further information on baseline soil plans and how to sample can be found in the Clean Energy Regulator’s simple method guide, the sampling guidance and in the Supplement to the Carbon Credits (Carbon Farming Initiative — Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018 (the Supplement).

Data from baseline and subsequent soil carbon testing and specific site information must be provided via email in the agreed format to the Clean Energy Regulator within nine (9) months of the testing results being available. This data can also be re-used when project proponents apply for credits.

Document to download

documentasset:Soil and activity data provision template

2) Link with a Carbon Abatement Contract

The advance payment is available through fixed delivery and optional delivery Carbon Abatement Contracts.

To receive the advance payment, the contract ‘Seller’ (the party who has a Carbon Abatement Contract with the Commonwealth) will need to agree to an additional contract (either an Advance Payment Addendum – fixed delivery or an Advance Payment Addendum – optional delivery) with the Clean Energy Regulator. This addendum sets out requirements relating to the advance payment, repaying ACCUs, changes to the delivery schedules, data sharing and related matters.

A Carbon Abatement Contract is therefore a requirement for having a contract addendum for the soil sampling advance payment. If a project proponent does not hold a Carbon Abatement Contract, they can seek one for a soil project under the method via a competitive ERF Auction. Alternatively, they may be able to have their project added to an existing fixed delivery contract with the agreement of the relevant contract Seller. While the Clean Energy Regulator will require written consent from the project proponent to facilitate the project being added to a fixed delivery contract, it is the responsibility of these parties to establish their relationship, including how and when the advance payment and future repayment of ACCUs will occur for the soil sampling advance payment contract addendum and how data sharing requirements will be addressed.

Connecting a soil project to a Carbon Abatement Contract supports the administration of the advance payment and the associated contractual obligations. However, it also results in the project being subject to Carbon Abatement Contract conditions and may impact the ability of the project to come forward for an additional contract. See the ERF Auction Guidelines for further information about contract eligibility.

Any advance payment will be made to the Contract Seller - the agency cannot make advance payments for ACCUs directly with parties that do not hold a Carbon Abatement Contract.

A fixed delivery contract may have one or more projects added to it. Additional eligible projects can each receive advance payments, provided the contract is still active. The remaining contract duration would need to allow for new soil projects to be added, data from those projects to be provided and sufficient volume remaining in the Contract to repay the advance payment. Separate applications need to be submitted for each project seeking an advance payment and the Clean Energy Regulator will assess each application for suitability.

For both fixed delivery and optional delivery contracts, there will be an obligation to repay the ACCUs associated with the advance payment to the Clean Energy Regulator. This means that the addendum to an optional delivery carbon abatement contract becomes, in effect, a fixed delivery contract for the advance payment ACCUs. If ACCUs from the project are not available, ACCUs from other sources can be used and where ACCUs cannot be provided, the advance payment amount will need to be repaid in dollars.

Documents for download

documentasset:Advance payment eligibility decision tree

3) Payment

The advance payment is to support costs from baseline soil sampling.

Contract Sellers will be required to provide evidence of costs incurred to undertake the baseline sampling rounds such as a receipt from a soil carbon technician with the date, location of sampling and any laboratory costs, as well as providing a copy of a dated baseline soil sampling plan that must be used as part of project reporting. The amount of the advanced payment cannot exceed the cost of the soil sampling.

Payment will be made to the Seller’s nominated bank account under the Contract.

4) Acquitting the advance payment

The acquittal of the advance purchase of ACCUs is to occur within 5 years of the advance payment terms being agreed. When acquitting the advance payment, ACCUs can be made from another source (such as another project or the private market) and does not need to be from the project directly connected to the contract. This applies for both fixed delivery and optional delivery contracts.

Where an advance payment scheduled delivery is unable to be met, the Seller and Clean Energy Regulator will use all best endeavours to negotiate a revised schedule.

Debts due against advance payment amounts will be recovered with interest from the time due, in accordance with the Clean Energy Regulator’s debt recovery principles.

How to apply

An application form to request the advance payment can be downloaded and submitted via the General Submission section of the Client Portal.

Once submitted, the Clean Energy Regulator will consider your request, typically within 30 days and if eligible the Seller(s) will be asked to sign the Advance Payment Contract Addendum and agree to an Advance Payment Terms Schedule.

More information

This information is intended as a guide only and should be read in conjunction with the Advance Payment Contract Addendum and the detailed eligibility criteria to ensure you fully understand your legal obligations. Independent professional advice should be sought if you have any concerns. You can also call or email us directly with any questions.


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