Moving existing CFI projects to the ERF. What will be covered in this webinar Main changes in moving...

Moving existing CFI projects to the ERF

What will be covered in this webinar

• Main changes in moving from the CFI to the ERF

• Preparing to participate in the first auction

• Detail on the auction and contract processes – register for the upcoming webinars

• Method specific technical detail

What wont be covered…

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Transition Kit

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Derby, WA 17 February 2015 4

What is the Emission Reduction Fund?

Reducing emissions by:• Crediting: run a project and apply for ACCUs• Purchasing: CER purchases ACCUs through auction process• Safeguarding: applies to largest carbon emitters; keeps emissions

below baseline; start 2016

Crediting SafeguardingPurchasing

Legislative framework of the ERF

• The name of the Act is the same, and is still “the CFI Act”.

• Rules replace the CFI Regulations.

• ERF methods are added to CFI methodologies.

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Carbon Credits (Carbon Farming Initiative) Act 2011

Sets up the

scheme for the issue of

ACCUs in relation to

ERF projects

Carbon Credits (carbon Farming Initiative) Rule 2015

Additional detail on eligibility, process

and decision making

Method Determinations

Rules for undertaking and monitoring a specific type of project and calculating and

generating ACCUs.

How it works


Main changes for existing projects

There are five main changes for existing projects.

1. Change in crediting periods

2. Change in reporting periods

3. Change in auditing requirements

4. Change in permanence obligations (sequestration projects only)

5. New market for ACCUs

These are explored in the following sections.

7CFI to the ERF | 17 February 2015

Five main changes : Change in crediting periods

All existing projects will start a new crediting period on 13 December:

• 7 years for emissions reduction projects

• 25 years for sequestration projects

Exceptions are:

• avoided deforestation projects - no change to the current 20-year crediting period

• savanna burning projects - new 25-year crediting period starts in January 2015.

Projects cannot apply for subsequent crediting periods, as they could under CFI.

8Integrating existing CFI projects into the ERF | 19 November 2014

Five main changes: Change in reporting periods

• A project report can be submitted as frequently as every six months

• Project reports must be submitted at least once:

• every two years for emissions avoidance• every five years for sequestration projects.

• NB if backdated to July 1 2010, must report by 30 June 2015

• The first project report under ERF will include abatement achieved since the previous report, regardless of when that previous report was – even if it pre-dates the ERF implementation date.


Five main changes: Change in auditing requirements

• Risk based approach

• Audit schedule provided for each project based on average annual abatement – derived from Forward Abatement Estimate


Forward Abatement Estimate (FAE)

ERF Broome 2015 20 February 2015 11

FAE = total project abatement over the crediting period

Make it consistent with the applicable method to work out FAE

Helps participants determine project viability & pricing

Sets the audit schedule

Use historical data, calculators or third party assistance

Five main changes: Change in auditing requirements

• Initial and subsequent audits have different scope

• Unscheduled audits can be triggered


Threshold – average annual abatement

Initial audit Number of subsequent

audits

Total number of audits

Small Up to 49 999 t CO2-e One Two Three

Medium 50 000 – 149 999 t CO2-eOne Three Four

Large Over 150 000 t CO2-e One Five Six

Five main changes: Change in permanence obligations

• Projects can choose to stay with the 100 year permanence period or swap to a 25 year permanence period.

• They must do this within 2 years of the ERF start date.• Once the change has been made, it cannot be reversed.

• Projects choosing the 25 year option will incur a 20 per cent reduction in the number of ACCUs issued over the life of the project.

• Projects with ACCUs already issued may be required to relinquish 20 per cent of their issued ACCUs to the CER.

• 5 per cent risk of reversal buffer remains


Five main changes: New market for ACCUs

Australian Government becomes the primary market:

• Carbon Abatement Contract• Commercial Terms

• Delivery Terms

• Financial terms - Auction

Secondary market – expected to take some time to develop:

1. Supply any shortfalls in projects delivering against a contract2. Eventual liabilities under the safeguarding mechanism


Carbon Abatement Contracts


• Commercial terms

• Established through the auction qualification process

•Indicate volume of abatement and project information

•Conditions precedent

• Must be completed 20 working days before auction date

•13 March for the 15-16 April Auction



• Delivery terms

• Established during the Auction registration process• Apply to participate in particular auction

• Provide total volume of abatement

• Provide delivery schedule

• Contract expiry date• Auction registration closes 5 business days before the Auction



• Financial terms

• Established during the Auction• Submit a bid through the online bidding platform

• First Auction is around 8 weeks away (15-16 April)

• Get legal and financial advice

• Consider delivery total and schedule and contract duration

• Qualify by 13 March and Register for auction by 7 April

Important readingThe transition Kit

Audit guidelines

Carbon Abatement Contract

Auction guidelines

All at: www.cleanenergyregulator.gov.au

Questions?

Transitioning projects

• “Transition” refers to the period of time between the date the ERF is passed into law, and 1 July 2015.

• The “transition rules” do not apply to project applications using ERF method determinations during this period of time.

Transitioning applications will be assessed under the ERF, except:

• the “newness” and “government program” requirements do not apply

• backdating will still be permitted as per the methodology determination being used

• any existing ROE status will satisfy the “Fit and Proper Person” entry requirements.


Moving existing CFI projects to the ERF. What will be covered in this webinar Main changes in moving...

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