FOOD MANUFACTURERS – Impact of the proposed ERF

10 June 2014

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How Food Manufacturers can gain from the Government’s proposed Emissions Reduction Fund

Wiley has been keeping a keen eye on opportunities for the food industry from the Australian Government’s proposed new $2.55 billion Emissions Reduction Fund and, now that the Fund is outlined in draft legislation, we have a much clearer idea of how our industry might benefit.

The Emissions Reduction Fund (ERF) is the centrepiece of the Government’s Direct Action Plan to abolish the carbon tax and reduce Australia’s greenhouse gas emissions by 5 per cent below 2000 levels by 2020. It has been developed with several rounds of community and business consultation, which concluded in May.

The ERF at a glance

  • The ERF is designed to be a streamlined market mechanism for pursuing lowest-cost and genuine additional contributions to Australia’s abatement task. 
  • It will build on the existing Carbon Farming Initiative, expanding its coverage and streamlining its processes to promote economy-wide participation. 
  • Like its predecessor, the Carbon Farming Initiative, the scheme will credit reductions in emissions per unit of output.
  • It will operate alongside existing programs that are already working to offset Australia’s emissions growth, such as the Renewable Energy Target and energy-efficiency standards on appliances, equipment and buildings. 

How to secure the money

Under the draft legislation, which is due to go to Parliament in the upcoming winter sittings, the ERF would work like this: 

  • Participants would estimate their emissions reductions (using a government estimating tool) and register their projects with the Clean Energy Regulator. Emissions reductions would have to be real, measurable and additional to business as usual. The Clean Energy Regulator would undertake a pre-qualification process to ensure the projects can generate the estimated emissions within the timeframes indicated.
  • Proponents of approved projects would submit their bid into a competitive auction (conducted quarterly by the Clean Energy Regulator) to sell emissions reductions on the basis of price per tonne of carbon dioxide equivalent. The auctions will be designed to achieve best value for money. 
  • Successful bidders would then enter into contracts with the government for the purchase of emissions reductions from their projects.
  • Successful bidders would conduct their projects, report on the emissions reduction results and, once verified by the Clean Energy Regulator, receive credits.
  • Only new projects would be eligible for credits. 
  • Projects that reduce emissions but don’t need government assistance to take place would not be funded under the ERF.
  • The scheme would credit improvements in emissions intensity, even if the project results in an overall increase in the business’ emissions.

The crediting and purchasing elements of the ERF would only start once the carbon tax has been repealed. (One of the government’s repeal bills is before the Senate and the government intends to re-introduce its others.)

So what does the ERF mean for you? 

The Government says it’s designing the ERF to make it easy to participate. The concept is to encourage participation from large businesses covered under the National Greenhouse and Energy Reporting Scheme, as well as proponents in the waste, transport, building energy efficiency, and land sectors.

Initially there will be 30 emissions reduction methods allowable under the ERF. They’ll be of two types: 

  • activity methods for specific emissions reduction actions 
  • facility methods that can aggregate emissions reductions from multiple activities at large facilities for which data are reported under the National Greenhouse and Energy Reporting Scheme.

The methods will be broad rather than applicable to specific projects so that project developers can apply them to a wide variety of projects and be innovative in project design. 

Technical working groups are presently developing suitable methods so that participants can hit the ground running as soon as the ERF is operational. Some of the methods they’re working on that are relevant to our industry include:

Waste

  • Landfill gas capture
  • Alternative waste treatment facilities
  • Methane capture at waste water facilities, including abattoirs and chemical processing facilities

Industry energy efficiency

  • Use of generic engineering-type assessment to support energy efficiency improvements in industrial facilities (for example, process heating and the replacement of boilers and furnaces)

Building energy efficiency

  • Energy efficiency improvements in the commercial building sector, such as offices, retail, government and education facilities (including partial and full retrofits of existing commercial buildings and installation of co- and tri-generation)

Methods under the Carbon Farming Initiative (emissions avoidance methodologies)

  • Destruction of methane generated from manure in piggeries
  • Destruction of methane generated from dairy manure in covered anaerobic ponds
  • Destruction of methane from piggeries using engineered bio-digesters.

Wiley’s Process Engineering Director, Steve Christie, sees plenty of opportunities for the food processing industry in the new ERF but advises companies to look more at productivity gains than energy efficiency. 

“The real money and the real benefit would be in pursuing productivity gains because the value to the manufacturer of productivity gains far outweighs the value of the carbon credit.

“Projects under the previous government’s Clean Technology Investment Program tended to focus on energy, while only a few focused on productivity. But those that did look at productivity, such as amalgamating plants, also saved energy because they were putting through more units for the same amount of energy used”, he said.

“If you make productivity your focus, everyone wins. If you can fill up your conveyor and put more product through, you save energy and make more product.

“The scheme will credit reductions in emissions per unit of output. So I’d be looking past energy-specific projects to productivity projects because the prize is bigger”, he said.

Wiley can help you to structure your projects to access the new ERF and welcomes enquiries before the ERF starts.

“Wiley is one of the few companies specialising in both energy and productivity. It’s a tricky area and few companies are equipped to do it, but we certainly are”, Steve said.