Guide 5 of 5 · Carbon credit units
Australian carbon credit units: how they are issued, used and handed back
An Australian carbon credit unit (ACCU) is a unit the Clean Energy Regulator issues on behalf of the Commonwealth under the Carbon Credits (Carbon Farming Initiative) Act 2011, by making an entry in the holder’s Registry account. Units for a project are issued to the holder of a certificate of entitlement, and the Regulator says a participant can earn one ACCU for every tonne of carbon dioxide equivalent its project stores or avoids.
General information only, not legal or financial advice. The official place to check is the Clean Energy Regulator’s Australian Carbon Credit Unit Scheme page.
Who can run a project
This one is not a duty that switches on at a size. The Regulator describes the scheme as encouraging people and businesses to run projects that reduce emissions or store carbon, and says “Individuals, sole traders, companies, local, state and territory government bodies and trusts can participate in the ACCU Scheme.” Projects either reduce or avoid emissions (emissions avoidance) or remove carbon from the atmosphere and store it (sequestration).
The Regulator gives examples, not a closed list: industry, business, landholders, farmers and First Nations people running projects “to reduce emissions, improve energy efficiency, avoid emissions of methane and nitrous oxide, or convert methane”, among others. Its agricultural examples include reforestation, revegetation, savanna burning and improving soil carbon. The Regulator publishes the methods available for ACCU Scheme projects.
From project to unit
- The project is declared. The project is declared an eligible offsets project; the Act calls this the section 27 declaration.
- An application for a certificate. For each reporting period, an application under s 12 asks for a certificate of entitlement (s 15(1)).
- The Regulator decides. It must issue the certificate if satisfied of every condition in s 15(2), listed below, and must take all reasonable steps to decide within 90 days of the application, or of any further information it asked for (s 15(5)). A refusal comes with written notice (s 15(6)).
- Units are issued. The certificate states the unit entitlement, and the Regulator must, as soon as practicable, issue that many units to the certificate holder: Kyoto ACCUs if the project has resulted in eligible carbon abatement, non-Kyoto ACCUs if it has not (s 11(2), (3)).
- Into a Registry account. A unit is issued by making an entry in the person’s Registry account, and none is issued to a person who has no account (ss 11(5), (6), 148).
The conditions for a certificate, s 15(2)
The Regulator must be satisfied that:
- the applicant passes the fit and proper person test;
- immediately before the end of the period, the applicant was the project proponent and was identified as the proponent in the s 27 declaration;
- the reporting period is within a crediting period for the project, or, for a project with an extended accounting period, within a crediting period or that extended period;
- the application passes the no double counting test;
- any declaration condition that all regulatory approvals be obtained before the end of the first reporting period has been met, as has any condition under s 28A(2);
- the applicant is not subject to a Part 7 requirement to relinquish units, and owes no amount under s 179 or s 180 in relation to one; and
- any other eligibility requirements in the regulations or legislative rules are met.
What happens to the units
The Regulator says ACCUs can be sold in two ways: to the Australian Government, under a carbon abatement contract, or on the secondary market, where private buyers use them to offset their emissions voluntarily or to meet compliance requirements.
Among those buyers are the facilities under the Safeguard Mechanism, which must keep their emissions below set baselines and can do so by buying and surrendering ACCUs; the Regulator adds that safeguard facilities can also earn ACCUs by running their own projects. In the NGER Act, the ACCU is one of the two “relinquishable” units, beside the safeguard mechanism credit unit (s 7).
An entity reporting under AASB S2 that has a net greenhouse gas emissions target explains its planned use of carbon credits, including how far the target relies on them, which third-party scheme will verify or certify them, and what type they are; the guide to what a climate statement contains has the rest.
When units must be handed back
Part 7 of the Act sets out requirements to relinquish units. Among its provisions, ss 88 to 91 each let the Regulator, by written notice, require a person to relinquish a specified number of ACCUs, and each gives 90 days from the notice to comply:
| Section | When it applies | How many units, at most |
|---|---|---|
| s 88 | Information the person gave the Regulator was false or misleading in a material particular, and the issue of units was directly or indirectly attributable to it. | The number whose issue was attributable to that information. |
| s 89 | A sequestration project’s declaration is revoked under regulations or legislative rules made for the provisions s 89 lists. | The net total issued for the project under Part 2. |
| s 90 | A significant reversal of a sequestration project’s carbon dioxide removal that is not attributable to natural disturbance, to reasonable actions taken to reduce the risk of bushfire, or to conduct by someone other than the proponent that is outside the proponent’s reasonable control. | The net total issued for the project under Part 2. |
| s 91 | A significant reversal attributable to natural disturbance, or to conduct by someone other than the proponent that is outside the proponent’s reasonable control, where the Regulator is not satisfied the proponent took reasonable steps within a reasonable period to mitigate its effect. | The net total issued for the project under Part 2. |
For ss 89 to 91, the time since units were first issued for the project, or since its declaration was last varied to add project areas, must be shorter than the project’s permanence period. The notes to all four sections say an administrative penalty is payable under s 179 for not complying with a relinquishment requirement. And while a requirement is unmet, or an amount under s 179 or s 180 is owed, s 15(2) stops the Regulator issuing a new certificate of entitlement to that applicant.
Who runs the scheme
Policy for the ACCU Scheme is overseen by the Department of Climate Change, Energy, the Environment and Water. The Clean Energy Regulator says it administers the scheme by assessing project applications for registration, assessing project reporting, ensuring scheme compliance, issuing ACCUs, managing carbon abatement contracts, and publishing the ACCU Scheme project and contract registers.