Moving existing CFI projects to the ERF

What will be covered in this webinar Main changes in moving from the CFI to the ERF Preparing to participate in the first auction Detail on the auction and contract processes – register for the upcoming webinars Method specific technical detail What wont be covered…

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Derby, WA 17 February What is the Emission Reduction Fund? Reducing emissions by: Crediting: run a project and apply for ACCUs Purchasing: CER purchases ACCUs through auction process Safeguarding: applies to largest carbon emitters; keeps emissions below baseline; start 2016 Crediting Safeguarding Purchasing

Legislative framework of the ERF The name of the Act is the same, and is still “the CFI Act”. Rules replace the CFI Regulations. ERF methods are added to CFI methodologies. 5 Footer Details | Date Carbon Credits (Carbon Farming Initiative) Act 2011 Sets up the scheme for the issue of ACCUs in relation to ERF projects Carbon Credits (carbon Farming Initiative) Rule 2015 Additional detail on eligibility, process and decision making Method Determinations Rules for undertaking and monitoring a specific type of project and calculating and generating ACCUs.

How it works Derby, WA 17 February

Main changes for existing projects There are five main changes for existing projects. 1.Change in crediting periods 2.Change in reporting periods 3.Change in auditing requirements 4.Change in permanence obligations (sequestration projects only) 5.New market for ACCUs These are explored in the following sections. 7 CFI to the ERF | 17 February 2015

Five main changes : Change in crediting periods All existing projects will start a new crediting period on 13 December: 7 years for emissions reduction projects 25 years for sequestration projects Exceptions are: avoided deforestation projects - no change to the current 20-year crediting period savanna burning projects - new 25-year crediting period starts in January Projects cannot apply for subsequent crediting periods, as they could under CFI. 8 Integrating existing CFI projects into the ERF | 19 November 2014

Five main changes: Change in reporting periods A project report can be submitted as frequently as every six months Project reports must be submitted at least once: every two years for emissions avoidance every five years for sequestration projects. NB if backdated to July , must report by 30 June 2015 The first project report under ERF will include abatement achieved since the previous report, regardless of when that previous report was – even if it pre-dates the ERF implementation date. 9 Integrating existing CFI projects into the ERF | 19 November 2014

Five main changes: Change in auditing requirements Risk based approach Audit schedule provided for each project based on average annual abatement – derived from Forward Abatement Estimate 10 Integrating existing CFI projects into the ERF | 19 November 2014

Forward Abatement Estimate (FAE) ERF Broome February FAE = total project abatement over the crediting period Make it consistent with the applicable method to work out FAE Helps participants determine project viability & pricing Sets the audit schedule Use historical data, calculators or third party assistance

Five main changes: Change in auditing requirements Initial and subsequent audits have different scope Unscheduled audits can be triggered 12 Integrating existing CFI projects into the ERF | 19 November 2014 Threshold – average annual abatement Initial audit Number of subsequent audits Total number of audits SmallUp to t CO 2 -eOneTwoThree Medium – t CO 2 -e OneThreeFour LargeOver t CO 2 -eOneFiveSix

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Five main changes: Change in permanence obligations Projects can choose to stay with the 100 year permanence period or swap to a 25 year permanence period. They must do this within 2 years of the ERF start date. Once the change has been made, it cannot be reversed. Projects choosing the 25 year option will incur a 20 per cent reduction in the number of ACCUs issued over the life of the project. Projects with ACCUs already issued may be required to relinquish 20 per cent of their issued ACCUs to the CER. 5 per cent risk of reversal buffer remains 14 Integrating existing CFI projects into the ERF | 19 November 2014

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Five main changes: New market for ACCUs Australian Government becomes the primary market: Carbon Abatement Contract Commercial Terms Delivery Terms Financial terms - Auction Secondary market – expected to take some time to develop: 1.Supply any shortfalls in projects delivering against a contract 2.Eventual liabilities under the safeguarding mechanism 16 Integrating existing CFI projects into the ERF | 19 November 2014

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Carbon Abatement Contracts Derby, WA 17 February Commercial terms Established through the auction qualification process Indicate volume of abatement and project information Conditions precedent Must be completed 20 working days before auction date 13 March for the April Auction

Carbon Abatement Contracts Derby, WA 17 February Delivery terms Established during the Auction registration process Apply to participate in particular auction Provide total volume of abatement Provide delivery schedule Contract expiry date Auction registration closes 5 business days before the Auction

Carbon Abatement Contracts Derby, WA 17 February Financial terms Established during the Auction Submit a bid through the online bidding platform First Auction is around 8 weeks away (15-16 April) Get legal and financial advice Consider delivery total and schedule and contract duration Qualify by 13 March and Register for auction by 7 April

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Important reading The transition Kit Audit guidelines Carbon Abatement Contract Auction guidelines All at:

Questions?

Transitioning projects “Transition” refers to the period of time between the date the ERF is passed into law, and 1 July The “transition rules” do not apply to project applications using ERF method determinations during this period of time. Transitioning applications will be assessed under the ERF, except: the “newness” and “government program” requirements do not apply backdating will still be permitted as per the methodology determination being used any existing ROE status will satisfy the “Fit and Proper Person” entry requirements. 24 Integrating existing CFI projects into the ERF | 19 November 2014