New ERF method and 2022 priorities announced

The Morrison Government has developed an Emissions Reduction Fund (ERF) method to credit abatement from new carbon capture and storage projects.

For the first time globally, a national government will award large-scale CCS projects that capture and permanently store carbon underground with tradeable high-integrity units (Australian Carbon Credit Units or ACCUs).

Each ACCU earned by a CCS project represents one tonne of carbon emissions avoided. Projects will be able to sell ACCUs to the Australian Government at bi-annual auctions or sell them on the private voluntary market.

Minister for Energy and Emissions Reduction Angus Taylor said the new CCS method would support investment in large-scale CCS hubs and projects through a voluntary financial incentive.

“Voluntary incentives, not penalties, are an essential part of our plan to play our part in global efforts to reduce emissions without imposing new costs on Australian households and business,” Minister Taylor said.

“CCS is a priority under the Government’s Technology Investment Roadmap and the new ERF method will incentive emissions reductions from a range of energy-intensive sectors including LNG production, which currently accounts for around 10 per cent of Australia’s emissions.

“Our north Asian trading partners are relying on gas to reduce their emissions and provide affordable and reliable energy to power their economies.

“This high-integrity method will position Australia to scale up clean LNG production and make use of our abundant geological storage potential.

“It will also support the production of clean hydrogen from existing energy resources like coal and gas.

“We have worked closely with industry practitioners and technical experts to develop this method, which we expect will help unlock new projects across Australia, create new jobs and generate billions of dollars in economic activity.”

Minister for Energy and Emissions Reduction Angus Taylor also announced five new priority methods, to be developed by the Clean Energy Regulator over the next 12 months, to expand the range of activities eligible under the ERF.

Following a period of public consultation, the Government will now develop five new ERF methods in 2022:

  • Transport, including emissions reductions created by electric vehicle charging and hydrogen refuelling infrastructure;
  • Hydrogen, including injection of clean hydrogen into the gas network, and the use of hydrogen in electricity generation or other uses, such as low carbon steel;
  • Integrated farm method, including allowing separate ERF land-based activities to be combined or ‘stacked’ on the same land; 
  • Carbon capture use and storage (CCUS or carbon recycling), including in the production of industrial and building materials like insulation or concrete; and
  • Savanna fire management, building on the existing method with updated carbon accounting and by expanding the carbon pools and vegetation types covered.

The Government will also progress further research and technology development to support the development of future ERF methods, including:

  • Expanded recognition of different sources of agricultural waste as feedstocks, to support an enhanced biomethane or ‘green gas’ method;
  • Livestock feed technologies, which have the potential to substantially reduce emissions from agriculture in the future;
  • Direct air capture technologies, which absorb carbon from the atmosphere for re-use (CCUS) or permanent storage underground. 

“The ERF goes from strength to strength – in early September the 1000th project was registered under the scheme and the 100 millionth ACCU was issued,” said Minister Taylor.

“The ERF is doing great work accelerating new projects to reduce emissions and deliver benefits across the Australian economy.”

Through the 2020-21 Budget, the Government provided $40 million of new resourcing to the Clean Energy Regulator to accelerate new ERF method development to five per year.

Public consultation has identified a pipeline of potential new methods and the Government will continue to support technology cost reductions and research to develop the supporting scientific evidence base to ensure that new methods have environmental integrity, a requirement of the ERF’s legislative framework.

Further information is available on the Clean Energy Regulator’s ERF web page.

Media contact:

Minister Taylor's office 02 6277 7120