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With the increased focus on climate change, there are a wide range of new business opportunities available. In particular, you may be considering participating in the development of new technologies to lessen the impact of industrial activities on the environment. One way you can do this is by participating in the carbon credit market and selling Australian Carbon Credit Units (ACCUs) to the Commonwealth Government. This article will explain what a carbon abatement contract is and how you can use one to participate in the carbon credit market.
What is Carbon Abatement?
Carbon abatement refers to either:
- the removal of greenhouse gases from the atmosphere; or
- the avoidance (including the reduction or elimination) of emissions of one or more greenhouse gases.
The relevant greenhouse gases for carbon abatement are:
- carbon dioxide;
- methane;
- nitrous oxide;
- sulfur hexafluoride; and
- certain hydrofluorocarbons and perfluorocarbons.
Australia has introduced several schemes to promote carbon abatement projects. This includes issuing ACCUs when certain levels of carbon abatement are achieved.
How Do I Earn Australian Carbon Credit Units?
You can earn ACCUs if you, as a business, operate projects with a carbon abatement purpose (project proponents). You can register these types of projects with the Clean Energy Regulator if they meet the eligibility criteria under the ACCU Scheme. Not all project types are eligible, and there are strict requirements. As such, you should consider receiving legal advice before registering.
Continue reading this article below the formWho is the Clean Energy Regulator?
The Clean Energy Regulator is the independent legal authority responsible for promoting carbon abatement in Australia. It was established by the Clean Energy Regulator Act 2011. While the Clean Energy Regulator has many functions, one of those is to facilitate auctions for project proponents under the ACCU Scheme. This allows businesses opportunities to enter into carbon abatement contracts. These carbon abatement contracts allow a successful party to sell ACCUs to the Commonwealth Government through the Clean Energy Regulator.
What is an ACCU Auction, and How Can I Participate?
Not everyone with ACCUs can sell to the Commonwealth Government. You must first participate in an ACCU Auction and bid for the right to enter into a carbon abatement contract.
Before participating in an ACCU Auction, you need to consider:
- the estimated carbon abatement that the project will achieve, which informs how many ACCUs could be delivered to the Clean Energy Regulator;
- the timing at which ACCUs would be delivered to the Clean Energy Regulator, also known as the contract delivery schedules; and
- the duration of the carbon abatement contract (the most common standard contract length is seven years).
The first step for participating in an ACCU Auction is to submit an application to qualify to participate. This also acts as an offer to enter into a carbon abatement contract. You must complete the application via the client portal at least 20 days prior to an ACCU Auction. If successful, your application will be valid for all auctions conducted in the next 12 months, provided there are no changes to the information submitted.
Secondly, you must register an eligible project for the auction. This step is a commitment to the quantity and timing of ACCUs to be delivered. A registration application must be submitted through the client portal at least five business days before the auction.
Once approved at both the auction qualification and registration steps, you will be provided with a unique code and information on how to submit a bid through AusTender. If a bid is successful, a carbon abatement contract with the Clean Energy Regulator is automatically formed.
What Are the Two Kinds of Carbon Abatement Contracts?
Carbon abatement contracts come in two forms, where are:
- Optional delivery contracts
- Fixed delivery contracts
An optional delivery contract provides you with the right to sell ACCUs to the Commonwealth Government at an agreed price within a set time. This does not mean you must sell to them.
On the other hand, a fixed delivery contract requires you to provide an agreed number of ACCUs to the Commonwealth Government across the duration of the contract.
What Are the Key Obligations in Carbon Abatement Contracts?
A carbon abatement contract has several key obligations. These include:
- Code of Common Terms: These non-negotiable terms set out the rights and obligations of the parties under the contract.
- Commercial Terms: This is where your details and information about your project are included.
- Delivery Terms: The delivery term will identify the quantity and timing of ACCUs to be delivered, as well as the overall contract duration.
- Financial Terms: Information included here refers to the price per ACCU agreed during the auction bidding process.
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Key Takeaways
Carbon abatement contracts present an exciting opportunity for your business to be more involved in environment-focused initiatives. These contracts are legal arrangements under which you sell Australian Carbon Credit Units (ACCUs) to the Commonwealth Government. Types of contracts include:
- optional delivery contracts; and
- fixed delivery contracts
To earn ACCUs, you must have a carbon abatement-oriented project registered under the ACCU Scheme. You can then apply and register a project for an ACCU auction to enter into a carbon abatement contract.
If you would like assistance entering into a carbon abatement contract, contact our experienced greentech lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1800 485 860 or visit our membership page.
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