Early carbon movers left wondering

When it comes to pricing carbon from waste you would be excused if you find it hard to tell the truth from the erroneous.

It is pretty easy to miss the big picture behind the headline-grabbing estimate or to just feel lost because you went away for a few days!

With our most recent article being superseded by a new reality within two hours of being published (!), we thought it was time to reflect on where Australia’s leading carbon abatement industry (the waste and recycling sector) is at, and where it is going.

Since the 2006 Stern Review which recommended a range of measures including carbon taxes to “address the market failure represented by climate change with the least amount of economic and social disruption”, we have been on an ever changing and always more uncertain path to pricing carbon.

As a contrast, the science and know-how of carbon accounting and abatement has been steadily progressing.  Over that time we have seen Greenhouse Friendly, the GGAS scheme, the National Greenhouse and Energy Reporting Scheme (NGERs), the Emission Trading Scheme (ETS) and the Carbon Pricing Mechanism (CMP). Now Direct Action is entering the frame.

Experts even developed a method to price emissions all the way to 2054 (40 years) to take account of the emissions profile of landfills. No other sector has a more complicated method than waste.

The waste diversion and landfill gas industry – and its major players including SITA, Veolia, LMS, EDL, LGI, AGL, GRL, ResourceCo, Biomass, Boral and about 10 proactive councils took the lead in abating carbon and developing methods to account for it. They did so in spite of Government back flips, twists and double pikes.

Together they reduced emissions by about 4,000,000 (and counting) tonnes of CO2-e under the CFI in the last two years alone. They should be applauded and supported.

Figure 1 – number of Australian carbon credit units (ACCUs) issued as of June 2014

Projects have mainly included landfill gas capture and diversion of organics to AWTs (in the period 2012-2012). Until a few days ago, these projects were all underpinned by the CPM.

As responsible companies they have acted on Government policy and price signals. With the demise of the CPM they are now left wondering whether their projects are viable or “stranded”.

Figure 2 – Expected returns for CFI projects with and without the carbon tax

As of today, there is nothing to underpin these abatement projects in the medium to long term, except for a fragile voluntary market and a promise of Direct Action.

Figure two indicates that the price they can get for their carbon abatement will likely drop from $25 to $6 per t-CO2e. So companies and local government authorities have invested capital in gas wells, flares, AWTs but the revenue they will bank from them has probably been reduced by 80-100%. At no fault of the company but another triple pike by government.

With the carbon tax repealed, we now urge the government to pass the ERF legislation so that the industry can continue to generate carbon credits (and associated revenue) from carbon abatement projects.

Draft methodologies will soon be released for:

  • The recognition of capture of landfill gas from both legacy and non-legacy waste;
  • The recognition of diversion of Municipal Solid Waste (MSW) from landfill through AWT facilities;
  • Soil carbon sequestration through application of compost and biochar on land.

Direct Action also potentially opens the door to many other sources of abatement but unfortunately there still are no ERF methods for:

  • Diversion of Source Separated Organics (food and green “FOGO”) from landfill through composting;
  • Diversion of green/garden waste from landfill through composting;
  • Avoided emissions through recycling of materials with high embodied energy;
  • Avoided emissions by replacement of superphosphate fertilisers with compost;
  • The use of biofuels in transport; and
  • Energy efficiency.

For these methods to gain traction, we need a robust carbon framework.

The industry can work with Direct Action. It looks and feels a lot like the old Greenhouse Friendly but hopefully will offer additional abatement pathways and aggregation of small projects into larger project applications.

The sooner industry gets certainty from government, the sooner the stalled investments in landfill gas, AWT, composting and other new technologies will start to move again.