#1South Pole Group Making domestic offsets available for European / international trade: the Australian Case Patrick Bürgi, Director Public Sector Berlin, 27 September 2016 south pole group#2South Pole Group Agenda About South Pole Group Australia's domestic offset scheme Double counting Linking 03 05 07 09 Page 2#3South Pole Group About us Page 3 south pole group#4Our solutions CO₂ Carbon Credit Solutions 2 Renewable Energy Solutions Sustainability Advisory Green Finance $#5Page 5 South Pole Group Developing solutions worldwide south pole group San Francisco Stockholm London Madrid The Hague Berlin Zurich Mexico City Medellín Addis Ababa New Delhi Jakarta São Paulo Beijing Hong Kong Hanoi Bangkok Sydney Melbourne climate friendly Regional office Headquarters Representations Climate impact/renewable energy projects#6South Pole Group Our Past: 10 years of Creating Global Impact Page 6 80 million+ 500+ 100,000+ GWh renewable energy produced 70,000 jobs created in developing countries $10 bn+ projects developed in renewables, forestry, agriculture, industry and households 15,000+ km² saved forest from deforestation 55,000+ km² land protected or restored clean energy investments mobilised in emerging markets#7South Pole Group Our project portfolio in Australia ca. 20% Market share after 3 ERF auctions 69 registered projects 56 regeneration 8 savannah burning 3 avoided deforestation 1 reforestation 1 composting Climate Friendly Carbon Farming Projects Savannah Burning (4,608,200 ha) Avoid Deforestation (30,000 ha) Forest Regeneration (2,253,959 ha) Waste Diversion Project climate friendly south pole group natural carbon Page 7#8South Pole Group Australia's domestic offset scheme Page 8 south pole group#9South Pole Group Australia's climate policy suite INDC target of 26-28% reduction by 2030 compared to 2005 . • Emissions Reduction Fund (ERF) - Three elements; crediting, purchasing and safeguarding emissions reductions $2.55b to start with and $800m remaining for future auctions Safeguard Mechanism - Places emissions baselines on heavy emitting facilities (>100,000 tCO2-e/year) Commenced 1 July 2016 Renewable Energy Target 23.5% renewable energy by 2020 National Energy Productivity Plan Economy-wide work plan to deliver a 40 per cent improvement in Australia's energy productivity by 2030 Page 9 Source: Carbon Market Institute (CMI)#10South Pole Group How Australia will meet its 2030 target The climate policies to meet the 26-28% emissions reduction (on 2005 levels) Mt CO2-e 0 -100 -200 -300 -400 -500 Indicative Emissions Reductions Sources 2020 to 2030 26% below 2005 levels Emissions Reduction Fund (existing) Emissions Reduction Fund and Safeguard Mechanism (post-2020) I National Energy Productivity Plan (energy efficiency) National Energy Productivity Plan (vehicle efficiency) Ozone and HFC measures -600 -700 -800 28% below -900 2005 levels -1,000 Technology improvements and other sources of abatement Page 10 Source: Carbon Market Institute (CMI)#11South Pole Group Overall ambition and challenges Climate Action Tracker assessment of policy projections vs INDC Emissions (Mt CO,eq.) 800 Inadequate Medium Sufficient Role Model Basic view + Pledges + Kyoto accounting 700 600 500 400 300 200 100 AN -100 -200 1990 2000 2010 2020 2030 2040 2050 Historical emissions, excl. forestry Historical emissions removals from forestry Current policy projection Policy projections prior to repeal of climate legislation O 2020 pledge unconditional/ conditional" I INDC max/min First commitment period Kyoto emissions allowances** Second commitment period Kyoto emissions allowances*** ■ Kyoto targets (QELROS)**** www.climateactiontracker.org/ Climate Analytics/Ecofys/ NewClimate/PIK Source: Climate Action Tracker Page 11#12South Pole Group Emission Reduction Fund Key principles • Landowners, traditional owners and businesses that store carbon in trees and soil can earn Australian Carbon Credit Units (ACCUS) • The Australian Government pays for the carbon credits All projects are independently audited and meet Australian Government regulations 2 types of credits: - - Kyoto ACCUS (domestic & potentially international compliance/voluntary markets) - Non-Kyoto ACCUS (voluntary markets only) 食 Conduct an approved carbon farming project N C