Address at the Carbon Market Institute Carbon Farming Industry Forum
ANGUS TAYLOR: Australia’s voluntary offset market is incredibly strong and the growth I’ve observed over the last 12 months has been incredible.
Interest from banks, large businesses and project proponents is enormous.
And the reforms that have been implemented since the King Review in 2019 are paying off.
Project registrations have surged 23 per cent from 944 at the beginning of 2020 to more than 1,160 today.
More than 17 million Australian Carbon Credit Units were issued last year, and the Regulator expects to issue a record 18 million ACCUs this year.
Seven new methods have been developed since the King Review concluded.
And I know that the CMI and its members have welcomed the opportunity to be involved in the prioritisation and co-design processes.
Another five new methods are on the way this year:
- carbon capture utilisation, to complement the carbon capture and storage method finalised last year;
- a hydrogen method;
- an integrated farm method;
- an enhanced savanna fire management; and
- new transport technologies.
Addressing recent criticisms
The program of reforms that I have driven since 2019 have been focused on maintaining integrity and additionality while we accelerate new method development and increase supply.
Because the ERF’s integrity and additionality are two of its greatest strengths.
So I think it’s appropriate to address recent criticisms of the ERF right up front.
I believe these criticisms are completely unfounded.
And I’d particularly like to thank John for the statement he made last Sunday.
I couldn’t agree more with John’s comment that “Sensational claims of “fraud, “rorts and “sham” amount to a direct attack on a vast network of farmers, traditional owners, service providers, investors, auditors, conservationists and public servants many of whom have spent the last decade striving to accelerate support for stronger industrial emission reduction, sustainable agriculture and reversal of deforestation."
“Many of these participants are feeling aggrieved by accusations which do not appear to be substantiated by the academic papers.”
I know quite a number of CMI members have released similar statements and I welcome those, too.
When industries come under political attack, they have a responsibility to stand up – not for themselves, but for the facts.
And the fact is, the Clean Energy Regulator and Emissions Reduction Assurance Committee looked into the first round of claims made by Andrew Macintosh, The Australia Institute and other groups like the Australian Conservation Foundation late last year.
They engaged substantively with those individuals and organisations and the Regulator and ERAC, both independent organisations, found those claims were not supported by the evidence.
Of course, I expect the Regulator and ERAC to look into these new claims and I welcome the fact they have already commenced that important work.
I look forward to the outcome of their investigations, which will be released publicly once complete.
And I welcome efforts by the CMI and some of its members to independently look into those issues themselves.
It is telling that groups like the ACF have backed away from this latest round of attacks on the ERF and are no longer promoting the claims that have been refuted by the Regulator and ERAC.
We all have a role to play in ensuring the ERF’s ongoing integrity and additionality. We have never taken a ‘set and forget’ approach to these issues.
Managing risks to agricultural production and regions
And as the ERF continues to grow, it’s important that we get the balance right between managing land, storing carbon and ensuring the ERF has a positive impact on agricultural production.
As many of you know, my Department has finished consulting on changes to the ERF rules to reduce the risk of native forest regeneration projects having adverse impacts on regional Australia.
On Friday, 8 April, those changes will commence.
Notifications will be needed for any proposed new native forest regeneration projects, or project expansions, that are more than 15 hectares and more than one third of a farm.
Native forest regeneration projects of that size will only be able to go ahead if the Minister for Agriculture doesn’t make a finding that they will have material adverse impacts on agricultural production or local communities in the region.
Native forest regeneration projects will also need to report on their compliance with state, territory and local government requirements for managing pests and weeds.
I know that CMI members have a variety of views on these changes. The government will review their operation by the end of 2023.
We all have a role to play in safeguarding the ERF’s social licence.
What I can say to you today is the higher the standard you set as an industry, the more the government can step back.
2025 soil carbon goal
One of the areas where there is a great opportunity to ensure ‘win win’ outcomes for farm productivity and emissions is soil carbon.
