EXPLANATORY STATEMENT
Carbon Credits (Carbon Farming Initiative) Act 2011
Carbon Credits (Carbon Farming Initiative) Methodology (Transport) Determination 2014
EXPOSURE DRAFT
Background: Emissions Reduction Fund
The Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act 1) enables the crediting of
greenhouse gas abatement from emissions reduction activities across the economy.
Greenhouse gas abatement is achieved either by reducing or avoiding emissions or by
removing carbon from the atmosphere and storing it in soil or trees.
In 2014, the Australian Government introduced the Carbon Farming Initiative Amendment
Bill 2014, which establishes the Emissions Reduction Fund (ERF). The ERF expands on the
Carbon Farming Initiative (CFI) by extending the scope of eligible emissions reduction
activities and by streamlining existing processes. The ERF has three elements: crediting
emissions reductions, purchasing emissions reductions, and safeguarding emissions
reductions.
Emissions reduction 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 to make, by legislative instrument, a
methodology determination. The purpose of a methodology determination is to establish
procedures for estimating abatement (emissions avoidance or sequestration) from eligible
projects and rules for monitoring, record keeping and reporting. These methodologies will
ensure that emissions reductions are genuine—that they are both real and additional to
business as usual.
In deciding to make a methodology determination the Minister must have regard to the advice
of the Emissions Reduction Assurance Committee (ERAC), an independent expert panel that
will be established to advise the Minister on proposals for methodology determinations. The
Minister will also consider any adverse environmental, economic or social impacts likely to
arise as a result of projects to which the determination applies.
The Carbon Farming Initiative Amendment Bill 2014 also provides a process for an Interim
ERAC to advise on draft methodology determinations before the Bill is passed by Parliament.
In particular, clause 393 of Schedule 1 to the Carbon Farming Initiative Amendment Bill
2014 enables the advice of the Interim ERAC to be used in the place of advice of the statutory
ERAC after the Bill commences. It is intended that consultation on this exposure draft be
used to inform the advice of the Interim ERAC under that provision.
The ERAC (or Interim ERAC) must include in its advice to the Minister the Committee’s
opinion on whether the proposed determination complies with the proposed offsets integrity
standards to be set out in section 133 of the Act. The offsets integrity standards require that an
eligible project should result in carbon abatement that is unlikely to occur in the ordinary
course of events and is eligible carbon abatement under the Act. In summary, the offsets
integrity standards also include that:
1
All references to ‘the Act’ in this document refer to the Carbon Credits (Carbon Farming Initiative)
Act 2011, as if amended by the Carbon Farming Initiative Amendment Bill 2014 (as introduced into
the Senate on 26 June 2014).
1
• amounts are measurable and capable of being verified;
• the methods used are supported by clear and convincing evidence;
• material emissions which are a direct consequence of the project are deducted; and
• estimates, assumptions or projections used in the determination should be
conservative.
Offsets projects that are undertaken in accordance with the methodology determination and
approved by the Clean Energy Regulator (the Regulator) can generate Australian Carbon
Credit Units (ACCUs), representing emissions reductions from the project.
Project proponents can receive funding from the ERF by submitting their projects into a
competitive auction run by the Regulator. The Government will enter into contracts with
successful proponents, which will guarantee the price and payment for the future delivery of
emissions reductions.
Further information on the ERF is available on the Department of the Environment website,
www.environment.gov.au/emissions-reduction-fund.
Background: Transport
The transport sector represents 15 per cent of Australia's annual emissions and offers potential
for emissions reductions across the range of transport modes and vehicle categories,
including light and heavy vehicles, air, rail and sea.
The Exposure Draft Carbon Credits (Carbon Farming Initiative) Methodology (Transport)
Determination 2014 (the draft Determination) provides for crediting emissions reductions
achieved through a reduction in the emissions intensity of transportation (i.e. emissions per
unit of transportation service). The draft Determination includes different emissions intensity
service units to reflect the different types of services that vehicle categories provide, for
example, passenger-kilometre (pkm) or tonne-kilometre (tkm). Along with road, rail, air and
sea transport, the draft Determination provides for crediting emissions reductions from mobile
equipment (for example, mining trucks or agricultural machinery).
The draft Determination provides for crediting emissions reductions based on changes to
emissions intensity rather than changes to absolute emissions. This provides for crediting
emissions reductions when the level of service expands, and ensures credits are not provided
for emissions reductions achieved through a contraction of the same.
