The Federal Government's draft legislation for the Emissions Reduction Fund

12 May 2014Archived News Dr Peter Holt Climate Change Matters

On Friday 9 May, the Federal Government released its exposure draft legislation for the Emissions Reduction Fund. Two weeks have been given for the review, with submissions due 12 noon, EST, Friday 23 May 2014.

Essentially the draft legislation rebadges the Carbon Credits (Carbon Farming Initiative) Act: 

  • It creates "carbon abatement" from a broader range of activities that include avoidance activities

  • A definition of additionality is given

  • Government architecture is provided for the implementation of the ERF by broadening the authority of the Clean Energy Regulator, establishing the Emissions Reduction Assurance Committee, and audit and assurance through existing CFI audit legislation (though renamed).

What should your business consider doing?

  • Immediately assess the abatement opportunities you have to create emission reductions to sell into the ERF.

  • Understand your risk profile for future capital investments - has this shifted? do you need a shadow carbon price?

  • Comment on the draft legislation.

Expansion to energy efficiency

Carbon abatement has been defined as the removal or avoidance of greenhouse gases. This effectively expands the scheme to include emissions reductions through energy efficiency measures including process optimisation, commercial building upgrades and fugitive emissions reductions.

Additionality has been defined more broadly

Additionality is assessed according to:

  • "newness": the project has not yet been implemented

  • regulatory additionality: project not required by law

  • whether it is a government program requirement. Projects not carried out under another government program eg State-based energy efficiency schemes.

The rules may provide an ability for carbon abatement to be accepted for existing projects under approved methodologies.

Operational matters

  • The Clean Energy Regulator has the authority to enter into carbon abatement contracts. Principles are defined for the conduct of the carbon abatement purchasing process, including least cost and the maximum amount of abatement within the allocated resources.

  • Currently a reverse auction has been promoted by the government as the preferred purchasing mechanism, yet the draft legislation provides the flexibility for the CER to purchase carbon abatement through a variety of mechanisms.

Audit and assurance

The legislation also provides for the creation of the Emissions Reduction Assurance Committee (replacement of the DOIC) and broadening of their remit. ERF audits will be based on the CFI audit approach with the key difference being the naming of the audits. Energetics can provide support by ensuring that your projects meet pre-qualification requirements to access funding through the ERF.

Energetics can assist with the development of your business' submission. Please feel free to get in touch with one of our experts if you would like assistance, or to simply discuss what the Emissions Reduction Fund may offer your business.

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