Emissions Reduction Fund

The Australian Government’s Emissions Reduction Fund (ERF) was legislated in late 2014. It provides government funds to encourage businesses to carry out projects to reduce greenhouse gas emissions. The Government has committed $2.55 billion to the ERF to purchase emissions reductions generated as a result of Australian-based project activities.

The ERF consists of three key parts:

- Crediting emissions reductions
- Purchasing emissions reductions, and
- Safeguarding emissions reductions.

Crediting emissions reductions
In order to participate in the ERF, businesses need to engage with the Clean Energy Regulator and develop projects based on an approved “Methodology”.

Once approved, businesses will operate their emissions reduction projects and lodge regular reports to the Regulator to claim Australian Carbon Credit Units (ACCUs). Each ACCU represents one tonne of CO2-equivalent abated as a result of the project activities. A subset of these reports will need to be audited by a Registered Greenhouse and Energy Auditor.

Government purchasing of emissions reductions
If desired, businesses can choose to bid their ERF projects into a reverse-auction process run by the Regulator. If successful at this auction, the government will enter into a contract to purchase ACCUs from the project proponent over time at the bid-price used during the auction.

The first auction was held in April 2015 and resulted in the government entering into contracts worth $660 million to purchase 47 million ACCUs at a weighted-average price of $13.95 / tonne CO2e. Future auctions will be held until the ERF funding pool has been exhausted.

Alternatively, businesses may choose to retain ACCUs for future trading on a secondary market, or to acquit future liabilities the business may have (for example, under the forthcoming safeguard mechanism).

The safeguard mechanism
The safeguard mechanism is due to commence on 1 July 2016. It will apply to large emitting facilities operating with more than 100,000 tonnes CO2e of direct (Scope 1) emissions.

The Government has released a White Paper for consultation on the details of the safeguard mechanism. Businesses will need to establish historical baseline levels of emissions, which will form a future limit for emissions from affected facilities. If emissions grows at these facilities, emissions in excess of the baseline may be offset with ACCUs either purchased on the market or generated through registered ERF projects.

Carbon Intelligence has experience in bringing ERF projects through the Registration and Auction processes. We consulted for the first industrial (non land-based) ERF project to be funded through the ERF, creating a team to provide technical, legal, financial and future assurance services in one integrated offering.

We are also experienced auditors (employing multiple Registered Greenhouse and Energy Auditors) and can provide audits of ERF project reports.

For more information on the Emissions Reduction Fund please contact
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