The draft Determination is activity neutral to support a broad range of activities to reduce
emissions intensity within the transport sector, including:
•
replacing existing vehicles;
•
modifying existing vehicles;
•
changing energy sources (that is, fuel switching) or the mix of energy sources; and
•
changing operational practices.
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This draft Determination includes two sub-methods to quantify reductions in emissions
intensity, to provide flexible options for different types of transport projects and business
structures.
• Sub-method 1 credits emissions reductions from a group of vehicles where vehicles of
the same vehicle category are treated as a single entity, against a historically-derived
baseline, which for some vehicle categories improves over time. Emissions reductions
from different vehicle categories are then aggregated. This sub-method is likely to be
suitable for large vehicle fleets such as hire car companies or public bus fleets.
• Sub-method 2 credits emissions intensity reductions achieved by individual vehicles,
where baselines are tailored to the vehicle and activity being undertaken. This submethod is likely to be suitable for proponents with disaggregated, vehicle-specific
data, such as aviation and shipping. Emissions reductions from multiple individual
vehicles are then aggregated.
Application of the draft Determination
The draft Determination sets out the detailed rules for implementing and monitoring offsets
projects that would reduce emissions of greenhouse gases by reducing the emissions intensity
of transportation. These rules have been designed to help ensure that emissions reductions are
real and additional to business as usual.
Project proponents wishing to implement projects under the draft Determination, once it is
made, must make an application to the Regulator under section 22 of the Act. They must also
meet the general eligibility requirements for an offsets project set out in subsection 27(4),
which include compliance with the requirements set out in the draft Determination, and the
additionality requirements in subsection 27(4A) of the Act. The additionality requirements are:
• the newness requirement;
• the regulatory additionality requirement; and
• the government program requirement.
Subsection 27(4A) of the Act provides that a methodology determination may specify
requirements in lieu of any of the above requirements. The draft Determination does not
specify any requirements in lieu, and so all three requirements in the Act apply to eligible
transport projects.
Public Consultation
The draft Determination has been developed by the Department of the Environment in
collaboration with a technical working group of experts from the transport industry and the
Regulator. The transport sector technical working group held meetings on 28 November
2013, 19 February 2014, 8 May 2014 and 23 July 2014. The technical working group has
reviewed several draft versions of this methodology prior to release of this draft
Determination for public consultation.
The exposure draft of the Determination has been published on the Department’s website for
public consultation from 15 October 2014 to 12 November 2014. Details for how to make
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a submission are provided on the Department of the Environment website,
www.environment.gov.au
Draft Determination Details
The draft Determination will be a legislative instrument within the meaning of the Legislative
Instruments Act 2003.
Details of the draft Determination are at Attachment A.
Note on this explanatory statement
Numbered sections in this explanatory statement align with the relevant sections of the draft
Determination.
Definitions for terms which are highlighted in bold italics can be found in the draft
Determination.
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Attachment A
Details of the Methodology Determination
Part 1
1
Preliminary
Name
Section 1 sets out the full name of the draft Determination, which would be the Carbon
Credits (Carbon Farming Initiative) Methodology (Transport) Determination 2014.
2
Commencement
Section 2 provides that the draft Determination would commence on the day after it is
registered.
3
Authority
Section 3 provides that the draft Determination would be made under subsection 106(1) of the
Act.
4
Duration
Under subparagraph 122(1)(b)(i) of the Act, a methodology determination remains in force
for the period specified in the determination.
Paragraph 4(a) provides that the draft Determination will be in force from commencement
until the day before it would otherwise be repealed under subsection 50(1) of the Legislative
Instruments Act 2003.
Instruments are repealed under that provision on the first 1 April or 1 October following the
tenth anniversary of registration on the Federal Register of Legislative Instruments.
Paragraph 4(b) ensures that the draft Determination would expire in accordance with
subparagraph 122(1)(b)(i) of the Act.
If the draft Determination expires or is revoked during a crediting period for a project to
which the draft Determination applies, the draft Determination will continue to apply to the
project during the remainder of the crediting period under subsections 125(2) and 127(2) of
the Act. Project proponents may apply to the Regulator during a reporting period to have a
different methodology determination apply to their projects from the start of that reporting
period (see subsection 128(1) of the Act).
5
Definitions
Section 5 defines a number of terms used in the draft Determination.
Generally, where terms are not defined in the draft Determination, they have the meaning
given by section 5 of the Act.
5
Under section 23 of the Acts Interpretation Act 1901, words in the determination in the
singular number include the plural and words in the plural number include the singular.
