The results are in from the second Emissions Reduction Fund auction, held on 4 and 5 November 2015, and they have played out much as we thought they would in April.
The average price of abatement was $12.25 per tonne, down from the first auction's average price of $13.95, but the number of players and variety of projects has increased, including projects generating abatement from more recently approved methodologies such as industrial energy efficiency activities.
Cumulatively, there are now nearly 240 Carbon Abatement Contracts that will deliver almost 92.8 million tonnes of abatement at an average price of $13.12.
As with the first auction, much of the contracted abatement will be delivered over 7-10 years; of the 129 contracts let, only 10 are for delivery over a period of 6 years or less. As the delivery schedule for each contract is not disclosed, it is uncertain how much of the contracted abatement under the 7-10 year contracts will be delivered by 2020 and therefore be available to meet Australia's 2020 emissions reduction target. What we do know is that the shorter term contracts (5 years or less) from this auction will deliver only 752,317 tonnes to meet that target.
As ERF is delivering abatement post-2020, it can be used for the post-2020 target of 26-28% of 2005 levels by 2030 which Australia is taking to COP21 in Paris later this year. The downside to this is that there is a limit to the amount of money the government has committed to the ERF ($2.5bn), and it has already spent almost half of that on two auctions.
The next auction date has not yet been set, but anyone considering bidding at a future auction should start the project registration process, and consider the available project methodologies (or propose a new one) as soon as possible.
The ERF auction results compared
Click here to view table.