The Australian government has repealed its predecessors’ controversial carbon-equivalent levy on refrigerants. But is the replacement carbon scheme any better, asks Vincent Aherne
When the current Australian government repealed its predecessors’ carbon price legislation and the carbon-equivalent levy on refrigerants last year, its decision was to replace the stick with the carrot.
The government will invest A$2.25bn (£1.3bn) over four years to effectively pay people to reduce their carbon emissions.
The Emissions Reduction Fund (ERF) is a public reverse-auction of emission reduction proposals – whereby the government will ‘purchase emission reductions’ from industry at the lowest cost practicable or available.
The voluntary scheme will purchase carbon emissions from a variety of sources and include baselines and penalties.
There will be a safeguard mechanism built in to ensure that emissions reductions paid for through the ERF are not offset by significant increases in emissions elsewhere.
The ERF team has been busily designing methods for measuring and verifying the carbon emission reductions achieved by proposed projects. There are already concerns that these will present a large administrative burden for those participating in the scheme, and essentially increase the costs of the emission reductions achieved.
There is no single method proposed that deals with reduction in emissions of refrigerants. The current government appear to favour supporting multilateral international phase-down for high GWP refrigerants, rather than taking additional domestic actions.
Three emissions reduction methods have been formally declared by environment minister Greg Hunt, with 14 more draft methods yet to be formally declared. Among the methods proposed are:
- Reductions in emissions-intensity of transport;
- Commercial, industrial and aggregated energy efficiency;
- Capture and combustion of landfill gas and agricultural waste;
- Proposals for the land sector, including increasing soil carbon and reducing livestock emissions.
ERF projects for commercial buildings, where the cooling industry could participate, must involve: “Modifying, installing, removing or replacing energy consuming equipment; or equipment that generates electricity for consumption at the building; or a building component or other equipment that isn’t either of those; or, changing how energy consuming equipment is controlled or operated; changing the energy sources used by energy-consuming equipment; or promoting behaviours by occupants of the building that affect energy consumption by energy consuming equipment at the building.”
There remain uncertainties about the ERF.
Foremost among these is the de facto carbon price that will emerge from the auction process.
Then there are a lot of upfront risks for project proponents, which may reduce the number of people who participate in the auctions.
There is also an expectation from government that bids will reflect lowest emission reduction costs, but the market may not agree – it may choose to inflate them.
There are also barriers to the participation of commercial buildings and HVACR projects in the scheme.
The current methods seem to favour the larger property portfolio owners or the big end of town rather than the smaller but more prolific (and energy-wasteful) medium and smaller independently owned buildings.
The general feeling in the building and cooling industries is that the ERF will not be suitable for this sector and will not incentivise buildings emission reductions as intended.
ERF as proposed seems more suited to the agricultural, power, mining and heavy industrial sectors, who can achieve large emission reductions with single projects.
Once details have been released by the Clean Energy Regulator, which runs the scheme, more will be known as to the effectiveness and industry interest in the scheme. Both industry and government will have to learn how to work with the scheme and iron out any unintended consequences.
Vincent Aherne is a building services engineer based in Australia