Key definitions in section 5 of the draft Determination include those set out below.
duty cycle, for a vehicle, means the kind of work done by the vehicle.
• The duty cycle of a vehicle is a large driver of the emissions intensity of a given
vehicle or group of vehicles. For example, a truck performing interstate line haul is
likely to have lower emissions intensity than the same type of truck performing
regional line haul, because the latter is likely to involve more stops and more urban
driving than the former.
• Duty cycle thus plays an important role in the transport method to ensure that
emissions intensity reductions are achieved through additional activities, rather than
through changes to a vehicle’s duty cycle.
emissions intensity means emissions produced compared with service output (or work done).
• In the transport method emissions reductions are calculated based on reductions in
emissions intensity, rather than reductions in absolute emissions. This is to allow a
business to expand or contract and still be credited with real emissions reductions. The
emissions intensity is calculated as the emissions per quantity of services, where the
quantity of services are measured in service units (see service unit below).
service unit means a unit of measure set out in the table in clause 1 of Schedule 1.
• The service unit is a unit of measure for the services performed by the vehicles. The
service unit is prescribed for each vehicle category, based on the type of work that
vehicle category commonly does. For example, the service unit for vehicle categories
that provide freight transport is tonne-kilometre (tkm), whereas the service unit for
vehicle categories providing passenger transport is passenger-kilometre (km).
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Part 2
6
Transport projects
Transport projects
The effect of paragraphs 27(4)(b) and 106(1)(a) of the Act is that a project must be covered
by a methodology determination, and that the methodology determination must specify the
kind of offsets project to which it applies.
Section 6 provides that the draft Determination would apply to an offsets project that involves
a reduction in emissions intensity of existing transport activities. The project must involve
one or more instance of replacing vehicles, modifying existing vehicles, changing energy
sources or the mix of energy sources, or changing operational practices. The draft
Determination defines these kinds of projects as transport projects.
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Part 3
Project Requirements
Division 1
General requirements
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Operation of this Part
The effect of paragraph 106(1)(b) of the Act is that a methodology determination must set out
requirements that must be met for a project to be an eligible offsets project. Under
paragraph 27(4)(c) of the Act, the Regulator must not declare that a project is an eligible
offsets project unless the Regulator is satisfied that the project meets these requirements.
Part 3 of the draft Determination specifies a number of requirements that must be met in order
for a project to be an eligible offsets project.
A key requirement under both the ERF and the CFI is that credits are issued for emissions
reductions that are ‘additional’ - that is, emissions reductions would not likely have occurred
under normal business conditions, in the absence of the ERF. The newness, regulatory
additionality and government program requirements are additionality requirements specified
in subsection 27(4A) of the Act. These requirements are sufficient for eligible transport
projects and therefore the draft Determination does not specify requirements in lieu of those
in the Act.
8
Projects must use one sub-method
Section 8 allows proponents to choose between two sub-methods for calculating abatement.
This section requires that the same sub-method be used for each reporting period of the
project. This is to ensure that abatement is calculated in a comparable way throughout the
project.
Some vehicle categories are ineligible to use one or other of the sub-methods, given lower
confidence in crediting real and additional emissions reductions. This is to ensure the draft
Determination is in line with the offsets integrity standards.
Mobile equipment is excluded from using sub-method 1 because the sub-method relies on a
decline rate to account for business as usual emissions intensity reductions. The diversity of
mobile equipment means that there is not appropriate data on which to base this decline rate.
Light vehicles (passenger vehicles, motorcycles and light commercial vehicles) are excluded
from sub-method 2. This ensures that the sub-method does not credit business as usual
emissions reductions associated with fast vehicle turnover (in comparison to a crediting
period) and rapid improvement of the new vehicle fleet.
9
Service units for vehicle categories
Section 9 prescribes the service units to be used for each vehicle category and sub-method.
For some vehicle categories proponents may choose between different service units. The
service units are listed in Schedule 1.
Proponents must use a prescribed service unit for the sub-method chosen, and the same
service unit must be used for each reporting period of the project. This is to ensure that
abatement is calculated in a comparable way throughout the project.
8
Applicable only to sub-method 2, section 9 includes the rules for converting passengers to
tonnes where a vehicle category may carry both passengers and freight and the prescribed
service unit is in tonne kilometres.
See Schedule 1 of this explanatory statement for more information on service units.
