Markets to sell and buy carbon emissions have gained momentum worldwide since 1992 when the United Nations Framework Convention on Climate Change designated carbon markets as one of its main policy instruments to mitigate anthropogenic climate change. Australia has committed to a 26-28% reduction on 2005 emissions levels by 2030 and has seen substantial policy development around carbon markets over the past decade, including government purchases, compliance-based and voluntary approaches.
The primary market mechanism for trading carbon from sequestration projects in Australia is the Emissions Reduction Fund (ERF), which began in 2014. This emerged from the Liberal/National government’s repeal of the Clean Energy Act 2011, which had previously aimed to deliver a cap-and-trade scheme but was repealed before it had passed its initial fixed-price (or ‘carbon tax’) phase. Participation in the ERF is voluntary and it operates according to a baseline and credit model, whereby emitters can earn credits by reducing emissions below a baseline level and landholders can earn credits by sequestering carbon above a baseline level of carbon stored in the vegetation on their land. The ERF has a single buyer (the Australian Government) and prices are determined through regular auctions of Australian carbon credit units (ACCUs), which are awarded to bidders willing to provide abatement at the lowest cost.
While the ERF focuses on a diversity of sectors such as energy efficiency, facilities, mining, oil and gas, waste, waste water and agriculture, the majority of the projects relate to vegetation management. Different methodologies relating to vegetation management have been developed, such as avoided deforestation, human induced regeneration and environmental plantings.
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