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for the project to be recommended for funding without changes to the
application. During the departmental assessment, the application was
reframed by changing the boundary to a process boundary, which was
calculated to deliver a reduction in carbon emissions intensity of 71 per cent
and therefore increased the assessment score to a level at which the project
could be recommended for funding despite the project not having changed.
4.12 In
respect of the 849 merit assessed applications:
a change in the boundary was recorded in the departmental assessment
for eleven applications five of these applications were funded for a
total value of 462 033; and
an
increase in the predicted percentage reduction in carbon emissions intensity
was recorded for a further 102 applications 71 of these applications
were funded for a total value of 44.3 million. The average
increase for these applications was 12 per cent.
113
4.13 The
approach of allowing applicants to select more narrowly defined boundaries
was adopted not to reflect a change in the scope of the project or to improve
the carbon emissions intensity reduction outcomes expected from projects
but, rather, with the intention of improving their scoring against the merit
criteria so as to maximise the amount of funding being paid to industry. In
this context, where the boundary used for assessment purposes does not incorporate
all the emissions associated with producing the manufacturer’s output,
the extent of the reduction in carbon emissions intensity associated with
a project has been overstated so that the project can appear to have greater
merit under the programs and, therefore, be awarded grant funding.
4.14 Another
factor that influenced the reduction in carbon emissions intensity
indicator one was the size of existing emissions levels. For example, the
department estimated that a 40 kilowatt photovoltaic PV system can reduce
an applicant’s electricity consumption from the grid by 58 400 kilowatt hours
kWh per annum. This correlates to a 10 per cent reduction for an applicant
that consumes 584 000 kWh of electricity per annum, but only a
113 In November 2014 the department advised ANAO that the predicted reduction in carbon emissions intensity for these applications increased for a number of reasons including:
changes to the project boundary;
correcting technical errors in the customers calculations and claims; adjustments to anticipated production increases based on the customer evidence; and
excluding claimed carbon savings that were not supported by available evidence.
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five per cent reduction for an applicant that consumes 1 168 000 kWh of
electricity per annum.
Total carbon savings over the life of the conservation measure
4.15 As
previously noted, indicator two as identified in the customer guidelines
was generated using the calculator. Advice provided to departmental
staff by the program management area of the department in February
2012 noted that total carbon savings were included as a second indicator
because: An
absolute measure means that large manufacturers won’t be penalised for making
small percentage improvements, as these small improvements can still yield
large carbon savings.
4.16 In
October 2014, the department provided further advice to ANAO that the
two indicators measured the short‐term and long‐term extent of the reduction
in carbon emissions intensity. Specifically: Indicator
1 provided a relative measure that demonstrated the immediate impact
of a project compared to the customerʹs existing manufacturing processes.
This was done by measuring the percentage reduction in emissions intensity
in the first year following project completion. Indicator
2 provided a more long‐term representation of the impacts of the reduction
in emissions intensity to be delivered by the project. This indicator was
based on Indicator 1, but further incorporated the effective life of the emissions
reduction measure and the manufacturerʹs expected production levels
during this period e.g. the next 10 years. This long‐term view was achieved
by representing the reduction in emissions intensity in terms of the carbon
savings over the life of the conservation measure. Where
a project involved electricity savings, Indicator 2 also accounted for the impact
of varying state and territory electricity emissions factors on the emissions
intensity reduction to be delivered by the project. This provided a more
complete picture of the emissions intensity reductions associated with each
project at a national level. Projects that reduced grid electricity consumption
from emissions‐intensive grids e.g. Victoria, with electricity generated
from brown coal were recognised as delivering higher reductions in
emissions intensity.
4.17 In
this respect, the reduction in carbon emissions intensity indicator reflected
the short‐term impacts of the project generally 12 months, while the total
carbon savings over the life of the conservation measure measured the longer
‐term impacts from 10 years to 100 years. By combining the two
