ERF: Auctions

Updated 27 April 2017

Main points:

  • The Clean Energy Regulator is conducting auctions to purchase carbon credits from project owners and aggregators.
  • Bidders must agree to a standard contract at least 20 business days before an auction and choose between a long term, short term or immediate contract at least 5 days before an auction.
  • So far five auctions have been held contracting 189Mt of abatement.

Timeline:

15-16 April 2015 – First auction conducted

4-5 November 2015 - Second auction conducted

27-28 April 2016 - Third auction conducted

15-16 November 2016 - Fourth auction conducted

5-6 April 2017 - Fifth auction conducted

The details:

The CFI Act empowers the Clean Energy Regulator to enter into contracts with project owners to purchase carbon credits following an auction (or other process).

The Regulator must conduct the auctions to purchase credits at least cost, ensure there is integrity in the process and provide fair treatment to all participants.

The Regulator has published guidelines governing how the auctions will be conducted.

Anyone wishing to participate in an auction must have an approved project. There are 3 steps to participating in an auction: qualification, registration and bidding.

Auction qualification

The auction qualification process is about agreeing to the Regulator’s contract (version 2.0) and providing information about the project including an indication of the amount of credits you wish to bid.

If the project is not up and running, you may nominate conditions, such as financial approval, which must be met before a contract could come into effect following an auction.

The Regulator will review the information and advise if the project has qualified to participate in the auction.

The auction qualification form must be submitted at least 20 business days before the auction and nominate an authorised bidder (individuals may nominate themselves).

Auction registration

The auction registration process is about firming up the number of credits, the delivery schedule and the length of the contract (generally 7 years).

The minimum bid is 2,000 credits per year or 15,000 credits in total (must also be at least 10% of the projected abatement for the project/s).

Projects may choose between a standard contract of 7 years, a short term contract of less than 7 years or an immediate or 'spot' contract for credits already issued.

The auction registration form must be submitted at least 5 business days before the auction by the authorised bidder.

Auction bidding

If you pass the qualification and registration, the authorised bidder can bid in the auction on the Austender bidding platform (need to register with Austender).

The Regulator will then accept the cheapest bids up to a threshold of between 50-100% of the total credits bid below a benchmark price they set before the auction. This gives the Regulator flexibility to adjust how much abatement is purchased depending on how much abatement is bid below the benchmark price. 

Within 5 business days, the results will be notified. If successful, the contract will be automatic based on the qualification and registration process (including any nominated conditions) – the terms cannot be changed following the auction.

The Regulator will publish the average price of the successful bids (but not the individual bids).

erf contract not a financial product

In regulations made on 12 March 2015, ERF contracts are defined not to be financial products, meaning they are not regulated by financial advice requirements - anyone may provide advice on ERF contracts, however, advisers must hold a financial licence to provide advice about selling carbon credits in the voluntary or other markets.

This change followed a consultation process run by Treasury aimed at relaxing financial requirements in relation to the ERF process.

Resources

Contracts and auctions  Clean Energy Regulator

Auction forms  Clean Energy Regulator

Auction Guidelines  Clean Energy Regulator

Carbon Abatement Contract  Clean Energy Regulator