Your guide to preparing for the ERF's first auction

02 Nov 2014Archived News Brian Innes Climate Change Matters

Minister for the Environment, Greg Hunt has indicated that the ERF will commence in the first quarter 2015. Business can now prepare for the reverse auction process which will be administered by the Clean Energy Regulator.

Energetics anticipates that the first auction will attain the highest price - providing a “first mover” advantage for businesses that are prepared. 
 

Summary of the main features of the ERF

Following a deal with the Palmer United Party and Senator Xenophon, on Friday, 31st October the Senate passed the Carbon Farming Initiative Amendment Bill 2014: the legislation that underpins the Emissions Reductions Fund (ERF).  Some of the major features of the deal struck by the Government include:

  •  The Climate Change Authority remains, and will undertake an eighteen month review of international emissions trading schemes.

  •  Legislation to abolish the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) has been withdrawn.

  •  Contracting periods for emissions reduction projects bid into the auction will be seven years.  This is an increase from the previous five year contracting period.  Projects with longer crediting times will in turn have longer contracts.

  •  All credits must be created in Australia.

What should businesses be doing now?

The process for participating in the ERF is described on the Clean Energy Regulator 's website and is replicated below. 

five-steps-to-the-ERF.jpg

In order to be ready to participate in the first of the reverse auctions, Energetics recommends that the following three steps should be undertaken now. 
1. Assess opportunities to access the fund either directly for projects greater than 2000 t CO2-e emission reduction per year or through an aggregator for smaller projects. 

2. Submit of “notice of intent” form of your projects to the Clean Energy Regulator. This enables you to continue to both assess the feasibility of projects to bid into the reverse auctions, as well as developing the supporting business case.  This work can be done whilst still satisfying the “newness” criteria of the Fund.

3. Develop your business case to gain the necessary support internally.

What types of projects are eligible?

Energetics' summary of Methods and their development status

ERF-Methods-table.jpg

The safeguarding mechanism

Senator Xenophon successfully negotiated a legislative framework for a safeguarding mechanism as part of the CFI Amendment Bill.  The rules for the operation of the safeguard mechanism should be released in October 2015, however it will not commence until 1 July 2016. 

For large emitters, how the baseline is established in the safeguard mechanism, becomes a core question. If your production levels fluctuate, it would be preferable for emissions to be measured against an intensity baseline, rather than an absolute baseline.

For large emitters, you need to evaluate and in turn develop your business’ position on:

  • the relative benefits of an input- based intensity as opposed to an outputs-based intensity (EITE was outputs-based) for baseline calculations

  • safeguard boundary conditions

  • emissions coverage.

Critical to understanding the safeguard mechanism’s potential impact will be insight into your performance relative to your industry average.  Large emitters should participate in the consultation process for the development of the safeguard mechanism. 
 

Energetics' insights

Energetics can provide end-to-end support as your business seeks ERF funding for emissions reduction projects. 

We can advise on the suitability of projects and help you prepare the business case.  We have insights into a number of the ERF Methods that will be used to assess projects bidding into the auction, specifically: 

  • facility level methods

  • coal mine waste gas capture

  • industrial energy efficiency

  • building (NABERS) energy efficiency

Please contact one of our experts for more information.

 

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