Australia's landfill gas upgrades to keep baselines

Most upgrade landfill gas projects in Australia will be able to retain their baselines under a proposed new Australian Carbon Credit Unit (ACCU) method, reinforcing expectations that the biggest impact will be on older, large facilities with baselines of 0-24pc.

The proposed new baselines are 30pc for new, existing and upgraded flaring-only projects, 37pc for new and upgraded electricity generation projects, and 39pc for existing electricity generation sites under the planned new method, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) said in a consultation in May. The baselines represent the level of emissions abatement that would occur in the absence of the ACCU scheme. Projects with a baseline of 39pc would be credited for 61pc of the total amount of methane reductions.

At least 10 existing upgrade projects that have calculated their baselines would be able to transition to the new method and keep their baselines, as those are above the proposed 30-37pc for upgraded projects, according to waste management firms LMS Energy and LGI.

LMS, Australia's largest landfill gas operator, said its six upgrade projects with confirmed baselines — four electricity generation and two flaring sites — would stay on their current baselines under the new method. The company has nine other registered upgrade projects, but they are still within their initial 12-month baseline monitoring period and will need to go through auditing to determine their capture efficiency and confirm their baselines, the company told Argus. It did not disclose individual baselines.

LGI noted that its three flaring upgrade projects have baselines of 36-40pc, while its Mugga Lane electricity upgrade project in Canberra has a 66pc baseline. These projects would be able to retain their baselines during the entire additional 12 years of crediting if they transition to the new method. The proposed upward sloping baseline of 0.5 percentage point/yr under the new method would mean final baselines of 36pc for flaring and 43pc for electricity generation projects that started with the default factors of 30pc and 37pc respectively.

The remaining of Australia's five largest landfill gas operators EDL Energy and Veolia did not disclose whether their upgrade projects had baselines above the new proposed figures, while Cleanaway did not reply to queries for comment. The five companies accounted for around 95pc of the 45.16mn landfill gas ACCUs issued since 2012, which make up 27.5pc of the 164.15mn units issued under the scheme, according to the latest Clean Energy Regulator (CER) register data (see table).

Information about project baselines cannot be disclosed as this is protected under the Clean Energy Regulator Act 2011, the DCCEEW said in response to queries from Argus about the impact of the proposed method on existing projects.

Impact on older projects

Some 35 upgrade projects were registered, although only 11 had submitted offsets reports required to calculate their upgrade baseline factor, the DCCEEW said in May. And 14 out of the 35 projects were located at the same landfill as a core project, which means they share the same infrastructure, the department said.

"Because many upgrade projects are co-located with a core project, which may have a lower baseline, the recent uptake of upgrade projects with higher baselines is not convincing evidence that all projects could be maintained at higher baselines," the department said.

All upgrade projects received a total of 467,244 ACCUs in the July 2023-June 2024 fiscal year, or 42pc of the 1.1mn units earned by 93 projects that started since the landfill gas ACCU methods were established in 2012, CER data show.

Most landfill gas ACCUs are issued to 51 projects that started before the Carbon Farming Initiative (CFI) Act came into force in December 2011. Their historical baselines of 0-24pc were "grandfathered" as these projects transitioned between schemes and methods, and do not represent what would happen in the absence of the ACCU scheme, the DCCEEW said in the consultation. These projects received 3.58mn ACCUs in 2023-24, or 76.4pc of the total landfill gas units (see table).

The integrity risk from these projects could be addressed by letting them expire. But this approach would reduce some of the additional abatement delivered by the scheme, the DCCEEW said. A total of 47 out of these 51 projects will end their crediting periods in 2026.

These projects with 0-24pc baselines will be the most impacted by the baseline increases proposed under the new method, LMS told Argus.

Higher baselines reduce the incentive to abate methane for landfill gas projects, LMS chair John Falzon said. The industry average baseline is proposed to increase by more than 60 percentage points from 23pc to 39pc. This risks more methane being emitted into the atmosphere, he added.

The new method would strengthen the integrity of ACCUs from landfill gas projects, incentivising more abatement through new projects and supporting existing projects to continue investing in landfill gas capture infrastructure, the DCCEEW said.

"The method was developed in consultation with independent experts as well as the landfill gas industry, who have indicated an intention to commence new projects under the method if made," the department told Argus.

Of LGI's projects, only the Willawong landfill gas project has a 0pc baseline, it said. The project has received 511,063 ACCUs so far — the biggest volume under the company's portfolio. The landfill was closed around 1994 and LGI has been operating a biogas-to-renewable power project at that site since 2011. Its other projects are at 30pc and above.

Once the new ACCU method is confirmed, LGI will assess each existing project and its eligibility under the different project categories, it said. The firm anticipates switching projects to the new method close to the expiry of their current crediting periods.

The DCCEEW has delivered a method that is workable in order to encourage continued and real capture of methane, Veolia ANZ chief executive and managing director Richard Kirkman said.

EDL Energy has continued working with the DCCEEW on the proposed new baseline method and looks forward to the certainty this will provide the landfill gas industry, it said.

By Juan Weik