Carbon credits revenue to dry up for landfill gas generation projects

The Department of Environment and Energy has  released a draft variation to the landfill gas method that proposes several changes.

Landfill gas abatement is one of the most widely-used Emissions Reduction Fund methods, and companies that earn carbon credits from landfill projects include AGL, LMS Energy and EDL.

More than 80 projects that use the method have contracts to sell abatement to the Clean Energy Regulator. These have a total value of about $245 million.

No extension beyond seven years

The most significant change proposed in the draft variation is a decision not to extend the crediting period for landfill gas generation projects, which means that many existing projects will no longer be able to earn credits from about 2021.

The department has accepted the advice of the Emissions Reduction Advisory Committee (ERAC), which found that these generation projects are viable without credits (see background here).

However, projects that only flare methane and don’t generate electricity will be allowed to earn credits for a further five years after their initial seven-year period of earning carbon credits.

This is also in line with the recommendations of ERAC, which found that these projects need support to be viable.

The draft variation will also clarify that the crediting period of seven years for electricity generation projects can start after up to two years of earning credits from flaring without electricity generation.

In addition, the variation strengthens the definition of an upgrade activity, to ensure projects can’t be classified as an upgrade if they simply return to normal operating levels after a temporary downturn.

In 2017, AGL warned that its nine landfill gas generation projects might not continue beyond 2022 unless the government extended the crediting period (see background here).

Seven of the nine AGL projects have ERF contracts, which are worth about $14 million.

Comment on the draft variation closes on April 5.

Landfill gas methodology determination variation and related materials (Department of Environment and Energy, March 2019)