10
Projects must use data from domestic activities only
Section 10 requires that data used for the calculation of net abatement must be from domestic
activities only, that is, does not include emissions from international aviation and
international maritime activities, including from activities in preparation for or as part of an
international trip or voyage. All movements between domestic ports are considered
Australian, all movements from a domestic port to an international destination are considered
international. Australia includes Australian external Territories, the exclusive economic zone
(EEZ) and airspace above the EEZ. This ensures that emissions reductions achieved under the
draft Determination are eligible carbon abatement, and count towards Australia’s 2020
emissions reductions target.
For example, if an aircraft flies from Perth to Sydney and then an international destination, the
first flight leg is considered a domestic trip (and therefore the associated fuel use and
greenhouse gas emissions are included in the project calculations), while the second leg is
considered an international trip (and the associated fuel use and emissions are totally
excluded). The point at which it is considered international occurs when the aircraft begins to
prepare for the international trip in Sydney, for example, adds fuel, changes gate or takes on
passengers, cargo or catering in preparation for the second leg.
11
Projects must have data from previous years
Section 11 requires that proponents have the data from previous years that is required in the
calculation of carbon dioxide equivalent net abatement amount. For sub-method 1, historic
data is required for the three years prior to project declaration. This ensures that data on
which the baseline is derived reflects recent, actual performance of the group of vehicles.
For sub-method 2 historic data is required for each vehicle for the three years prior to the
commencement of the reporting period in which the vehicle is first included in the project..
Similarly, this ensures that the baseline data reflects the recent actual performance of the
vehicle, recognising that in sub-method 2, vehicles are likely to be added to the project over
time..
Division 2
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Requirements for particular sub-methods
Operation of this Part
The effect of paragraph 106(1)(b) of the Act is that a methodology determination must set out
requirements that must be met for a project to be an eligible offsets project. This division sets
out requirements specific to each of the sub-methods.
9
13
Using sub-method 1(group of vehicles)
The draft Determination provides that a project using sub-method 1 is conducted on a group
of vehicles. The group must be made up of all vehicles in one or more vehicle categories in
one or more operations or business units. Requiring all the vehicles in a given category
reduces the risk of leakage of emissions to other parts of the operation. Each vehicle category
within the group is treated as a single unit, which allows for more streamlined and simple
calculations, monitoring and reporting.
Because each vehicle category within the group is treated as a single entity for the purposes of
calculating the net abatement amount (including data requirements), individual vehicles may
move in and out of the group over time for commercial reasons (for example seasonal
scheduling or to replace another vehicle that is not operating for maintenance). However, a
vehicle cannot be moved to or from a related group of vehicles that is outside the project for
the dominant purpose of producing eligible abatement for the project. This is to reduce the
risk of leakage and scope for intentionally shifting high emissions intensity vehicles from the
project to another part of the operation, or intentionally shifting low emissions intensity
vehicles into the project from another part of the operation.
14
Using sub-method 2
The draft Determination requires that a project using sub-method 2 involves monitoring and
treatment at the individual vehicle level, with abatement from multiple individual vehicles
aggregated.
Passenger vehicles, motorcycles and light commercial vehicles are excluded from using submethod 2 because of the higher risk of crediting non-additional abatement than for other
vehicle categories due to the high fleet turnover and the fast rate of improvement of the new
vehicle fleet (this is less of a risk in sub-method 1 due to the decline rate applied to the
historic emissions intensity).
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Part 4
Net abatement amount
Division 1
Operation of this Part
15
Operation of this Part
Paragraph 106(1)(c) of the Act provides that a methodology determination must specify how
to calculate the carbon dioxide equivalent (CO 2 -e) net abatement amount for the project in
relation to a reporting period.
16
Overview of gases accounted for in abatement calculations
This section provides a summary of the greenhouse gas sources that are assessed in order to
determine the net abatement amount. The emission sources which need to be taken into
account when calculating abatement for the project are the carbon dioxide (CO 2 ), methane
(CH 4 ) and nitrous oxide (N 2 O) from fuel combustion for transport purposes, and scope 2
emissions from electricity when it is used as a transport fuel.
A number of emissions sources are excluded from the abatement calculations for the
following reasons:
17
•
Emissions from fuel extraction and processing, fuel blending and fuel transport are
excluded as they are scope 3 emissions. This is consistent with the National Inventory
Report and the NGER (Measurement) Determination, and also prevents the potential
for double counting of abatement from another project/facility for which these are
scope 1 emissions.
•
Emissions from fuel storage and dispensing have been excluded. Where fuel storage
and dispensing occurs offsite, they are scope 3 emissions, and so are excluded as
above. Where fuel storage and dispensing occurs onsite they are likely to be
comparable in the baseline and project scenarios.
