The emissions reduction fund auction

WHAT IS THE EMISSIONS REDUCTION FUND?

* The centrepiece of the Abbott government's carbon emissions direct action policy, which replaced Labor's carbon tax

* A $2.55 billion fund that pays Australian business for projects to slash carbon emissions

* The mechanism to achieve Australia's emission reduction target of five per cent on 2000 levels by 2020

* Businesses voluntarily bid at reverse auctions, where government chooses most cost-effective projects

HOW THE AUCTION WORKS

* Businesses apply under prescribed methods created by government agencies and private entities and approved by the environment minister

* For example, a company may bid to reduce 10,000 tonnes of carbon for $15 per tonne. Another company may bid to do the same for $13.50

* Government pays for "lowest cost abatement"

* Clean Energy Regulator sets benchmark price to act as ceiling and purchases 80 per cent of abatements offered below that price

* If the benchmark is too low, it risks discouraging participants but if set too high, the $2.55 billion won't purchase enough abatement to meet Australia's five per cent target

RESULTS OF FIRST AUCTION

* Average price paid per tonne = $13.95

* Number of projects = 144

* Total abatement purchased = 47,333,140 tonnes

* Total amount spent = $660,471,500

* Projects run between three to 10 years

WHAT PROJECTS?

* Kia Ora Piggery - capture of biogas from pig manure (120,000 tonnes)

* Terra Carbon - Protecting Ashwood Native forest (1,250,863 tonnes)

* LMS Energy - collection and combustion of methane from legacy waste in Eastern Creek, Hallam, South Cardup, Swanbank landfills (3,526,278 tonnes)

* Olkola Aboriginal Corporation - Olkola fire project, controlled fire management across savannas in the fire prone tropical north of Australia (455,000 tonnes).