emissions reduction fund roadshows - carbon...

17 to 30 June 2015Geelong, Melbourne, Adelaide, Perth,

Brisbane, Townsville, Sydney, Newcastle

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Emissions Reduction Fund Roadshows

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AGENDA

1. Introductions2. ERF Overview and Participation – CMI

a. ERF key principles and design featuresb. What is in the ERF for businessc. Update on the safeguard mechanismd. Results of first auctione. Overview and update of method developmentf. End‐to‐end process for ERF participationg. Indicative timelines for participationh. Key factors to consider in preparing an auction bidi. Sources of information

3. Panel discussion and Q&A 4. Networking

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AGENDA

• CMI is an independent, membership‐based, not‐for‐profit organisation. It is the peak body for carbon market participants.

• Members – liable entities, professional service providers, banks, project developers, technology providers, academics, specialists.

• CMI facilitates the networks, knowledge exchange and commercial interaction amongst key government policy makers and regulators, industry, financiers and investors, professional services companies and technology solution providers.

• CMI works with Government to ensure effective implementation of policy, such as the Emissions Reduction Fund legislation (the Carbon Farming Initiative Amendment Bill 2014).

• Australian Emissions Reduction Summit – 3‐4 May 2016, MCG, Melbourne– 450 people in 2015 and 69 speakers inc. Christiana Figueres, Exec. Secretary, UNFCCC

ABOUT CMI

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CMI MEMBERS – including

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Design principles:

• Lowest‐cost emissions reductions: the ERF will identify and purchase emissions reductions at the lowest cost.

• Genuine emissions reductions: the ERF will purchase emissions reductions that make a real and additional contribution to reducing Australia’s greenhouse gas emissions.

• Streamlined administration: the ERF will make it easy for businesses to participate.

Three elements of the ERF:• Crediting emissions reductions

• Purchasing emissions reductions

• Safeguarding emissions reductions

ERF – BRIEF OVERVIEW

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• $660 million of funding has been allocated – contracts have been issued.

• $1.89 billion remaining in ERF

• Businesses can gain valuable co‐benefits from reducing emissions ‐ lower energy bills, improved productivity and broader environmental/social outcomes.

• Opportunities for new business models.

• Opportunities for service providers and aggregators.

• Implementation of new projects that can lower the future cost of abatement.

• There is now second mover advantage in ERF auctions

ERF – WHAT’S IN IT FOR YOU?

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• Safeguard mechanism – policy mechanism to limit emissions growth across the economy.

• Key design features as per consultation paper– Coverage – 100,000 tCO2 per year– Baselines – highest absolute annual emissions FY2009‐14– Flexibilities for new investments and expansions– Sectoral approach to electricity sector– Compliance process

• Recent consultation period on design rules – 88 submissions received

• Rules to be set by 1 October 2015.

• Safeguard mechanism important for non‐liable entities due to secondary market.

SAFEGUARD MECHANISM - UPDATE

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Civil penaltyNotification Multi-year averaging

Monitoring /offsettingReporting

• First ERF auction held on 15‐16 April 2015

• $660 million awarded in contracts

• 107 Carbon Abatement Contracts awarded

• 47,333,140 tonnes of abatement

• Volume weighted average price $13.95 per tonne

• 144 projects – largest 3.5 million tonnes, smallest 12,000 tonnes

• 43 contractors

• Contract length 3‐10 years – majority 10 years

ERF – FIRST AUCTION OUTCOMES

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Sequestration Landfill & waste Savannaburning

Piggeries Transport

28 Mt

18 Mt

0.5 Mt 0.3 Mt 0.15 Mt

10 years 7 years

5 years3 years

Contract Length

Abatement Volumes

• Emissions reduction projects under the ERF must use an approved method.

• Methods contain rules that explain:• How to carry out and manage an emissions reduction

project.• How to estimate the resulting reductions in greenhouse

gas emissions. • Conditions which must be met over the course of the

project.

