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The Emissions Reduction Fund Auction Process Simplified

The Clean Energy Regulator is responsible for purchasing as many ACCU’s as possible so that these credits may be used against Australia’s Kyoto obligations. The regulator must purchase as many credits as possible for as little money as they can. This is done through a reverse auction process, and similar to the way the government secures all tenders.

Auctions are run 2 – 3 times a year.

Project proponents (or Owners) calculate the total amount of abatement that their project can be expected to generate over a 10 year period. They then ‘bid’ in this amount, together with a price per ACCU that they would receive if they were a successful bidder.

The Clean Energy Regulator has a secret benchmark price. They are able to purchase up to 80% of abatement offered that is under this benchmark price. Project proponents are not allowed to discuss their bids in any way, nor are they able to discuss any successful prices. Any projects that are bid over the benchmark price will not be accepted, and any bid that are accepted under the benchmark will receive the price nominated at the time of bidding, not the benchmark price. The regulator has serious budget constraints, as set by the government which cannot be exceeded. The winning bidders are then instantly entered into a commercial contract for the delivery of the abatement that was submitted as part of the bid.

As part of the bidding process, you must nominate a delivery schedule for the ACCU’s that are generated as a result of your emissions avoidance or sequestration activities. As you are now in a commercial contract with the government, and non supply issues are dealt with in accordance with the terms of the contract. This can obviously have a significant impact upon a project that has had a loss of ACCU’s as a result of factors beyond their control (for example, fire in a regeneration project). One of the options in this regard would be to purchase ACCU’s from the secondary market to fulfil your delivery obligations to the regulator.

Not all projects that are registered have a contract with the government, and outside of a contract, the only market is the voluntary market or selling to those who have contracts but are unable to fulfil their delivery schedules. At the completion of each auction, the regulator issues an infographic that shows the total abatement secured, the types of methodologies, and the average price paid. At no point, is the benchmark price revealed, even at the completion of the auction.

The current average price paid in the November auction is $12.25 per ACCU. The next Auction has been called for 27-28 April with successful bidders notified approximately 2 weeks later.