What is the Emissions Reduction Fund?
The Emissions Reduction Fund, or ERF, is the major carbon credit scheme in Australia and builds on the Carbon Farming Initiative (CFI). It is an elective scheme with the objective of lowering greenhouse gas emissions, through increasing the adoption of modern technologies, equipment and practices by various companies and entities. The scheme came about through the Carbon Credits (Carbon Farming Initiative) Act 2011, the Carbon Credits (Carbon Farming Initiative) Regulations 2011 and the Carbon Credits (Carbon Farming Initiative) Rule 2015 and provides incentives to those who choose to adopt systems that lower their carbon emissions for various projects they may be working on. It additionally produces an incentive to participate in activities that assist in Australia meeting their international climate level responsibilities, which is an important nation-wide necessity.
The ERF has three key elements, crediting, purchasing and safeguarding emissions reductions, based on the premise of lowering emission rates at the smallest possible cost whilst still purchasing genuine and additional emissions reductions. Its aim is to support businesses and farmers, as well as landowners, to take practical and realistic steps to help the environment and decrease greenhouse gasses.
How does the ERF work?
The Emissions Reduction Fund works by allowing participants to earn Australian carbon credit units, or ACCUs, for emission reductions. A range of activities are eligible under the ERF and, for each tonne of carbon dioxide equivalent (tCO2-e) stored or avoided by a participants project, one ACCU is earned. Once ACCUs are earned, they can be sold through a carbon abatement contract or in the secondary market to create income.
Clean Energy Regulator
As the ERF is an Australian Government initiative, it has various departments and sectors across the nation that are involved in ensuring it runs smoothly. The Clean Energy Regulator however oversees a lot of the major administration tasks required by the ERF. Their duties include :
- Registering projects
- Running auctions
- Managing contracts
- Issuing ACCUs
It is worth noting that the Clean Energy Regulator does not have any legislative power - they are an ‘economic regulator’, meaning they do not have any direct role in enforcing legislation however they may share relevant information with another regulator is necessary. Ultimately it is up to the relevant business or entity to ensure they meet their requirements under a project and, if it is believed someone isn’t meeting their targets, the local government should be contacted.
The ERF also includes a safeguard mechanism, which is in place to ensure that emission reductions are not displaced by an increase in emissions in other parts of the economy. It complements the ERFs aim to reduce emissions through better practices and it sends a message to large businesses to avoid upturns in emissions that are higher than normal levels. In order to achieve this, the safeguard places a legislation-mandated obligation on the largest greenhouse gas emitters in Australia to keep their overall emissions below their ‘limit’, otherwise known as a ‘baseline’. If a business goes over their baseline, they can surrender ACCUs to offset the emissions that are above their limit.
The National Greenhouse and Energy Reporting scheme is the framework in which the safeguard mechanism operates under, with its prime application for businesses with direct scope 1 emissions over 100,000 tonnes of carbon dioxide equivalent (tCO2-e) per year. It is not industry-specific, with the safeguard mechanism applying across a variety of sectors including electricity generation, mining, oil and gas, manufacturing, transport, construction and waste.
What businesses is the ERF suitable for?
The ERF is suitable for most businesses that wish to take a more environmentally-friendly approach to improve either the energy use of your business, or its productivity. This could be through changing practices, choosing to invest in current or evolving technology or upgrading your current equipment, with hundreds of projects being registered across lots of eligible activities.
What emissions reduction project types are eligible?
The following types are examples of projects that are eligible to participate in the ERF :
- Energy efficiency - installing high efficiency appliances
- Vegetation - regenerating native forest or protecting native forests
- Savanna burning - managing bushfires
- Agriculture - building soil carbon through changed farming practices
- Industrial fugitives - reducing fugitive emissions from oil and gas operations
- Transport - reducing air/land/sea transport emissions through more efficient practices
- Waste - treating wastewater or capturing methane from landfills for electricity production
How do I participate in the ERF?
There are a few different steps when it comes to participating in the ERF, including :
Before registering for the ERF, you need to ensure you and your project are eligible. This can be done through the Australian Government website and includes components such as :
- Selecting a suitable project type, also known as a ‘method’. Due to the broad application of methods, a selection of different projects can use a lot of different methods
- Ensuring your project is most likely a new arrangement and not implemented before registration with the Clean Energy Regulator, including construction and making final investment decisions
- Ensuring you have the legal right to carry out your chosen project
- Ensuring you are a ‘fit and proper person’ in accordance with the Fit and Proper Person requirements
- Ensuring your project meets the regulatory additionality requirements
- Ensuring you have contacted the eligible interest holder and obtained their consent, if applicable
Also, ensure you are completely aware of all auditing and reporting requirements for your project method, as you do not want any nasty surprises at any time during the project duration.
If you have completed pre-registration, it is time to register your project through setting up an Australian national registry of emissions units (ANREU) account and providing the relevant checks and documents. Once your registration has been confirmed, you will then be searchable on the Emissions Reduction Fund register and you will receive a declaration of registration including yearly audit requirements.
Run project, report, audit
Once you are registered, you must now run your project in accordance with the rules and regulations applicable to your situation, including abatement calculations. Reports and audits must also be completed throughout.
When you provide a report, you may also apply to claim ACCUs if applicable. Your documentation will be assessed in accordance with the legislation and other requirements and, if approved, your ACCUs will be issued to your ANREU account.
Hold or sell ACCUs
You may hold onto your ACCUs when you have earned them, or you may sell them. There are two options when it comes to selling them :
If you are wanting to sell your ACCUs to the government, this is done through a carbon abatement contract. If your project is registered then you can apply to sell your ACCUs through entering a carbon abatement contract with the Clean Energy Regulator. This is completed through an auction process and then by moving ACCUs to the Clean Energy Regulators ANREU account. Contracts can be ongoing for up to 10 years, or an immediate, one-off transaction and you will be required to deliver the agreed amount of ACCUs in accordance with the agreed contract terms.
The sale of ACCUs does not have to occur through a carbon abatement contract - they can also be sold to businesses and entities who are wanting to offset their emissions through a secondary market. This market is not regulated by the government and ACCUs are sold through a private commercial contract arrangement.
What are the benefits of the ERF?
The Emissions Reduction Fund and the activities it supports offer a range of benefits, including :
- Environmental, social, economic and cultural benefits for farmers, businesses, landholders, Indigenous Australians and communities
- Better soil productivity
- Improvement to biodiversity
- Reduction of greenhouse gas emissions
- Improvement to water quality
- Boosts to agricultural productivity
- Lower operational costs for businesses
- Supports jobs for Indigenous communities
- Creates ways to increase land productivity
The ERF builds on the success of the CFI, which is a voluntary carbon offset scheme that many people are familiar with. The ERF provides improvement in some areas under the CFI, supporting better participation rates for both farmers and landowners with a more-streamlined process.
If you have any questions about how Inoplex can help you with participation in the Emissions Reduction Fund, contact us on 1300 113 782 or complete an online enquiry form now. We take a practical and holistic approach to addressing water, waste and energy issues and want to ensure every step is taken to offer sustainable options to all.
Disclaimer : This is a summary only and should not be read in isolation. It is strongly recommended that you complete your own research regarding the topic and contact all relevant governmental departments regarding the ERF.