EXPLANATORY STATEMENT

Issued by the Authority of the Parliamentary Secretary for Climate Change, Industry and

Innovation

Carbon Credits (Carbon Farming Initiative) Act 2011

Carbon Credits (Carbon Farming Initiative) (Enclosed Mechanical Processing and Composting Alternative Waste Treatment) Methodology Determination 2013
 

Background

The Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act) enables the crediting of greenhouse gas abatement in the land sector. Greenhouse gas abatement is achieved by either avoiding emissions or by removing carbon from the atmosphere and storing it in soil or trees.

Abatement activities are undertaken as offsets projects. The process involved in establishing an offsets project is set out in Part 3 of the Act. An offsets project must be covered by and undertaken in accordance with a methodology determination.

Subsection 106(1) of the Act empowers the Minister, by legislative instrument, to make a methodology determination. The purpose of a methodology determination is to establish procedures for estimating abatement (emissions reductions and sequestration) and project rules for monitoring, record keeping and reporting on abatement.

A methodology determination must meet the offsets integrity standards set out in section 133 of the Act and the criteria set out in section 106 of the Act. The Minister cannot make a methodology determination unless the Domestic Offsets Integrity Committee (DOIC) has endorsed the proposal under section 112 of the Act and advised the Minister of the endorsement under section 113 of the Act. The DOIC is an independent expert panel established to evaluate and endorse methodology proposals.

Application of the Methodology Determination

The Carbon Credits (Carbon Farming Initiative) (Enclosed Mechanical Processing and Composting Alternative Waste Treatment) Methodology Determination 2013 (the Determination) sets out the detailed rules for implementing and monitoring legacy waste diversion projects that process waste to manufacture a range of fit-for-purpose products.

Project proponents wanting to implement the Determination must make an application to the Clean Energy Regulator (the Regulator) and meet the eligibility requirements for an offsets project set out in subsection 27(4) of the Act. These requirements include compliance with the rules set out in this Determination.

Offsets projects that are undertaken in accordance with the Determination and approved by the Regulator can generate Australian carbon credit units (ACCUs) that can be sold to:

• Australian companies that pay the carbon price established under the Clean Energy Act 2011; and
• businesses in Australia wanting to offset their own carbon pollution.

Public Consultation

The Determination gives effect to two methodology proposals. 

The first proposal, Avoided emissions from diverting legacy waste from landfill through a mechanical processing and separation, and enclosed aerobic composting alternative waste treatment facility, was developed by Biomass Solutions (Coffs Harbour) Pty Ltd and submitted for the DOIC’s consideration on 30 March 2012.  The proposal was made available for public consultation on the website of the Department of Climate Change and Energy Efficiency (the Department) from 14 July to 22 August 2012.  Seven submissions relating to the proposal were received.  The DOIC considered the issues raised in the submissions during its assessment of the proposal as required under subsection 112(5) of the Act and requested further information from the applicant.  On 13 March 2013 the applicant submitted a revised version of the proposal in response to the request for further information.  On 21 March 2013 the DOIC endorsed the revised proposal, and advised the Minister of its decision to endorse the proposal as required under subsection 113(2) of the Act.

The second proposal, Avoided emissions from diverting legacy waste from landfill through a mechanical processing and separation, and enclosed aerobic composting alternative waste treatment facility, was developed by Port Macquarie-Hastings Council and submitted for the DOIC’s consideration on 29 June 2012.  The proposal was made available for public consultation on the Department’s website from 2 March to 10 April 2013.  No submissions relating to the proposal were received.  The DOIC endorsed the proposal on 24 April 2013.

On 26 April 2013 the DOIC advised the Minister of its decision to endorse the proposal. In its advice the DOIC noted that, due to the similarity between the two methodology proposals, two separate methodology determinations would not be necessary.

The applicants and the Regulator were consulted in the development of the Determination, which gives effect to both methodology proposals.

Determination Details

The Determination is a legislative instrument within the meaning of the Legislative Instruments Act 2003.

The Determination commences retrospectively from 1 July 2010.  Retrospective commencement is authorised by subsection 122(3) of the Act, which provides that a determination can be expressed to have come into force on 1 July 2010 if the determination is made on or before 30 June 2013, and the application for endorsement was made on or before 30 June 2012. Both of these conditions are satisfied in this case.

