ANALYST UPDATE: Expenditure lower than ERF allocation?

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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

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