Carbon auction a strong start

The first carbon abatement auction under the Federal Government’s Emissions Reduction Fund awarded 47 million tonnes worth of contracts.

The first carbon abatement auction under the Federal Government’s Emissions Reduction Fund awarded 47 million tonnes worth of contracts.

By Courtney Pearson

April 28, 2015

AUSTRALIA’S first Emissions Reduction Fund (ERF) auction was deemed a success by Environment minister Greg Hunt, which saw the Clean Energy Regulator award contracts for 47 million tonnes of abatement at an average of $13.95 per tonne.

Forty-three companies will be paid $660 million to eliminate 47mt of carbon in the first round of the $2.55 billion ERF. The majority of auction winners were carbon farmers and landfill operators, including companies such as AGL Energy and LMS Energy.

“Earlier this year the Department of Environment confirmed that Australia’s abatement challenge between now and 2020 is 236mt,” Mr Hunt said.

“The first ERF auction alone has achieved 47 million tonnes of abatement and there will be multiple more auctions between now and 2020.”

Mr Hunt said Australia was “well on track” to achieve the target of reducing emissions by 5 per cent from 2000 levels by 2020.

The ERF was a more efficient and cost-effective way to help meet the target compared to the carbon tax, he said.

Carbon Market Institute chief executive Peter Castellas said the ERF auction would bode well for future investment in carbon abatement.

“Solid contracts with significant sums will definitely encourage other project proponents under new ERF abatement methods to consider participating in the second and subsequent auctions,” he said.

“The crediting and purchasing arrangements under the ERF are, however, only one important component of a suite of policy measures needed to achieve Australia’s emissions reduction target.”

However, the Climate Institute was not convinced.

“The results highlight the inadequacy of the policy in two key ways,” Climate Institute chief executive John Connor said.

“First, the abatement purchased through the auction is a mere drop in the bucket of the level of carbon pollution reduction that the government needs to achieve credible pollution targets.”

He said the second way was for the government to shift responsibility for pollution reduction to the taxpayer.

With its allocated funds, Mr Castellas said the ERF could “do some of the important heavy lifting of emissions reductions in the next few years but limiting emissions growth in the period [between] 2020-2030 also needs to be considered as a central part of the initial policy framework and, as such, the final design of safeguard mechanism will assume great importance”.