Retrospective commencement does not adversely affect the rights of any person or impose a liability on any person in respect of anything done or not done before the date of registration on the Federal Register of Legislative Instruments. Rather, retrospective application confers a benefit in that it allows persons to apply for and generate ACCUs in circumstances where they would not normally be eligible to apply.

Details of the Determination are at Attachment A.

Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

This legislative instrument does not engage any of the applicable rights or freedoms.

Conclusion

This legislative instrument is compatible with human rights as it does not raise any human rights issues.

Attachment A

Details of the Determination

Part 1  Preliminary

1.1  Name of Determination

Section 1.1 provides that the name of the Determination is the Carbon Credits (Carbon Farming Initiative) (Enclosed Mechanical Processing and Composting Alternative Waste Treatment) Methodology Determination 2013.

1.2.  Commencement

Section 1.2 provides that the Determination commences retrospectively from 1 July 2010. Retrospective commencement is authorised by subsection 122(3) of the Act.

While the Determination may apply to projects that were established prior to 1 July 2010, the project proponent can earn credits only for abatement which occurs from 1 July 2010. Subsections 27(15) and (16) of the Act prevent the crediting of abatement before this date.

1.3  Definitions

Section 1.3 defines a number of terms used in the Determination. Key definitions include:

• ‘alternative waste treatment (AWT) plant’, which is defined in the Carbon Credits (Carbon Farming Initiative) Regulations 2011 (the Regulations) to mean an enclosed resource recovery plant that:

(a)   accepts and processes mixed solid waste using:

(i)            mechanical processing; and

(ii)            biological or thermal processing; and

(b)   extracts recyclable organic materials.

• ‘mixed solid waste’, which is defined in the Regulations to mean waste from sources such as offices, community organisations, sporting facilities, households, retail and catering businesses and institutions (including schools, hospitals and prisons), but excludes the following:

(a)   recyclable paper, paperboard, glass, metal or plastic that has been separated at the point of generation;

(b)   green waste or wood waste, including waste from gardens or parks, that has been separated at the point of generation;

(c)   biosolids;

(d)   organic waste from the livestock industry, such as straw bedding and manure mixes;

(e)   commercial and industrial waste comprising only putrescible waste when it is received by an alternative waste treatment plant;

(f)    construction and demolition waste.

Generally, where terms are not defined in the Determination, they have the meaning given by section 5 of the Act. The Act is available at http://www.comlaw.gov.au.

1.4     Kind of project to which this Determination applies

The effect of paragraph 106(1)(a) of the Act is that a methodology determination must specify the kind of offsets project to which it applies.

Section 1.4 provides that the Determination applies to a project that proposes to divert mixed solid waste to a composting AWT plant in circumstances where the waste:

• is legacy waste;
• would otherwise have entered a landfill facility; and
•  is processed to manufacture biobased products.

Alternative waste treatment (AWT) refers to a wide range of technologies which can be used to extract resources from mixed waste. In the Australian context, AWT typically refers to a combination of mechanical sorting and biological processes such as composting.

In this context, ‘diversion’ refers to the process of recovering waste material otherwise destined for landfill disposal. Examples include composting of organic waste and recycling of plastics, metals, and paper.

Part 2 Requirements for declaration as eligible project

2.1  Eligible projects

The effect of paragraph 106(1)(b) of the Act is that a methodology determination must set out requirements that must be met for the offsets project to be an eligible offsets project.  Under paragraph 27(4)(c) of the Act, the Regulator must not declare that an offsets project is an eligible offsets project unless the Regulator is satisfied that the project meets these requirements.

Section 2.1 provides that to be declared an eligible offsets project, a project to which the Determination applies must meet the requirements specified in Part 2 of the Determination. 

2.2     Requirement 1—Project mechanism

 Section 2.2 requires that the project must divert mixed solid waste to a composting AWT plant, in circumstances where the waste would otherwise be deposited to landfill.

The waste must be of the kind outlined in section 2.3 (legacy waste that is mixed solid waste within the meaning provided in the Regulations), and must be processed using technology specified in section 2.4.

2.3  Requirement 2—Eligible waste characteristics

Section 2.3 sets out the characteristics of eligible waste for the purposes of the Determination. 

