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The Emissions Reduction Fund is the Australian Government’s central climate change policy tool. The Fund’s objective is to help achieve Australia’s greenhouse gas (GHG) emissions reduction targets of 5% below 2000 levels by 2020 and 26 to 28 per cent below 2005 levels by 2030. The Government has provided $2.55 billion to the Emissions Reduction Fund, with ‘further funding to be considered in future budgets’. The Fund is administered by the Clean Energy Regulator.

The Fund has three key components:

  • a voluntary scheme to credit emissions reductions, whereby emissions reductions delivered by registered emissions reduction projects using an approved methodology can be issued with credits, known as Australian Carbon Credit Units
  • a process to purchase emissions reductions (via competitive reverse auctions run by the Clean Energy Regulator, whereby the Regulator enters into contracts with successful bidders) and
  • the ‘safeguard mechanism’.

This guide focusses on the last component, the safeguard mechanism, the key aim of which is to ensure that emissions reductions purchased through the Emissions Reduction Fund are not displaced by significant increases in emissions elsewhere in the economy.

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