The recently released Emissions Reduction Fund White Paper outlines the government’s favoured design for its Direct Action Plan, proposing that the safeguard mechanism be split from the Emissions Reduction Fund legislative package, allowing further consultation over the next 12 months.
As a result, the design of the ERF takes centre stage in the White Paper, with additional detail suggesting that industry will have considerable flexibility in generating emissions reduction credits – from avoiding emissions that would have occurred under a BAU emissions intensity scenario to capturing and reducing fugitive emissions.
Furthermore, with participation in the ERF expected to initially be low, opportunities may emerge for early movers from industry to engage in price discovery and capitalise on a low number of bidders, with CFI project developers potentially seeking higher prices under the CPM true-up through to February 2015.
