$2.55b Carbon Auction Scheme Takes Off 2

Tuesday, April 14th, 2015
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Turning pig manure into electricity, catching methane from landfill and better managing savanna fires could earn Australian farmers some extra cash from the federal government.

These are some of the projects for which farmers will be bidding on Wednesday at the government’s first emissions-reduction fund reverse auction.

The goal is to outbid each other with the most cost-effective projects to cut carbon emissions. If successful, they will get a slice of the federal government’s $2.55 billion fund to implement the project.

Almost 250 projects have been registered for the auction, most of which fall under the defunct carbon farming initiative, which paid farmers and land managers to store or cut carbon emissions.

The fund is the centrepiece of the Abbott government’s direct action policy which replaced Labor’s carbon tax and effectively pays polluters not to pollute. It’s the government’s tool-kit to meet its five per cent carbon emissions reduction target by 2020.

But critics aren’t convinced.

The main unknown is how much the government is willing to pay per tonne of carbon emissions. The ceiling price will be set by the Clean Energy Regulator and kept secret.

Reputex, which analyses energy and emissions markets, believes the benchmark price will be a major factor in determining the policy’s success. The coalition originally estimated the price would be between $10 to $15, other estimates are between $5 and $40.

If it’s too low, Reputex executive director Hugh Grossman says, industry might just not turn up at auction number two.

“They’ll just stay at home,” Mr Grossman said.

But equally a high price could blow out the government’s $2.55 billion budget, undermining the goal of purchasing the “lowest cost abatement”.  He doesn’t expect larger polluters to join in until the third auction and when they’ve seen average prices and more methods for emission reductions developed.

Even with an ambitious price, Reputex believes the fund won’t meet the five per cent reductions target on its own.

“At a broad level, it’s underfunded,” Mr Grossman said.

The Australian Greens say the carbon farming initiative projects – created under the carbon tax – will cease unless the government is prepared to pay at least $15 per tonne.

“It’s hard to see how these projects will keep going,” Greens leader Christine Milne said.

The Climate Institute believes the emissions reduction fund won’t stop the biggest polluters from increasing emissions.

“It’s a bandaid,” Deputy CEO Erwin Jackson.

While the projects are worthwhile, he says they are no replacement for credible climate policy that places real limits on the amount of pollution that companies can put into the air.

But Environment Minister Greg Hunt is adamant this is the right way.




  • The centrepiece of the Abbott government’s carbon emissions direct action policy, which replaced Labor’s carbon tax.
  • A $2.55 billion fund that pays Australian business for projects to slash carbon emissions.
  • The mechanism to achieve Australia’s emission reduction target of five per cent on 2000 levels by 2020.
  • Businesses voluntarily bid at reverse auctions, where government chooses most cost-effective projects.


  • Businesses apply under prescribed methods created by government agencies and private entities and approved by the environment minister.
  • For example, a company may bid to reduce 10,000 tonnes of carbon for $15 per tonne. Another company may bid to do the same for $13.50.
  • Government pays for “lowest cost abatement”.
  • Clean Energy Regulator sets benchmark price to act as ceiling.


  • If the ceiling price is too low, companies won’t be motivated to participate.
  • If it’s too high, it could blow out the $2.55 billion budget.
  • Modelling by private entities show it’s unlikely to achieve the emissions reduction targets on its own.
  • Environment department hasn’t done its own modelling to show it will work.
  • The safeguard mechanism, which will penalise companies if their emissions balloon over historical levels, is yet to be developed and won’t be implemented until 2016.
  • Safeguard mechanism may be set too high, allowing companies to increase emissions and undermine the fund.
  • It’s expensive.


  • Reforestation, forest management and native forest protection.
  • Savanna fire management.
  • Landfill gas recovery.
  • Manure management.
  • Management of methane from livestock.
  • Soil carbon and biochar.
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  1. Dr J. Mark Dangerfield

    And fail to meet a modest target met years ago by progressive countries

  2. David A HOOD AM

    Funny how nobody has mentioned that we taxpayers are now funding polluters to cut emissions, whereas under the carbon price (it was never a tax) the polluters had to pay and the money collected was returned to every taxpayer who would purchase low carbon products instead of the increased prices on high carbon goods and services. Was working brilliantly until Gillard called it a TAX and Abbott rode that to an election win. Now it is costing taxpayers big time, it won't work, and big business is laughing at us. Thank you Coal-ition….