Guarantee of Origin Scheme for Hydrogen and Renewable Energy to become law in 2024

Claire Smith, Brett Cohen, Katy Warner, Tim Stanton and Cloe Jolly
04 Oct 2023
Time to read: 7 minutes

Over the past three years, the Australian Government has been developing an internationally aligned Guarantee of Origin scheme to measure, track and verify the carbon emissions and other attributes of Australian clean energy products and to certify renewable energy. Consultation is now open to inform the final legislation and the drafting of regulations to give effect to the scheme.

The Australian Government is developing a Guarantee of Origin (GO) scheme in light of the growing international and domestic demand for renewable energy and “clean” energy products. To address this, the Australian Government has been working domestically and internationally to develop an internationally-aligned GO assurance scheme to track and verify the emissions associated with hydrogen, renewable electricity and, in the future, other "clean" or "green" products in Australia.

This most recent consultation package integrates and builds on domestic and stakeholder consultation from 2020 through to 2023.

With the advent of a new hydrogen industry in Australia and international hydrogen markets, the Australian Government initially developed, consulted on and trialled a Guarantee of Origin scheme for hydrogen only (the Hydrogen GO scheme) in June 2021. Throughout this process, it became clear to the Government that a GO scheme should be designed to cover other forms of renewable energy and should facilitate the development of markets for other products as well, over time. In late-2022, using the learnings from its consultation of the Hydrogen GO Scheme, the Government released two policy position papers for consultation which proposed high-level design positions for a broader GO Scheme including renewable energy.

Feedback is now being sought on:

Consultation on the GO Scheme Design and Renewable Electricity GO Approach closes on 17 October 2023 and consultation of the GO Emissions Accounting Approach as well as on the proposed annual consultation process to expand the scheme into new products outside of hydrogen closes on 14 November 2023.

According to the GO Scheme Paper, the proposed GO scheme will:

  • stimulate market creation by allowing clean energy products to be fairly valued for their emissions attributes;
  • incentivise clean energy product innovation across the supply chain;
  • accelerate the uptake of clean energy products;
  • play a key role in helping new projects secure finance and improve the effectiveness of other Commonwealth efforts to scale up renewables and the hydrogen industry; and
  • serve as an information source that could link to government or industry-led schemes that provide incentives for low-emissions products or provide branding for "green" or "clean" products.

Overview of the GO Scheme

The GO scheme will initially cover hydrogen, hydrogen energy carriers (eg. ammonia) and renewable electricity but is proposed to expand to other products. This aims to ensure that it remains responsive to the emergence of new markets for clean energy products, international trends, and the need to appropriately certify emerging Australian energy products. Initial candidates may include metals, biofuels and other materials.

The GO scheme is proposed to be established under new legislation to be administered by the Clean Energy Regulator (CER). The core scheme design, administration and integrity controls would be covered in the Act and Regulations. Beneath these would sit other legislative instruments which provide guidance on how to calculate emissions-intensity for the product-based emissions accounting framework.

GO scheme eligibility, enrolment and registration process

Prospective scheme participants will need to apply to the CER to be enrolled in the GO scheme. Participation in the GO scheme will be voluntary, and producers will be eligible if they are using a production pathway covered under an emissions accounting methodology under the scheme. No minimum emissions-intensity thresholds are proposed for participation.

Registered participants will nominate relevant "production" and "post-production" profiles relevant to the products they produce. Production profiles will contain core information about the facility producing the product – including the product type, facility name and location, and emissions accounting methodology. Post-production profiles will contain core transport and storage information – including transport/storage methods and key information enabling emissions accounting. This upfront reporting approach is intended to reduce the ongoing reporting burden of the scheme.

Once registered participants have registered relevant profiles, they will be required to keep the information up-to-date and comply with scheme requirements including cooperating with CER monitoring and audit programs.

Integrity controls

The GO scheme will be designed with strong upfront controls around profile registration and a lighter touch for validating creation applications. The CER, as the administrator of the GO scheme, will undertake compliance monitoring and have a range of regulatory powers to address non-compliance. Limited Scope Technical Reviews (LSTRs) will provide third-party assurance over the up-front information reported in the GO scheme.

GO Certificates

GO Certificates will be the core mechanism for recording and tracing information – such as emissions – through the GO scheme. Scheme participants will input GO certificate data that covers emissions throughout a product life cycle. The GO certificate captures this data in a way that can be shared with product recipients. The information included on GO Certificates will form the basis of the valuation and trade of GO products and renewable electricity. Importantly, they provide registered participants with the ability to claim the attributes of associated products or electricity generated once they are "consumed".

The GO scheme will include two categories of GO certificates:

  • Product GO Certificates (Product GOs) associated with the product-based emissions accounting framework. These will initially cover hydrogen, hydrogen energy carriers.
  • Renewable Electricity GO Certificates (REGOs) which will be used to track and verify claims of renewable electricity generation and usage, both in the production of GO products and to support broader renewable energy claims. REGOs are proposed to be a certificate that can be traded separately to the renewable electricity they were produced alongside. This approach is consistent with how Large-scale Generation Certificates (LGCs) work currently, but the features of the proposed REGO design aim to make it a more fit-for-purpose and flexible market-based instrument now and in the future. More detailed information about REGOs is available in the Renewable Electricity GO Approach paper.