Subsection 2.3(2) specifies that this type of waste is:

(a)   mixed solid waste; and

(b)   legacy waste, which is waste received by an AWT plant before 1 July 2012; and

(c)   waste that is derived from one, or a combination, of the following waste streams:

(i)            municipal solid waste; or

(ii)            commercial and industrial waste.

2.4  Requirement 3—Processing technology

Section 2.4 sets out the processing technology that must be used when undertaking a project to which the Determination applies. The technology must include a combination of any of the following:

• rotating autoclave, where batches of putrescible eligible waste are heated up to over 100°C both to sterilise waste materials and to fast-track the aerobic decomposition process that assists in the recovery of organic materials;
• size reduction and/or screening, where putrescible waste materials are processed and screened into various sized fractions with various material compositions (for example, organic rich fraction);
• aerated static piles, where air is drawn through material that has been screened and reduced, via aeration channels in the floor, to stabilise the materials (residence time of approximately three to four weeks); 
• enclosed agitated bay composting bunkers, where composting material is turned daily to optimise the quality of the compost produced from the organic input (residence time of approximately 28 days); 
• enclosed aerobic composting tunnels, where an aerated and enclosed chamber accelerates the compost process in combination with regular turning of materials prior to further windrow composting (residence time of approximately five weeks); or
• compost windrowing, where regularly turned open air windrows are used as additional conditioning of the compost if required (residence time of approximately eight weeks).

Part 3 Requirements for operation of eligible projects

Part 3 of the Determination sets out general rules relating to the operation of projects to which the Determination applies.

The note under the heading to the Part refers to section 27 of the Act, which sets out the criteria for declarations of eligible offsets projects.  Paragraph 27(4)(c) of the Act specifies that projects must meet the requirements set out in the applicable methodology determination under paragraph 106(1)(b) of the Act. If paragraph 27(4)(c) is not complied with, the declaration can be revoked under section 35 of the Act and regulation 3.26 of the Regulations. Projects can also be audited to assess whether the project is operating in accordance with the section 27 declaration and the applicable methodology determination for the project (see regulation 1.12 of the Regulations).

3.1     Operation of eligible projects

Section 3.1 clarifies that a project that complies with the requirements in Part 2 must be operated in accordance with Part 3.

3.2     Waste must be classified

Section 3.2 requires waste used in the project to be classified before the net abatement amount for a reporting period for the project is calculated. The waste must be classified into the following waste mix types:

• municipal solid waste; or
• commercial and industrial waste.

AWT plants in Australia can be divided into groups based on the type of waste they receive.

Municipal solid waste is the residual waste material from households, collected by or for local government authorities. Note that although the meaning of municipal solid waste provided in the Determination is wide enough to include waste separated at the point of generation (e.g. green waste and recyclables), the Regulations excludes this type of waste as non-landfill waste.

Commercial and industrial waste is typically generated from manufacturing, wholesale, retail, professional services and administration sectors. Construction and demolition waste is waste generated by the construction and demolition industry. Construction and demolition waste is not covered under the Determination.

Division 3.2 Greenhouse gas assessment boundary

3.3     Greenhouse gases that must be accounted for

Section 3.3 describes the greenhouse gases that need to be assessed in order to determine the total net change in greenhouse gas emissions resulting from the project. The greenhouse gas boundary is outlined in Figure 1.

Emissions sources that must be accounted for in the abatement calculations include:

• decomposition of putrescible eligible waste in landfill;
• transport of eligible waste to a landfill facility, where the emissions are calculated in accordance with section 4.11;
• onsite fossil fuel consumption at the AWT plant other than for electricity generation;
• onsite electricity use at the AWT plant where they occur between 1 July 2010 and 1 July 2012, as specified in paragraph 4.9(1)(a);
• composting processes;
• transport of eligible waste diverted to an AWT plant where the AWT plant is outside a radius of 10 kilometres from the landfill facility;
• transport of residual waste to a landfill facility where the landfill facility is outside a radius of 10 kilometres from the AWT plant; and
• transport of biobased products to the end user where the end user destination (point of delivery for the biobased product) is outside a radius of 10 kilometres from the AWT plant.  

Figure 2 identifies the flow of greenhouse gases through the project, including the avoided landfill emissions.

