Tag Archives: alternative
CFI Nears One-Year Mark
31 Jul, 2013 03:30 AM MARK SIEBENTRITT THE Carbon Farming Initiative officially came to life about 12 months ago. And despite the uncertainty created by debates round Australia’s future carbon pricing legislation, the CFI is up and running and looks set to stay in some form post the next federal election. So how is it performing one year in? So far as I am aware, there are no indicators in place to judge progress with the CFI so I created a few of my own: are CFI methods being approved, are the methods getting used, and are Australian carbon credit units being issued? There would no doubt be others, but let’s take these as a start. In previous articles, I have discussed the importance of having relevant, CFI- approved methods in place. But to put it simply, without CFI methods there can be no approved projects and therefore no ACCUs generated. So how many approved CFI methods are there? When the scheme started in July, 2012, there were four approved methods, all of which had been developed by the Federal Government to get the CFI under way. Since this time, a further 16 have been approved, split equally between methods developed by the private sector and the Federal Government. Interestingly, the private-sector methods have focused solely on carbon sequestration through vegetation plantings, and avoided emissions from landfill. It could be argued that getting a method approved has been no simple task, with eight proposed methodologies not being accepted. This means that for every method proposed by the private sector and approved by the government, there is another that has been knocked back. So are the methods getting used and are we seeing projects approved? The answer is ‘yes’. At the time of writing this article, 69 projects had been approved by the Clean Energy Regulator. What is really interesting, is understanding which of the approved projects have had ACCUs issued to them. Of the 68 approved projects, only 22 have had ACCUs issued coming from only seven methods. What’s more, 87 per cent of all issued ACCUs have come from one method: the capture and combustion of methane in landfill gas from legacy waste. Furthermore, landfill related projects as a category account for 98pc of all ACCUs issued to date. All up, 1.75 million ACCUs have been issued in the first year. Applying a carbon price of $23.10 a tonne of CO2 equivalent equates to $40 million of carbon credits. While this is a good start, it’s worth remembering that this quantity of offsets equals about 0.5pc of the emissions generated by liable entities in Australia and even less of Australia’s total emissions. So if we scratch around behind the statistics what are some of the key learnings? First, emissions avoidance projects – especially landfill projects – are the front- runner in terms of generating revenue. This makes sense. Avoiding the emission of methane can result in a short turnaround time for generating ACCUs and has a 21 times multiplier in terms of generating carbon credits compared with storing carbon in trees or the soil because methane is a far more serious greenhouse gas. The approach is also well developed. Unlike some of the newer methods and thinking for generating offsets, the technology and many of the companies involved with the landfill-related projects have been around for at least two to three decades. Second, managed savannah burning has the potential to become popular and widespread in the short term. If we look at the number of projects per approved method, it is only second to the capture and combustion of methane in landfill gas from legacy waste. Because it is about avoided emissions, rather than sequestration, it also has the potential to generate revenue in the short term in the same way as landfill projects. Third, the private sector is embracing the concept of the CFI. While in the early part of 2012-13 it looked as if the Federal Government would drive development of all CFI methods, as described earlier the private sector has also chimed-in and over the course of the past year has proposed more methods in total than the Government. *Full report in Stock Journal , July 25 issue, 2013. Continue reading
Permits To Pollute Can Be Bought Too Cheaply
Cheap emissions permits means industry hasn’t traded in its polluting ways. David Davies/PA When the carbon price collapsed to below €3 in April this year, EU policymakers sought to prop up carbon prices by a deal that would delay the release of carbon allowances (known as “backloading”). This deal was agreed by the European Parliament in July , but has had little impact – prices still languish at around €4-5, well below the highs of €30, the sort of level economists consider necessary to bring emissions under control. Is this a disaster? Does it mean the death of the carbon markets , as many have suggested ? A recent op-ed in the Financial Times made the case that prices do not matter much. The emissions trading scheme (ETS) simply ensures that Europe meets its emissions targets. A low carbon price is not necessarily a sign of trouble. In fact, if – it’s a big if – it’s the result of substantial, sustainable emissions reductions, a low price is a sign of success. But is the point of the ETS simply to ensure that a short-term cap is met? And if so, can the ETS be considered to be a success? Let’s look at the second question first – is the EU ETS making a major contribution to reducing short-term emissions at very low cost? Certainly, emissions are declining in Europe. The official numbers show that between 2005 and 2010, industries covered by the