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Regulatory additionality and government programs

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23 September 2016
ERF

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The regulatory additionality requirements

To be eligible for registration under the Emissions Reduction Fund a project must meet, among other things, two eligibility requirements which, for these purposes, we will refer to as the 'regulatory additionality requirements'.

The regulatory additionality requirements support the government's policy that the Emissions Reduction Fund will only credit abatement that is genuine and additional. That is, abatement that is unlikely to occur in the ordinary course of events.

The first of these is the general requirement that the project must not be required to be carried out by or under a law of the Commonwealth, a State or a Territory. In some cases, the relevant method replaces the general requirement. These methods are specifically designed to ensure that only carbon abatement that is unlikely to occur in the ordinary course of events will be credited.

The second regulatory additionality requirement is that the project must not involve an activity that was mandatory under a Commonwealth, State or Territory law, but is no longer mandatory because the law was repealed, or amended to be less onerous, after 24 March 2011.

Whether a project meets the regulatory additionality requirements will depend on the circumstances, and will be assessed by the Clean Energy Regulator on a case-by-case basis.

By way of guidance, the Clean Energy Regulator is likely to consider that a project does not meet the first regulatory additionality requirement if the project or activities that constitute the project are specifically required to be undertaken by or under a law. This includes planning approvals or licences to undertake activities that require the relevant approval or licence holder to undertake a specific project or activity to reduce emissions. Similarly, a specific requirement to generate a certain quantity of offsets may fail the regulatory additionality test, even though the approval or licence does not specify the particular abatement activity that must be undertaken.

Regulatory requirements can also be expressed as general requirements in documents that are adopted by or under a law, such as State or Territory guidelines that apply to a particular industry sector or activity, and do not have to relate to a particular project. For example, State and Territory guidelines for management of landfills that aim to 'minimise greenhouse gas emissions' or similar, may constitute a regulatory requirement.

Regulatory requirements may be contained in a number of forms, including but not limited to:

  • Commonwealth, State or Territory legislation
  • guidelines set by State and Territory environmental regulators
  • licences
  • permits
  • consents (other than Eligible Interest Holder)
  • codes of practice
  • environmental approvals
  • development approvals, and
  • local government area requirements.

When applying to have an Emissions Reduction Fund project registered, you will be asked whether the project, or any part of it, is required to be carried out by or under a law of the Commonwealth, a State or a Territory or was mandatory under a Commonwealth, State or Territory that was repealed or amended to be less onerous after 24 March 2011.

Your answer to this question should be 'Yes' if:

  • the project, or any part of it, is required to be carried out to meet a condition imposed by, or agreed with, a Commonwealth, State or Territory department, agency or body;
  • there are any Commonwealth, State or Territory laws that require the project activities to be undertaken or if any part of the project is being undertaken as remedial action as a result of a non-compliance with a regulatory approval or permission; or
  • there are any Commonwealth, State or Territory laws that mandated an activity that is involved in the project, but that no longer mandate that activity due to the law being repealed or amended to be less onerous after 24 March 2011.

Examples

For guidance, we have provided some examples of how the regulatory additionality requirements are expected to operate.

The following projects are unlikely to meet the first regulatory additionality requirement:

  1. Projects involving abatement activities related to large mining projects that have environmental approvals with prescriptive emissions reduction requirements. This is particularly likely in Western Australia, and also likely in Queensland and Northern Territory, because of the nature of their environmental approvals.

  2. Projects involving forestry activities undertaken to directly satisfy requirements imposed on developments for biodiversity objectives or offsets.

  3. Projects that involve planting trees to satisfy a condition of a development approval (e.g. where planting as a visual screen, windbreak or for amenity), unless the tree planting was discretionary, and other options, such as a concrete wall, could have been used to satisfy the requirement.

  4. Revegetation, where it is the sole option to satisfy biodiversity requirements imposed on a location unless the revegetation activity goes above and beyond what was required and will result in more abatement.

  5. Projects that involve upgrading the star rating of a building to meet star rating requirements in a local government area, unless the projects would exceed the relevant requirements.

  6. Projects involving changing equipment to meet work health and safety requirements, such as in a remediation agreement. However, a project involving a change to equipment that also has a self-identified work health and safety benefit may meet the regulatory additionality requirement.

  7. Undertaking an activity to control feral management in a national park where this is required by a Plan of Management.

However, there are circumstances that will be assessed on their merits by the Clean Energy Regulator:

  • If complying with the law allows a choice between a range of options, and the selected activity results in more eligible abatement than other options (i.e. the project proponent goes above and beyond what was required with a resulting increase in abatement), then the additional abatement may result in the project being eligible for registration.

  • If the law prescribes a specific activity, but the scale of activity outlined in the Emissions Reduction Fund project clearly goes above and beyond what was required to comply with the law and will result in more eligible abatement, then the additional abatement may result in the project being eligible for registration.

The following projects are not likely to meet the second regulatory additionality requirement:

  • Projects in Victoria that involve activities that were a requirement of the state's mandatory Environment and Resource Efficiency Plans (EREP) program that was ended in 2013.

Projects in Queensland involving activities that were mandatory under repealed or amended vegetation protection laws.

The government program requirement

Some projects that include activities also carried out under specified Commonwealth, state or territory government program or schemes may be excluded from participating in the Emissions Reduction Fund. This is intended to ensure that emissions reductions are not incentivised under the Emissions Reduction Fund if the projects have received incentives under another government program.

Projects are able to source funding or in-kind support from other government programs in some cases. It is not the Government's intention to prevent participants from obtaining funding or in-kind support from multiple sources. For example, the Government anticipates that environmental planting projects could receive assistance from the Green Army, fire management projects may involve rangers involved in Indigenous ranger programs and some energy efficiency projects may receive funding assistance through investment schemes run by the Clean Energy Finance Corporation and Australian Renewable Energy Agency.

The table below provides a high-level overview of the additionality requirements and associated government program specified in the rule. Full details of excluded activities is included in section 21 of the Carbon Credits (Carbon Farming Initiative) Rule 2015 (the rule). If the government program your Emissions Reduction Fund project receives funding from is not listed below and your project does not contain certain activities under a government program listed below, then your project is not excluded from participation in the Emissions Reduction Fund under the ‘government program requirement’ provisions.

Additionally requirement Government program
Your project must not receive funding under the20 Million Trees Program
Your project must not include certain activities under the Renewable Energy (Electricity) Act 2000 (Cth)
Electricity Supply Act 1995 (NSW)
Victorian Energy Efficiency Target Act 2007 (VIC)
Electricity (General) Regulations 2012 (SA)
Gas Regulations 2012 (SA)
Energy Efficiency (Cost of Living) Improvement Act 2012 (ACT)

Activities included in an Emissions Reduction Fund project may expand on a non-Emissions Reduction Fund project that has previously been funded by a government program specified above , but must not currently receive funding from those government programs listed above.

The excluded activities specified above may be included in an Emissions Reduction Fund project if:

  • the project’s method allows for abatement from the excluded activities to be subtracted from the project’s net abatement amount, or
  • the excluded activity has only a minor or trivial impact on the abatement amount.

The Clean Energy Regulator will require participants to make a statement about support from other government programs as part of their application for project registration. If a project subsequently breaches the government program requirements you must notify the Clean Energy Regulator in:

  • writing within 60 days of becoming aware of the change
  • any offsets reports following the change.

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