Australia: Summary of ERF Carbon Abatement Contract

Last Updated: 16 December 2014
Article by Elisa de Wit


An amended form of the Carbon Abatement Contract (Contract) which the Clean Energy Regulator (Regulator) will use under the Emissions Reduction Fund (ERF) was released on 1 December 2014. The initial draft consultation version of the Contract (which was released on 27 June 2014) has been amended to provide flexibility for under delivery and less onerous make good requirements.

In simple terms, under the Contract the Seller (who will be a successful bidder at an ERF auction) agrees to sell to the Regulator a specified number of Australian Carbon Credit Units (ACCUs) over a specified time period, with delivery of the ACCUs to take place on specified dates. Although the Contract will reference particular pre-approved emissions reduction or carbon sequestration projects, the Seller can source the ACCUs from anywhere. In other words, to satisfy its delivery obligations under the Contract, the Seller can use ACCUs sourced from its own project, from other approved projects or from the secondary market.

The final version of the Contract will be published by the Regulator after the amendments to the Carbon Credits (Carbon Farming Initiative) Act 2011 take effect.

Overview of Contract

The Carbon Abatement Contract (Contract) comprises 4 parts:

  • Code of Common Terms
  • Commercial Terms
  • Delivery Terms; and
  • Financial Terms

As its name indicates, the Code of Common Terms contains the standardised provisions which will apply to all contracts entered between a successful bidder and the Regulator. These provisions are non-negotiable and acceptance of these terms will be a pre-requisite to auction participation.

The other three parts of the Contract will be determined by the Seller and will be put forward to the Regulator as part of the bidding process. The Commercial Terms include details of the registered projects that the Seller is bidding into the auction, and may include conditions precedent which must be satisfied for the Contract to take effect. There is no indication as to what form these conditions precedent can take, but we envisage they may include matters such as securing finance, obtaining all necessary approvals required to implement the project or obtaining any other third party consents. The Seller is able to specify the expiry date for satisfaction of the conditions precedent, which can be no later than the start date of the crediting period for the project.1

The Delivery Terms will specify the total quantity of ACCUs that the Seller must deliver under the Contract and the expiry date for the Contract. It will also detail the proposed delivery schedule for the term of the Contract. Delivery dates could be as frequent as every 6 months, given that ACCUs are able to be generated from a project this frequently.2

The price at which the ACCUs are sold to the Regulator will be included in the Financial Terms and will be the A$ amount bid into the auction by the Seller.

Main contract terms

The Contract commits the Seller to deliver an overall volume of ACCUs known as the "Agreed Quantity" to the Regulator.

The Seller is agreeing to deliver a specified quantity of ACCUs on specified dates to the Regulator and the Regulator is agreeing to purchase those ACCUs.

It is possible to deliver all or part of the specified quantity of ACCUs earlier than the specified delivery date, provided that the actual delivery date falls within the same financial year as the specified delivery date and provided that the Seller gives the Regulator 20 business days advance notice of the early delivery. If the actual delivery date is in an earlier financial year than the specified delivery date, then the Regulator must formally accept early delivery of the ACCUs and is under no obligation to do so.

Varying the Delivery Schedule

The delivery schedule can be varied in the following circumstances:

