A former senior executive of the Clean Energy Regulator is establishing a new standards and certification scheme to reduce risks for businesses that buy carbon credits.
Raphael Wood, who held senior roles at the Regulator from 2010 to 2015 and is now managing director of Market Advisory Group, has founded a new Australian Carbon Standards Association and together with the CSIRO is seeking Queensland government support to help launch it.
They are seeking funding through the Queensland government's Land Restoration Fund (see background here), as well as from the federal government, and Wood expects other state governments will also be interested in providing backing.
The aim of the scheme is to develop a set of robust standards for estimating the amount of carbon abatement that individual projects are likely to deliver, and to establish an assurance framework to independently check that the estimates were properly calculated.
According to Wood, the scheme is essential if the domestic carbon market is to attract more buyers, because it will give them greater confidence to sign long-term contracts.
He compared it to the JORC code used to estimate ore reserves in the mining industry.
As with JORC, the assurance part of the proposed scheme would provide certification by a competent person that the estimate calculated by the carbon project proponent "is a bankable number against the standard", Wood said.
This assurance process is a vital part of the evolution of the carbon market, he said.
Delivery risk managementWood noted that large emitters are increasingly "looking at how they enter the carbon market and how they procure carbon offsets", but they lack the market insights available to the Clean Energy Regulator.
A robust standards scheme would give large companies more confidence about abatement volumes and would help small landholders find buyers willing to sign long-term contracts, he said.
The scheme would also prove useful as more capital-intensive carbon abatement projects start to emerge, he added.
The financial structures to support these projects will require carbon contracts to be in place, and a standards and assurance scheme would help make that possible, Wood said.
First standard aimed at regeneration projectsWood says the first standard would be for human-induced vegetation regeneration projects, which dominate the Emissions Reduction Fund.
This would be completed by the end of 2019 and standards for other types of ERF vegetation-based abatement projects would then follow.
The Australian Carbon Standards Association will be a not for profit, industry-run organisation, and the standard-setting committee would have representatives from the carbon industry, large emitters and science agencies.