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Legal right

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04 March 2016
ERF

An Emissions Reduction Fund participant:

  • is responsible for carrying out the project, and
  • has the legal right to carry out the project.

If a project has multiple participants, the participants will need to have the legal right to carry out the project. The participants may collectively have this legal right or each participant may have the legal right to carry out the project.

It is a participant’s responsibility to ensure they have the legal right to carry out an Emissions Reduction Fund project.

What is legal right? (Elements of legal right)

For you to have the legal right to carry out an Emissions Reduction Fund project, you must:

  • have the right to carry out the project activities on or for the sites or assets included in the project, and
  • have a lawful and exclusive right to be issued all Australian carbon credit units (ACCUs) that may be created as a result of the project activities.

Having an exclusive right to something means no other person can lawfully claim that right.

Who provides you with legal right?

To acquire the legal right to carry out the project you should consider all the stakeholders involved or impacted by the project. Owners, lessees and service providers all may have an interest in whether an Emissions Reduction Fund project is being undertaken. Arrangements with or between them may determine who has the legal right.

In any commercial arrangement parties can assign the legal right to carry out the project to any of the parties involved, including aggregators or service providers (see below). The diagram below demonstrates the direction legal right holders can transfer their legal rights.

The directions legal right holders can transfer their legal rights 

It is the responsibility of a participant to ensure that their project will not overlap with any other Emissions Reduction Fund project. The legislation does not permit double counting abatement.

It is important that you are transparent with all stakeholders of your intention to undertake an Emissions Reduction Fund project. If a project is registered, no other person will be able to register a project with the same activity or overlapping activities at or for the same project site or assets.

The Clean Energy Regulator’s assessment at the time of project registration that a person has legal right to carry out a project is an administrative assessment based on information provided to it. Such an assessment cannot be relied upon as evidence of existence of that legal right. The Clean Energy Regulator or its processes do not create legal right, nor do they certify that it exists.

What is the duration of legal right?

Your legal right to carry out the project on or for the sites or assets included in the project must exist over a period of time that is not less than the duration of the crediting period for the project. This will usually mean 7 years for emissions avoidance projects and 25 years for sequestration projects.​

What happens if circumstances change?

If your project is registered and for any reason your legal right to carry out the project or your responsibility for it ceases, you must notify the Clean Energy Regulator within 90 days. The Clean Energy Regulator may revoke the project’s registration if the person with responsibility for the project is not registered as a participant for the project within 90 days after the cessation occurs. Where revocation of a sequestration project’s registration occurs before expiry of its permanence period, the Clean Energy Regulator may also require you to relinquish a certain number of ACCUs. A relinquishment notice will not exceed the total number of ACCUs issued for the project.

If you are registered as a project’s participant and another person acquires your legal right to carry out the project you will need to apply to the Clean Energy Regulator to change the project registration to name that person as the participant. The Clean Energy Regulator may grant your application and make the change. As a pre-condition to granting the application, the Clean Energy Regulator may require you to give security to the Commonwealth in relation to the fulfillment of any requirements to relinquish ACCUs imposed on you under the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act). Such a security may be in the form of a bank guarantee, a letter of credit issued by a bank, a bond, etc.

How is legal right demonstrated?

When you apply to the Clean Energy Regulator to register a project, you will need to indicate in the project registration form that you have the legal right to carry out the project. Your legal right will need to be described.

Your description of your legal right should be explained in clear terms. It must relate to each specified site or asset for which you claim to have legal right. The explanation must include:

  •  a description of the project activities and associated obligations (such as allowing access or monitoring),
  • a statement that you (the applicant):
    • have the right to carry out the project activities on or for the sites or assets included in the project, and
    • have a lawful and exclusive right to be issued all ACCUs that may be created as a result of the project activities,
  • an explanation of how you acquired the legal right, and
  • a statement about the duration of your legal right.

You may support your explanation with documents demonstrating your legal right.

If in any project report you provide to the Clean Energy Regulator, you claim ACCUs for any changes in project sites or assets after registration of the project, or after the last project report was provided, you must describe your legal right for those changed sites or assets in the manner stated above. You may support your explanation with documents demonstrating your legal right.

After receiving your application or project report, the Clean Energy Regulator may require clarification or more information.

An auditor of a project report may need to see information and documents such as relevant title or contractual documentation which evidence your legal right. This may occur in an initial audit which will audit your claim of legal right for any specified sites or assets at the time of project registration, or in a subsequent audit which will audit a project report that discloses any changes in sites or assets in respect of which ACCUs have been claimed.

You must satisfy the Clean Energy Regulator of the existence of your legal right to carry out the project with respect to specified sites or assets. If you do not do so, ACCUs will not be issued for any site or asset for which your legal right is not clear.

What documents could demonstrate legal right?

You may provide any documents to demonstrate your legal right. Such documents could be copies of email exchanges, letters, agreements or similar documentation (or their extracts).

If you provide a contract or similar documentation (or their extracts), you should provide an explanation or summary of the parts that are relevant to your legal right and its duration. If you are providing an extract, you should state that there is nothing in the other parts of the document from which the extract was made that contradicts the information in the extract or causes that information to be incorrect or misleading.

Examples of project roles

Site/land owner

This is the person that holds the title to the land that the activity is being undertaken on.

