The ERF is a $2 billion Abbott-era government fund that purchases carbon abatement twice a year by conducting reverse auctions. At each auction, projects can be awarded ACCU off-take contracts that are either fixed – where the project must deliver the ACCUs over the contract term; or optional – where the project can sell their ACCUs to the ERF or choose to sell at a higher price on the spot market. 

The average price paid by the Australian Government for ACCUs in the latest auction was $16.94, spread across 24 optional delivery contracts, for a total of 6.8 million tonnes of CO₂-e abatement. This is the first time that no fixed delivery contacts have been awarded, against the backdrop of climbing ACCU prices in spot market. This suggests that the ERF is moving to a role of providing a floor price to project developers while still allowing them to participate in the growing spot market. 

As shown below, this year has seen significant growth in the ACCU market with spot prices diverging from the historic trend of following the auction results. In the past 12 months, there has been a 108% growth price to $33.50, $10.40 (65% of the 12-month growth) being in the past 6 weeks alone. 

In compassion to international markets, ACCUs (AU$33.50) are still trading at discount, per tonne of CO₂-e, compared to European Allowances – €57.93  (AU$90.36); and UK Allowances – £58.00 (AU$106.95); But above the Californian Emission Trading Scheme – US$23.30 (AU$31.21); and China’s newly launched ETS – ¥41.62 (AU$8.73). 

Also this month, the Minister for Energy and Emissions Reduction announced the program development priorities for 2022, which add methods for electric vehicle and hydrogen refuelling infrastructure, use of hydrogen, stacking of different activities on farms, and expansion of the existing carbon capture and savanna fire management methods. This announcement builds on the existing priorities for soil carbon, biomethane, plantation forestry, and blue carbon. 

While there have been criticisms of some land-based methods in the past months, ACCUs are recognised as a high-integrity carbon units with a diversity of methods to credit carbon savings. The growing value of ACCUs is increasing interest in projects for industry, particularly in energy efficiency, fuel switching, transport, and alternative waste treatment across a range of sectors. The methods for industry are based on rigorous internationally recognised standards, such as the International Performance Measurement and Verification Protocol. While the ERF is dominated by land-based projects, industrial projects now make up 22% of the active projects, with further growth expected as higher ACCU price reduces payback periods for capital intensive projects in the industrial sector. 

If you haven’t factored ACCU pricing into your next project, now is the time to reconsider how the carbon value of your projects can be realised to boost the energy productivity of your business as the world transitions to net-zero. 

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A soil carbon project on a sheep and cropping farm in Gollan, NSW – just outside of Dubbo – was registered in August and marked the milestone under the growing scheme. Soil projects have accounted for a quarter of all new registrations under the Emissions Reduction Fund (ERF) in 2021.

Whilst the program has been dominated by the agricultural sector, there is an increasing growth in the number of projects for industry. Our experience in ERF is widely driven by energy efficiency and alternate waste treatment activities – including a range of fuel switching, industrial equipment upgrades and anaerobic digestion.

A voluntary program, the Emissions Reduction Fund (ERF) is managed by the Clean Energy Regulator and seeks to provide incentives for organisations and individuals to adopt new practices and technologies to reduce their greenhouse gas emissions. Projects earn Australian carbon credit units (ACCUs) that can be sold to generate income, either to the Government through a carbon abatement contract, or to private buyers in the private market. The average sale price across all government auctions is $12.32 per tonne.

The ERF’s most recent report showed that the scheme had so far delivered 98.89 million tonnes in cumulative emissions reductions to July 31, 2021. The 100 million tonnes barrier is expected to be broken in coming months, with the Regulator expecting the ERF to credit 17 million tonnes of emissions reductions during 2021.

Minister for Energy and Emissions Reduction Angus Taylor said the Emissions Reduction Fund is at the heart of the Government’s technology-led plan to drive down emissions. 

“As one of the world’s most rigorous carbon offset programs, the Emissions Reduction Fund is driving genuine actions to help Australia meet and beat our climate goals”

Minister Taylor said. 

The Clean Energy Regulator has set targets to halve the development time of new ERF methods to less than 12 months. 

You can read the full article on the Clean Energy Regulator website here.

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