A key platform of the incoming coalition government is the abolition of the carbon tax and introduction of a “direct action” scheme for reducing emissions. For energy users the direct action program will be focussed on the reverse auction of carbon abatement, using the Emissions Reduction Fund (ERF).

The ERF will have a budget allocation of $300m, $500m and $750m over its first three years of operation. Its likely that this will be managed by Low Carbon Australia Limited (LCAL), which was recently merged with the Clean Energy Finance Corporation (CEFC). The CEFC itself is likely to be scrapped, but LCAL will remain.

Within 30 days of taking office the Coalition will issue a white paper on the ERF, and is aiming to legislate within 100 days. This will present an opportunity to provide input into the policy.

With the whitepaper not yet released its not possible to fully anticipate what will be canvassed. However I envisage that the ERF will likely:

• Be based on one round per year of reverse auctions. The reverse auction process is aimed at achieving least cost abatement.
• Have a minimum threshold of carbon savings that must be put up in the process. Its hard to imagine this threshold being below 10,000 tonnes, and possibly could be higher.
• The clear target of the ERF will likely be large emitters who are liable to report under NGERs (National Greenhouse Energy Reporting) and may be part of the Energy Efficiency Opportunities Program. Participation in the reverse auction process may be limited to NGERS liable entities, as this to some extent will make it easier to measure and verify emissions abatement.

The white paper may put the following up for consultation/consideration:

• The threshold for participation.
• Rules around measurement and verification of savings
• If funding is only to be provided after savings have been verified, bridging financing may be discussed. Industry will likely much prefer to be penalised for non-performance rather than come up with capital for the project up front.
• If it is possible to aggregate projects or not.

If you are not a major emitter of GHG emissions and do not trigger NGERS obligations (i.e. less than 25,000 tonnes CO2-e per year at one facility, or less than 50,000 tonnes annually across your organisation) we are particularly interested in hearing from you. How do you think the Emissions Reduction Fund should be best managed? Please post your comment below (click on read more then scroll down to the comments section).

Sources used in this post:
http://www.theguardian.com/world/2013/jul/09/coalition-direct-action-tony-abbott
http://www.abc.net.au/environment/articles/2013/09/05/3841810.htm
http://www.theaustralian.com.au/national-affairs/election-2013/coalition-takes-axe-to-climate-programs/story-fn9qr68y-1226716471498