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This statement outlines a number of facts that have not featured substantially in the public discussion on the Emissions Reduction Fund’s (ERF) landfill gas method to date. These are:

  • The Emissions Reduction Assurance Committee’s (ERAC’s) 2019 decision to reconsider its earlier decision limiting crediting for landfill gas generation projects.
  • ERAC members examined the possibility of partly reversing its prior decision but did not complete the matter prior to the departure of Professor Andrew Macintosh as ERAC chair in Feb 2020.
  • Over the first half of 2020 and subsequently, electricity and LGC prices were at lower-than-expected levels, reducing the commerciality of all projects. This change in factual information was a key driver for ERAC to subsequently conclude that all projects should be regarded as meeting the additionality requirement.

Summary of Decision Points

In June 2019, the ERAC decided to reconsider its 2018 decision on landfill gas electricity generation, specifically to consider whether the decision should be reversed in whole or in part. At this point Professor Andrew Macintosh was still the ERAC Chair.

The ERAC examined the possibility of extending the crediting period for Australian carbon credit units (ACCUs) for smaller landfills, which would in part reverse its previous decision. This work was considered by the ERAC prior to Professor Macintosh resigning as Chair in February 2020.

In July 2020, the ERAC further considered the analysis on whether registered generation projects were likely to be financially viable in the absence of ACCUs. Electricity and Large-scale Generation Certificate (LGC) prices had fallen substantially over the first half of 2020. Given this and projected declines in electricity prices and LGCs, the ERAC requested additional updated analysis.

In April 2021, the ERAC determined based on this updated analysis, that the crediting period for registered generation projects should be extended from 7 years to 12 years for generating projects of all sizes.

In May-June, in accordance with the usual procedure for the introduction of new methods, a public consultation process on the new Landfill Gas (Generation) Method (incorporating a 12-year crediting period) took place. No submissions raising concerns about a lack of additionality1 were received during the process.2

In July 2021, the ERAC recommended to the Minister for Emissions Reduction that the Landfill Gas (Generation) Method, incorporating a 12-year crediting period, should be made.

At all times, the ERAC has operated consistently with its obligation to preserve the integrity of the methods which underpin the Emissions Reduction Fund.

ERAC continues to disagree with Professor Macintosh’s view that large projects should not be regarded as meeting the additionality requirements.

Further detail: Key Milestones in development of the Landfill Gas (generation) Method

This statement is intended to elaborate the chain of events and decisions taken leading up to the Landfill Gas (Generation) Method3 being approved by the Minister for Energy and Emissions Reduction in September 2021, as recommended by the ERAC

2018 Credit Period Extension

In February 2018, the ERAC decided to provide a crediting period extension of up to 5 years for existing landfill gas flaring projects and 12 years for new flaring projects that are eligible to be credited with Australian carbon credit units (ACCUs) for carbon abatement measured under the 2015 Landfill Gas Method. At that time ERAC decided against extending the crediting period of 7 years for any landfill gas projects generating electricity. In general, existing landfill gas flaring projects would access the crediting period extension progressively as they reached the end of the original 7-year crediting period. Projects registered after the varied method was made would have a 12-year crediting period. Electricity generating projects would not be eligible for further credits after the expiry of the original 7-year crediting period

2019 Landfill Gas sub-committee

In June 2019, the ERAC, with Professor Macintosh as Chair, agreed to reconsider its decision to not extend the crediting period for electricity generation projects. The ERAC formed a subcommittee, including Professor Macintosh to make a proposal to ERAC. The sub-committee examined confidential industry data. It considered allowing smaller electricity generation projects to receive credits over an extended period but not to provide credits for larger scale projects above a (yet to be specified) threshold. Professor Macintosh resigned from the ERAC in February 2020 and was not further involved in ERAC deliberations.4

2020 Updated Analysis

In July 2020, the ERAC first formally considered the analysis conducted by its landfill gas subcommittee on whether registered generation projects were likely to be financially viable in the absence of ACCUs. The analysis considered expected projects costs and revenue to 2028, which depends on electricity and Large-scale Generation Certificates (LGC) prices. Electricity prices and LGC prices declined significantly over the first half of 2020.Given this and projected declines in electricity prices and LGCs, the ERAC requested the analysis be updated to ensure that its decision-making process would be informed by the latest available data.5

2021 Landfill Gas (Generation) Method approved

At its April 2021 meeting, the ERAC considered the updated analysis, which was informed by updated data on energy and LGC prices. ERAC concluded that all the sample sites, including the larger landfills, should be assessed as additional for the extended crediting period taking account of current and projected electricity and LGC prices. The ERAC also considered the sub-committee’s proposal for the introduction of thresholds, to be based on size or capacity, as part of the sub-committee’s earlier consideration of the circumstances when a crediting period extension would be warranted.6 The earlier subcommittee analysis included substantially higher electricity and LGC prices than what actually occurred over the period from 2020 to 2021 and that were then projected to occur to 2028. Broadly, these earlier assumptions had the effect of over-estimating the commercial viability of larger projects without ACCUs. Public commentary on the ERAC’s conclusion on whether the larger landfills would be additional without ACCUs does not appear to have recognised the very substantial fall in electricity and LGC prices from 2019 levels.

The ERAC determined based on the new evidence before it, that the crediting period should be extended from 7 years to 12 years for generating projects of all sizes. The draft Landfill Gas (Generation) Method was released for public consultation from 24 May 2021 to 13 June 2021. No submissions raising concerns about a lack of additionality were received as part of the public consultation process.7 Professor Macintosh did not make a submission.

In July 2021, the ERAC recommended to the Minister that the Landfill Gas (Generation) Method be made incorporating a 12-year crediting period to give effect to its conclusions.

Preserving Integrity of the ERF

At all times, the ERAC has operated consistently with its obligation to preserve the integrity of the methods which underpin the ERF. As part of that obligation, ERAC ensures that its decisions are based on updated information. The full ERAC made its decision only after careful consideration of this updated analysis and following its usual procedures, including a public consultation process on the new method.

The ERAC will respond more fully to the contents of Professor Macintosh’s paper The Emissions Reduction Fund’s Landfill Gas Method: An Assessment of its Integrity in due course. The ERAC has prioritised making this initial response on the landfill gas method as it is the only one of the three current methods subject to claims from Professor Macintosh that was developed after Professor Macintosh left the ERAC Chair.

Footnotes

1 Section 133(1)(a)(ii) of the Carbon Credits (Carbon Farming Initiative) Act 2011 states methods should result in carbon abatement that is unlikely to occur in the ordinary course of events.

2 See the Method consultation for further background

3 The Carbon Credits (Carbon Farming Initiative—Electricity Generation from Landfill Gas) Methodology Determination 2021

4 The current Chair, Mr David Byers was appointed to that position on 15 December 2020 having been member of ERAC since 15 June 2020.

5 Average NEM wholesale prices and LGC prices fell from the December quarter 2019 to the June quarter 2020 by a total of $49.50 per MWh or around 40%. By the March quarter 2021, combined NEM wholesale electricity prices and LGC prices were around 39% less than in December 2019. While these prices are not necessarily the specific prices received by the projects in question it does illustrate the broad forces acting on longer term prices.

6 The sub-committee proposal included an illustrative threshold concept but did not include actual thresholds that could were to be used for this purpose.

7 See the Method consultation for further background