EXPLANATORY STATEMENT
Carbon Credits (Carbon Farming Initiative) Act 2011
Carbon Credits (Carbon Farming Initiative—Emissions Abatement through Savanna Fire Management) Methodology Determination 2015
EXPOSURE DRAFT
Background
The Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act) enables the crediting of greenhouse gas abatement from emissions reduction activities across the economy. Greenhouse gas abatement is achieved either by reducing or avoiding emissions or by removing carbon dioxide from the atmosphere and sequestering carbon in soil or trees.
In 2014, the Australian Parliament passed the Carbon Farming Initiative Amendment Act 2014, which establishes the Emissions Reduction Fund (ERF). The ERF has three elements: crediting emissions reductions, purchasing emissions reductions, and safeguarding emissions reductions.
Emissions reduction activities are undertaken as offsets projects. The process involved in establishing an offsets project is set out in Part 3 of the Act. An offsets project must be covered by, and undertaken in accordance with, a methodology determination.
Subsection 106(1) of the Act empowers the Minister to make, by legislative instrument, a methodology determination. The purpose of a methodology determination is to establish procedures for estimating abatement (emissions reduction and sequestration) from eligible projects and rules for monitoring, record keeping and reporting. These methodologies will ensure that emissions reductions are genuine—that they are both real and additional to business as usual.
In deciding to make a methodology determination the Minister must have regard to the advice of the Emissions Reduction Assurance Committee (ERAC), an independent expert panel established to advise the Minister on proposals for methodology determinations. The Minister must not make or vary a methodology if the ERAC considers it inconsistent with the offsets integrity standards, which are set out in section 133 of the Act. The Minister will also consider any adverse environmental, economic or social impacts likely to arise as a result of projects to which the determination applies.
Offsets projects that are undertaken in accordance with the methodology determination and approved by the Clean Energy Regulator (the Regulator) can generate Australian Carbon Credit Units (ACCUs), representing emissions reductions from the project.
Project proponents can receive funding from the ERF by submitting their projects into a competitive auction run by the Regulator. The Government will enter into contracts with successful proponents, which will guarantee the price and payment for the future delivery of emissions reductions.
Further information on the ERF is available on the Department of the Environment website at:
www.environment.gov.au/emissions-reduction-fund.
Background: Emissions Abatement through Savanna Fire Management
During combustion, fires emit greenhouse gases, including methane and nitrous oxide. Methane has a global warming potential that is 21 to 25 times greater than that of carbon dioxide, and nitrous oxide has a global warming potential that is about 310 times greater than that of carbon dioxide.
Emissions of greenhouse gases are greater for very hot, high intensity fires compared with cool, low intensity fires. In northern Australian savannas, high intensity fires predominate late in the dry season, and lower intensity fires predominate early in the dry season when vegetation still contains some moisture from the wet season. In the late dry season, vegetation is very dry and almost complete combustion results in large quantities of greenhouse gases being emitted to the atmosphere. During the late dry season, many unplanned ignitions occur from lightning, which occurs at a high frequency in dry lightning storms immediately prior to the wet season. With no or minimal fire management, fires occur predominately in the late dry season in northern Australian savannas.
In contrast, the early dry season is the period when fires in northern Australian savannas are of lower intensity due to partial combustion of vegetation, and there are smaller quantities of greenhouse gases being emitted to the atmosphere. As lightning is infrequent at this time, most early dry season fires are a result of fire management.
The project activity under the draft Determination is fire management during the early dry season. This will reduce the incidence and extent of fires during the late dry season, resulting in an overall reduction in greenhouse gas emissions from fire.
Under the draft Determination, estimations of carbon abatement are parameterised to account for the differences in emissions between vegetation fuel types, time since the last fire and regions receiving different amounts of average annual rainfall. The draft Determination covers two rainfall zones:
· the high rainfall zone, which covers areas that receive more than 1,000 millimetres long-term average annual rainfall; and
· the low rainfall zone, which covers areas that receive more than 600 and less than or equal to 1,000 millimetres long-term average annual rainfall and, in the driest quarter, total quarterly rainfall of less than 15 millimetres.
