The date of the first auction under the federal Government's new Emissions Reduction Fund has finally been announced, with bidders being given two months to prepare.
The auction will open at 9:00 am AEST on Wednesday 15 April and run until 5:00 pm AEST on Thursday 16 April 2015.
However, despite earlier indications that the Clean Energy Regulator would give parties guidance about a "benchmark price" for bids in early auctions, the Regulator has now indicated it will not do so.
Despite this the Regulator has predicted "a good field of bidders, mainly from projects currently part of the Carbon Farming Initiative". The minimum bid size is 2,000 tonnes of CO2-e per year. Bidders will be notified of the outcome within five business days of the auction and the Regulator will then publish volume weighted average price, and update the Emissions Reduction Fund register.
Regulator chair Chloe Munro said disclosing the benchmark price ahead of the auction would not promote competition. The discretion to do so was included in the legislation as a precaution, in case participation in the first auction was inhibited by unrealistic expectations, the Regulator said in a written statement.
"Competition will increase in future auctions as additional projects come forward, based on the new Emissions Reduction Fund methods," Ms Munro said.
"Many projects have successfully delivered carbon abatement and are in a good position to bid based on experience of running their projects. We will accept the lowest price bids up to 80% of the volume offered below the benchmark price. This cut-off provides a strong incentive to bid competitively, based on the lowest price at which it is worth their while to operate their project."
The Regulator will issue Australian carbon credit units (ACCUs) for emissions reductions that are created and audited under approved methods. These credits can then be purchased by the Government through the Emissions Reduction Fund, used under voluntary carbon offsetting programs or sold to other companies.
Once a bidder is successful it will enter into a standard form contract with the Government. Details provided by the bidder before the auction – quantity of ACCUs to be delivered, price and delivery schedule – will automatically become terms of the contract.
At the commencement of the ERF there will be around 30 methods, including those approved for the existing Carbon Farming Initiative.
Participants will submit a bid specifying a price per tonne of projected emissions reductions to the Regulator with the lowest-cost projects being selected.
Projects must be registered before a bid can be submitted. To register a project, participants will need to confirm their identity and probity and propose a schedule of annual emissions reductions estimated in accordance with an approved method.
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