Emissions from electricity

Emissions from grid derived electricity need to be calculated for project activities that occurred between 1 July 2010 and 1 July 2012. This is to avoid double counting emissions from electricity because the carbon pricing mechanism, introduced on 1 July 2012, covers emissions from electricity.

Emissions from transport

The test for determining whether emissions from transport of materials from the AWT plant would be greater than the baseline scenario is one of proximity to the end destination. 

The end destination for:

• eligible waste­­­—is the AWT plant;
• residual waste—is a landfill facility; and
• biobased products—is the point of delivery or location where a customer receives the product (also defined in the Determination as the ‘end user destination’).

Section 4.11 provides that emissions from transport of diverted eligible waste and of residual waste must only be calculated if the AWT plant is located outside of a 10 kilometre radius from the landfill facility. Similarly, the section also provides that emissions from transport of biobased products must only be calculated if the AWT plant is located outside of a 10 kilometre radius from the end user destination.

If the transport destination of any of these products (i.e. eligible waste, residual waste and biobased products) is within a 10 kilometre radius of the starting point, then transport emissions are deemed to be small enough to be taken to equal zero for the purposes of the Determination.  This rule assumes a straight line distance of 10 kilometres and not actual trip distance.  

Transport emissions for eligible waste, residual waste and biobased products are not calculated, and also deemed to equal zero, where transport of the waste or product is not organised or contracted by the AWT plant. For example, where a customer collects, or has organised for a contractor to collect, the biobased product directly from the AWT plant.

If the straight line distance for the transport of eligible waste, residual waste or biobased products to their end destination is greater than 10 kilometres then the emissions for transport must be calculated in accordance with Equation 10.

Equation 10 takes into account a range of inputs, including the average load weight of waste or product being transported, the emissions factor for various fuel types used, and the actual return trip distance involved in transporting that waste or product.

The return distance travelled assumes that for every load of waste or product delivered to a destination, the transport vehicle must necessarily return to the point of origin in order to pick up another load of waste or product. In actual practice it may be the case that transport vehicles do not necessarily return directly to the point of origin, but may instead be contracted to perform other deliveries unrelated to the AWT project. The requirement in Equation 10 to take into account a return distance is intended to provide a conservative and simplified estimate of transport emissions. 

Part 4 The net abatement amount

Division 4.1 The net abatement amount

4.1     The net abatement amount

Paragraph 106(1)(c) of the Act provides that a methodology determination must specify a method for calculating the carbon dioxide equivalent (CO2-e) net abatement amount for the project in relation to a reporting period.

The CO2-e net abatement amount for a project to which the Determination applies is the quantity of methane emissions avoided as a consequence of the project minus emissions from project activities, and is calculated in accordance with the equations set out in Division 4.2.

Division 4.2 Calculations

Subdivision 4.2.1 Preliminary

4.2   General

Section 4.2 clarifies that all calculations are in respect of activities done or outcomes achieved during the project period.

Paragraph 4.2(c) clarifies the version of the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (the NGER (Measurement) Determination), and the National Greenhouse and Energy Reporting Regulations 2008 that must be used if a factor or parameter is not otherwise specified in the Determination or in Schedules 1 to 4 to the Determination.

The reason for this clarification is that the NGER (Measurement) Determination was amended on 1 July 2011. One of the amendments included removing the default value for the fraction of degradable organic carbon dissimilated (DOCf) for solid waste disposal, and replacing this default with individual DOCf values based on each waste mix type. These changes apply to the 2011–2012 financial year.

Subdivision 4.2.2 Calculating the baseline

4.3  Calculating the baseline

Paragraph 106(4)(f) of the Act provides that a methodology determination must specify a method for calculating the baseline for a project.

Subdivision 4.2.2 contains methods for calculating the baseline for projects to which the Determination applies.  The methods are set out in:

• Equation 1, which calculates the actual baseline emissions;
• Equation 2, which calculates the methane generation potential of the degradable organic carbon content of the eligible waste that is diverted;
• Equation 3, which calculates the quantity of each waste mix type present in the eligible waste;
• Equation 4, which sets out a method for adjusting default percentages for waste types; and
• Equation 5, which calculates the quantity of degradable organic content present in the eligible waste diverted by the AWT plant.