•
Emissions from the transport facility electricity use, vehicle and facility maintenance,
vehicle manufacture, new vehicle transportation and vehicle decommissioning are
considered comparable in the baseline and project cases. Further, some of the sources
are likely to be immaterial, and impractical for project proponents to access this
information.
References to factors and parameters from external sources
The calculation of the net abatement amount in the draft Determination includes factors taken
from other sources, such as emissions factors from the NGER (Measurement) Determination.
The draft Determination specifies that such factors or parameters should be taken from the
version of the external source that is current at the time of reporting emissions reductions from
the project or at the time the report is required to be given to the Regulator (whichever is
earlier).
The requirement to use versions of referenced documents current at the earlier of the time the
offsets report is submitted or the time the report is due does not apply to the emissions factor
for electricity. The draft Determination states that the relevant grid-based emissions factor for
electricity must be derived from the National Greenhouse Accounts (NGA) Factors
document in force on the day the project is declared an eligible offsets project.
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Division 2
18
Sub-method 1 (group of vehicles)
Summary of sub-method
Section 18 provides a summary of how sub-method 1 calculates the net abatement amount.
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Net abatement amount
Subsection 19(1): The carbon dioxide equivalent net abatement amount (equation 1)
The carbon dioxide equivalent net abatement amount for an eligible offsets project using submethod 1 is set out in equation 1. The net abatement amount is the baseline emissions
(worked out using equation 2) minus the project emissions (worked out using equation 12).
Subsection 19(2): Baseline emissions (equation 2)
Baseline emissions are calculated by summing across all vehicle categories the product of the
baseline emissions intensity (worked out using equation 3) and the project quantity of service
(determined in accordance with the monitored parameters, section 29).
Subsection 19(3):Baseline emission intensity (equation 3)
The baseline emissions intensity of each vehicle category is calculated using equation 3. It is
calculated as the historic emissions intensity (worked out using equation 4) for the vehicle
category multiplied by the decline rate specific to the vehicle category (found in schedule 3 of
the draft Determination) to the power of the year of the project in which the report is
submitted or was due to be submitted.
Projects that have more than one vehicle category must perform calculations for each vehicle
category to ensure that decline rates are applied to the appropriate types of vehicles. The
decline rates in Schedule 3 of the draft Determination are based on data from the Centre for
Transport, Energy and the Environment Australian Transport Facts 2014. The decline rates
represent the observed changes in emissions intensity in each vehicle category across the
Australian economy based on the prescribed service unit. Relevant decline rates are applied to
the historic emissions intensity of each vehicle category in the project in order to define a
baseline. Note that some vehicle categories have a decline rate of 1: for these categories there
has been no observed improvement in emissions intensity.
The power term in equation 3 is the year in which the offsets report is submitted or was due to
be submitted, where year y = 1 commences at project declaration. There are two main
implications for this:
•
The baseline decline starts from project declaration, even if the activity has not begun
until after declaration. This is because the basis for using a decline rate in the submethod is that some types of groups of vehicles have shown improvement over time.
That business as usual improvement is not expected to stop at declaration.
•
If a reporting period is longer than one year, or straddles over two years of the project
the baseline will be set using the later year, as there is no mechanism to apportion
abatement between years within a single reporting period.
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Subsection 19(4): Historic emissions intensity (equation 4)
The historic emissions intensity for each vehicle category is set at the minimum emissions
intensity of the three years prior to project declaration (worked out using equation 11A or
11B).
Using the lowest emissions intensity minimises the risk of crediting non-additional emissions
reductions achieved through normal variations in emissions intensity.
For discussion – requirement to distinguish data by vehicle category in sub-method 1
In sub-method 1, operational data on fuel consumption and transport services are required to
be collected at the level of vehicle category. This is to ensure the estimate of abatement is as
robust as possible: the decline rates are based on the observed historic emissions intensity
improvements by vehicle category.
However, there may be circumstances in which data cannot be disaggregated by vehicle
category, precluding the use of sub-method 1.
The Department invites information from stakeholders who believe that they could not
perform the required disaggregation for a proposed/hypothetical project. Key information
sought includes:
• vehicle category composition of the transport operation or business unit; and
• operational data collection and management processes, including reasons why the data
cannot be disaggregated at the vehicle category level by the proponent and
impediments to collecting or recording data to allow for vehicle category
disaggregation.
Division 3
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Sub-method 2 (aggregated individual vehicles)
Summary of sub-method
This section provides a summary of how sub-method 2 calculates the net abatement amount.
