It may be early days for carbon trading in Australia but many
farmers and graziers are already trading or exploring how they can
In April 2015, the Clean Energy Regulator (CER)
conducted the first "reverse" auction to buy carbon
credits with the second auction being conducted in November
These auctions are funded by the Federal Government's
Emissions Reduction Fund (ERF). The ERF is a scheme designed to
help Australia meet its emissions reduction targets. Through these
two auctions the Federal Government has now committed $1.217
billion of the $2.55 billion set aside for the ERF.
With the next auction set for Wednesday 27 and Thursday 28 April
2016 and a further auction set for the final quarter of 2016, now
is the time to consider whether your business can benefit.
How do I get involved?
Many of Thynne + Macartney's clients who participate in the
ERF engage the services of a consultant to assess the suitability
of their property and assist with the application and
There are a number of methods landholders and producers can
implement to earn tradeable Australian Carbon Credit Units
Forest regeneration – the regeneration of native
forests that have been suppressed by livestock or clearing.
Avoided deforestation – the preservation of
native forest previously approved for clearing (therefore avoiding
the emissions that would have resulted from clearing).
Savannah burning – fire management in the early
dry season in northern savannas is aimed at reducing the incidence
and extent of larger, higher intensity late dry season fires.
Feeding nitrates to beef cattle – replacing urea
lick blocks with nitrate lick blocks for pasture-fed beef
There are four broad steps involved in participating in the
Apply – you must apply to become an ERF
participant and register your project with the ERF.
Contracts and auctions – to secure a contract
with the CER, you must complete an auction qualification
application, auction registration application, and bid successfully
at an auction run by the CER.
Reporting and auditing – if you are successful
at auction, you are required to report on your project at regular
intervals and for most projects a minimum of three scheduled audits
across a seven year period is required.
Delivery and payment – you must ensure that the
number of ACCUs you have promised to the CER have been created,
assessed and credited to your account by your scheduled
Participating in the ERF and entering into a contract with the
CER are not without risk. Some issues that participants must
consider before deciding on whether to participate in the CER
Duration of commitments to the Government
The duration of your contract with the CER be a period of up to
10 years but you may wish to nominate a shorter period to preserve
Some projects are also subject to permanence obligations which
require the carbon stored by a sequestration project to be
maintained for the nominated period (either 25 or 100 years). If
you withdraw from a project during the permanence period you may
become subject to a "relinquishment requirement" which
may require you to return a specified number of ACCUs to the
Sale of property
Under the terms of your contract with the CER, you cannot
transfer your obligations without the consent of the CER. This
could delay or hinder the sale of your property.
If you cannot deliver the required number of ACCUs to the CER by
the required date, you can negotiate a revised delivery schedule
with the CER or you can purchase additional ACCUs on the secondary
market. In the worst case scenario, you may be liable to pay
damages to the CER.
The legal right to carry out a carbon sequestration
A "project proponent" must have the legal right to
carry out the project.
For example, where a "project proponent" is
undertaking a carbon sequestration project they must have the
exclusive "carbon sequestration right" for the project
area. These rights are governed by state legislation and each state
has taken an individual approach to the creation of "carbon
sequestration right" and uses varying terminology.
In Queensland, holders of certain leasehold tenures may be
required to address native title issues, which potentially is a
Carbon trading consultants
Care should be exercised when entering into any "services
agreements" with a consultant to ensure that you are
adequately protected and are not liable for any unexpected costs
particularly if your project does not proceed.
Landholders who wish to participate in the ERF should always
seek legal advice before deciding whether to participate and before
contracting with both the CER and any expert or company
specialising in this area.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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