ERF – METHODS

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ERF – METHODS

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• Approved methods cover a range of emissions reduction projects across sectors such as:

• Agriculture• Energy Efficiency• Coal mining• Vegetation management• Transport• Waste and wastewater

• New methods are under development• High efficiency fan installations• Beef herd cattle management• Commercial and public lighting• Facilities• High efficiency commercial appliances• Oil and gas fugitives• Refrigeration and ventilation fan upgrades• Soil carbon

• Commercial building energy efficiency

• Reduced emissions from electricity and/or fossil fuel consumption

• Examples:– HVAC system upgrade– Boiler upgrade– Installing co‐generation unit– Building management– Fuel switching

• Eligibility– NABERS rating required before project

commencement– Must raise NABERS energy rating by at

least one star– Applies to existing commercial buildings

only

ERF METHODS – COMMERCIAL BUILDINGS

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• Industrial electricity and fuel efficiency

• Reducing emissions through improved fuel and/or electricity efficiency

• Examples:– Equipment upgrades (motors,

refrigeration, fans & pumps, etc.)– Variable speed drives– Co‐gen and tri‐gen

• Eligibility– Multiple activities can be grouped

together to form one project– Baseline data must be obtainable– Each project must consist of an eligible

activity

ERF METHODS – INDUSTRIAL

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• Land and Sea Transport

• Reducing emissions through reduced energy intensity of transportation

• Examples:– Replacement of inefficient vehicles– Vehicle modifications– Biofuels – Load scheduling

• Eligibility– 3 years of historic fuel and service data must

be available– Can be from a group of vehicles (e.g. fleet) or

single (e.g. mobile equipment) vehicle

ERF METHODS – TRANSPORT

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ERF METHODS – AGRICULTURE

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• Savanna Burning

• Reducing emissions through early dry season savanna fire management

• Examples:– Early season burning to reduce incidence

of high intensity late dry season fires

• Eligibility– Project must be within one or both of two

rainfall zones (high and low)– Must contain vegetation fuel types

specific to each rainfall zone as specified in method

ERF – END TO END PROCESS FOR AUCTION PARTICIPATION

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ApplyAuctions and contracts

Reporting and auditing

Delivery and payment

STEP 1 ‐ Apply• All projects must be registered with the Regulator and sit under an approved method.

• Apply for approval of your project by demonstrating that the project meets all eligibility criteria set out in the relevant method and ERF legislation.

– Newness requirement– Regulatory additionality requirement – Government program requirement

• Provide forward abatement estimate (FAE) and nominate crediting period.

• Due diligence checks by Regulator to confirm fit and proper person and that project is credible and can deliver stated abatement.


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STEP 2 ‐ Auctions and Contracts•Three phases to the auction process:

1‐ Auction qualification ‐ Offer to enter into Carbon Abatement Contract.

2‐ Auction registration ‐ Apply to participate in auction & specify contract duration.

– Standard – 7 years– Short term – <7 years – Immediate term – single delivery of ACCUS– 10 year – project must have >10 year crediting period

3‐ Auction participation ‐ Enter bid through AusTender website.

‐ auctions will be decided on price only.





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Reporting and Auditing• Proponent will submit offsets reports detailing emissions reductions within the legislated timeframes.

– Can nominate reporting period (every 6 months to 2 years)

• Audit reports will accompany some offsets reports, with a minimum of three audits across the project crediting period.

• Audit schedule determined by the Regulator using a risk‐based approach.





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Delivery and Payment•Regulator will issue ACCUs for abatement delivered.

•Proponent receives payment from the Regulator at contracted (auction) price when ACCUs surrendered.

•There are provisions in the contract for under delivery of contracted abatement, e.g.

• Carry‐over• 20% rule• Vary abatement delivery schedule

•Make good can be in the form of ACCUs from other projects owned by the project proponent or those purchased from the secondary market.




ERF – INDICATIVE TIMELINE FOR PARTICIPATION

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Participate in auction via AusTender

Auc

tion3

months2

months1

month3

weeks2

weeks1

week

Auction qualification closes

Auction date and bidding window published

Auction registration closes

Auction results within 5 business days

Register project with RegulatorOpen ANREU account

Decide on appropriate method and begin project planningSeek internal approvals

Formulate bid

Estimate project costs e.g. auditing

1. Seek advice – lessons learnt from first auction, professional service providers, successful contractors

2. Method – determine which method is most applicable.

3. Establish a business case – determine business model; evaluate cost/benefits of projects; undertake feasibility work.

4. Project registration – allow for time to register project with Regulator.

– Check eligibility requirements.– Ensure documentation complete to facilitate simpler processing.

