6th ERF auction result – millions more sunk in “vegetation” abatement

The results of the federal government’s latest Emissions Reduction Fund auction have been released by the Clean Energy Regulator, revealing the purchase of nearly 8 million tonnes of carbon abatement, at an average price of $13.08 per tonne.

In a statement on Thursday, the CER said that the auction, the sixth to be conducted as part of the federal government’s Direct Action climate policy, had delivered the volume of abatement expected, “given the market activity observed prior to the auction.”

“We expected to purchase in the range of $75 million to $150 million at this auction and we have done that—purchasing 7.95 million tonnes of carbon abatement, for a little over $104 million,” CER chair David Parker said.

“Over 26 million tonnes of contracted abatement from the first five auctions has already been delivered, on or ahead of schedule,” he said.

And the Regulator said that having now successfully established a significant base of projects – with a total contracted abatement of more than 191 million tonnes – it would now shift its focus to the delivery of abatement.

The auction results come just days after an independent review of the ERF, by the Climate Change Authority, conceded that the scheme may not deliver as much domestic carbon abatement as hoped, and warned that other policies would need to take up the slack.

Of particular concern, the report noted, was the “significant risk” for the reversal of carbon stored in the 139 million tonnes of vegetation and other soil projects that dominated the scheme so far, through natural events like floods, bushfires and droughts.

Across the course of the first five ERF auctions, the CCA found that a huge 65 per cent of contracts were awarded to vegetation management projects, which credits carbon storage from the regrowth of vegetation by removing stock or fencing off land, or from preventing land clearing.

As you can see in the table below, this trend was continued in the December 6 and 7 auction.

Some stats from the sixth auction:

•     the Clean Energy Regulator committed to purchase 7.95 million tonnes of abatement on behalf of the Commonwealth
•    purchasing resulted in an average price per tonne of abatement of $13.08, which is the weighted average price for each Australian carbon credit unit purchased at this auction
•     26 contracts were awarded for 26 projects
•     the total value of all contracts awarded was $104 million, and
•     the largest single contract was for 1.7 million tonnes of abatement and the smallest for 5000 tonnes of abatement