Matt Drum

Matt Drum

Political Editor of The Guardian Australia, Lenore Taylor, reported on Friday 1 May that the Minister for the Environment, the Hon Greg Hunt MP, is on record stating that Direct Action will require electricity generators and heavy industry to gradually reduce greenhouse gas emissions after 2020.

The minister is quoted as offering the following definition of Direct Action: “It is a two-part system. An emissions reduction fund (ERF)… [and] secondly, we have the safeguards mechanism which allows us to work with individual firms on a budget which can be adjusted and progressively tightened throughout the 2020s through to 2030 and 2040 and 2050.”

This is the first time (to our knowledge) that Minister Hunt has made any mention of ‘decreasing’ emissions via the Safeguard Mechanism. Until now it has always been described as ‘safeguarding emissions that are purchased under the ERF’, not as a tool to actually drive down economy wide business as usual (BAU) emissions. The practical implications of this is that in order to actually drive down BAU emissions post 2020, the Safeguard Mechanism will need to employ decreasing emissions baselines over time at a facility level, rather than the ‘flat’ baseline proposed between now and 2020.

 , industry has traditionally been unperturbed. The Australian Industry Group has stated that safeguards “[meet] the government’s objective that the mechanism will not be a driver of abatement towards the 2020 target” and the Business Council Of Australia is on record stating “[the] safeguard mechanism should not in effect impose an additional cost on new facilities that acts as a de facto carbon cost”.

Finally, Taylor reports that “In internal government discussions the prime minister, Tony Abbott, and his office have been very concerned the safeguards mechanism could never turn into a de facto carbon price or a burden on emitting industries.”

Read the full article here.

 

Amendments to two key pieces of National Greenhouse and Energy Reporting (NGER) legislation have been made that will affect reporting procedures for the FY15/16 reporting year.

The National Greenhouse and Energy Reporting (Measurement) Amendment Determination 2015 (No. 1) and National Greenhouse and Energy Reporting Amendment (2015 Measures No. 1) Regulation 2015 see a number of changes to the NGER reporting process.

Of critical importance is the change to the Global Warming Potential to Methane, which will increase from 21 tCO2-e to 25 tCO2-e. A common reportable substance in the solid waste and waste water sectors this will lead to a significant impact on emission profiles for businesses reporting in these sectors. The Global Warming Potentials, furthermore, for each NGER reportable greenhouse gas have been updated. Table 1 details each change.

Table 1. GWP FY14/15 & FY15/16

 

Item

Greenhouse gas

Chemical formula

Global Warming Potential (GWP) FY14/15

Global Warming Potential (GWP) FY15/16

1

Carbon dioxide

CO2

1

1

2

Methane

CH4

21

25

3

Nitrous oxide

N2O

310

298

4

Sulphur hexafluoride

SF6

23 900

22 800

5

HFC‑23

CHF3

11 700

14 800

6

HFC‑32

CH2F2

650

675

7

HFC‑41

CH3F

150

92

8

HFC‑43‑10mee

C5H2F10

1 300

1 640

9

HFC‑125

C2HF5

2 800

3 500

10

HFC‑134

C2H2F4 (CHF2CHF2)

1 000

1 100

11

HFC‑134a

C2H2F4 (CH2FCF3)

1 300

1 430

12

HFC‑143

C2H3F3 (CHF2CH2F)

300

353

13

HFC‑143a

C2H3F3 (CF3CH3)

3 800

4 470

14

HFC‑152a

C2H4F2 (CH3CHF2)

140

124

15

HFC‑227ea

C3HF7

2 900

3 220

16

HFC‑236fa

C3H2F6

6 300

9 810

17

HFC‑245ca

C3H3F5

560

693

18

Perfluoromethane (tetrafluoromethane)

CF4

6 500

7 390

19

Perfluoroethane (hexafluoroethane)

C2F6

9 200

12 200

20

Perfluoropropane

C3F8

7 000

8 830

21

Perfluorobutane

C4F10

7 000

8 860

22

Perfluorocyclobutane

c‑C4F8

8 700

10 300

23

Perfluoropentane

C5F12

7 500

9 160

24

Perfluorohexane

C6F14

7 400

9 300

 

 

We expect that all changes to emission factors will be incorporated into EERS. Reporters likely to be affected should incorporate the updated emissions factors into their calculations processes for continuous monitoring purposes.

