Emissions Reduction Fund

$2.55 Billion program with the aim to help business reduce their emissions through the Emissions Reduction Fund.

Emissions Reduction Fund

The Emissions Reduction Fund provides positive incentives to businesses across the economy to reduce emissions. Its aim is to reduce emissions at lowest cost and contribute towards Australia’s 2020 emissions reduction target of five per cent below 2000 levels by 2020.

Background

The Emissions Reduction Fund will operate alongside existing programs that are already working to offset Australia’s emissions growth, such as the Renewable Energy Target and energy efficiency standards on appliances, equipment and buildings.

Streams

The Emissions Reduction Fund has three elements:

1. crediting emissions reductions
2. purchasing emissions reductions
3. safeguarding emissions reductions.

Eligible Activities

Businesses have identified a range of activities that the Emissions Reduction Fund could unlock. These include:

• upgrading commercial buildings
• improving energy efficiency of industrial facilities and houses
• reducing electricity generator emissions
• capturing landfill gas
• reducing waste coal mine gas
• reforesting and revegetating marginal lands
• improving Australia’s agricultural soils
• upgrading vehicles and improving transport logistics, and
• managing fires in savanna grasslands.

2015-16 Priority Activities

The Minister for the Environment has determined the 2015-16 priority activities for method scoping and potential development under the Emissions Reduction Fund, following consultation with Technical Working Groups, the public and the Emissions Reduction Assurance Committee.

The priorities are determined to ensure that activities offer the greatest opportunity for uptake and genuine abatement. The prioritisation is an annual process and provides a 12 month forward work plan for method scoping and development. The sectors where activities will be scoped and their feasibility tested for potential method development in 2015-16 are listed below.

Agriculture
Activities for scoping include reducing emissions from fertilizer use in sugar cane production, reducing emissions from sheep flock management and soil carbon sequestration.

Energy Efficiency
Activities for scoping include coverage of community buildings; improvements to the energy efficiency of boilers, pumping systems, compressed air systems, and reducing emissions from air conditioning systems in industrial and commercial settings; and a technology-neutral energy efficiency sampling method.

Industrial Process
Scoping will include an industrial process efficiency method that would reduce Scope 1 emissions of industrial process gases.

Transport
Scoping will include a transport mode shift sub-method as an extension to the existing land and sea transport method.

Vegetation
Activities for scoping include savanna sequestration, abatement through avoided degradation and rehabilitation of Australian woodlands and protection and restoration of mangroves for sequestration and carbon storage.

Waste
Activities for scoping include waste to energy projects that could provide incentives to avoid or destroy emissions associated with current waste disposal practices.

Funding

The Government has provided $2.55 billion to establish the Emissions Reduction Fund in the 2014-15 Budget. The full level of funding will be available to be committed under contract from the commencement of the Emissions Reduction Fund. Payment will be made as emissions reductions are verified.

The Regulator will hold auctions to purchase emissions reductions at the lowest available cost.

Auctions will be conducted with cost as the only criterion. Other project attributes such as project risk and commercial readiness will be assessed when businesses register to participate in Emissions Reduction Fund auctions.

Process

Participants will submit a bid—specifying a price per tonne of emissions reductions—with the lowest cost projects being selected. Participants will not be able to see what other companies are bidding as bids will be ‘sealed’, or secret.

Successful participants will be paid the price that they bid (often called a ‘pay-as-bid’ auction). The Government will enter into contracts with successful bidders, which will guarantee payment for the future delivery of emissions reductions over the life of the contract.

The Regulator will publish average price information following each auction to help businesses forward plan future projects. The Regulator may also publish the benchmark price prior to the first auction. The benchmark price is the maximum price that the Government will pay for emissions reductions. Only bids below the benchmark price will be considered. The benchmark price may differ for each auction.

Eligible Applicants

Businesses, community organisations, local councils, state governments and other members of the community who meet the eligibility requirements can undertake activities like these in accordance with approved emissions reduction methods under the Emissions Reduction Fund. They can then sell the resulting emissions reductions to the Clean Energy Regulator, acting on behalf of the Government.

Fifth Emissions Reduction Fund Auction Announced

The Clean Energy Regulator has announced the fifth Emissions Reduction Fund auction will be held on 5-6 April 2017.  Guidelines for the fifth auction are published on the Clean Energy Regulator’s website.

Key dates are summarised in the table below.

Information on planning for an Emissions Reduction Fund auction is available here.

CER announces eighth ERF auction results

The Clean Energy Regulator has announced the results of the eighth ERF auction.

At this auction, the Regulator awarded 34 carbon abatement contracts to deliver 3.3 million tonnes of abatement, at an average price of $13.87 per tonne. Newly contracted activities are spread across agriculture, vegetation, savanna fire management and waste projects. The average price across all seven auctions is now $12 per tonne.

Over $2.3 billion has now been committed under the ERF, with more than $220 million available for future purchasing.

The Emissions Reduction Fund continues to contribute to the government’s emissions reduction targets, with over 37 million tonnes of abatement already delivered.

ERF auctions results

More information on the results of the eighth ERF auction are available on the Regulator’s website.

CER announces fifth ERF auction results

The Clean Energy Regulator has announced the results of the fifth ERF auction. The Emissions Reduction Fund has now secured 189 million tonnes of abatement through 387 contracts.

The Clean Energy Regulator has awarded new contracts for 11.25 million tonnes of abatement under 31 Carbon Abatement Contracts for a total value of $133 million.​

The majority of bids at the fifth auction represented value for money, with 84.1 percent of the volume of abatement offered below the benchmark price accepted. Abatement was purchased at an average price of $11.82 per tonne. Across all auctions the average price has remained steady at $11.83.

A total of $2.2 billion has now been committed under the Emissions Reduction Fund, with more than $300 million available for future purchasing.

A summary of the fifth Emissions Reduction Fund auction results are available on Clean Energy Regulator’s auction results page.

Round 1 Recipients

43 Recipients share in $660M for projects that help business reduce their emissions. The successful contractors have committed to deliver over 47 million tonnes of abatement, with an average price of $13.95 per tonne of abatement.