Głowacki Law Firm

CFI offsets vs additionality test
Wednesday, 12 September 2012 06:05

 

Recognising the additionality test may often cause problems for project developers, it is interesting how the Carbon Farming Initiative (CFI) architecture has been streamlined to avoid these risks.

The issue has not only theoretical character since, as an effect of these fundamentals, the Kyoto and non-Kyoto ACCUs are likely to be traded in different markets and at different prices.

 

 

Pursuant to media Australia has approved four landfill gas projects under CFI that can generate 170,000 offset credits per year.

 

The said news is a good moment to recall that in Australia, any company or person wishing to offset their emissions and achieve carbon neutrality for goods or services can do so under the National Carbon Offset Standard. Companies and individuals are able to surrender ACCUs units generated under this scheme (click here for more information on ACCUs) to offset their emissions.

 

Explanatory Memorandum to the Australian Carbon Credits (Carbon Farming Initiative) Bill 2011 shed some light on approach adopted with respect to the CFI/Kyoto relation.

 

The fundamental for this architecture is that CFI was set up as entirely voluntary action, independent of Kyoto Protocol Australia commitments, designed to be additional benefit to combating climate change beyond the mitigation driven by other policies and programs.

 

It follows that the Australian Government will not count CFI abatement towards Australia’s Kyoto target or any subsequent international obligation.

 

These assumptions allowed for mitigating the risks that additionality rules will limit scheme opportunities.


According to the above Explanatory Memorandum the said concerns were addressed by removing the project-level additionality test, including references to financial additionality. Instead, abatement activities that are not common practice within an industry or region would be included on a ‘positive list’ and recognised as additional.

 

Nevertheless, the CFI scheme allows for Kyoto-consistent credits issued under the Carbon Farming Initiative to be exchanged for Kyoto-consistent credits and exported overseas. Similarly, these units will not then be used to meet Australia’s international obligations.

 

Kyoto and non-Kyoto abatement projects are also separately identified, as are the ACCUs issued for such projects. This is to assist buyers because, under the Kyoto Protocol, not all land sector abatement is internationally recognised.

 

A wide range of biosequestration activities may be credited under the CFI, but not all activities will be internationally recognised. For example, improved forest management, revegetation and activities that enhance carbon in agricultural soils are not recognised under the current international framework and would receive non-Kyoto ACCUs.

 

As another example, the only non-Kyoto emissions reduction projects would be those involving feral animal management. Pursuant to the Explanatory Memorandum all other emissions avoidance projects under the CFI are internationally recognised.

 

That said, it should not rise doubts that Kyoto and non-Kyoto ACCUs are likely to be traded in different markets and at different prices.

 

Given the above potential ambiguities, which offset project generating ACCUs is able to yield Kyoto-consistent credits, the regulatory confirmation of this qualification is envisioned .

 

The relevant document in question will be the declaration issued by the Carbon Credits Administrator (from 2 April 2012 the said role is entrusted to the Australian Clean Energy Regulator) that an offsets project is eligible under the CFI scheme. This document (named a declaration of an eligible offsets project) will also confirm whether an eligible offsets project is a Kyoto project or a non-Kyoto project, and consequently, the project’s eligibility for either Kyoto or non-Kyoto ACCUs.

 

 

 

 

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