The 2015-16 Federal Budget has maintained funding for the Emissions Reduction Fund (ERF) in line with its 2014-15 allocation, with expenditure not updated to account for longer delivery schedules for successful projects.
The ERF was previously allocated funding based on 5 year contracts for delivery. Since the implementation of the ERF, however, contracts for delivery have been extended to 7 years, with carbon sequestration projects able to contract out over a 10 year period. As we outline in Figure 1 below, this is likely to result in contracted ERF expenditures being lower than projected, with our projections indicating that abatement delivery will be spread over a longer timeframe than originally assumed by the government.
As per our earlier update, Out of Gas: Demand gap likely to emerge in 2016, projections suggest that the Clean Energy Regulator’s contracting capability is likely to be fully exhausted next year, meaning further funding may be needed to be considered by the government in order to ensure that demand for the acquisition of emission reduction credits continues.
This will remain a key watch for industry participants seeking to engage in subsequent ERF auction rounds, with go-to-market timing a critical consideration, along with broader
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