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Net abatement amount
Subsection 21(1): Carbon dioxide equivalent net abatement (equation 5)
The carbon dioxide equivalent net abatement amount for an eligible offsets project using submethod 2 is set out in equation 5. The net abatement amount is the sum of abatement from
each vehicle in the project.
If the vehicle has retained its original duty cycle for more than 80 per cent of the reporting
period then its abatement is the baseline emissions (worked out using equation 6) minus the
project emissions (worked out using equation 12).
If the vehicle is a replacement vehicle that has the same duty cycle as the vehicle it replaced,
and the replaced vehicle is sold or disposed of within 30 days, then the abatement is the
baseline emissions (worked out using equation 6) minus the project emissions (worked out
using equation 12).
If neither of the above are true for a vehicle then the abatement for that vehicle is zero. This is
to limit the risk that the emissions reductions credited are non-additional.
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The provision regarding changing duty cycle for 20 per cent or more of the time recognises
that normal business operations may require changes to a vehicle’s duty cycle while
minimising the risk of crediting non-additional abatement.
Replaced vehicles must be disposed of within 30 days prior to or after the commencement of
operation of the replacement vehicle to ensure that the activity is a valid replacement, rather
than an additional vehicle being added to the fleet.
Subsection 21(2): Baseline emissions for an individual vehicle (equation 6)
Baseline emissions for an individual vehicle are worked out using equation 6. It is the
baseline emissions intensity of the vehicle (worked out using equation 7A, 7B, or 7C as
appropriate) multiplied by the project quantity of service (determined in accordance with the
monitored parameters table in section 29).
Subsection 21(3): Baseline emissions intensity for an individual vehicle (equation 7A, 7B, and
7C)
The baseline emissions intensity for an individual vehicle is worked out using equation 7A,
7B, and 7C. There are specific baseline setting rules that must be used depending on the
activity that is occurring and the type of vehicle.
If the vehicle is not replaced equation 7A is used, where the baseline emissions intensity is set
as the historical emissions intensity of the vehicle (worked out using equation 8). This is
because the emissions intensity of a single vehicle is not expected to improve over time in the
absence of any specific emissions reduction activities.
If a vehicle is replaced, equation 7B is used, where the baseline for the replacement vehicle
must be set at the lower of the historic emissions intensity of the vehicle which is being
replaced (worked out using equation 9) and the average emissions intensity of the vehicles
within the reference group (worked out using equation 10). This is because if a vehicle is
being replaced, the business as usual replacement would be expected to be either similar to
the vehicle that it is replacing, or similar to all the other comparable vehicles in the operation.
By choosing the lower emissions intensity of the two as the baseline, lowers the risk of
crediting non-additional abatement.
If the replacement vehicle is a new vessel over 400 gross tonnages, equation 7C is used. Under
Marine Order 97, new vessels over 400 gross tonnage must comply with the required Energy
Efficiency Design Index (EEDI) as stipulated in MARPOL Annex VI. This regulation sets a
target for the energy efficiency for new vessels over 400 gross tonnes in grams of CO 2 per
tonne-nautical mile. The EEDI effectively creates a regulatory baseline, and so is used as the
baseline for replacement vehicles that are required to comply with it. The EEDI target must be
converted to tonnes CO 2 -e per tonne kilometre, which is worked out in Subsection
21(3).
Subsection 21(4): Historic emissions intensity for vehicles that are not being replaced
(equation 8)
For vehicles that are not being replaced, the historic emissions intensity is worked out using
equation 8. The historic emissions intensity is the lowest emissions intensity (worked out
using equation 11A) of the vehicle in the three years prior to the start of the reporting period
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in which it is first included the project. It is selected as the lowest of the three years to reduce
the risk of crediting normal variations in the emissions intensity of the vehicle.
Subsection 21(5): Historic emissions intensity for replaced vehicles (equation 9)
For vehicles that have been replaced, the historic emissions intensity is worked out using
equation 9. The historic emissions intensity is the lowest emissions intensity (worked out
using equation 11A) of the replaced vehicle in the three years prior to the start of the
reporting period in which the replacement vehicle is first included in the project. It is selected
as the lowest of the three years to reduce the risk of crediting normal variation in the
emissions intensity of the vehicle.
Subsection 21(6): Reference group emissions intensity (equation 10)
The reference group emissions intensity is worked out using equation 10. It is worked out by
calculating the average emissions intensity of all vehicles in a reference group (using equation
11A) for each of the three years prior to the start of the reporting period in which the
replacement vehicle is first included in the project and taking the lowest value.
