The Human-Induced Regeneration method, the biggest generator of carbon credits in Australia, will expire in September 2023, the Clean Energy Regulator said June 2.
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There will be no new project registration under the HIR method after Sept. 30, with project developers advised to submit new applications by July 2, the regulator said.
HIR projects involve storing carbon by regenerating permanent native forests on a property where vegetation has been suppressed by activities such as unmanaged livestock grazing, feral animal activity, and chemical destruction of regrowth.
The method is the only nature-based method that generates a significant volume of Australian carbon credit units, or ACCUs.
The method generated nearly 4 million ACCUs in fiscal 2022-23 (July-June), just a step behind 4.4 million ACCUs generated by landfill gas-based projects.
However, HIR projects have generated the highest volume of ACCUs since at least FY 2019-20, with nearly 6.4 million HIR ACCUs issued in FY 2021-22.
The fall in FY 2022-23 was mainly due to new measures being implemented by CER to better uphold the integrity of the HIR projects.
As a result, the issuance of HIR ACCUs flatlined since early January.
Platts, part of S&P Global Commodity Insights, assessed the price of Generic ACCUs at A$34.50/mtCO2e ($22.49/mtCO2e) June 1 and HIR ACCUs at A$35/mtCO2e. Generic ACCUs are generated from avoidance-based methods, such as landfill gas, and are usually sold at a discount to HIR ACCUs.
"While all best endeavors will be taken by the Clean Energy Regulator to assess applications and register projects prior to the expiry date, participants should be aware that submitting applications fewer than 90 days before the expiry increases the risk that the project may not be able to be registered prior to the expiry date," the regulator said in a statement.
The HIR projects already registered will continue to be issued ACCUs till their crediting period ends. The usual crediting period for HIR projects is 25 years.
However, projects whose crediting period starts after Sept. 30 will not be able to continue their projects when the method expires, the regulator added.
The new projects or those yet to be accepted have the option of registering under a new method that will replace the HIR method.
However, the integrated farm management, or IFM, method that was expected to replace HIR is yet to be approved by the CER.
"The concern is that once HIR lapses, there is going to be a lag from that closure and the development and finalization of a new method to replace it," a project developer told S&P Global.
There will be further delay as developers work out measures to implement any new land management practices, assess the commercial viability of method activities, and explain the approach to landholders, the developer added.
"We see a material lag in credit issuance of up to two years from projects registered under new IFM once it is released," the developer said.