The Product GOs will use a mass balance chain of custody approach, which allows tracking and tracing of attributes from production to delivery gate applied on a batch or consignment basis. This approach links attributes evidenced by the certificate to a physical product consignment and for the blending of certified and non-certified products if there is a "reasonable physical link" between the production and the consumption of the product.

Product GOs will be created by registered participants submitting Product GO certificate creation claims, which will be validated by the CER. Through the creation process, renewable electricity certificates (both LGCs and REGOs) may be used to track the use of renewable electricity as an input into a Product GO. Voluntary cancellation of Australian Carbon Credit Units (ACCUs) and Safeguard Mechanism Credits (SMCs) will not be recognized in the GO scheme.

Once a Product GO Certificate has been completed and validated by the CER, they can be surrendered – through reporting consumption information associated with the surrender – to claim the attributes of a product. Completed GO Certificates can be transferred between participants to align with contractual or commercial arrangements.

REGOs will initially exist alongside the current LGC framework under the Renewable Energy Target (RET). Critically, REGOs will continue beyond 2030 when the RET ends to provide on-going certification of renewable electricity. Unlike the RET, the GO scheme is voluntary so REGO prices (and their ability to financially support renewable generation when the RET ends) will depend on voluntary market demand for green power.

Data-sharing provisions

The GO scheme will be administered through an online GO Registry. Both types of GO Certificates (Product GOs and REGOs) would be housed on a public register with general information available publicly. Product GO information would include facility details, product information (including period and production date) and emissions information. However, commercially sensitive information, such as supplier details, would not appear on the registry.

The CER will be empowered to establish formal data sharing arrangements with administrators of other schemes – such as Climate Active, the NSW Government and GreenPower – to safeguard the accuracy, efficiency and reliability of the registry.

Emissions accounting approach

As the GO scheme will commence initially with hydrogen (and its energy carriers) (and renewable electricity), the emissions accounting framework proposed focuses on production, transport and storage of hydrogen. However, it is intended that the scheme will be expanded to cover a wide range of clean energy products and the emissions accounting framework will remain flexible and evolve as more products are added to the scope of the Scheme.

Emissions accounting scope

The system boundary for the GO scheme’s emissions accounting methodology will be based on a well-to-delivery gate system boundary. This position is consistent with the proposed scope of the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE) methodology.

In effect the following emissions will be covered by the GO scheme:

  • upstream emissions associated with the extraction, processing and transport of feedstocks (supply of raw materials);
  • direct emissions associated with the production of outputs from the product facility; and
  • post-production emissions associated with transport and storage of the registered product to its delivery gate (to the point of consumption or international departure).

This boundary excludes emissions associated with capital expenditure, consumption of the registered product, end-of-life and waste processing. These emissions sources may be considered for inclusion in the future but are currently outside of scope for the initial GO scheme.

Estimating emissions / emissions-intensity values

The proposed approach to estimating emissions for the GO scheme is conceptually based on the approaches that are currently used in the National Greenhouse Gas and Energy Reporting (NGER) Scheme, adjusted to reflect the system boundary of the GO scheme (drawing from the NGER Scheme for measurement standards and from the NGER Scheme, NGA Factors, EcoInvest and AustLCI for default emissions factors).

Emissions intensity values will be calculated by aggregating the emissions associated within each boundary and then dividing this by the total quantity of product represented in terms of its functional unit.

The Product GO will display several emissions intensity values that contribute to the overall emissions intensity across the system boundary per unit delivered. It is the sum of:

  • the production boundary emissions intensity, which captures the well-to-production gate emissions per unit produced (covering upstream emissions, direct emissions (including emissions from combustion and accrued emissions), electricity emissions, carbon capture and storage and co-product deductions);
  • the post-production boundary emissions intensity, which captures the production gate-to-delivery gate emissions per unit delivered (covering transport emissions and storage emissions); and
  • a loss correction term to spread the production emissions attributable to lost product across the delivered quantity.

This information is reported as part of initiating the Product GO certificate creation process.

The necessary formulas and default factors (methodology) proposed for calculating emissions intensity for hydrogen are set out in the GO Emissions Accounting Approach paper.

Key takeaways

Following consultation on the GO Scheme Paper, GO Emissions Accounting Approach and Renewable Electricity GO Approach, the Department will undertake several work streams to finalise the development of the GO scheme, including:

  • develop draft primary and subordinate legislation to give effect to the GO scheme;
  • scheme expansion and product prioritisation; and
  • ongoing work with international forums (including the IPHE) to develop internationally aligned emissions accounting methodologies.

The scheme is intended to be legislated in 2024.

Prioritisation of the products to include within the scheme in the future is also underway and input on this is also sought from the stakeholders in this round of consultation, through the survey form available on the Department’s website.

Current and potential participants in various green commodity markets should be mindful of the development of the GO scheme. We will provide further updates as consultation progresses and the design of Australia’s final GO scheme takes shape with draft legislation being released.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.