The Land Restoration Fund and Australia's carbon market
Australia’s carbon market
Carbon farming in Australia is regulated by the Australian Government. The Clean Energy Regulator administers schemes legislated by the Australian Government for measuring, managing, reducing or offsetting Australia's carbon emissions, including the Emissions Reduction Fund (ERF).
The ERF is a voluntary scheme that incentivises organisations and individuals to adopt new practices and technologies to generate carbon credits. These credits are known as Australian Carbon Credit Units (ACCUs). The ERF is enacted through the Carbon Credits (Carbon Farming Initiative) Act 2011 and associated regulations and rules.
A number of emissions reductions activities that comply with legislated rules known as ‘methods’ are eligible under the ERF for carbon farming projects to earn ACCUs.
Carbon farming activities either:
- sequester carbon (remove carbon dioxide from the atmosphere) by storing it in plants and soil, or
- avoid the release of greenhouse gas emissions through better management of fire, livestock, and fertiliser use.
One ACCU is earned for each tonne of carbon dioxide equivalent (tCO2-e) sequestered or avoided by a project. ACCUs can be retired to offset emissions or sold to generate income, either to the Australian Government through a carbon abatement contract, or in the secondary (voluntary) market.
Administrator of carbon credits
The Clean Energy Regulator oversees the Emissions Reduction Fund and issues Australian Carbon Credit Units (ACCUs) under the Carbon Credits (Carbon Farming Initiative) Act 2011.
| Compliance buyers | The compliance (regulatory) market is used by entities that by law must account for their carbon dioxide emissions. For example: Emissions Reduction Fund - Safeguard mechanism: a legislative requirement on large emitters that exceed their emissions baseline to purchase ACCUs from eligible carbon farming projects equivalent to the level of carbon emissions they have emitted above their baseline. The ACCUS are then surrendered, which means they are cancelled in the Australian National Registry of Emissions Units (ANREU) and cannot be used again. |
|---|---|
| Voluntary buyers | The voluntary market allows any government or private entity to trade and/or surrender ACCUs to meet emission reduction commitments they place upon themselves. For example: Emissions Reduction Fund: the Australian Government purchases lowest cost ACCUs via reverse auction in the voluntary market and surrenders them to offset its own emissions. Land Restoration Fund: buys premium carbon credits from carbon farming projects that produce ACCUs plus demonstrated additional environmental, economic, social and First Nations co-benefits. The LRF may choose to trade the ACCUs purchased to enable funding for further carbon farming projects or surrender them to support the Queensland Government’s emission reduction targets. Carbon neutral programs: retail offset programs, such as those offered by airlines, purchase and surrender ACCUs against the company’s carbon emissions. |
How does the Land Restoration Fund fit with the existing Emissions Reduction Fund framework?
The Land Restoration Fund (LRF) is different to the ERF because it supports projects that deliver demonstrated environmental, socio-economic and/or First Nations outcomes – called co-benefits – in addition to sequestering or avoiding carbon emissions. The LRF pays for these priority co-benefits in the overall sum offered to landholders.
As a result, the LRF may pay more for the ACCUs generated from carbon farming projects than the ERF which is required by legislation to purchase lowest cost abatement.
All LRF projects need to be registered with the ERF and generate ACCUs.
All LRF participants must follow an ERF method for their carbon farming project. The methods explain how to carry out a project and measure the resulting reductions in emissions. Examples of land sector methods are available on the ERF website. The list of ERF methods eligible for LRF investment will be specific to each LRF investment round.
Check your eligibility to register with the ERF using the Interactive Emissions Reduction Fund Questionnaire.
| Land Restoration Fund | Emissions Reduction Fund |
|---|---|---|
Purchases ACCUs
| YES | YES |
Pays for co-benefits in addition to carbon
| YES | NO |
Projects must register with the ERF
| YES | YES |
Purchasing method | Contract for ACCUs and co-benefits through dedicated investment rounds | Contract for lowest-cost ACCUs through reverse auction |
Assurance method |
Converting carbon to income
Domestic and international carbon markets are relatively new, and prices vary between markets and buyers. In Australia, there are several buyers of ACCUs in the marketplace including government and private investors.
The LRF contracts with landholders to purchase “premium” carbon credits. These are made up of ACCUs plus the co-benefits that are aligned with Queensland Government objectives set out in the Priority Investment Plan . The price per ACCU (including co-benefits) takes into consideration the cost of generating those ACCUs plus co-benefits, and the benefits to the state that the project will deliver.