The Hon. Greg Hunt MP
Minister for the Environment
Emissions Reduction Fund White Paper released
24 April 2014
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The Government has today released the Emissions Reduction Fund White Paper, setting out a cost effective, practical and simple approach to reduce our national emissions without a multi-billion dollar carbon tax.
The White Paper sets out the final design for the Emissions Reduction Fund, the centrepiece of the Australian Government's efforts to tackle climate change.
At the last election, Australians voted for removal of the carbon tax and a climate change policy that actually reduces emissions.
The Australian Government accepts the science of climate change and is firmly committed to reducing Australia's emissions to meet its target of five per cent below 2000 levels by 2020.
Since the release of the Emissions Reduction Fund Green Paper, the abatement task has been revised down from 431 to 421 million tonnes of CO2-e over the period to 2020.
The target will be achieved without a tax on families and small business. The Government has already introduced legislation to repeal the carbon tax.
The White Paper outlines the detailed design of the Emissions Reductions Fund, which has been developed following in-depth consultation with business and the community.
The design of the Emissions Reduction has been guided by three key design principles:
- Lowest-cost emissions reductions: the Emissions Reduction Fund will identify and purchase emissions reductions at the lowest cost.
- Genuine emissions reductions: the Emissions Reduction Fund will purchase emissions reductions that make a real and additional contribution to reducing Australia's greenhouse gas emissions.
- Streamlined administration: the Emissions Reduction Fund will make it easy for businesses to participate.
In designing the Emissions Reductions Fund, the Government has considered more than 290 submissions received on the Terms of Reference released in October 2013, and more than 340 on the Green Paper released in December 2013.
We have listened to business and the community and taken care to develop a streamlined approach to achieving emissions reductions that will help Australia meet its 2020 emissions target.
The Emissions Reduction Fund will help drive private sector investment to achieve emissions reductions. The important thing is that emissions reductions are real, measurable and additional to business as usual.
Since the Green Paper, the Government has taken major decisions on the three elements to the Emissions Reduction Fund - crediting, purchasing, safeguarding. These decisions are set out in the White Paper, including:
1. Crediting emissions reductions
- The Government will leverage the experience of state and territory-based energy efficiency schemes by building on their methods as a model for the development of nationally applicable energy efficiency methods under the Emissions Reduction Fund.
- Emissions reduction methods will be simplified and streamlined to support participation in the Emissions Reduction Fund. Emissions reduction methods set out the rules for estimating emissions reductions from different activities and will be developed in conjunction with business.
- The Government will establish an Emissions Reduction Assurance Committee to provide independent, expert advice to ensure emissions reduction methods meet the integrity standards of the Emissions Reduction Fund and are delivering genuine emissions reductions. This will replace the existing Domestic Offsets Integrity Committee under the Carbon Farming Initiative.
2. Purchasing emissions reductions
- In the Green Paper, the Government set out a commitment to the Emissions Reduction Fund of $300 million, $500 million and $750 million - totalling $1.55 billion - to the Emissions Reduction Fund over three years. In line with the Government's long standing policy, the forward estimates commitment to the ERF will be $2.55 billion, with further funding to be considered in future budgets.
- Removing barriers to aggregating emissions reductions by setting up standard arrangements for transferring rights from households and small businesses to a project aggregator.
- As part of its ongoing consultation with business, prior to the first auction the Government will conduct a market assessment of projects proposed to be bid into the Fund by business to ensure the right contractual arrangements are in place.
- Auctions will start in the second half of 2014 and will be run quarterly. This will provide regular opportunities for participation as new methods become available and more projects are approved. The Clean Energy Regulator will publish an indicative 12-month forward schedule of auctions.
- The Clean Energy Regulator will publish the weighted average price awarded to successful projects after each auction to provide information to the market.
3. Safeguarding emissions reductions
- The Emissions Reduction Fund's safeguard mechanism will safeguard the value of funds spent under the Emissions Reduction Fund and create a stable and predictable policy landscape in which businesses can make new investments. It will commence on 1 July 2015.
- The safeguard mechanism will apply at the facility level and will be restricted to facilities with direct emissions of 100 000 tonnes of CO2-e a year or more. This approach will limit the number of covered businesses to around 130.
- The safeguard mechanism will not impose new mandatory reporting obligations on existing businesses. For current facilities, absolute emissions baselines will be set using existing data reported under the National Greenhouse and Energy Reporting Scheme.
- The Government has not budgeted for any revenue from the safeguard mechanism.
Work has already begun to identify and prioritise opportunities to reduce emissions and on methods businesses will use to unlock emissions reduction opportunities in their operations.
I look forward to continue working with business and the community as we move towards implementation of the Emissions Reduction Fund. The White Paper is available at www.environment.gov.au/emissions-reduction-fund