A proposed Guarantee of Origin (GO) scheme is being developed in Australia in light of the growing international and domestic demand for renewable energy and “clean” products.
With the recent tidal wave of commitments, in the public and private sectors, to achieve greenhouse gas (GHG) emissions reduction and net zero emissions targets, and rising concerns about energy supply and energy security, there is a growing impetus for an objective measure of GHG emissions embodied in electricity and other products.
The Australian Government has been developing a GO scheme for hydrogen for the last two years, with the advent of a new hydrogen industry in Australia and international hydrogen markets. It now is proposing to use the learning from that process to provide a much broader, voluntary GO scheme for renewable electricity and other products across supply chains.
The Government has now released, for public consultation until 3 February 2023, two policy position papers which outline the proposed design of Australia’s GO Scheme:
According to the GO Scheme Paper, the proposed GO scheme will:
- help quantify market value for the clean attributes of these products;
- enable industry to make robust, credible emissions claims; and
- unlock trade and decarbonisation opportunities.
In this sense, it shares the goals of most other green certification schemes.
Initial development of a Hydrogen GO scheme
The Australian Government has been working domestically and internationally since the release of the National Hydrogen Strategy to develop a Guarantee of Origin scheme for hydrogen (Hydrogen GO scheme).
It has previously consulted on the proposed design of the Hydrogen GO scheme, and has been conducting trials in relation to a proposed scheme.
In June 2021, the Australian Government released a Discussion Paper on the design of an Australian Hydrogen GO scheme, which dealt with issues including the potential introduction of a new type of renewable energy certificate and the role of carbon offsets.
In December 2021, following consultation on the Discussion Paper, the Australian Government released its “Consultation summary and next steps” paper, and participants with projects that are operating, or in an advanced stage of planning, were invited to participate in these trials to inform the design of Australia’s Hydrogen GO scheme.
Following consultation, a trial of Australia’s proposed Hydrogen GO scheme commenced, with phase one running from March to July 2022 and phase two proposed to run from July 2022 to June 2023.
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.
The proposed GO scheme
Objective and key principles
The GO Scheme Paper says:
"The Australian industry requires a trusted, internationally-aligned framework for measuring emissions across commodity supply chains to establish and support claims for renewable energy and clean products."
To achieve this, the GO Scheme Paper proposes a framework which focuses on a product’s origin, life cycle emissions and attributes.
The GO scheme will initially cover hydrogen, hydrogen energy carriers (eg. ammonia) and renewable electricity but is proposed to expand to other products. Initial candidates include metals, biofuels and other materials.
Five principles have emerged out of domestic and international engagement that will underpin the approach to designing the GO scheme. These are:
- trustworthy – the scheme has high integrity and the information provided is trusted
- transparent – the scheme clearly articulates relevant emissions information to scheme and market participants
- practical – the scheme is practical for scheme participants, being commercially effective to interact with and minimising regulatory burden
- consistent – the scheme is able to be recognised by domestic and international schemes and markets
- flexible – the scheme can evolve with changing consumer needs, technology, and international market developments
The GO scheme is proposed to be established under new legislation to be administered by the Clean Energy Regulator (CER). The proposed legislative framework is illustrated below.
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.
The product-based emissions accounting framework will address emissions intentity throughout the supply chain of products, covering the supply of raw materials, production and transport and storage to the point of consumption or international departure (ie. a “well-to-user” system boundary). This is broader than the “well-to-gate” coverage which was favoured for the Hydrogen GO scheme.
Participation in the GO scheme will be voluntary for eligible renewable electricity power stations and producers of hydrogen and hydrogen energy carriers. Producers will be eligible if they are using a production pathway covered under an emissions accounting methodology, but no minimum emissions intensity thresholds are proposed for participation.
The GO scheme will be designed with strong upfront controls around profile registration and a lighter touch for validating creation applications. The CER as administrator will also have a range of compliance controls to ensure risks to scheme integrity will be identified and addressed. This will include audits and third-party assurance mechanisms and an Annual Reconciliation Check (ARC) process to identify and address matters such as any errors in measurement or changes in inputs in the previous year.
GO certificates and registers
In addition to product-based emissions accounting methodologies, the GO scheme will create an enduring certificate mechanism for renewable electricity that will build on the existing certificate framework under the existing Renewable Energy Target scheme (RET).
Two new certificates will be created under the GO scheme:
- Product GOs – these will be associated with the product-based emissions accounting framework and will enable scheme participants to measure, track and verify the carbon intensity of a product across its lifecycle to the point of consumption or international export.
- Renewable Electricity GOs (REGOs) – these will be used to track and verify claims of renewable electricity usage, both in the production of GO products and to support renewable energy claims more broadly.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) currently work under the RET.More detailed information about REGOs in available in the REC Paper.
Both Product GO and REGO certificates would be housed on a public register (managed by the CER) with general information available publicly:
- information on Product GOs would include a summary of the facility, product quantity, emissions intensity and any inputs relevant to emissions intensity such as water source; and
- information on REGOs would include time and location of generation, commissioning date of the generating power station and the end consumption.Scheme participants could also voluntarily make more detailed GO information available for other specified participants.
Interaction with other existing and emerging schemes
The GO scheme framework is designed to complement existing and emerging schemes, including:
- Australia’s existing emissions accounting and reporting schemes (including the Safeguard Mechanism as well as voluntary schemes such as Climate Active and the Corporate Emissions Reduction Transparency (CERT) report);
- schemes providing carbon neutral certification (including the Green Hydrogen Standard and Zero Carbon Certification scheme); and
- schemes providing incentives for the uptake of technologies or fuel sources (including the NSW Renewable Fuel Scheme, WA’s Renewable Hydrogen Target and GreenPower’s Renewable Gas Certification Pilot).
According to the GO Scheme Paper, the key differentiating factors between the GO scheme and other schemes are:
- the GO scheme is product-based where many other emissions accounting based schemes are facility or company based; and
- the GO scheme is proposing the broadest level of coverage, measuring and tracking emissions across the supply chain where other schemes are focused on only parts of the supply chain.
The GO Scheme Paper details an emissions accounting approach for all GO scheme products, covering (amongst other things):
- Scope 1 and 2 emissions;
- upstream emissions (being the relevant Scope 3 emissions from extraction, processing and transport of production inputs);
- metering (of electricity, gas flows etc.); and
- co-products (being products resulting from the production process that have demonstratable value from being on-sold or reused in the production facility).
The approach is consistent with the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE) methodologies and has been further developed through the consultation and trial process for the Hydrogen GO scheme.
The GO Scheme Paper proposes measures to deal with offsets and double counting, as well as how the surrender of LGCs or REGOs can be used to claim the zero emissions attributes of renewable electricity as part of the GO scheme.
Following consultation on the GO Scheme Paper and REC Paper, the Government will undertake several work streams throughout 2023 to finalise the development of the GO scheme, including:
- summarise feedback on the papers and develop draft legislation and methodologies to give effect to the GO scheme;
- work with international forums to ensure international alignment as markets and certification schemes evolve;
- continue to test the international methodologies through phase 2 trials; and
- develop domestic applications of the international methodologies into subordinate legislation.
The scheme is intended to be legislated by the start of 2024.
The nature and scope of the proposed GO scheme is very ambitious but, if successful, it could provide a much needed platform for market confidence in carbon emissions claims and a boost to domestic and export markets.
Current and potential participants in various green commodity markets, and especially renewable energy producers, should review the consultation papers and consider making a submission. We have considerable experience in green certification scheme design and operation, and would be happy to assist.
We will provide further updates as consultation progresses and the design of Australia’s final GO scheme takes shape.