Further changes are also detailed, in particular the annual updates to emission factors associated with electricity consumption. The changes for the Measurement Determination are detailed here and the Regulation are detailed here.

Both amendments do not apply for the FY14/15 reporting year.

The Department of Environment (DoE) has released the consultation paper outlining approaches for the details of the Safeguard Mechanism implementation. The broad aim of the Mechanism is to try and reduce emissions growth that has already been purchased by the tax payer via the Emissions Reduction Fund (ERF).

We have given the paper a quick review. Some of the key items, other than the already legislated framework, include:

BASELINES - It is suggested baselines to be set over a five year period - using the highest absolute emissions number at the facility (scope 1 emissions only) for the NGER reporting years 2009-10 to 2013-14. This is the default position although DoE on numerous occasions flexibility is key! This was the preferred position noted in the ERF Green Paper. Interestingly I have been hearing more and more that only an emissions intensity baseline will work for many large emitters, although it appears the DoE position has firmed on absolute emissions with no exceptions. The paper also suggests dis-aggregating reporting for vertically integrated production processes and aggregated facilities which may require some participants to adjust their approach to reporting. See diagram on page 13 of the Paper for a quick outline.

NEW AND EXPANDING FACILITIES- reasonably complex provisions have been suggested for new and expanding facilities, allowing for baselines to be set based on a projected intensity type approach ('product*emissions intensity per unit' for new) and to adjust baselines where certain thresholds of expansion are exceeded. The latter will potentially result in a threshold within a threshold!?

EMISSIONS VARIABILITY- again flexibility is the key here. Oil, gas and mining singled out as being allowed to alter baselines when/where the extraction process becomes more emissions intensive - the paper suggests independent assessments (via NGERs auditors) of altered baselines are undertaken.

WASTE - only emissions from waste deposited post 1 July 2012 be counted towards the threshold (100,000 tCO2-e) for coverage. This would likely see only a few (if any) landfills covered in the early years as emissions from waste take a few years to really ramp-up after they are deposited.

'EMISSIONS MANAGEMENT'- firming up the requirement to use eligible offsets to 'make-good' where baselines are exceeded, although the only type of offsets identified were Australian Carbon Credit Units (ACCUs) - no mention of international units although they were not explicitly ruled out. The paper also suggests facilities are given three years to average out times when the baseline is exceeded - again allowing for emissions variability. See diagram on page 18 for overview.

The Minister has also yesterday approved the ERF 'Industrial Electricity and Fuel Efficiency' Methodology. Unfortunately the Methodology has been released too late to see any energy efficiency projects in the first ERF auction (15-16 April) as a methodology was required to register the project through a convoluted process a week ago. Hopefully we will see some of these new projects in round 2 of the Auction. Our engineers are currently reviewing the Methodology - we can tell you however that the name has changed over the past couple months since the consultation closed!

A link to the Safeguard paper can be found here:

http://www.environment.gov.au/climate-change/emissions-reduction-fund/about/safeguard-mechanism

A link to the 'Industrial Electricity and Fuel Efficiency' Methodology and the Explanatory Statement can be found at: http://www.comlaw.gov.au/Details/F2015L00346/Download

Tuesday, 10 March 2015 15:16

Welcome to our New Team Members!

 

Ndevr Environmental would like to welcome Hannah and Tori – our two new recruits to the team.

Hannah Meade is our new Melbourne based Principal; she joins us from Rare Consulting/ pitt&sherry where she was a senior engineer in the carbon & energy team. Hannah has a background in consulting and government – and a broad range of experience in all things energy, environment and transport related, particularly with government industry engagement type programs.

Tori Lamb is our new Melbourne Technical Lead; bringing over 15 years of experience in environmental engineering in terms of air, water, waste and greenhouse gases. Tori joins us from Shell where she was the lead Greenhouse Gas Adviser, and prior to that GHD where she was a senior environmental engineer. Tori is also currently lecturing at Monash University in Chemical Engineering.

For more details on Hannah and Tori’s skills and experience, or to contact them directly click here for about us page.

Emission Reduction Fund – Auction Qualification due Friday 13 March 2015!

Time is creeping up on the first Emissions Reduction Fund (ERF) auction (15-16 April 2015). If you are thinking about submitting a bid you need to get your Auction Qualification Form in by next Friday 13 March at the latest (20 business days before the auction- don’t forget Easter break!). Note that applying for auction qualification does not mean you have to bid but failure to do so will render you ineligible if you did want to.

