Although the price per tonne of carbon abatement will no doubt
fluctuate in the future, the auction set an average price of $13.95
per tonne of avoided greenhouse gas emissions, which should give
some guidance for future bidders.
The ERF auction results at a glance
There are 43 winning bidders, entering into 107 Carbon
Abatement Contracts covering 144 projects.
Contracts between three and 10 years, with more than half the
contracts lasting 10 years (although the standard contract period
is 7 years).
The average price is $13.95 per tonne of avoided greenhouse gas
The contractors are supplying 47.3 million tonnes of
The total value of all contracts is $660 million, representing
more than a quarter of the total funding available under the
The smallest contracted abatement is 12,000 tonnes.
The largest contracted abatement is 3.5 million tonnes.
The vast majority of abatement is via sequestration (28 million
tonnes) and landfill / waste (18 million tonnes), with one
contracted project for reduced land transport emissions and two for
increasing carbon levels in soils.
Getting ready for the next Emissions Reduction Fund
While the Government's spend in this first auction exceeded
most expectations, there is still about $1.9 billion of currently
allocated Government funding left to spend, either in future
auctions or in other purchasing methods which the Clean Energy
Regulator may decide to use.
In addition, many of the successful auction bids were for
projects which were established before the ERF and, since these
projects will not be eligible to bid in the next auction, there is
considerable space for new projects.
While the average successful bid price was $13.95 per tonne of
avoided greenhouse gas emissions, and it's reasonable to expect
the average at the next auction may be lower, this average is
higher than many commentators expected, and the Government
hasn't revealed what the highest successful bid price was.
So the indications are that there is still plenty of opportunity
for new entrants to participate in the next ERF auction.
We don't know yet when the next auction will be – the
Regulator has said it will hold another auction when it believes
there is sufficient participation to make the auction competitive.
However, anyone considering bidding at a future auction should
start the project registration process, and consider the available
project methodologies (or propose a new one) as soon as
If future abatement purchases are of this order of cost, this
program alone will not meet the Government's target, but will
require complementary assistance from other programs such as the
renewable energy target, reductions in energy demand, increases in
energy efficiency, and structural changes in the economy in order
to meet the target.
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.
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