Create ACCUs now to mitigate future risks and benefit financially through the ERF

18 Nov 2015Archived News Megan Born Climate Change Matters

There are two reasons why large, energy intensive businesses should generate ACCUs for energy efficiency and emissions reduction projects. As demonstrated by the second ERF auction results, participation can yield considerable financial benefits, and ACCU creation can also help liable businesses prepare for the introduction of the safeguarding mechanism.  

Encouraging results from the second ERF auction

The results of the second ERF auction released last week, show that the Fund offers significant financial support for projects that fall under the Methods introduced since the first auction, such as industrial and commercial energy efficiency. 
45 million tonnes of abatement were contracted in the second auction at an average price of $12.25 per tonne. The first and second auctions combined cost the Fund approximately $1.2 billion purchasing a total of nearly 93 million tonnes of abatement.  The average price per tonne of abatement across the two auctions is $13.12.


Across the 129 successful contracts, the new industrial-based ERF Methods were represented as follows : 

  • Energy efficiency – five projects for a total 3.7 million tonnes
  • Transport – three projects for total 1.1 million tonnes
  • Industrial fugitives (coal mine waste gas) for total 0.8 million tonnes
     

The table below shows the value to business on average per year of abatement achieved.  The most notable point being that on average, energy efficiency projects created $1.35 million p.a. in revenue through the ERF. 
ERF-second-auction-contract-value.jpg

 

Successful projects using the ERF Methods

The three successful projects were described on the Clean Energy Regulator website.  Summaries are below. 

Adelaide Brighton Cement Limited submitted a wood firing project which reduces emissions by changing the energy sources or mix of energy sources used by existing energy consuming equipment.  This project applied the Industrial Energy and Fuel Efficiency Methodology.

Pacific National (Asciano) used the Land and Sea Transport Method for project to reduce emissions by modifying existing vehicles, changing energy sources or the mix of energy sources, and changing operational practices.

Wesfarmers was successful with a lighting upgrade project that modifies, replaces and supplements the lighting system of various types of serviced areas in business premises across all States and Territories.  In this project the Commercial and Public Lighting Method was used. 

Register your projects so that you can generate ACCUs ahead of the introduction of the safeguard mechanism

In the short term the safeguarding mechanism is designed with significant concessions and not linked to the national emissions reduction target. However, over the longer term there is provision for the Minister for the Environment to lower baselines to drive abatement. 

The Government has flagged that a national conversation on the approach to achieving the 26-28% reduction in emissions will begin in 2017-18.  As the 2030 national target is challenging for Australia, in the absence of new significant policy levers, achieving the proposed 26-28% reduction in emissions on 2005 baseline levels will place a heavy burden on the Emission Reduction Fund unless constraints are placed on emissions from large facilities.  Therefore the possibility of robust baselines for the safeguard mechanism emerging from this review poses risks to business, and we may see demand rising for ACCUs to offset emissions that exceed baselines. 

Also, developing a market for ACCUs is an efficient way for the government to drive emissions reductions and it operates outside the Government’s Budget at a time of declining taxation revenues.  A healthy market trading ACCUs also has the potential to link more closely to international carbon markets.
 

Energetics can help your business secure ACCUs

Our experts can advise on the implications of the safeguard mechanism for your risk mitigation strategy particularly if your current emissions exceed baselines.  We can also identify suitable projects for ACCU creation.
 

As we see confidence grow in the ERF auction process, we can expect more businesses to use the energy efficiency methods in future auctions.  Energetics can help prepare and register projects, and advise you on your bidding strategy.  We have insights as we participated in the design or review of a number of ERF Methods.  For guidance see our summary

 

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