There are a number of steps and requirements in the ERF process. We have prepared a checklist to help potential participants get organised in preparing to participate in the ERF. Please contact us if you would like a copy.

The Auction Qualification is the offer to enter into a Carbon Abatement Contract – the commercial terms, which requires information about your project registration, an indication of the total quantity of units the project will provide through the contract, and information on your bank account for payment of ACCUs.

Following this, if you decide to bid you will be eligible to register for the auction. This provides the delivery terms for your carbon abatement contract, including the total abatement proposed to be delivered, the delivery schedule (dates and amounts), and the duration of the contract proposed. Note the Auction Registration closes five business days before the auction and requires your project to have already been registered as an eligible project and qualified for auction.

For those who have not yet registered a project (which is a step prior to auction qualification) the Clean Energy Regulator has indicated they will be willing to streamline the process due to late methodology finalisation and allow project registration and auction qualification to be jointly submitted – but you will need to get a move on!

The Government's $2.5B Emissions Reduction Fund (ERF) is likely to pass the Upper House after Clive Palmer and his Senators agreed to support the ERF legislation. The ERF allows for the continuation of existing Carbon Farming Initiative (CFI) projects and will be expanded to cover activities such as Industrial Energy Efficiency, transport emissions reductions and more. 

Under the ERF businesses will now be able to 'monetise' many energy efficiency projects that also lead to carbon reductions. Depending on the scale of reductions (and the price per tonne of carbon available via a reverse-auction), pay-back periods and business cases for projects may be significantly improved.

The Department of Environment currently has numerous ERF Methodologies out for public consultation. Projects need an approved Methodology to be able to monetise their carbon reductions, and an Industrial Energy Efficiency Methodology is due to be released soon.

We will keep you posted as the policy develops, in the meantime if you have any questions feel free to contact us directly. 

Wednesday, 20 August 2014 14:00

EERS Up and About

The Emissions and Energy Reporting System (EERS) for the 2014 NGERs reporting season is now up and running after an extended upgrade period. Users are now able to enter data, generate drafts and submit reports as required under NGER Section 19 and Section 22 (liable entities) for the 2013/14 reporting period.

We have noted there are still some issues plaguing the system. Some users have found that generating drafts can take longer than usual (up to a few days). This, coupled with a feature in EERS which now prevents data entry when a draft report has been generated means users may find themselves unable to modify EERS data for an extended period of time after generating a draft report. Once the report is generated, users can go in to ‘unlock’ the report and continue data entry.

If you are experiencing any difficulties you can contact the Clean Energy Regulator support team on 1300 553 542

On 1 July 2014 the Clean Energy Regulator will allow project proponents to register a ‘Notice of Intention’ to participate in the $2.55B ERF. Despite the lack of legislation at this stage, and the events of the past week, projects that will achieve carbon reductions and meet the eligibility criteria can initiate the process to achieve ERF funding.

This process is particularly important for ‘new’ projects that are not transitioning from the Carbon Farming Initiative (CFI), which will be expanded under the ERF. Carbon saving projects and methodologies are already well underway for new activities such as:

  • Industrial Energy Efficiency (i.e. fuel switching, boiler upgrades etc.)
  • Transport efficiency improvements
  • Commercial building upgrades

What’s the Rush?

The additionality tests for the ERF (which governs if a project is eligible or not) have softened significantly via proposed amendments to the CFI, opening the door for many new activities. One of the key eligibility criteria is that the project cannot have already ‘begun’ if it is to be considered eligible. If a project has been identified to the Regulator (via Notice of Intention) before it begins and meets the other criteria, it will be eligible for support under the ERF.

So, if you have any carbon saving projects under consideration, they should be included in the Notice of Intention as soon as possible. This will keep the door open for ERF funding if and when the legislation passes. If the project begins before the Regulator is notified, it will immediately be ruled out!

The ‘notice of intention’ is not a binding agreement, and we have been told the form will be (likely) available on 1 July or very soon thereafter. It will be a straightforward process with only preliminary company and project details required. If you are interested in pursuing ERF funding, contact us directly and we will forward the link to the form as soon as it’s available. Further if would like some more information on the types of projects likely to be eligible and feasible we're happy to discuss.