ERF – KEY FACTORS TO CONSIDER IN PREPARING A BID

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5. Delivery schedule ‐ Validate abatement delivery schedule.

6. Contracting– Understand the flexibility provisions and make good requirements.

7. Risk – determine the level of risk of under delivery of contracted abatement. Understand the risks and opportunities in purchasing carbon credits from the secondary market.

8. Bid price – factor in:– Project costs ‐ including reporting/auditing costs. – Required rate of return as well as other factors and other

commercial factors that might change impacting price.– Bid price that makes project viable over the life of the contract.– Evaluate bidding behaviour.

ERF – KEY FACTORS TO CONSIDER IN PREPARING A BID

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• Carbon Market Institute – carbonmarketinstitute.org• Emissions Reduction Fund Enquiries – emissions‐[email protected]• To subscribe to receive ERF updates from the Department of the Environment, visit:

http://www.environment.gov.au/climate‐change/publications/emissions‐reduction‐fund‐update

• Clean Energy Regulator ‐ cleanenergyregulator.gov.au

• To subscribe to receive ERF updates from the Clean Energy Regulator, visit:

• http:// www.cleanenergyregulator.gov.au/Emissions‐Reduction‐Fund/subscribe‐to‐email‐updates/Pages/default.aspx

• Department of the Environment – environment.gov.au

• AusIndustry – business.gov.au

ERF – SOURCES OF INFORMATION

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PANEL DISCUSSION

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ERF Information Session Geelong

Moderator: Dr Tim Richards, Carbon Market Institute

Panellists:

• James Griffin – Department of the Environment

• Arien Van Oosterhout – Clean Energy Regulator

• Emma Fagan – Energetics

• Charlie Knaggs – EY

• Dermot Duncan – Greenbank Environmental

• Phil Link – NDevr Environmental

PANEL DISCUSSION

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ERF Information Session Melbourne

Moderator: Peter Castellas, Carbon Market Institute

Panellists:

• Andrew Pankowski – Department of the Environment

• Raphael Wood – Clean Energy Regulator

• Shohini Parker – Energetics

• Frederic Papon – EY


• Jenny Sinclair —GreenCollar

• Elisa de Wit – Norton Rose Fulbright

PANEL DISCUSSION

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ERF Information Session Adelaide


Panellists:

• Steve Refshauge – Department of the Environment


• Andrew Lister – Energetics

• Kim Farrant – EY



PANEL DISCUSSION

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ERF Information Session Perth


Panellists:

• Catherine Caldwell – Department of the Environment


• Brian Innes – Energetics

• Michele Villa – EY


• Phil Link – Ndevr Environmental

PANEL DISCUSSION

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ERF Information Session Brisbane


Panellists:

• Andrew Bray – Department of the Environment

• James Turnbull – Clean Energy Regulator

• Jody Asquith – Energetics

• Elizabeth Rose – EY


• Lewis Tyndall – GreenCollar


PANEL DISCUSSION

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ERF Information Session Townsville


Panellists:

• Andrew Bray – Department of the Environment

• James Turnbull – Clean Energy Regulator



PANEL DISCUSSION

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ERF Information Session Sydney


Panellists:

• Joe Pryor – Department of the Environment


• Gordon Weiss – Energetics

• Jamie Ayers – EY



• Noni Shannon – Norton Rose Fulbright

PANEL DISCUSSION

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ERF Information Session Newcastle


Panellists:

• Jee Karunarathna – Department of the Environment

• John Lawson – Clean Energy Regulator

• Jody Asquith – Energetics

• Jamie Ayers – EY

Copyright and DisclaimerCopyright © 2015 the Carbon Market Institute Limited (CMI). No part of this presentation may be reproduced without consent. The opinions which may be expressed in this presentation do not necessarily reflect the opinions of the CMI directors, sponsors, partners or members. No responsibility is accepted by CMI, its directors, sponsors, partners, or members or the authors of any articles for the accuracy of information contained in this presentation or the consequences of any person relying upon information. The information contained in this presentation does not constitute financial product, investment, legal, tax or other advice and is provided for general information purposes only. Examples and case studies are purely for illustration. You should seek your own independent, professional advice and should not rely upon this information to make financial decisions.

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