The reference group is all the vehicles in the same transport operation or business as the
replaced vehicle that has the same vehicle category or vehicle sub-category and comparable
duty cycle to the replaced vehicle. A vehicle sub-category can be identified on the basis of
type, gross vehicle mass or passenger capacity, as appropriate.
Division 4
Calculating emissions intensity
Subsection 22(1): Emissions intensity (equation 11A and 11B)
Equation 11A is a general calculation for emissions intensity which is called upon throughout
the calculations. Emissions intensity is defined as the emissions (worked out using equation
12) divided by the quantity of service (determined in accordance with the monitored
parameters, section 29). The units of emissions intensity are therefore dependent on the
service unit used to measure the quantity of transport services.
For sub-method 1, the emissions and quantity of services used are the total emissions and
total quantity of services for all vehicle categories within the group for the period concerned.
Where fuel consumption cannot be measured for a group of passenger vehicles under submethod 1, equation 11B may be used. The emissions intensity of the group may be calculated
as the average of the ‘label rate’ emissions intensities from the Green Vehicle Guide. This
recognises that some proponents (for example hire car companies) may have access to
quantity of services data but not quantity of fuel consumed, which would preclude them from
participating. Using the Green Vehicle Guide ‘label rate’ to set the emissions intensity for the
group of vehicles is a conservative approach, as in-service emissions intensities tend to be
higher than the label rate. This is more acutely so for older vehicles. Projects that use label
rates will only be credited for emissions reductions from vehicle replacements (as reductions
in fuel use due to other activities cannot be measured), where the replacement vehicles’ Green
Vehicle Guide emissions intensity are compared against the replaced vehicles’.
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For sub-method 2, the emissions intensities are only ever calculated on an individual vehicle
basis. As such, emissions and quantity of services must correspond to a single vehicle for the
period concerned.
Subsection 22(2): Emissions (equation 12)
Emissions are calculated using equation 12. In the draft Determination, emissions sources that
must be included in the calculation are emissions from transport fuel use (worked out using
equation 13), and, if applicable, emissions from electricity when it is used as a transport energy
source (worked out using equation 14).
Subsection 22(3): Emissions from transport fuel use (equation 13)
Emissions from transport fuel are worked out using equation 13, based on the quantity of
each type of fuel used (determined in accordance with the monitored parameters, section 29).
Default emissions factors and energy content for each fuel are taken from the NGER
(Measurement) Determination.
Subsection 22(4) Emissions from consumed electricity (equation 14)
Emissions from electricity are worked out using equation 14, based on the quantity of
electricity used as a transport fuel (determined in accordance with the monitored parameters,
section 29) multiplied by the relevant scope 2 grid-based electricity emissions factor
(determined in accordance with Schedule 2).
The electricity emission factor is determined from the National Greenhouse Accounts Factors
published by the Department of the Environment, and will apply unchanged from the date of
project declaration. If the electricity is from a source other than an electricity grid included in
the National Greenhouse Accounts Factors then the project should apply the factor provided
by the supplier of the electricity or if that factor is not known then a factor for off-grid
electricity should be used.
This approach applies across all emission reduction methodologies that require calculation of
electricity emissions.
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Part 5
Reporting, record keeping and monitoring requirements
Division 1
Offsets report requirements
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Operation of this Part
Subsection 106(3)(a) of the Act provides that a methodology determination may require the
project proponent of an eligible offsets project to comply with specified 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 Part 5 of the draft
Determination are in addition to any requirements specified in the Act and subordinate
legislation.
24
Offset report requirements
The Act and subordinate legislation provide for flexible reporting periods between six months
and two years in duration. Proponents should be aware that the Act and subordinate
legislation may also specify other reporting and notification requirements affecting the draft
Determination.
Aside from the offset report requirements in the Act and subordinate legislation, proponents
are also required to report any changes to the emissions reductions activities from what was
stated at project declaration. This recognises that, given the diversity of activities that could
be undertaken and allowed under the draft Determination that proponents may seek to change
the scope, timing or type of activities over the course of the crediting period.
25
Division of project into smaller projects
Sub-section 77A(2) of the Act provides rules under which a proponent can divide an overall
project into parts for the purpose of submitting offset reports and applying for certificates of
entitlement.
For sub-method 1, the draft Determination provides for dividing a project down to the level of
all vehicles in a vehicle category for a particular business unit or operation. For sub-method 2,
the draft Determination provides for dividing a project down to the level of a single vehicle.
