Eligible emissions units

Carbon pricing mechanism repeal

The Clean Energy Act 2011 has been repealed. This abolishes the carbon pricing mechanism from 1 July 2014. Liable entities must still meet their carbon price obligations for the 2013-14 financial year.

Content on the Clean Energy Regulator website will be progressively updated to reflect these changes. More information can be found on the carbon pricing mechanism repeal page.

Liable entities under the carbon price can satisfy their liability by surrendering 'eligible emissions units'. Each eligible emissions unit represents one tonne of carbon pollution emitted: carbon dioxide equivalent (CO2-e). For example, if an entity have an emissions number of 35 000, they need to surrender 35 000 eligible emissions units to satisfy their liability.

Entities surrender eligible emissions units from your account in the Australian National Registry of Emissions Units (ANREU) by an electronic notice transmitted to the Clean Energy Regulator.

An eligible emissions unit is:

  • a carbon unit
  • an eligible Australian carbon credit unit (ACCU), or
  • an eligible international emissions unit.

Some restrictions apply to using ACCUs and eligible international emissions units, as outlined below.

Carbon units

We issue carbon units under the Clean Energy Act 2011 for the purposes of satisfying liabilities under the Act. We issue each carbon unit by making an electronic entry in the relevant Australian National Registry of Emissions Units (ANREU).

For more information about the characteristics of carbon units, including how they are acquired and used to satisfy liability, see the concise description of units.

Australian Carbon Credit Units (ACCUs)

We issue ACCUs for greenhouse gas abatement activities undertaken as part of the Carbon Farming Initiative.

For more information about the characteristics of ACCUs, including how they are acquired and used to satisfy liability, see the Concise description of units. Importantly, in the fixed price period (2012–15), liable entities can surrender eligible ACCUs totalling no more than five per cent of a person's liability. The only exception is if the majority (at least 50 per cent) of a person's liability comes from landfill emissions. In this case, entities can surrender ACCUs up to their full liability during the fixed price period.

In the flexible price period (from July 2015), there will be no limit on the surrender of ACCUs.

Eligible international emissions units

Current eligible international emissions units are certified emission reductions (other than temporary or long-term certified emission reductions), emission reduction units, removal units, prescribed units issued in accordance with the Kyoto rules and prescribed international units.

The following international units are included in the legislation establishing the carbon pricing mechanism:

  • European allowances from the European Union Emissions Trading System (EU ETS)
  • certified emission reductions (CERs) from Clean Development Mechanism projects under the Kyoto Protocol, other than temporary CERs, long-term CERs, and CERs from nuclear projects, the destruction of trifluoromethane, the destruction of nitrous oxide from adipic acid plants or from large-scale hydro-electric projects not consistent with criteria adopted by the European Union (based on the World Commission on Dams guidelines)
  • emission reduction units (ERUs) from Joint Implementation projects under the Kyoto Protocol, other than ERUs from nuclear projects, the destruction of trifluoromethane, the destruction of nitrous oxide from adipic acid plants or from large-scale hydro-electric projects not consistent with criteria adopted by the European Union (EU) (based on the World Commission on Dams guidelines)
  • removal units (RMUs) issued by a Kyoto Protocol country on the basis of land use, land-use change and forestry activities under Article 3.3 or 3.4 of the Kyoto Protocol,
  • Australian-issued international units that may be issued by the Clean Energy Regulator with respect to corresponding foreign emissions units that have been withdrawn from circulation in a foreign registry, and
  • any other international units that the Government may allow by regulation.

Liable entities cannot use eligible international emissions units to satisfy liability in the fixed price period.

In the flexible price period, until 2020–21, entities can satisfy their annual liability using no more than 50 per cent of eligible international emissions units. A sub-limit within the 50 per cent limit applies to the use of eligible Kyoto units (CERs, ERUs, RMUs) meaning these units can only be used to meet up to 12.5 per cent of an entity's total annual liability.

Emissions units—summary of requirements and transitions

Fixed price period

  • We issue carbon units to the ANREU account of the purchaser; these units are automatically surrendered.
  • Carbon units issued within the fixed price period can only be surrendered is the same vintage year in which they were issued; they are cancelled after the following 1 February.
  • Industry assistance schemes provide free carbon units for each vintage year. These units are issued into the ANREU accounts of successful applicants.
  • Free carbon units are tradable. A buy-back of free units is available for each fixed price year and free units that are not surrendered or bought back by the following 21 February are cancelled.
  • No banking (holding over units from one vintage year to the next) or borrowing (surrendering units in advance of the vintage year) may occur.
  • International units cannot be surrendered in this period.
  • ACCUs are limited to five per cent of the total surrender (except if the majority, at least 50 per cent, of an entity's liability comes from landfill emissions).

Flexible price period

  • We issue carbon units by auction, and the amount of available units will be capped.
  • Industry assistance schemes provide free carbon units for each vintage year. These units are issued into the ANREU accounts of successful applicants.
  • Free units are tradable.
  • Banking (holding over units from one vintage year to the next) and borrowing (surrendering units in advance of the vintage year) are permitted. Borrowing is limited to five per cent of surrender.
  • Until 2020, liable entities must meet at least 50 per cent of their annual liability with domestic units.
  • There are no limits on the use of ACCUs.
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