EU ETS cut their emissions by roughly 8% . The ETS is doing its job, one might conclude at first glance. However, those regulated by the ETS are, it turns out, no different to other polluters. Over the same period, total carbon emissions in the 27 EU member states fell by just over 8% , which implies there is little difference between those industries regulated by the ETS and those that are not. Two preliminary studies ( Jaraite and Di Maria, 2011 and Calel, 2013, forthcoming ) directly compare them, and neither uncovers any systematic difference. If the EU ETS isn’t doing the bulk of the work, what is driving the fall in emissions? Most studies (see, for instance, Anderson and Di Maria, 2011 ; Cooper, 2010 ; Kettner et al., 2011 ; Bloomberg New Energy Finance, 2009 ) suggest that the lion’s share of cuts has been driven by other factors such as the EU’s energy efficiency and renewables targets, the recession, and the high price of oil. The ETS has an impact too, but it cannot take credit for the majority of the cuts that have been achieved. Let’s now return to the first question – what is the point of the EU ETS? Certainly, a major objective is to ensure that a short-term cap is met. But another is to set the direction for the economic transition to a cleaner economy. What really matters is the total emissions produced up to 2050, not just those in the short term. And what matters greatly for the health of our economies is that this transition is undertaken gradually and smoothly. We don’t want to move too fast to begin with, but if we dawdle and move too slowly then a late rush to catch up and consequent upheavals will cost economies dearly. A carbon price of under €5 indicates that the system is sluggish – especially when such low prices can be seen to be the result of recession and financial crisis, not a miraculous decarbonisation of our economies. Even at these low prices, has the EU ETS sent a signal to businesses that the development of new low-carbon technologies is likely to yield profits in future? Encouraging evidence from some recent studies suggests that, though few in number, some businesses have invested more in R&D and patented more low carbon technologies. This innovation response seems strongest among those businesses that foresee the future will bring a high carbon price. So while the ETS is not the main driver of low carbon innovation – nor should it be – even in its current state it has encouraged some low carbon innovation. But instrumental to even this modest success, it seems, is that policymakers follow through on the promise that the trading scheme deliver a higher carbon price in the future. Where does that leave us? Should we worry about low carbon prices? Yes – the rock bottom carbon price is not a sign of success. It simply reflects a glut of permits on the market at a time of low economic activity – permits too numerous and cheap to force businesses to invest in innovative means to cut emissions. Low prices matter because they dampen the signal that low-carbon innovation will pay. The EU Parliament’s backloading measure does not directly address this, but it buys time for policymakers to cancel carbon allowances which would restore prices to higher levels. A higher carbon price would get the message to businesses that investment in decarbonisation is money well spent for the long term. When at last zero carbon technologies become economically competitive, we can celebrate the collapse of the carbon price. But that is likely to be some time into the future. Continue reading
California And Australia Bolster Carbon Trading Ties
Memorandum of understanding comes weeks after Australian Prime Minister Kevin Rudd pledged to accelerate introduction of emissions trading scheme By Jessica Shankleman 31 Jul 2013 California and Australia have agreed to step up efforts to work together to link their respective carbon markets, just weeks after Australia’s prime minister announced he would accelerate plans to replace the country’s carbon tax with an emissions trading scheme. California’s Air Resources Board and Australia’s Clean Energy Regulator yesterday signed a memorandum of understanding that aims to establish a working relationship for the two organisations to co-operate on efforts to curb greenhouse gas emissions . The agreement builds on existing work over the last year, which has seen the two organisations share some of the practical experiences gained introducing a new carbon market. The new framework focuses on measures to increase investment in clean energy generation and improve market integrity, as well deepening collaboration between the two agencies. For example, it will allow the organisations to share information on designing and running carbon pricing programmes and discuss how they could link their markets in future . Mary Nichols, chairwoman of CARB, said the agreement would continue California and Australia’s “productive relationship” as both jurisdictions seek to expand their carbon markets. “It is another step forward in California’s efforts to establish relationships with other programs to continue sharing information and best practices to fight the global danger of climate change,” she said. The agreement comes just weeks after Prime Minister Kevin Rudd said Australia would replace its carbon tax with an emissions trading scheme (ETS) a year earlier than planned if his Labor party were to win this year’s election. Rudd wants the fixed price on carbon to end on 30 June 2014, rather than 2015, with a floating market linked to the European Union’s ETS opening the following day. Continue reading
