CFI review: doing okay but watch out

Under section 306 of the CFI Act, the Climate Change Authority had to deliver a review of the Carbon Farming Initiative by the end of 2014. Did you miss it on the eve of Christmas?

After 3 years it was probably time to for someone to take a look at what we’ve created.

On the whole, the Authority thought the CFI had performed pretty well, had achieved real reductions (14.6m credits and counting) and that the ERF had brought some positive streamlining.

But then this cracking line from the Chair's Statement on the ERF changes:

[The ERF] retains, however, much of the administrative intensity and complexity inherent in schemes where credits are assessed on outcomes against pre-determined baselines. In such schemes there can be no certainty that the credits awarded to participants always relate to emissions reductions which are genuinely additional to those that would have occurred in the absence of the scheme.

Read on for the Climate Change Authority's CFI Review...

Read on for the Climate Change Authority's CFI Review...

Ouch!

When you consider, at the time of the review, 90 per cent of credits had gone to 2 activities – landfill and avoided deforestation, neither of which require building a project from scratch – it gives you pause for thought about how to dish out credits in a voluntary program.

But wait. There’s more:

[T]he big difference between the CFI and the ERF which replaced it is the much greater scale of the latter – and the much greater consequences of the risks that the scheme might not only miss some real opportunities to reduce emissions but also (and perhaps more worryingly) result in large payments for reductions that would have occurred anyway.

So if the CFI had some risks, which had been managed, the ERF shortens the odds of trouble ahead. Ultimately, carefully considering which projects are ‘additional’, or would not have happened in the absence of the scheme, is the most important decision for administrators.

It’s not a surprise this led to the 2 recommendations of the review: enhancing additionality checking for large projects and independently reviewing whether the ERF is appropriate for certain sectors. The government must respond to these.

For full disclosure, I do want to record that I was seconded to the Climate Change Authority secretariat to help with this review. While there, however, one thing that really hit home for me is how hard it is for this kind of scheme to do the heavy lifting – this is because the ERF can only do work where methods and projects exist  where there are no methods or people don't want to play it can't do anything. By comparison, a carbon price thingy, which more comprehensively covers all activities in targeted sectors without exceptions, would still need to be priced at $65 to meet the 5% target (according to Treasury modelling).

It’s no surprise then that estimates available suggest the ERF will not go anywhere near Australia’s 5% target (unless the economy breaks down!) RepuTex, who follows these things, reckons the ERF will get between 40 and 130 Mt of abatement by 2020. This is against the government’s estimate of 421 Mt required by 2020 and the CFI’s work to date of nearly 15 Mt over 3 years.

Have a read. I will be watching closely.