Emissions Reduction Fund: The top 3 important points for food manufacturers

19 December 2014

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Update 13th February:
Date announced for the first Emissions Reduction Fund auction
The Clean Energy Regulator today announced that the first Emissions Reduction Fund auction will open on Wednesday 15 April 2015.The auction will open at 9:00 am AEST on Wednesday 15 April and run until 5:00 pm AEST on Thursday 16 April 2015. This announcement gives a full two months’ notice of the auction date.

On the 24th of November the Senate passed the Carbon Farming Initiative Amendment Bill, this act will officially establish the Emissions Reduction Fund (ERF) that the government has developed as part of its Direct Action Plan to effect emissions reductions. The ERF will make available $2.55 billion in government funding for eligible projects that support industry in improving environmental and sustainability practises that reduce CO2 emissions.

Much like other grant schemes the ERF comes with a swathe of checklists, requirements and design features for eligible projects to receive funding. However, unlike other grant schemes the ERF operates in terms of purchasing and crediting emissions reductions from industry. The Carbon Market Institute highlights that the ERF has been designed around the following three principles:

  • Lowest-cost emissions reductions – the ERF will identify and purchase emissions reductions at the lowest cost
  • Genuine emissions reductions – the ERF will purchase emissions reductions that make a real and additional contribution to reducing Australia’s greenhouse gas emissions
  • Streamlined administration – the ERF will make it easy for businesses to participate

In addition to this, any eligible projects must be new and must use approved methods in order to obtain ERF funding unless they formed a part of the previous Carbon Farming Initiative (CFI). Approved ERF methods include but are not limited to:

  • Sequestration methodologies
  • Emissions avoidance
  • Agricultural methodologies
  • Transport improvements
  • Wastewater treatment
  • Landfill and alternative waste treatment and
  • Industrial fuel and energy efficiency

 

There ERF represents some potential challenges and loopholes that food manufacturers will need to be aware of in order to make the best of the funding that is available.

1, Reverse auctions

If a project is accepted for market entry, the next step is auction participation. Auctions will consist of a minimum number of registered bidders and a minimum amount of emissions reductions.

The Clean Energy Regulator (CER) runs these auctions and they are designed to ensure the best bang for the government’s buck. This is achieved in a number of ways: first, the CER sets a benchmark price for Australian Carbon Credit Units (ACCUs) – no bids will be considered that are above this benchmark price, auction participants are then expected to bid as low as they can to secure the funding against their competitors. In addition to this, only 80% of the emissions reductions offered at any auction will be purchased provided they are below the benchmark price. However, if a project is considered that pushes beyond the 80% threshold it will still be selected.

It is important to note that the auction is a single-round, pay-as-bid, sealed-bid auction format which means there are no second chances; submitting the lowest price that maintains project viability will be key for project submissions.

2. Ensure that your project will benefit your site regardless

The fine print on the ERF states that any project that is required to be completed by other regulatory authorities such as the EPA or state-based organisations will not be considered for ERF funding.

To make the best of what’s on offer and take advantage of the funding available, any projects submitted should be viable solutions for sites with or without governmental funding. Undertaking a project for the sake of receiving some government funding can undermine the integrity of a project from the offset.

It is best practice to conduct a thorough audit of a site and identify areas that can realise genuine emissions reductions.

3. Improving efficiency in production processes to grow production output

The cornerstone of efficiency in food manufacturing facilities is ensuring that production is matched by the output of your facility. In short, utilisation is the crux of efficiency for manufacturing. The continuous improvement of plant utilisation is obviously a benchmark for all food manufacturers.

The way in which the ERF will be implemented seems to leave little room for the emissions reductions savings of energy intensity improvement. However, there is a provision for this if the correct reporting methodologies, key measurables and correct data are utilised. This means that manufacturers will have to have a detailed understand of their current production methods and how future efficiencies could improve production output; and therefore energy intensity.

The reporting and auditing methods for the ERF are quite strict and it is imperative that business owners and project managers adhere to these to secure their chunk of funding.

The first ERF auctions will be taking place in early 2015. Contact Wiley above to take advantage of the opportunities represented by the Emissions Reduction Fund.