Emissions Reduction Assurance committee

Consultation paper

Review of the Carbon Credits (Carbon Farming Initiative— Industrial Electricity and Fuel Efficiency) Methodology Determination 2015

How to make a submission

The Emissions Reduction Assurance Committee invites submissions in response to its review of the Carbon Credits (Carbon Farming Initiative—Industrial Electricity and Fuel Efficiency) Methodology Determination 2015.

Submissions should be provided using the template available on the Department of the Environment and Energy website www.environment.gov.au and may be emailed to the Emissions Reduction Assurance Committee Secretariat .

Alternatively, submissions may be sent to the following postal address:

Emissions Reduction Assurance Committee Secretariat

Department of the Environment and Energy

GPO Box 787

Canberra ACT 2601

Responses should be submitted to the Emissions Reduction Assurance Committee no later than 11 August 2017.

It is the policy of the Emissions Reduction Assurance Committee for submissions to be published on the Department of the Environment and Energy website. If you wish for your submission to remain confidential please tick the appropriate box on the template. If you have chosen not to use the template and wish for your submission to remain confidential then the document should be clearly marked as confidential.

A submission should only be considered confidential if it could reasonably be expected to substantially prejudice the commercial interests of the author or another person. Copies will be provided to the:

•Emissions Reduction Assurance Committee

•Department of the Environment and Energy

•Clean Energy Regulator

Any request made under the Freedom of Information Act 1982 for access to a submission marked as confidential will be considered in accordance with that Act.

1. Introduction

The functions of the Emissions Reduction Assurance Committee include periodic reviews of methods and undertaking public consultation in relation to such reviews (see section 255 of the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act)). According to the Emission Reduction Fund White Paper, methods are to be reviewed at least once every four years.

The Committee is undertaking a review of the Industrial Electricity and Fuel Efficiency method (the Carbon Credits (Carbon Farming Initiative— Industrial Electricity and Fuel Efficiency) Methodology Determination 2015). As part of this review, the Committee invites comments from the public on all issues associated with the method and its administration, including those not explicitly discussed in this paper.

2. Overview of the Industrial Electricity and Fuel Efficiency method

2.1 History

The Industrial Electricity and Fuel Efficiency method was made by the Minister for the Environment on 25 March 2015.

The Method was subsequently amended by the Carbon Credits (Carbon Farming Initiative – Industrial Electricity and Fuel Efficiency) Methodology Variation 2015 on 11 September 2015 to align the treatment of projects that combust biomass to produce energy, or use biomass-derived energy, with the Renewable Energy Target scheme.

2.2 Eligible activities under the Industrial Electricity and Fuel Efficiency method

The Industrial Electricity and Fuel Efficiency method is activity neutral and provides flexibility for participants to determine what activities are most appropriate for their project. Examples of activities that could be undertaken to reduce emissions include:

  • replacement or modification of boilers or heating, ventilation and air conditioning systems
  • improving control systems and processes
  • waste heat capture and re-use
  • improving the efficiency of crushing or grinding equipment on mining sites
  • replacing low efficiency motors, fans and pumps with high efficiency versions
  • installing variable speed drives (VSDs)
  • improving compressed air processes, and
  • fuel switching.

2.3 Calculating abatement

The Industrial Electricity and Fuel Efficiency method follows commonly accepted energy efficiency measurement and verification approaches to calculate emissions. In simple terms, the level of abatement delivered by a project is determined by comparing the emission levels that would have occurred if there had been no equipment upgrade or replacement (i.e. baseline emissions), and the emissions produced by the upgraded or replaced equipment (i.e. project emissions). Importantly, the level of emissions before the upgrade or replacement is adjusted to reflect the conditions (e.g. production or temperature) experienced after the upgrade or replacement. This is achieved using a baseline emissions model, which estimates what emissions would have been in the absence of project activities based on variables which correlate strongly with emissions. Using a baseline emissions model enables a meaningful comparison of baseline and project emissions levels and provides for proponents to be credited appropriately for abatement delivered by project activities, irrespective of whether production increases or decreases.

2.4 Summary of registered projects and abatement under the method

There are currently 31 projects registered under the Industrial Electricity and Fuel Efficiency method. Seven projects have won contracts through a Clean Energy Regulator auction to sell credits to the Australian Government. These contracts represent two million tonnes CO2-e of abatement. Table 1 provides further project statistics.

Table 1: Industrial Electricity and Fuel Efficiency method overview statistics as at June 2017

Industrial Electricity and Fuel Efficiency method statistics
Registered projects / 31
Contracted projects / 7
Australian Carbon Credit Units issued (tonnes CO2-e) / 0.12 million
Contracted abatement (tonnes CO2-e; the total abatement to be delivered over the life of the 13 contracted projects, including from future reporting periods) / 2.01 million

3. Review of the Industrial Electricity and Fuel Efficiency method

Under the Act, Emissions Reduction Fund methods must comply with a set of standards known as the offsets integrity standards. The purpose of the standards—defined in section 133 of the Act—is to ensure abatement credited by a method is genuine and additional to usual business practices. A summary of the standards is provided in Table 2. The Committee is required to undertake regular review of methods to ensure ongoing compliance with these standards. The principal focus of the Committee’s review of the Industrial Electricity and Fuel Efficiency method is to assess whether the method continues to meet the offsets integrity standards.

Table 2: Offsets integrity standards

Standard / Relevant paragraph in Act / Test
Additionality / 133(1)(a) / Projects covered by the determination should result in abatement that is unlikely to occur in the ordinary course of events (i.e. unlikely to occur in the absence of the incentive provided by the scheme).
Measurement and verification / 133(1)(b) / Removals, reductions and emissions covered by the determination are measurable and capable of being verified.
Eligible carbon abatement / 133(1)(c) / Abatement accredited under the determination is ‘eligible carbon abatement’ (abatement that can be used to meet Australia’s international mitigation obligations).
Evidence / 133(1)(d) / The method is supported by clear and convincing evidence.
Project emissions and leakage / 133(1)(e) / The method provides for deductions of material emissions that occur as a direct result of the conduct of projects.
Conservativism / 133(1)(g) / All estimates, projections or assumptions in the determination are conservative.
Legislative rules / 133(1)(h) / The determination satisfies any applicable legislative rules.

In addition the review will evaluate:

  • practical implementation of the method; and
  • interactions and consistency with other Emissions Reduction Fund methods.

3.1 Feedback sought from stakeholders

To assist its review, the Committee welcomes feedback from stakeholders on the matters within the scope of the review outlined above. The Committee also welcomes feedback on other aspects of the design and operation of the Industrial Electricity and Fuel Efficiency method. This may include:

  • proponent’s experiences in implementing/registering their project under the method
  • concerns about possible consequences of any changes in the method
  • whether additional support tools could improve the experience of proponents
  • issues relating to method calculations
  • any other matters related to the method.

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