Taken from CARBON FARMING INITIATIVE AMENDMENT BILL 2014 EXPLANATORY MEMORANDUM:

“The Bill expands the current land-based scope of the CFI Act to enable any type of emissions reduction project to be an eligible offsets project. This is to enable the Emissions Reduction Fund to unlock emissions reduction opportunities across the economy.

A key requirement under both the Emissions Reduction Fund and the Carbon Farming Initiative is that credits are issued for emissions reductions that are ‘additional’ – that is, they are not likely to have occurred under normal business conditions, in the absence of the Emissions Reduction Fund.”

As mentioned, one of the key requirements to prove additionality is that the project has not begun, this is called the ‘newness’ test. An extract from Section 388B(2) describes the concept:

In determining whether the project has begun to be implemented, disregard any of the following activities that have been, or are being, undertaken in relation to the project:

  • planning or designing the project;
  • obtaining regulatory approvals for the project;
  • obtaining consents relating to the project;
  • obtaining advice relating to the project;
  • conducting negotiations relating to the project;
  • sampling to establish a baseline for the project;
  • an activity specified in the legislative rules;
  • an activity that is ancillary or incidental to any of the above activities.

The following are examples of when a project has begun to be implemented:

  • making a final investment decision in relation to the project;
  • acquiring or leasing a tangible asset (other than land) that is for use wholly or mainly for the purposes of the project (disregard an asset that is a minor asset);
  • commencing construction work for the purposes of the project;
  • in the case of a sequestration offsets project—preparing soil for seeding or planting that is for the purposes of the project;
  • in the case of a sequestration offsets project—seeding, planting or fertilising plants that are for the purposes of the project;
  • in the case of a sequestration offsets project—installing an irrigation or drainage system for the purposes of the project.

‘Final investment decision’ has the meaning generally accepted within the corporate finance community.

As you can see the criteria is quite broad, with some ambiguity, however the basic principle is that the Government is genuinely trying to remove as many barriers to entry as possible and encourage participation.

Projects will also need to be undertaken in accordance with a methodology to obtain registration from the Regulator. Once registered, a project will generate Australian Carbon Credit Units (ACCUs) and it is these units that the Regulator will contract to buy at a price the successful bidder (proponent) nominates, generally via a reverse auction process.  The contract period will likely be 5 years or less depending on the nature of the project.

The exposure draft of the contract is currently open for consultation and can be found here.

In some circumstances emissions from petroleum based oils and greases (PBOGs) may be considered ‘covered emissions’ under the Carbon Pricing Mechanism (CPM) attracting the $23 per tonne of carbon dioxide equivalents (tCO2-e) liability.

An example of where PBOGs may be covered emissions is at a ‘directly liable large gas consuming facility’ (covered emissions greater than 25,000 tCO2-e) that also has a vehicle fleet carrying out ancillary activities and consuming PBOGs in the process.

It is assumed that in many circumstances oils and greases used for lubrication purposes (particularly in internal combustion engines) will partially oxidise, or combust, and release CO2-e into the atmosphere. Subdivision 2.40A of the NGER (Measurement) Determination 2008 contains the methodologies for estimating emissions from PBOGs, and there are a couple ways to approach the task. The default method assumes ~40 per cent of the PBOGs will be combusted.

There may be instances where PBOGs are being utilised and do not produce emissions, for example hydraulics etc. Our advice (based on discussions with the Clean Energy Regulator – CER) is if you believe no oxidisation occurs in some or all applications, you should have some supporting evidence or documentation.

We thought it would be pertinent to advise our clients and friends of this issue well before the section 22A reports for covered emissions are due (31 October), as PBOGs are typically small emission sources and usage data can be difficult to obtain.

Remember, this direct ($23/ tCO2-e) liability only applies at facilities captured under the CPM. NGER reporters have always been required to report PBOGs in similar circumstances as described above under the normal section 19 reports, also due 31 October.

We understand the CER is likely to release some explanatory material shortly, and if/when this is published we will notify our clients and friends and provide a link. In the meantime feel free to contact us directly if you would like any further information or clarification.

Disclaimer: this article should be considered general information only and not formal legal advice.

The AIEA conference will be held in Fremantle WA on 28 and 29 of November 2013. The  Conference is a great event for those involved ‘on the ground’ in the carbon, energy, pollution and water reporting and management fields.

Speakers and presentations are generally focussed on practical problems and solutions and delivered by recognised experts in the field – from consultants to corporate environmental officers and government representatives.

Click here to view the registration page and further information.

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