Lessee

This is the person renting a site or asset under a written lease from the owner (lessor).

Service provider

This is a party that will implement or support the implementation of the project. Usually comprised of technical and management expertise for carbon abatement projects.

Asset owner

This is the person that owns the equipment that generates abatement for the project (e.g. light bulbs in a commercial buildings project, boiler owner for an energy efficiency upgrade project or mobile assets such as vehicles).

Relevant right holder

This is a person who is not a site or asset owner, but also needs to consent to the project as they also have the legal right to undertake activities at or for the site or asset. For example, a site/asset lessee.

Note: Sequestration projects and area-based emissions avoidance projects may also require the consent of eligible interest holders.

Case studies (hypothetical)

Company A – Participant is a service provider, providing services to a site owner who leases project equipment, e.g. Facility upgrade

Company A is a service provider contracted by a site owner to undertake a series of energy efficiency upgrades at the site. The site owner funds the project, however all the operational activities are undertaken by Company A. The site owner decides to allow Company A to register as the Emissions Reduction Fund project participant.

Some of the larger pieces of equipment used for the project are procured by the site owner on a 10 year lease from the equipment manufacturer or other lessor. Therefore the manufacturer/lessor still owns the equipment that is being installed as part of the upgrade.

Acquisition of the legal right to conduct the project by Company A will involve, but may not be limited to, obtaining consents from the site owner and the equipment owner to undertake the project and get it registered in Company A’s name.

To demonstrate legal right to carry out the project, Company A (the service provider) must describe to the Clean Energy Regulator the project activities and associated obligations; provide statements about its legal right and the duration of that right; and how it obtained its legal right. This must include an explanation of arrangements with the site owner and that company’s ability to provide the legal right to Company A. Company A may also provide consents from the site owner and the equipment owner.

Company B – Participant is a service provider, e.g. Boiler upgrades

Company B is an energy retailer that wishes to undertake a project whereby clients can seek assistance from Company B to replace boilers. Its client, who is the owner of a boiler and leases space for the boiler at a site, makes an agreement for Company B to help install a replacement boiler at the site. In exchange for receiving a discount on the installation costs, Company B asks the client to allow Company B to receive all ACCUs generated from replacing the boiler for the next 7 years by registering the project with Company B as the registered project participant.

Acquisition of the legal right to conduct the project by Company B will involve, but may not be limited to, obtaining consents from the boiler owner and the site owner to undertake the project and get it registered in Company B’s name.

To demonstrate legal right to carry out the project, Company B must describe to the Clean Energy Regulator the project activities and associated obligations; provide statements about its legal right and the duration of that right; and explain how it obtained its legal right. Company B may also provide the consents from the boiler owner and the site owner.

Company C – Participant is a tenant, e.g. Building upgrades

Company C leases the use of a property from Company Z, the site owner. The leasing arrangements involve a complex range of rights associated with the use and infrastructure at the site.

The project will involve a number of energy efficiency upgrades and changes in operational practices to reduce the overall energy consumption on the site.

Company C contracts a service provider to implement the project on its behalf. It registers the project under Company C’s name. Company C is responsible for arranging auditing and the reporting requirements and receives the ACCUs, however the activity is undertaken by the service provider.

Acquisition of the legal right to conduct the project by Company C will involve, but may not be limited to, obtaining consent from the site owner to undertake the project and get it registered in Company C’s name.

To demonstrate legal right to undertake the project, Company C must describe to the Clean Energy Regulator the project activities and associated obligations; provide statements about its legal right and the duration of that right; and explain how it obtained its legal right. Company C may also provide the consent from the site owner.

Company D – Participant is an aggregator, e.g. Sequestration projects

Company D is a service provider who wants to undertake a project to establish plantings on a range of properties that are owned/leased by a number of land owners/lease holders.

The project will involve establishing permanent plantings on land that has been clear of forest for at least the last 5 years.

Company D will register the project and be responsible for all aspects of the project activities, including the purchase of all seed or tube stock, undertaking the planting, maintaining the plantings and reporting and arranging auditing as required. Company D will receive all the ACCUs created from these activities. Company D agrees to transfer, or pay the proceeds from the sale of, a percentage of the ACCUs issued to it to the land owners/lease holders in exchange for the rights to access their land and carry out the project.

Acquisition of the legal right to conduct the project by Company D will involve, but may not be limited to, obtaining consents from the land owners/lease holders to undertake the project and get it registered in Company D’s name.

To demonstrate legal right to undertake the project, Company D must describe to the Clean Energy Regulator the project activities and associated obligations; provide statements about its legal right and the duration of that right; and explain how it obtained its legal right. Company D may also provide the consent from each land owner/lease holder of the land.

Each land owners/lease holders is also an eligible interest holder. A completed Clean Energy Regulator’s eligible interest holder consent form will need to be obtained from each of them at project registration or before Company D applies for credits.

Disclaimer

This document provides general guidance concerning legal rights in the context of Emissions Reduction Fund projects. While reasonable steps have been taken in compiling this document, the Clean Energy Regulator accepts no responsibility for the accuracy, currency or completeness of the information contained in the document.

The Clean Energy Regulator recommends persons consult the relevant legislation and seek legal or professional advice concerning their circumstances if they have any doubts.

The Clean Energy Regulator is not engaged in providing legal or professional advice in making this document available.

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