The existing savanna burning methodology determination, the Carbon Credits (Carbon Farming Initiative) (Reduction in Greenhouse Gas Emissions through Early Dry Season Savanna Burning–1.1) Methodology Determination 2013, only covers projects in the high rainfall zone. Further research has enabled the parameterisation of the approach to the low rainfall zone, allowing the extension of this Determination to a wider region. In addition, the draft Determination improves the calibration of parameters used to estimate abatement in the high rainfall region.
This draft Determination is based on empirical data that has beenstratified by fire season, the years since last burnt, and vegetation fuel types present in the two rainfall zones.For each project, maps of the area burnt in each fire season of each year in the baseline and reporting years are derived from satellite data.These maps are overlaid by the project’s validated vegetation fuel type map, area burnt maps and years since last burnt maps. The sum of the hectares burnt is then multiplied by the potential emissions for each fire season, vegetation fuel type and years since last burnt. Emissions in the reporting year also arise from use of fuel to establish and maintain the project. Under the draft Determination, project proponents can either complete geospatial and other calculations manually, or use a new version of the Savanna Burning Abatement Tool (SavBAT2) which simplifies the reporting and record-keeping requirements.
The draft Determination provides an incentive for proponents to manage fire in savannas to reduce greenhouse gas emissions. In addition, projects may generate co-benefits, including social, cultural, employment and biodiversity benefits.
Application of the draft Determination
The draft Determination sets out the detailed rules for implementing and monitoring offsets projects that result in a net reduction of greenhouse gas emissions from savanna fires through fire management. The rules have been designed to help ensure that emissions reductions are real and additional to business as usual.
Project proponents wishing to implement projects under the draft Determination, once it is made, must make an application to the Regulator under section22 of the Act. They must also meet the general eligibility requirements for an offsets project set out in subsection 27(4) of the Act, which include compliance with the requirements set out in the draft Determination, and the additionality requirements in subsection 27(4A) of the Act. The additionality requirements are:
· the newness requirement; and
· the regulatory additionality requirement; and
· the government program requirement.
Subsection 27(4A) of the Act provides that a methodology determination may specify requirements in lieu of any of the above requirements. The draft Determination specifies a requirement in lieu of the regulatory additionality requirement (see section 3.2), which applies alongside the newness and government program requirements.
Public consultation
The exposure draft of the Determination has been published on the Department’s website for public consultation from XXXX 2014 to XXXX 2014. Details for how to make a submission are provided on the Department of the Environment website, www.environment.gov.au.
Research that contributed to the development of this methodology was funded through a Australian Government grant from the Indigenous Carbon Farming Fund Research and Development stream that was managed by the Northern Australian Indigenous Land and Sea Management Alliance. The research enabled the parameterisation of the carbon abatement estimations for the low rainfall region, and extended existing research for estimating carbon abatement for the high rainfall region.
Draft Determination details
The draft Determination will be a legislative instrument within the meaning of the Legislative Instruments Act 2003.
Details of the draft Determination are at Attachment A.
Note on this explanatory statement
Numbered sections in this explanatory statement align with the relevant sections of the draft Determination.
Attachment A
Details of the Methodology Determination
Part 1 Preliminary
1.1 Name
Section 1 sets out the full name of the draft Determination, which is the Carbon Credits (Carbon Farming Initiative—Emissions Abatement through Savanna Fire Management) Methodology Determination 2015.
1.2 Commencement
Section 1.2 provides that the draft Determination commences on the day after it isregistered.
1.3 Authority
Section 1.3 provides that the draft Determination is made under subsection 106(1) of theAct.
1.4 Duration
Under subparagraph 122(1)(b)(i) of the Act, a methodology determination remains in force for the period specified in the determination.
Paragraph 1.4(a) provides that the draft Determination remains in force from commencement until the day before it would otherwise be repealed under subsection50(1) of the Legislative Instruments Act 2003.
Instruments are repealed under that provision on either 1April or 1 October following the tenth anniversary of registration on the Federal Register of Legislative Instruments. Paragraph1.4(b) ensures that the draft Determination would expire in accordance with subparagraph 122(1)(b)(i) of the Act.