Waste mix type percentages, dealt with in Equation 4, are determined by either:

• using the maximum permitted tonnage of the restricted waste mix type (waste that is the subject of a restriction in accordance with a licence or other authorisation relating to the AWT plant) received at the waste diversion plant, where waste is a restricted waste type; or
• by adjusting the default percentages prescribed in Schedule 2 for each unrestricted waste mix type (means waste that is not a restricted waste type), in accordance with Equation 4.

The project baseline is the methane that would have been emitted from a landfill facility if that facility had received the putrescible waste in the absence of the project. This is demonstrated in Figure 3.

The Determination’s approach to calculating greenhouse gas emissions abatement is to estimate the methane production avoided from depositing waste into landfill. Only the methane emissions that are avoided after the capture and destruction of methane at the landfill should be counted. Consequently, the abatement calculation requires an estimation of the net methane production from the landfill.

The Solid Waste Calculator must be used to determine the proportion of methane generation potential that would have been released. The Solid Waste Calculator is available on the Regulator’s website at www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Forms-and-calculators/Pages/default.aspx

Instructions for using the Solid Waste Calculator are set out in Schedule 4 to the Determination.

The baseline also assumes that, in the absence of the project, the waste would be transported to a nearby landfill which would comply with state average landfill performance. These figures are prescribed in Schedule 1 to the Determination.

The assumptions related to waste decomposition, methane generation and oxidation are those underlying the NGER (Measurement) Determination.

The baseline also assumes that the methane generation from the diverted waste materials would have otherwise been migrated through the landfill profile and soil cover. To take into account the proportion of methane that would otherwise have been oxidised in the landfill and soil cover prior to being emitted to the atmosphere the amount of avoided methane generation that can be credited as abatement needs to be reduced by the oxidation factor (OF).

Subdivision 4.2.3 Calculating project emissions (Ep)

4.7     Calculating project emissions (Ep)

Equation 6 outlines the method for calculating project emissions.

Project emissions are:

• fuel emissions from the operation of the AWT plant, calculated in accordance with section 4.8;
• emissions from electricity used by the operation of the AWT plant, calculated in accordance with section 4.9;
• emissions from the composting process, calculated in accordance with section 4.10; and
• emissions from transport, which are calculated in accordance with section 4.11.

Subdivision 4.2.4 Calculating net greenhouse gas abatement

Paragraph 106(1)(c) of the Act provides that a methodology determination must specify a method for calculating the CO2-e net abatement amount for the project in relation to a reporting period.

4.12  Calculating the net abatement (A)

Section 4.12 sets out how the CO2-e net abatement amount for an offsets project is calculated.

4.13  Calculating project abatement for a given reporting period

Section 4.13 provides that the CO2-e net abatement amount for a reporting period is equal to the sum of the abatement for each year in the reporting period, in tonnes of CO2-e.

Once the sum of the abatement for each year is calculated, it must then be multiplied by the global warming potential of methane, and rounded to the nearest tonne of CO2-e.

Section 76 of the Act sets out a number of rules in relation to offsets reports. Paragraph 76(1)(d) provides that the number of years in each reporting period cannot be more than five years.

Part 5 Monitoring, measurement, record-keeping and reporting requirements

Division 5.1 General

5.1   General

The effect of subsection 106(3) of the Act is that a methodology determination may require the project proponent of an eligible offsets project to comply with specified monitoring, record-keeping and reporting requirements.

Under Parts 17 and 21 of the Act, a failure to comply with these requirements may constitute a breach of a civil penalty provision, and a financial penalty may be payable.

The monitoring, record-keeping and reporting requirements specified in this Part are in addition to any requirements specified in the Regulations.

Under the Determination, data must be collected for the following activities at the AWT plant:

• eligible waste accepted by the AWT plant, demonstrated through weighbridge records in accordance with the weighbridge protocol;
• fuel usage for the plant and all equipment at the AWT plant; and
• product outputs (including residual waste to landfill).

Division 5.2 Measuring requirements

5.2  Project measurement

The table contained in section 5.2 sets out the methods for deriving the parameters used to calculate greenhouse gas emissions and project abatement. It describes the method, unit of measurement, measurement procedure and measurement frequency for each parameter used in the calculations. 