Division 2
26
Record keeping requirements
Operation of this Division
The effect of paragraph 106(3)(c) of the Act is that a methodology determination may require
the project proponent of an eligible offsets project to comply with specified record-keeping
requirements.
27
Record keeping requirements
Section 27 sets out the record keeping requirements for a transport project.
Aside from the Act and subordinate legislation, the draft Determination requires information
to be kept for each vehicle to provide evidence for the calculation of net abatement in Part 4
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of the draft Determination and fulfilment of specific project requirements. These include
registration numbers of the vehicles, record of vehicle sales, disposal and movement
information, selection of reference group and records of reasons for vehicle movements.
Division 3
28
Monitoring requirements
Operation of this Part
Subsection 106(3)(d) of the Act provides that a methodology determination may require the
project proponent of an eligible offsets project to comply with specified monitoring
requirements.
Monitored parameters are measured according to the instructions provided in Part 5 of the
draft Determination. In general monitored parameters refer to requirements specified in the
NGER (Measurement) Determination.
29
Monitoring service units and fuel use
Section 29 sets out the requirements for monitoring the quantity of service, fuel use and
electricity use which are inputs into the calculations of the net abatement amount in Part 4 of
the draft Determination.
30
General monitoring requirements
The draft Determination requires that measurement procedures meet relevant specifications in
the NGER (Measurement) Determination or other relevant standards and other requirements
under the National Measurement Act 1960.
Any equipment or device used to monitor a parameter must be calibrated by an accredited
third party technician at intervals, and using methods, that are in accordance with the
manufacturer’s specifications.
Schedule 1 Service Units
1
Service units
Schedule 1 prescribes the service units for each sub-method in accordance with the vehicle
category.
The service units under sub-method 1 are consistent with the service units on which decline
rates are based.
In some instances, service units under sub-method 2 are different to those under sub-method
1. This is to ensure that abatement calculated under the sub-method is additional. The pkm
(cruising) and tkm (cruising) metrics for aviation have been included to minimise the impact
of an individual aircraft changing the relative proportions of different routes flown, thus
affecting the emissions intensity. This issue is most acute in aviation as the emissions intensity
of individual routes varies significantly depending on the length of the route. Aviation
proponents using sub-method 2 are required to measure and record data continuously and are
able to identify the data corresponding to the cruising quantity of service.
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For discussion – service units in sub-method 2
Unlike sub-method 1 which must prescribe service units that match those used in external
data sources to establish decline rates, there may be scope for sub-method 2 to include
additional service units other than those currently prescribed. For some projects, a different
service unit might be more appropriate.
The Department considers that allowing proponents complete discretion to choose any service
unit in sub-method 2 could reduce the rigour of the method, with potential to credit nonadditional abatement. To address this, the Department proposes the inclusion of a list (in
Schedule 1 of the draft Determination) of service units that are available for use in sub- method
2.
The Department invites stakeholder views on whether there are other service units that are
appropriate to include in sub-method 2. Submissions should include:
• the service unit and to which vehicle category/ies it applies;
• evidence of that service unit’s impact on vehicle emissions;
• where relevant, ways to manage the risks of crediting non-additional or non-real
emissions reductions that may arise with the use of that service unit;
• any restrictions that would need to be placed on its use; and
• any definitions that may be required.
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Schedule 2 Default Parameters
1
Default parameters
Schedule 2 outlines the default parameters that must be used in the calculation of
net abatement amount in Part 4 of the draft Determination.
Schedule 3 Decline rates
1
Decline rates
Schedule 3 outlines decline rates by vehicle category and service unit that must be used in
the calculation of the net abatement amount in sub-method 1 in Part 4 of the draft
Determination.
The decline rates are based on data from the Centre for Transport, Energy and the
Environment’s Australian Transport Facts 2014.
For discussion – separating the method into transport modes
The draft transport method is intended to be a broad-based, activity neutral method that can
be used across all transport modes. Developing such a broad-based method has required a
number of issues which are unique to individual modes of transport to be simplified or
homogenised. As a result, while the draft transport method can accommodate a wide range
of activities across the transport sector, it may be more difficult to apply to individual
projects than simple, narrow methods which support a single transport mode or activity.
It would be possible to separate the transport method into a number of narrower
methods tailored to individual (or similar) vehicle modes. While this would not change
the general structure of the method – including approaches to additionality – it would
enable the inclusion of information and guidance on eligible activities, calculation
approaches and project requirements which is more suitable for the relevant modes.
The Department invites stakeholder views on this issue.
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