The Emissions Reduction Fund (ERF) is a voluntary scheme that aims to provide incentives for a range of organisations and individuals to adopt new practices and technologies to reduce their emissions.
The Fund operates via an auction mechanism. Once or twice a year, the government holds auctions for achieving a set level of emissions abatement. Project proponents bid at the auctions to achieve part of the abatement target via emissions reduction projects, with the lowest cost projects selected by the government.
Eligible projects must meet certain criteria and be aligned with one of several "methods" of carbon abatement from the following list of options:
- a generic method for emissions reductions at facilities reporting under the National Greenhouse and Energy Reporting Scheme (NGERS)
- capture and destruction of coal mine fugitive emissions
- reduction of oil and gas fugitive emissions
- reductions in emissions-intensity of transport
- commercial, industrial and aggregated energy efficiency
- capture and combustion of landfill gas and agricultural waste
- alternative treatment of organic waste
- capture and combustion of biogas from wastewater, and
- methods for the land sector, including increasing soil carbon, reducing livestock emissions, expanding opportunities for environmental and carbon sink plantings, and reforestation.
Participants can earn Australian carbon credit units (ACCUs) for emissions reductions. One ACCU is earned for each tonne of carbon dioxide equivalent (tCO2-e) stored or avoided by a project. ACCUs can be sold to generate income, either to the government through a carbon abatement contract, or in the secondary market. ERF Projects are required to undergo third-party auditing, the applicable standards for which are published on the Clean Energy Regulator website.
To ensure that ACCUs are "additional" (that is, the emissions reductions would not have happened without the programme), a so-called "safeguard mechanism" has been established. Data from NGERS is used to establish baseline levels of emissions for industrial facilities, and project proponents must ensure projects are additional to established baselines.
The ERF is administered by the Clean Energy Regulator and enacted through the Carbon Credits (Carbon Farming Initiative) Act 2011, the Carbon Credits (Carbon Farming Initiative) Regulations 2011 and the Carbon Credits (Carbon Farming Initiative) Rule 2015.