If the draft Determination expires or is revoked during a crediting period for a project to which the draft Determination applies, the draft Determination would continue to apply to the project during the remainder of the crediting period under subsections 125(2) and 127(2) of the Act. Project proponents may apply to the Regulator during a reporting period to have a different methodology determination apply to their projects from the start of that reporting period (see subsection 128(1) of the Act).
Under section 27A of the Act the Emissions Reduction Assurance Committee may also suspend the processing of applications under a determination if there is reasonable evidence that the methodology determination does not comply with one or more of the offsets integrity standards. This does not impact applications for declaration already received by the Regulator before such a suspension or declared eligible offset projects which apply the Determination.
1.5 Definitions
Section 1.5 defines a number of terms used in the draft Determination.
Where terms are not defined in the draft Determination but are defined in section 5 of the Act, they have the meaning given by the Act.
Under section 23 of the Acts Interpretation Act 1901, words in the determination in the singular number include the plural and words in the plural number include the singular.
Part 2 Savanna fire management projects
2.1 Savanna fire management projects
Paragraphs 27(4)(b) and 106(1)(a) of the Act require all offsets projects to be covered by a methodology determination, and for methodology determinations to specify the kind of offsets projects to which they apply.
Subsection 2.1(1) provides that the draft Determination applies to offsets projects that: (a) aim to reduce the emission of methane and nitrous oxide as a result of fire by using fire management in the early dry season; and (b) are carried out in savannas that meet the requirements of subsection(2).
Subsection 2.1(2) provides that the savannas must be in the high-rainfall zone or the low-rainfall zone. The savannas may be in both rainfall zones. The high-rainfall zone is defined by the savanna burning 1000mm rainfall map, and the low rainfall zone is defined by the savanna burning 600–1000mm rainfall map. The 600–1000mm rainfall map restricts the low rainfall zone to areas that receive less than 15mm total rainfall in the driest quarter.
The rainfall maps can be found on the Department’s website at www.environment.gov.au.
Subsection 2.1(3) provides that a project covered by subsection 2.1(1) is a savanna fire management project.
Part 3 Project Requirements
Division 3.1 General
3.1 General
The effect of paragraph 106(1)(b) of the Act is that a methodology determination must set out requirements that must be met for a project to be an eligible offsets project. Under paragraph27(4)(c) of the Act, the Regulator must not declare that a project is an eligible offsets project unless the Regulator is satisfied that the project meets these requirements. Section 3.1 provides that the project must meet the requirements in Part 3 of the draft Determination.
3.2 Requirement in lieu of regulatory additionality requirement
Projects must meet the additionality requirements in subsection 27(4A) of the Act. The additionality requirements are:
· the newness requirement;
· the regulatory additionality requirement; and
· the government program requirement.
However, subsection 27(4A) of the Act also provides that a methodology determination may specify requirements in lieu of any of the above requirements.
Section 3.2 of the draft Determination specifies a requirement to apply in lieu of the regulatory additionality requirement in the Act, namely that the project is not required to be carried out by or under a law of the Commonwealth, a State or Territory. The requirement in lieu is that the project must not be carried out on land where fire management for the primary purpose of reducing emissions from fire is required to be carried out by or under a law of the Commonwealth, a State or a Territory.
The effect of section 3.2 is that projects will meet the draft Determination’s regulatory additionality requirement even if they are carried out on land where fire management is required by law, provided that the law’s requirement is not for the primary purpose of reducing emissions. For example, projects would meet the regulatory additionality requirement if they were carried out on land where a state law requires fire management for the purpose of reducing bushfire risk.
Division 3.2 Project area
3.3 Project area
‘Project area’ is defined in the Act, in relation to an areabased offsets project, as an area of land on which the project has been, is being, or is to be, carried out. Savanna fire management projects are area-based offsets projects because they are area-based emissions avoidance projects.
Section 3.3 provides that each part of the project area must be on land that is in the high rainfall zone or the low rainfall zone. The note at the bottom of the section confirms that the project area may consist of both land in the high rainfall zone and land in the low rainfall zone. The high rainfall zone is defined by the savanna burning 1000mm rainfall map, and the low rainfall zone is defined by the savanna burning 600–1000mm rainfall map. The rainfall maps are available on the Department’s website at www.environment.gov.au.