Access to trading markets has historically been out of reach for many individuals and small businesses. The shift took place following the rise of trading platforms allowing individuals the power to acquire and invest in assets (such as shares). Australian Carbon Credit Units (ACCUs) are increasingly becoming popular products to acquire. This is either to meet legal obligations under climate change targets or to offset greenhouse gas emissions and improve the overall carbon footprint of an individual or business. Carbon markets in Australia are currently fragmented, with a mix of official registries and private trading marketplaces in existence. As a result, the Clean Energy Regulator is leading the charge on the development of the Australian Carbon Exchange. This article explores what the Australian Carbon Exchange is, what types of products will be accessible on it, and the timeline for development.
Who is the Clean Energy Regulator?
The Clean Energy Regulator Act 2011 (Cth) established the Clean Energy Regulator to promote carbon abatement in Australia.
In particular, the Clean Energy Regulator is responsible for several climate change initiatives in Australia, including issuing ACCUs to those operating eligible projects with a carbon abatement purpose. The Clean Energy Regulator also purchases ACCUs under carbon abatement contracts on behalf of the Australian Government.
The Clean Energy Regulator will oversee the development and administration of the Australian Carbon Exchange.
New Developments
In 2021, the Clean Energy Regulator proposed to deliver a centralised trading market for emissions units, operating on a new and improved Unit & Certificate Register. The rationale for this project is to make participating in Australia’s carbon markets cheaper and easier.
The Clean Energy Regulator is working closely with the Australian Securities Exchange (ASX) to support the development of the Australian Carbon Exchange.
The Clean Energy Regulator hopes that the Australian Carbon Exchange will be able to support a range of existing and future emissions units, including:
- Australian Carbon Credit Units (ACCUs);
- Large-Scale Generation Certificates (LGCs);
- Small-Scale Technology Certificates (STCs); and
- certain international units.
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What Are Australian Carbon Credit Units?
ACCUs are tradeable units representing one tonne of carbon dioxide equivalent not released into the atmosphere. The Clean Energy Regulator issues them to those developing projects under the ACCU Scheme (formerly the Emissions Reduction Fund). To be eligible for ACCUs under the ACCU Scheme, your project must have a carbon abatement purpose, meaning that it intends to:
- remove greenhouse gases from the atmosphere; or
- avoid, reduce or eliminate greenhouse gas emissions.
ACCUs are currently held in accounts on the Australian National Registry of Emissions Units and may only be transferred to another ANREU account holder. The introduction of the Australian Carbon Exchange presents an opportunity to simplify the trading of ACCUs in Australia.
ACCUs are heavily regulated in Australia. ACCUs are financial products, and in some cases, you may require an Australian Financial Services Licence (AFSL) to deal with them (unless an exception applies). If you buy or sell ACCUs on behalf of another person, you may also need to comply with anti-money laundering and counter-terrorism financing legislation (AML/CTF).
What Are Large-Scale Generation Certificates?
Large-Scale Generation Certificates (LGCs) are issued under the Large-Scale Renewable Energy Target. This scheme incentivises large-scale energy suppliers to invest in and develop renewable energy power stations. For every megawatt hour of eligible electricity a power station generates, the Clean Energy Regulator can issue one LGC.
Typically, parties sell LGCs to organisations that must purchase LGCs and surrender them to the Clean Energy Regulator. Companies and individuals seeking to offset their emissions or support their sustainability goals may also purchase LGCs.
What Are Small-Scale Technology Certificates?
Small-Scale Technology Certificates (STCs) are issued under the Small-Scale Renewable Energy Scheme. To be eligible to receive STCs, you must have installed an eligible renewable energy system, such as:
- solar panel systems;
- small-scale wind systems;
- small-scale hydro systems;
- solar water heaters; and
- air source heat pumps.
Key Takeaways
The launch of an Australian Carbon Exchange presents an exciting opportunity for Australian individuals and small businesses to participate in carbon markets with lower barriers to entry, including in emissions units.
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