Australia: Opportunities for agribusiness under the Emissions Reduction Fund (ERF)

Clayton Utz Insights
Last Updated: 1 June 2014
Article by Nick Thomas and Alison Packham

Most Read Contributor in Australia, November 2017

Key Points:

New methodologies, land ownership rules, and a new measure for additionality all offer opportunities to agribusiness.

The Federal Government's proposed Emissions Reduction Fund (ERF) provides opportunities for proponents of projects which can demonstrate greenhouse gas (GHG) emission reductions to obtain Government funding, essentially via successful bids in a reverse auction for that funding.

The ERF will use much of the legislative architecture of the Carbon Farming Initiative (CFI), which focuses on land sector GHG abatement.

So what are the opportunities and challenges for agribusiness in the ERF?

The intersection between the Emissions Reduction Fund and agribusiness

The CFI is established and operates under the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act). Project proponents can generate Australian carbon credit units (ACCUs) from projects which are registered under the CFI Act and are carried out in accordance with a methodology which is approved under the CFI Act.

So far, 124 projects have been registered under the CFI Act, applying various approved methodologies. Most of these projects occur in the waste sector, but several projects are agribusiness-based:

  • eight reforestation and afforestation projects;
  • nine avoided deforestation projects;
  • 11 permanent environmental planting projects;
  • 11 early dry season savannah burning projects; and
  • seven projects involving methane destruction from piggeries.

There are also two approved methodologies relevant to agribusiness that have not yet been implemented:

  • methane destruction generated from dairy manure in covered anaerobic ponds; and
  • GHG reductions in milking cows through feeding dietary additives.

Proponents of CFI projects who can demonstrate actual abatement can obtain ACCUs from the Government under the CFI Act and then sell these to persons who have a liability under the carbon pricing mechanism (CPM) if the project generating the ACCUs is Kyoto-compliant, or in the voluntary market if the project is not Kyoto compliant.

The ERF will be established and operate under an amended version of the CFI Act. The project registration, methodology requirements and ACCU generation aspects of the CFI will remain (although they will be simplified and streamlined in a number of ways).

However, it is expected that the CPM will be repealed and, instead of persons liable under the CPM wanting to purchase ACCUs, the Government will offer to buy ACCUs. It will do so via a reverse auction, in which proponents will bid ACCU sale prices and the Government will purchase (via standardised contracts) the ACCUs which are bid with the lowest prices, up to a total budgeted spend. The distinction between Kyoto and non-Kyoto compliant ACCU's will be removed under the ERF, however, it still will be possible to sell ACCUs in the voluntary market under the ERF scheme.

The changes to the CFI regime associated with the ERF are particularly relevant for agribusiness. We have outlined some key changes below.

Some opportunities for agribusiness

While some of the details as to how the ERF will operate are still being determined, it seems likely the ERF will provide some additional opportunities for agribusiness. For example:

New methodologies

It can take significant time to prepare new CFI methodologies, but the Government has already begun developing some methodologies which are particularly suited to agribusiness. The Government has indicated that, by the time it expects Parliament will pass the ERF legislation (either shortly before or shortly after 1 July), the following additional land sector methodologies will be available:

  • increasing soil carbon;
  • reducing livestock emissions; and
  • expanding opportunities for environmental and carbon sink planting and reforestation.

Since the development of a relevant methodology is often expensive and is one of the most significant elements in a CFI project timeline, the Government's initiatives in developing new methodologies ahead of the commencement of the ERF, as well as simplifying the process for assessing and making methodologies under the ERF, are welcome.

New land ownership rules

The current CFI contains quite narrow land holding requirements for CFI project proponents – essentially, they need to own the land or have another relevant property right (eg. carbon property right) with respect to the land in order to have a project registered.

Under the ERF, in order to encourage participation of agribusiness through aggregation, it is proposed that a project aggregator (ie. a person who deals on behalf of several project proponents) will only need to demonstrate that it has the agreement of landholders to participate in the project. This should facilitate more efficient sharing of the risks and transaction costs of a CFI project among several project operators.

New permanence rules

Under the current CFI, there is a 100 year rule for sequestration projects (that is, the project must be continued for 100 years to minimise the risk and consequence of lost abatement). The ERF proposes a 25-year permanence option for sequestration projects, with a trade-off of a 20% reduction in the number of ACCUs issued for those projects (as an alternative risk offset mechanism). This is in response to comments about the difficulty which a 100 year rule presents for project feasibility.

New measure for additionality

The ERF takes a new approach to the concept of additionality (ie. the concept that a project must project GHG abatement over and above standard practice). Instead of the "positive list" of eligible project types which exists under the CFI Act, the draft ERF amendments to the CFI Act propose project-specific evaluations of additionality or methodology-specific additionality requirements. This should enable those who best understand the projects for which methodologies are being prepared to work out which projects will provide "additional" abatement and which won't.

Some possible challenges for agribusiness

Costs and reverse auction competitiveness

One of the difficulties with the CFI for some agribusiness enterprises is the implementation and administration cost. The ERF legislation should reduce administration costs with its streamlining initiatives, and some of the changes mentioned above should help reduce implementation costs. However, it is not yet clear whether agribusiness project proponents will be able to keep costs low enough to bid successfully at the ERF reverse auctions.

Long-term nature of agribusiness projects

Many agribusiness projects have long lead-times before ACCUs are generated or relatively long payback periods. It is not yet clear whether the long-term nature of agribusiness projects will remain an issue under the ERF scheme.

No more backdating of projects

The CFI allows projects to be backdated to 1 July 2010, provided they have been operating under the terms of an approved methodology and the CFI legislation during the backdating period. This allows projects some flexibility as to the timing of registering a project and recognises that projects are being carried out in anticipation of CFI registration. Under the ERF, while backdating can continue for existing CFI projects, only new projects will be accepted for registration going forward.

Concluding comments

The ERF legislation provides additional opportunities for agribusiness to participate in carbon abatement. Perhaps the biggest challenge for agribusiness, given the typically longer lead-times for agribusiness projects, is support for the value of ACCUs generated from agribusiness projects over the medium to long term.

The ERF, with its proposal for Government contracts for the supply of ACCUs, offers the opportunity for increased certainty, because typically governments can be expected to honour existing contracts but legislative schemes are less immune to change.

Other opportunities for longer-term value support could come from:

  • the development of a safeguard mechanism which involves entities who emit more than a prescribed amount of GHG (which is likely to be set by reference to a baseline for those entities) having to purchase ACCUs, possibly from land-based projects – the Government is proposing to develop its "safeguard mechanism" to complement the ERF over the next 12 months; and
  • the establishment of additional government support for agribusiness projects on the basis of their environmental co-benefits (such as improved soil conservation and agricultural productivity through higher soil carbon levels, and enhanced biodiversity through forestry projects) – although it may be necessary to review the additionality tests in the draft ERF legislation to ensure such support is possible.

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions