Australia: Carbon Farming Initiative bills passed; now to get ready for them

Australia will soon have a framework for carbon farming in place, with the passage of the Carbon Credits (Carbon Farming Initiative) Bill 2011, Carbon Credits (Consequential Amendments) Bill 2011 and the Australian National Registry of Emissions Units Bill 2011.

So far we do not know the date the new laws come into force, but it's expected to be soon.

What is carbon farming?

As we noted at the time the Bills were introduced into Parliament,  the CFI aims to give farmers, forest growers and landholders access to domestic and international carbon markets, providing an investment incentive for environmental conservation and greenhouse gas emission reduction. The CFI will work alongside the  announced carbon pricing mechanism (CPM) by facilitating the crediting of greenhouse gas abatement projects in the land sector and from legacy waste emissions.

By undertaking approved emission abatement activities that reduce or store carbon pollution, carbon credits, known as Australian Carbon Credit Units (ACCUs), can be created. Subject to the rules under which they are created, these ACCUs can then be sold domestically or internationally, and can be used to meet regulatory obligations such as under the CPM, or voluntary abatement activity.

The processes involved in establishing and operating offsets projects are set out in the Bill, and include the following requirements:

  • the project proponent must satisfy the "fit and proper person" test and become recognised as an offsets entity;
  • the project must be covered by an approved methodology;
  • the project must satisfy other scheme eligibility requirements, including being on the "positive list" of activities that are not common practice and not being on the "negative list" of activities that are excluded from the scheme (see below);
  • the project must be undertaken in accordance with the approved methodology; and
  • project reports must be submitted to the Carbon Credits Administrator.

The Government has committed $45.6 million over four years to implementing the scheme.

What's changed in the CFI Bill?

The Carbon Credits package was amended slightly in the Senate. The most significant changes are:

  • projects can now be excluded from the CFI scheme if they would have a significant impact on access to land for agricultural production, or have a material impact on water, biodiversity, employment, or the local community (there was no reference to a material impact leading to exclusion);
  • non-exclusive Native Title holders can now have carbon rights; and
  • the Domestic Offsets Integrity Committee must publish reasons for its decisions to endorse (or refuse to endorse) a proposal for a methodology determination that applies to a specified kind of offsets project within 28 days.

How does the CFI relate to the carbon price mechanism?

Although the CFI can work independently of the proposed CPM, clearly that mechanism will provide a demand for ACCUs generated by the CFI and so make many more abatement projects financially viable. Under the Clean Energy Future Package released on 10 July and the Clean Energy Bill 2011 released for public consultation on 28 July, Kyoto compliant ACCUs can be:

  • used to meet up to 5% of a liable entity's obligation during the first three years of the CPM (2012/13-2014/15), with no quantitative restrictions thereafter; and
  • exported to be used overseas.

ACCUs which are not Kyoto compliant (which cannot be counted towards Australia's emissions target under current international carbon accounting rules) and which cannot be used by liable entities under the CPM, will be purchased by the Commonwealth Government. It has committed $250m over six years from 2012/13 for this purpose with the intention of increasing incentives for additional abatement through projects involving soil carbon, revegetation and cessation of logging in native forests.

What's still to be determined about the CFI?

A crucial element to the CFI scheme will be the regulations, many of which are yet to be released. We currently have a draft version of the regulations on the positive and negative lists for the Carbon Farming Initiative, which is open for public consultation until 16 September.

The idea underlying the draft regulations is that activities, not individual projects, will be assessed for additionality, ie. the likelihood that a particular activity would occur without the Carbon Farming initiative, and is not common practice. This is intended to provide greater assurance that particular projects will be approved and hence reduce overall transaction costs.

The Positive List identifies 15 activities that would be considered additional and hence eligible to participate in the scheme, including:

  • establishment of permanent environmental plantings;
  • establishment of permanent mallee plantings after 1 July 2007;
  • re-establishment of native vegetation on private land; and
  • capture and combustion of methane from waste deposited in a landfill facility before 1 July 2012.

The Negative List identifies six activities that would otherwise be additional, but cannot be part of the scheme because they pose a significant risk to communities or the environment. Included on the list is the establishment of a forest as part of a forestry managed investment scheme.

Where to now?

The passage of the CFI bills is an important first step, but a first step only. Much of the detail relating to methodologies and other aspects of the mechanics of the CFI scheme are yet to be finalised. Until much of this detail is released, it may be difficult for the CFI to commence to garner critical mass.

Another factor that will affect take-up is the carbon price mechanism. Once the future policy and regulatory framework around a carbon price becomes clearer, interest in CFI will undoubtedly increase.

Nonetheless, the Carbon Farming Initiative is an important part of the general carbon market and the new carbon pricing mechanism. While the lead time needed to generate credits through CFI projects may mean that the initial supply which could be used in the carbon price mechanism is modest, the long-term effect will no doubt be greater. Those active in the offset space, including financial institutions, are working hard to make the CFI scheme an effective one which will deliver credits that could potentially reduce carbon price mechanism compliance costs for liable entities, and deliver better environmental and sustainable outcomes in the land sector.

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.