Rules to exclude WLRM projects from ERF Fund banned

JulienRules to exclude Waste Less Recycle More (WLRM) projects from the Emissions Reduction Fund (ERF) dumped.

All WLRM projects are free to participate in the ERF and to generate carbon credits.

The Department of the Environment has yesterday published its Carbon Credits (Carbon Farming Initiative) Rule 2015 instrument that will guide the ERF first auction. In previous drafts, the Department had proposed that projects funded under Waste Less Recycle More were ineligible for ERF carbon credits.

Under the “government funding” additionality test, “an offsets project must not have received, or be going to receive in accordance with the terms of a contract or other arrangement that has been entered into, funding by way of a grant or other payment under either of the following if the funding relates to activities that are, or are to be, undertaken as part of the project:

[…] (b) the initiative known as the Waste Less, Recycle More Initiative, administered by the New South Wales Government.”

Thanks to the concerted efforts of WMAA’s NSW carbon committee, AORA, Corporate Carbon, MRA Consulting, NSW EPA and importantly the NSW Environment Minister Rob Stokes, the final rules no longer include the limitation on WLRM projects.

The waste/recycling sector has been the earliest adopter and by far the largest participant, in CFI carbon abatement, nationally, when compared to all other sectors. Almost 6 Mt CO2-e or 64% of the approximately 10 million credits (ACCUs) issued since the Carbon Farming Initiative (CFI) began, have been issued to waste and recycling projects.  Much of that abatement has occurred (and will now continue to occur) in NSW.

In summary the points made by the above organisations included:

  • WLRM and ERF are different in both objective and outcomes.
  • WLRM funds infrastructure designed to improve diversion from landfill. It does not specifically fund projects for their carbon abatement. It provides up-front, capital funding to projects based on their capacity for diversion of waste from landfill. Abatement is not a selection criterion. Indeed WLRM funding may support the diversion of materials away from landfills with excellent methane gas capture rates (75%-90% or more). At the same time it could leave organic waste going into poorly run landfills with low gas capture rates. In other words WLRM projects may or may not, have abatement potential and may or may not generate CFI credits. For example improvements in dry recycling recovery rates do not generate carbon credits because there is no methodology under CFI. Diversion of organics from landfill only generates CFI abatement if it is through an AWT.
  • By contrast ERF funding specifically targets abatement. The ERF is delayed, operating phase funding, providing revenue to projects based on actual delivered emissions reductions. It is designed to reduce Australia’s emissions below the business as usual baseline. Because of the many commercial barriers to recycling (low inherent commodity value, lack of regulation or bans on landfill disposal, high costs of capital and labour, limited markets, absence of externality pricing mechanisms) most proposed projects will need both funding streams to achieve commercial viability.

The federal Minister for the Environment Greg Hunt should be congratulated for reviewing the policy and supporting the continued effort of NSW businesses and Councils in abating carbon as well as improved recycling. We welcome the federal government decision, which further supports project originators to recycle material AND generate carbon abatement credits.

The short story is that project proponents can now avail themselves of the $467 million State WLRM funding AND create carbon credits to access the $2.55 billion federal Emissions Reductions Fund.

Projects which can now receive funding and carbon revenue, under both schemes include:

  • AWT diversion of organics from landfill
  • Landfill gas collection and flare or energy production
  • Food organics collection and diversion from landfill (coming soon)
  • Energy from Waste (coming soon)

Energy efficiency, soil carbon and composting, bio-filters and phytocaps, biofuels, waste avoidance projects may also be eligible projects under the ERF.

The ERF funding of $2.55 billion lasts for 5 years. If companies or councils are considering any of the above projects in the next 5 years it would be prudent for them to register the project with the ERF now to ensure they remain eligible. (There are important rules about projects being above “business as usual).

For further information on the ERF or WLRM funding contact Julien Gastaldi on 0479 043 903 or email julien@mraconsulting.com.au