Opportunities in sight for source separated waste

If you’re about to undertake an emissions reduction activity, there’s a chance you may be eligible to generate Australian Carbon Credit Units (ACCUs), and with one ACCU awarded per tonne of carbon dioxide equivalent emission avoided, there is money to be made by selling them.

All up, $2.55 billion has been allocated to the Australian Government’s Emission Reduction Fund (ERF) as an incentive for organisations to undertake various greenhouse gas abatement projects. During the first ERF auction held in April 2015, the Carbon Abatement Contracts were granted to 43 contractors covering 144 projects with the Clean Energy Regulator awarding 107 Carbon Abatement Contracts to deliver a total of 47,333,140 tonnes of abatement. The total value of contracts awarded was more than $660 million with an average price of $13.95 per ACCU. The second auction will be taking place in November 2015.

If you want to get involved, one of the key requirements will be to demonstrate that you are undertaking a greenhouse emissions-reducing activity that complies with an approved ERF methodology. There are several methodologies available that relate to waste management, including capturing methane from landfills and diverting waste to compost or biodigester systems. Recently, a draft method was released for public consultation that focuses on source separated waste.

“People are often surprised to hear government is paying big money for some of these activities,” said James Bulinski, director of CO2 Australia, a company that specialises in developing ERF projects. “The key thing is to consider your options before undertaking new developments, so you aren’t leaving money on the table.”

What opportunities will the ‘source separated’ waste method open?

Simply put, source separation is sorting waste at the time it’s generated, such as through segregating and placing general waste and organic waste in separate bins. The separated organic waste can then be sent to a treatment facility for processing thus diverting it from the landfill for disposal and avoiding emissions from waste.

The crucial thing to remember in regards to this methodology is that it applies to new source separation activities or the expansion of an existing activity involving organic waste only. For example, diverting food waste from landfill through undertaking activities such as composting or donating excess food waste to charity are potentially eligible. Potential proponents for this method include councils, waste management companies, hospitals, academic institutions, hotels and food charities.

What’s involved in setting up and running an ERF project?

The starting point is to confirm that your proposed development, activity or expansion is actually eligible against the methodology. You will also need to take a good look at the business case for participating, as operating a project under ERF can incur costs in the form of administration, record keeping and audit fees. Most importantly, the business case is strongly linked to scale. “If you are not diverting at least 1000 tonnes of organics from landfill per year, then it’s not going to be commercially viable to set up an ERF project,” said Bulinski.

When you have made a decision to participate, the next big step is to submit a project registration application to the Clean Energy Regulator. It is critically important that your application is submitted before you actually start installing, upgrading or expanding your facilities otherwise you might be excluded from participating. So, it’s important you get the paperwork in early.

Once your project is registered, you can then place a bid at an ERF auction. These bids are actually a type of forward supply contract, where you commit to delivering ACCUs to the government at agreed times and at an agreed price. This locks in a steady future revenue stream, but it also locks you into an obligation to deliver. This implies to the fact that you need to be confident that you can deliver the committed number of ACCUs stipulated in your contract.

Key advantages of the auction process are that you are able to:

• structure carbon abatement contracts with the government in a way that allows for ‘locked-in’ revenue for up to 10 years; and
• place bids at an auction for projects that are still in development, allowing councils and organisations the flexibility of only proceeding with projects where they have a carbon abatement contract in place.

To actually generate ACCUs, you submit an offsets report to the Clean Energy Regulator setting out all the calculations and evidence to support your claims of greenhouse gas reductions. Offsets reports are subject to external audit and the frequency of the audit depends on the scale — the bigger the project, the more recurrent the audits.

The role of ‘Specialist Agents’

Big money can be made from the ERF but complex rules and technical detail can deter many. The good news is that there are a number of specialist companies that can assist.

ERF ‘agents’ can: handle eligibility assessments, help with reviewing the business case, set up projects and even manage the ongoing compliance requirements. CO2 Australia is one example of a company that specialises in establishing and operating ERF projects.

“We take the headache out of getting involved in the ERF by partnering on project development,” Bulinski said. “We take on some of the risk through investing our time and expertise up front and then sharing in the revenue when we get a successful result at the ERF auction.”

Working with experienced agents can fast-track the process of participation for an ERF project and get it to the point of realising revenue quickly.

The future looks bright

With $1.89 billion remaining in the Emission Reduction Fund, there remains plenty of opportunity to get involved and get new projects off the ground. The developing ‘Source Separated Waste’ method has the potential to open up the ERF to new waste management initiatives.

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