Industry pressure delayed ERF auction

INDUSTRY pressure has led to a delay of the first Emissions Reduction Fund auction, energy and emissions market analyst RepuTex said.

Jacqueline Ong

The ERF auction, previously expected to take place in March, is now announced to take place four weeks later on April 15.

Reputex said the delay allowed more time for new draft emissions reduction methods for industry to be formally regulated and be eligible for use in the first auction, including a method to cover industrial fuel and energy efficiency, and a facility method for companies disclosing under the National Greenhouse and Energy Reporting Scheme.

Consultation on these methods is closed following public comment, with regulatory determinations expected to be made over the next few weeks.

The initial March auction timeline was believed to be too soon for these methods to be made available for industry proponents seeking to participate in the first auction, Reputex said.

Thus, industry indicated to the Clean Energy Regulator that it needed more time to prepare its bids for the first auction following the release of the new, finalised methods, with a number of firms likely to commence price discovery in the early auction rounds.

To date, only three new ERF methods have been formally declared by the environment minister – commercial buildings, alternative waste treatment and landfill gas – with the commercial buildings method the only non-Carbon Farming Initiative method available to industry.

The 14 draft methods are currently closed for comment and are awaiting final determination –now expected to occur prior to auction one – are coal mining; aggregated small energy users; avoided clearing of native regrowth; avoided land clearing; beef cattle herd management; designated Verified Carbon Standard projects; facilities; fertiliser use efficiency in irrigated cotton; industrial Fuel and Energy Efficiency; deforestation; fire management; sequestration of carbon in soil using modelled abatement estimates; transport; and wastewater treatment.

“As noted in earlier research, criticism of the commercial buildings method had come from the property sector, which is likely to face high barriers to develop projects for the ERF,” Reputex said.

“Under the commercial buildings method, minimum bid thresholds and the required NABERS star rating improvements are likely to create barriers for small property owners, suggesting that the market may be more favourable for aggregators and firms with larger portfolios such as property trusts.”

According to Reputex, the new date for the first ERF auction indicates that just one auction is likely to be held in FY14-15, down from two initially expected by the market.

The April 15 auction date is a delay on the initial March timeline set for the first auction, as outlined by Environment Minister Greg Hunt in November.

"I can announce this today, that the first auctions under the Emissions Reduction Fund, after having spoken to the Clean Energy Regulator on Friday, will be held in the first quarter of next year. I can also say that the pipeline of the emissions reduction and abatement project is greater than we'd expected,” Hunt said in November.

"We're developing methodologies which will be released shortly. There are 26 out there, another more than 20 under development for things such as aggregated household energy efficiency, for cleaning up power stations, for cleaning up waste coal mine gas, for cleaning up emissions from waste water and sewerage farms."