Australian offset scheme hits milestone but future uncertain

December 11th, 20138:18 pm @

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Dec 11 (Reuters) – Australia this week surpassed 3 million
credits issued under its carbon offset scheme for agriculture,
forestry and waste, but uptake of new projects is low with
regulatory uncertainty weighing heavily on project developers,
experts say.

The Carbon Farming Initiative (CFI) was launched in 2011
under the former Labor government to drive emission reductions
in sectors not covered by the carbon pricing mechanism, as part
of Australia’s target to cut greenhouse gas emissions to 5
percent below 2000 levels by 2020.

Under the CFI, developers that curb carbon emissions are
issued offset credits, known as Australian Carbon Credit Units
(ACCUs), which they can sell to big emitters looking to meet
carbon targets imposed by the government.

But with the new government eager to repeal the carbon
pricing scheme, demand for ACCUs has fallen away and development
of new projects has almost ground to a halt.

“Should the carbon pricing mechanism be repealed, demand for
ACCUs will be limited to the voluntary market,” said Lloyd Vas,
general manager with lobby group the Carbon Market Institute.

Compared to mandatory emission markets, voluntary demand is
modest.

The conservative government wants to keep the CFI as a
supplier to carbon cuts under its proposed Emissions Reductions
Fund, but it remains unclear how the fund will work.

LANDFILLS

Of the 3.1 million ACCUs issued since the Carbon Farming
Initiative started two years ago, nearly 80 percent have gone to
projects that capture methane emissions from landfills. But
those are mostly projects that were already up and running when
the CFI launched.

“Landfills were already heavily participating in previous
offset schemes, so they were easily able to transit those
projects over to the CFI,” said Elisa de Wit, partner with
lawfirm Norton Rose Fulbright.

But while landfills have been successful under the scheme,
other activities have been slow to take off and only a few
projects have seen the light of day.

“We haven’t had any investment interest in 18 months,”
Andrew Grant, CEO of CO2 Group, Australia’s biggest carbon
project developer, told Reuters in October.

In addition to political uncertainty and lack of demand,
project development is also hampered by the long lead-time and
approval process farming and forestry projects need, according
to observers.

“A few small forestry projects have gotten through, however,
the larger projects have found it very onerous,” said one
developer who wished to remain anonymous.

“In reality, investment in new CFI land-based forestry
projects will not be viable without a significant carbon price
or a clear price and purchasing signal,” he added.

With at least another seven months likely to pass until the
future of Australia’s climate policy becomes clear, observers
expect the nation’s offset market to languish for a while
longer.

(Editing by Joseph Radford)

Article source: http://www.reuters.com/article/2013/12/11/australia-carbon-idUSL3N0JQ1FX20131211