Emissions are reduced or carbon is stored Carbon Credits (ACCUs) are issued which can be sold Page 12#13South Pole Group Emissions Reduction Fund Eligible project types - - - - Land-use sector Vegetation management - avoided clearing, regeneration, reafforestation, savanna burning - Agriculture beef herd cattle, piggery and dairy manure. methane capture & combustion Transport aviation, land and sea transport - Waste and wastewater - landfill gas, alternative waste treatment Energy Efficiency - commercial buildings, lighting, industrial energy and fuel efficiency, facilities. Mining, oil & gas - coal mine waste gas, oil & gas fugitives Page 13#14South Pole Group Emission Reduction Fund Project overview 4 14 2 23 11 50- 50 CONTRACTED NON-CONTRACTED MULTIPLE PROJECTS ◎ VEGETATION LANDFILL AND WASTE AGRICULTURE SAVANNA BURNING ENERGY EFFICIENCY TRANSPORT INDUSTRIAL FUGITIVES Page 14 Source: Clean Energy Regulator#15South Pole Group Emission Reduction Fund Facts & figures National Cumulative figures as at 31 August 2016 Total number of registered Emissions Reduction Fund projects 631 100 e CO₂ CO₂ CO₂ CO₂ CO₂ § CO₂ § CO₂ Total number of Australian carbon credit units issued 26 966 843 Emissions Reduction Fund contracts Total number of carbon abatement contracts 309 Page 15 Total number of Australian carbon credit units delivered under contract 10 760 114 Source: Clean Energy Regulator#16South Pole Group Emission Reduction Fund Project types Method type Cumulative registered projects by method type Page 16 Total energy industrial efficiency fugitives savanna burning transport facilities agriculture vegetation waste Registered projects 41 11 69 7 0 33 343 127 631 Source: Clean Energy Regulator#17South Pole Group Emission reduction fund auctions Contracted abatement 143 million tonnes $557m $660m Auction 2 Auction 1 NT 13 348 projects contracted to date Page 17 Volume of abatement Vegetation Landfill and waste Agriculture by method Savanna burning Energy efficiency Industrial fugitives Transport QLD 112 million 98.5 tonnes 21.8 million tonines 8.8 million 8 million tonnes tonines million 4.2 tonines 0.77 million tonines 1.2 million tonnes 309 $2.55 Billion Emissions Reduction Fund $516m $816m Auction 3 WA 16 Remaining total Contracts awarded multi-state projects SA 5 ACT 0 NSW 164 $13.95 VIC 20 $12.25 $10.23 5 TAS national projects 5 Auction 1 Auction 2 Auction 3 Average price per tonne of abatement Combined $12.10 Source: Clean Energy Regulator#18South Pole Group Project development Some examples Avoided deforestation Human-induced regeneration Landfill management Savannah burning Page 18#19South Pole Group Regenerating vegetation. Regenerating vegetation Page 19 => Mature vegetation#20South Pole Group Emissions Reduction Fund Avoidance of double counting (1/2) Type of double counting Double selling Safeguards Public registry with unique identification of projects and all transactions "no double counting test" to avoid Double issuance multiple issuances of the same unit (e.g. under different standards Non-Kyoto ACCUS Activities generating non-Kyoto ACCUs are not reflected in Australia's Kyoto accounts Double claiming Kyoto ACCUS (1) Purchased by the government: KACCUS transferred and cancelled by government (2) Sold on the secondary market: Tracking of transfers through registry Implications Page 20 Double selling virtually impossible; environmental integrity unimpaired Double issuance virtually impossible; environmental integrity unimpaired Environmental integrity is not impaired, as ERs from voluntary domestic projects are not accounted for in national GHG inventory (1) Environmental integrity not impaired; units only claimed by the government (2) Units can be claimed only once Source: adelphi#21South Pole Group Emissions Reduction Fund Avoidance of double counting (2/2) Type of double counting Double monetisation Safeguards Activities generating non-Kyoto ACCUS are not reflected in Australia's Kyoto accounts Implications Environmental integrity not Page 21 impaired; units are not reported in Australia's inventory (no impact on ACCUS may only be traded domestically. AAUs or RMUs). As credits must Kyoto ACCUS: (1) Export: Government exchanges credits for AAUS, ERUS or RMUS (2) Domestic use / sale on domestic market: double counting provisions in safeguard mechanism not be sold outside Australia, the issue of AAU or RMU cancellation does not arise. Environmental integrity is not impaired due to clear double counting provisions#22South Pole Group • Linking prospects Linking subject to policy decisions and demand/supply dynamics • Currently basically no exports of domestic offsets to price gap between ERF prices and international voluntary markets . Main long-term interest in importing international units (to a limited extent) in order to meet 2030 climate targets However . Provisions and mechanisms for export of ACCUS already in place Theoretical potential in land-use sector of around 500 Mt CO2e, which could not only make a significant contribution to domestic targets but also create room for exports Oversupply of ACCUS under ERF possible, depending on outcomes of 2017 policy review (stringency of safeguard mechanism & link to ERF + additional government funds for ACCUs auctions) Page 22#23South Pole Group Safeguard Mechanism The Safeguard mechanism requires Australia's largest emitters to keep emissions within baseline levels • 100,000 tCO2 threshold • • Covered facilities must keep emissions below historical highpoint (FY09-14) Approx. 140 facilities Separate sectoral baseline for power generation Safeguard 0,5% 11,0% 0,7% ■Electricity Generation Mechanism 11,2% Covered ■ Manufacturing ■Resources ■ Oil & Gas Emissions 14,6% 62,1% ■ Transport by Sector ■ Waste Page 23#24South Pole Group 2017 Climate Policy Review Page 24 • • • Department to establish Terms of Reference for Cabinet Formal review process to commence early 2017 Outcome/recommendations by November 2017 Key issues and focus areas ERF - Crediting and Purchasing: future funding, Safeguard mechanism: conditions and criteria for baseline setting and alignment with the international target International trade in carbon and use of international units: supply and demand of domestic and international units#25South Pole Group Thank you Patrick Buergi [email protected] thesouthpolegroup.com#26South Pole Group Back-up slides: ERF auction mechanism ERF project examples Page 26 south pole group#27South Pole Group How the Auction works 1. The Clean Energy Regulator has a benchmark price (ceiling) that it will not accept bids above. 2. CER identifies the bid(s) that straddle the 50% of volume offered at the auction. 3. All bid(s) below the straddling bids are selected. 4. Straddling bid(s) and bids above the straddling bid(s) are selected using the CER's bid analysis tool when determining value for money. Page 27#28South Pole Group Clearing in Queensland. Page 28#29South Pole Group Mechanical Clearing. Page 29#30South Pole Group Livestock suppression. Page 30#31South Pole Group Map accuracy checks. Homogenous land cover Regeneration P1 Minimum radius = 60m 05/11/2014 12:40 Page 31#32South Pole Group Main requirements. Human-Induced Revegetation. The project area must have: 1. Non-forest cover. 2. Forest potential. 3. A history of suppression of vegetation, such as heavy grazing, clearing or feral grazers. 4. A change of management leading to the removal of vegetation suppression. This could include grazing rotation, lower stock. levels or cessation of clearing. Mourachan did not meet the HIR key criteria as clearing was undertaken over 10 years ago and livestock levels are sustainable. The 'Native Forests from Managed Regrowth Method' was chosen instead, as it has much simpler requirements. Page 32#336,016,000 6,920,000 6,024,000 6,928,000 6,032,000 000'90's 6,940,000 6,044,000 South Pole Group Mourachan. Forest cover. 688,000 692,000 696,000 Mourachan Native forest Project - Baseline 700,000 704,000 708,000 712,000 Meters 2.550 5,100 10,200 15,300 20,400 688.000 692,000 696,000 700,000 704,000 708,000 712,000 716.000 720,000 6,916,000 716,000 720,000 6,920,000 6,924,000 6,928,000 6,932,000 000 906'9 1:126,000 0,940,000 6,944,000 south pole group climate friendly Generally, areas with 'forest cover' are ineligible under the methodology. Project Area Baseline Forest Cover 2009-2015 'Forest cover' includes forest with: • . • Trees that are 2 metres high. 20% canopy. Area of 0.2 ha. Page 33#34South Pole Group Mourachan. Forest cover. SLM_Armoobilla Regenerative Ecosystem Project - Stratification 314803 $24.990 325/908 south pole group climate friendly H H H H 292 90 236.000 после X4253 383 300 0 2.000 312.004 4.000 316.203 5.000 1280 12.000 324 350 Meters 16.000 325/008 Property Boundary Project Area Carbon Estimation Area-CEA Non Regeneration Baseline Forest Cover 1:100.000 Page 34#35South Pole Group Mourachan. Forest cover. 