The Australian government’s Direct Action emissions reduction fund could require up to $1bn of extra funds to meet its carbon emissions reduction goal, according to a Guardian Australia analysis based on initial auction results.
The results of the first Direct Action auction, revealed last week, showed emissions reduction contracts worth $660.4m had been awarded to prevent 47m tonnes of greenhouse gases entering the atmosphere.
According to the Clean Energy Regulator, the average cost per tonne of carbon-dioxide-equivalent greenhouse gases in the auction was $13.95.
The government has committed to a reduction in emissions of 5% below 2000 levels, with the latest projections putting this amount at 236m tonnes.
Although the total amount of abatement in the first auction is 47m tonnes, this includes projects with contract periods that go beyond 2020, so the contribution of this auction towards meeting the 2020 goal is a fair bit lower.
If we divide the volume of emissions reductions committed in each project by its contract duration, we can get a figure of volume per year for each. Based on these figures, the total abatement outcome in five years will be 28.4m tonnes.
This is only 12% of the government’s goal, with 207m tonnes remaining.
With $1.9bn left in the emissions reduction fund, the government could only meet a further reduction of 135m if the price stays at $13.95 per tonne. This leaves a shortfall of 72m tonnes, which would cost approximately $1bn, again assuming no reduction in price per tonne.
The results of the auction show the biggest beneficiary of the Direct Action policy so far has been a company called Terra Carbon, which gained contracts for 41 individual projects with an abatement volume of 20.7m tonnes. At the average price of $13.95, this results in an estimated $288m to the company.
As for the types of projects, I’ve added the abatement category to each project, based on information from the emissions reduction fund register. The majority of reductions are coming from “avoided deforestation”, but methane capture is also high on the list, particularly if you take the length of the contract into account:
You can see my full working, which has been reviewed by a climate policy analyst, here. Please let me know if you spot any errors with the calculations. See also this piece in the Conversation which performs similar calculations, although without a annualised figure for each contract.
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