5.3   Weighbridge protocol

Section 5.3 specifies the data that must be collected by using a weighbridge.

The weighbridge used in the project is required to be verified in accordance with the methods prescribed in the National Measurement Act 1960. Verification data needs to be reported only in the first offsets report for the project.

The National Measurement Act 1960 is available at http://www.comlaw.gov.au 

Division 5.3 Monitoring and recording requirements

5.4  General

Section 5.4 provides that a project proponent is required to comply with the monitoring and recording provisions set out in Division 5.3.

5.5  Monitoring requirements

Section 5.5 sets out the requirements relating to monitoring. It provides that a project proponent must develop a project monitoring plan that details information about the project, including a project description, details about the organisation carrying out the project, operational information including variables in the baseline and project parameters, and personnel training.

As part of developing and maintaining a project monitoring plan, project proponents should undertake an internal verification program. An example verification program would include:

• Weighbridge data:

        verify two daily periods of the weighbridge data;

        verify two month periods of the weighbridge data; and

        verify annual totals and calculation methodologies.

• Electricity consumption:

        verify calculation methodology;

        verify two month periods are accurate and complete; and

        verify annual totals and calculation methodologies.

• Fuel consumption:

        verify calculation methodology;

        verify two month periods are accurate and complete; and

        verify annual totals and calculation methodologies.

The project monitoring plan should also undergo a review process to ensure that it is up to date and accurate. As an example, this review could include:

• Whether the database for aggregate inventory identifies sources (operational sites) of energy, waste and production data;
• Whether data import from weighbridge systems, fuel and electricity accounts match with that recorded in the data input matrix of the spread sheet used for each month;
• A review of the definitions of the input and outputs of the process to ensure that they are correct and relevant;
• Verification, by sample, that measuring units for all data are consistent and accurately compiled;
• Identification of two sample monthly periods and auditing of each step, from initial data collection at the weighbridge to the final position for each month;
• Whether the most appropriate emission factors, energy content, and other parameters from the NGER (Measurement) Determination are applied;
• Verification that all calculations within each period are correct and appropriate;
• Verification that the summary of the periods is correct and appropriate; and
• Investigation of any discrepancies.

Division 5.4 Record-keeping requirements

5.6  Records that must be kept

Section 5.6 specifies the records that must be kept as part of a project to which the Determination applies.

This includes the project monitoring plan, as well as general information about equipment used in the project, and data relating to values and calculations performed in Part 4.

Division 5.5 Offsets report requirements

5.7  Report requirements

Section 5.7 sets out the information that must be included in all project offsets reports that are submitted to the Regulator.

Under the Act, a project proponent may choose when to report, provided that the period between reports is not shorter than 12 months or longer than 5 years.

Offsets reports are the primary mechanism used by the Regulator to, among other things:

•   determine whether or not to issue ACCUs for an eligible project; and
•   take action to vary or revoke a project.

Failure to provide an offsets report or taking action to avoid submitting an offsets report to the Regulator is an offence that may attract a civil penalty under section 76 of the Act.

Under the Act, the first reporting period for an eligible offsets project begins when the project is declared eligible by the Regulator or, if agreed by the proponent, at another specified date no earlier than 1 July 2010. The project proponent is required to nominate an end date for the reporting period, and must submit an offsets report within three months of the nominated end date. Under the Act, each subsequent reporting period begins immediately after the previous reporting period.

Schedule 1—Average state or territory based landfill gas capture rates

The table in Schedule 1 provides the average state or territory based landfill gas capture rates, which were calculated using data from the National Inventory Report 2010.

The National Inventory Report can be found at: www.climatechange.gov.au/publications

Schedule 2—Percentage of waste mix types

Schedule 2 provides a list of the percentage of the total waste tonnage for each waste mix type and a calculation to adjust for the limits imposed on restricted waste mix types to which the waste diversion plant is subject under licence or other conditions.

Schedule 3—Waste mix types, degradable organic carbon content and DOCF values

Schedule 3 lists waste mix types, degradable organic carbon content and ‘fraction of degradable organic carbon’ values (DOCFi).

Schedule 4—Instructions for using the Solid Waste Calculator

Schedule 4 provides instructions for using the Solid Waste Calculator.