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. Taylor Scott International