6,944,000 688,000 Mourachan Regeneration Project- CEA & Exclusion Area 692,000 696,000 700,000 704,000 708,000 712,000 716,000 720,000 6,940,000 6,944,000 south pole group climate friendly 6,916,000 6,920,000 6,924,000 6,928,000 6,932,000 6,936,000 6,940,000 0 688,000 692,000 696,000 700,000 2,550 FX! 5,100 10,200 15,300 20,400 704,000 708,000 712,000 716,000 720,000 Meters 6,916,000 Zv 6,920,000 6,924,000 6,928,000 6,932,000 6,936,000 Project Area Exclusion Area CEA 24 CEA 41 I CEA 251 CEA 42 CEA CEA 261 CEA 43 CEA 1 CEA 27 CEA 44 CEA 10 CEA 28 CEA 45 CEA 11 CEA 29 CEA 46 CEA 12 | CEA 3. CEA 47 ICEA 13 I CEA 301 CEA 48 CEA 14 CEA 31 CEA 49 CEA 15 ICEA 321 CEA 5 CEA 16 CEA 33 CEA 50 CEA 17 CEA 34 CEA 51 CEA 18 CEA 35 ICEA 52 CEA 19 CEA 36| CEA 53 CEA 2 CEA 37 CEA 6 CEA 20 ICEA 381 CEA 7 CEA 21 CEA 391 CEA 8 CEA 22 CEA 4 CEA 9 CEA 40 I CEA 23 1:126,000 Page 35#36South Pole Group Mourachan. Results. • Area of eligible land regenerating: 6,025 ha. • Typical model commencement date (date we show that regeneration started): 1 January 2007. . Aiming for reduction of woody debris in the baseline scenarios. . Project commencement date (date that project starts): 31 October 2016. Date of first issuance of credits: 31 October 2016. Page 36 • With our $8 net options, the 220,000 ACCU option would include a return of an estimated $1.76 million. Note: 27 CEAS are not included in this calculation, as they are all smaller than 20 ha. The total excluded area is 151.7 ha. Date Initial calculations MCD shifted to July 2007 Baseline debris reduced by 50% Combined: MCD shifted and Baseline debris reduced 31-Oct-16 31-Oct-17 -117,905 -57,359 -53,718 6,828 31-Oct-18 -94,497 -31,831 -30,310 25,528 31-Oct-19 -69,703 -6,696 -5,515 25,135 31-Oct-20 -44,207 17,627 19,980 24,322 31-Oct-21 -18,768 19,800 25,439 19,800 31-Oct-22 6,189 22,805 24,957 22,805 31-Oct-23 23,826 21,571 23,826 21,571 31-Oct-24 19,641 20,295 19,641 20,295 31-Oct-25 22,269 19,127 22,269 19,127 31-Oct-26 20,976 17,951 20,976 17,951 31-Oct-27 19,771 16,908 19,771 16,908 Total 112,672 156,084 176,859 220,271#37South Pole Group Mourachan. Requirements. • . Provision of evidence for audit purposes; proof of acquisition and related land management data. No further clearing or significant impacts to vegetation. Simplistic annual reporting. Page 37#38South Pole Group Quilpeta Regeneration Project Case Study The project issued 50,399 ACCUS for the first reporting period. At the $12.25 average price in auction two, that is $617,387 in revenue. The landholder is using these funds. to improve their pastoral business model. NORTHERN TERRITORY Australia AUSTRALIA Adelaide Breat Australian Bight QUEENSLAND Brisbane NEW SOUTH WALES Newcastle Sydney ACT VICTORIA Melbourne 15,000 ha Coral Sea $617,000 revenue Forest cover expansion In the Mulga Lands Bioregion Page 38#39South Pole Group The Mulga Lands. Ecological assets. Page 39 The Mulga Lands Bioregion is home to a variety of threatened flora and fauna, including: 9 threatened plant species. . • 5 threatened mammal species, including the endangered Greater Bilby (Macrotis lagotis). 7 threatened bird species, including the elusive nocturnal Night Parrot (Pezoporus occidentalis), which has been so rarely sighted in the wild it was assumed to be extinct until 2013. . 2 threatened reptile species. Night Parrot (Pezoporus occidentalis) Threatened flora and fauna Greater Bilby (Macrotis lagotis) Photo source: http://australian museum.net.au/greater-bilby#40South Pole Group The Mulga Lands. Threats and degradation. Page 40 • • . • . Large amount of continuous clearing. Low biophysical naturalness of the landscape. Poor connectivity of forest remnants confined mainly to major landscape features in eastern parts. Change in hydrology with changes to infiltration and run-off due to soil degradation from grazing pressure. Threatened biodiversity. Very low proportion of land in protected areas.