  • If it is not possible for the Seller (or its contractors or agents) to transfer ACCUs through the Australian National Registry of Emissions Units (ANREU) to the Regulator's ANREU Account. In this event, the Seller and Regulator will seek to agree a revised delivery date for that particular delivery of ACCUs.
  • By agreement between the Seller and Buyer (both acting in good faith), if the Seller is not going to be able to comply with a scheduled delivery date. In this instance, the Seller must give the Regulator notice of the actual or anticipated delivery failure, the reasons for it and what steps will be taken to address it. Provided that the scheduled delivery date is not the last date for delivery under the Contract, the Seller can propose a revised delivery schedule. This schedule can allocate all or part of the scheduled volume to different dates, but cannot extend the last delivery date, propose a date for delivery which is after the last delivery date or change the Agreed Quantity of ACCUs specified under the Contract. The Contract provides for a 20 business day negotiation period for the Seller and Regulator to reach agreement on the revised delivery schedule.
  • If the Seller and Buyer cannot reach agreement on a revised delivery schedule, then the Seller can put forward a revised delivery schedule which reallocates the undelivered amount (subject to a cap of 20% of the due amount) elsewhere in the delivery schedule. If the Seller doesn't put forward a revised delivery schedule, then the original delivery schedule will automatically be amended to add the undelivered amount to the final scheduled delivery date.
  • In the event of a force majeure event (see below)

Force majeure

Under the Contract, force majeure includes an event or circumstance beyond the control of the Seller (and its contractors or agents) that cannot, after using all reasonable efforts, be overcome and results in the failure by the Seller to perform its obligations under the Contract. A lack of funds is explicitly excluded from comprising force majeure, but the latest version of the Contract specifies that a force majeure event or circumstance will include the inability of the Seller to deliver ACCUs from the project which is specified in the Contract provided that the Seller did not play a substantial role in bringing about the event or circumstance. This change in the definition of force majeure contemplates a scenario where ACCUs cannot be produced from a project because of the action of a third party or the land owner (where the land owner is not the one undertaking the project).

If a force majeure event prevents deliveries of ACCUs being made on the scheduled delivery dates, the parties, acting in good faith, can use reasonable endeavours to agree a revised delivery schedule. As with the above scenarios, the final scheduled delivery date cannot be extended and deliveries cannot be scheduled for after this date. However, it may be possible to amend the Agreed Quantity. The ability to change the Agreed Quantity is entirely at the discretion of the Regulator, but the Regulator is not able to unreasonably withhold consent if the Seller is able to demonstrate that the force majeure event will prevent the delivery of the Agreed Quantity by the expiry date of the Contract.

Liquidated damages

The Seller will only be exposed to liquidated damages for non delivery if it fails to deliver more than 20% of the scheduled volume on a particular delivery date. (The first 20% can be reallocated in a revised delivery schedule, as explained above).

In this event, the Seller will need to pay damages to the Regulator which will comprise any additional amount the Regulator has to pay over and above the amount the Seller was due to receive under the Contract. As an example, if the price of the ACCUs bid by the Seller was A$10, but the Regulator had to pay A$12 to purchase the ACCUs which were not delivered by the Seller, the Seller would be liable to damages of A$2 per each non delivered ACCU. To determine the amount that the Regulator would need to spend to purchase the undelivered ACCUs, in the first instance it would calculated at the average spot price obtained from three separate third party dealers and if this was not possible, the price would be determined by an independent expert valuer.

The Seller would also be required to pay interest and the Regulator's reasonable costs and expenses, arising as a result of the non delivery.


The Contract can be terminated by either party in the following circumstances:

  • as a result of non-payment or false or misleading representations;
  • acts of insolvency or bankruptcy;
  • in the event of force majeure;
  • if there is mutual agreement by both parties.

The Contract will terminate automatically upon delivery of the Agreed Quantity and payment of all outstanding sums.

Damages will be payable by a defaulting party in relation to termination of the Contract, except in relation to termination for force majeure or by mutual agreement.

Dispute resolution

In the event that a dispute arises under the Contract, the parties are each required to nominate a representative to try and resolve the dispute through negotiation. If there is no resolution within 20 business days, the parties may refer the dispute to mediation by an independent third person, and if this does not result in resolution, either party may commence legal proceedings.


1If more than one project is covered by a Contract, the start date will be the earliest date of all of the crediting periods for the projects.
2Note that this frequency is applicable to emission reduction projects. Different reporting and credit issuance frequencies apply to other project types, such as carbon sequestration projects.

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.

Elisa de Wit
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.