That’s why I’ve been so relentlessly focused on addressing the cost of measurement.
If we can get measurement right, we can have confidence in the integrity of the reductions that are being achieved.
Methods can credit more abatement, because of that increased confidence and, in some cases, frequency of measurement.
It will also be cheaper to study and identify land management practices that sequester carbon in our soils.
Over the last Budget and MYEFO, we have invested an additional $50 million in R&D on technologies that will reduce the cost of soil carbon measurement, and a further $54 million to provide up to $10,000 per farm to support increased baseline testing.
The 2022-23 Budget will invest $20.4 million to empower Australian farmers to participate in the Emissions Reduction Fund through soil carbon projects.
This new funding will support an outreach program, working through existing agricultural service providers and co-operative groups, to address information barriers.
Mainstreaming activities that increase soil carbon will undoubtedly be good for Australian agriculture.
Our goal is to increase the number of soil carbon projects from the current 262 to 5,000, covering 500,000 hectares, by 2025.
And the Government is committed to working with existing service providers to unlock those opportunities.
Carbon abatement contracts
Last month, following advice from the Clean Energy Regulator, I announced a change to the way the Regulator manages fixed delivery ERF contracts.
Current fixed delivery contract holders will be able to pay an exit fee, equivalent to the existing Buyer’s Market Damages provisions in their contracts, to convert to optional delivery.
I know that the possibility of using BMD provisions to take advantage of higher voluntary private market prices has been discussed openly in industry circles for some months prior to this change.
If that had occurred, the Regulator would have been obliged to pursue legal remedies under the contract, including suing for debts resulting from non-delivery.
A disorderly exit of this nature would inevitably lead to disputes over damages for each failed delivery.
By contrast, the exit arrangement provides for an orderly transition away from the fixed delivery contracts.
The exit arrangement was deliberately a ‘minimal change’ - it does not alter rights under the contract.
It simply streamlines a contractual process into an administrative arrangement, avoiding the need for protracted litigation and increasing certainty for all parties, including the market.
The changes will not reduce the total amount of funding available to ERF projects and in fact will allow more projects to be supported.
Given the overwhelming preference for optional delivery contracts, the Regulator will not be offering any new fixed delivery contracts at Auction 14, which will be held next week.
Optional delivery contracts will enable the ERF will underwrite a greater number projects, delivering more abatement towards Australia’s 2030 Paris and 2050 net zero targets.
And the new requirement for Climate Active participants to use domestic offsets for at least 20 per cent of their climate active claim will further support the domestic carbon farming sector.
Australia’s carbon offset market is going from strength to strength – and if the Coalition is re-elected in May, that will continue.
We’ve set out our plan and our policies, and the Emissions Reduction Fund will continue to be a very, very important part of that.
We will also continue to resist calls to ratchet down the Safeguard Mechanism.
Make no mistake, this is a carbon tax by another name.
At a time when we are working to increase the security of our supply chains and bring more manufacturing back to Australian shores, Labor will force the nation’s 200 largest energy users and producers to reduce their aggregate emissions by 25 per cent by 2030.
Their carbon tax will hit metropolitan gas networks, waste and recycling, fuel refineries, airlines, trucking companies, flour mills and mining, steel and aluminium production.
Policies such as these reduce the margin for error when nations and economies face the unexpected.
They make energy-intensive industries that Australians rely on less competitive – and their products and services more expensive.
Ultimately, policies like these risk Australia losing control of its energy security and affordability.
The strong growth in private sector demand for Australian Carbon Credit Units shows that the market recognises and values their high quality and integrity.
Growth in voluntary demand has defied predictions and outstripped all expectations.
The Government will continue to take a balanced and sensible approach in this area.
The ERF will remain a key pillar of our policy approach and we’ll continue to invest to ensure that we maintain the integrity of the scheme as we expand the number of eligible activities and methods and grow supply.