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Choosing a project proponent for landholders

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19 June 2020
ERF

What is a project proponent?

A project proponent is the person that is responsible for carrying out a project and has the legal right to do so.

If you are considering conducting an Emissions Reduction Fund project on your land, an important consideration is who the 'project proponent' will be. This must be considered before you apply to register a project and before you enter into any agreement with third-parties in relation to your project.

The project proponent is the party who has the legal right to undertake the project. This means that they control the project, will be issued carbon credits created by the project and are legally responsible for meeting all obligations under the Carbon Credits (Carbon Farming Initiative) Act 2011 for the life of the project. The project proponent can be a single person, multiple people or an organisation.

If you own the land or are the leaseholder, you will generally have the legal right to conduct a project on your land. As the landholder, you can choose to:

  • Retain your legal right and be the project proponent yourself, or
  • You can give this right to another party.

As the project proponent is in control of the project, the Clean Energy Regulator's legal relationship is with the project proponent.

Being the project proponent yourself

If you choose to be the project proponent yourself, then you will be legally accountable to us for carrying out the project and meeting all obligations for the life of your project. Before your project can be registered with us you will need to:

  • be assessed by us to determine that you have the capability, capacity and good character to run the project and comply with the requirements,
  • demonstrate that you have the legal right to undertake the project and claim the carbon credits, and
  • open an ANREU account so that you can receive and transfer carbon credits.
  • You can remain the project proponent while engaging another party as an agent for your project. Agents act on behalf of project proponents according to the terms of the agency agreement you enter into, for example by providing reports on projects, submitting applications for carbon credits and generally dealing with the Clean Energy Regulator on your behalf. You must authorise an agent to act on your behalf in an arrangement similar to tax agents. Engaging an agent may be the right choice for you if you want to control the project but do not have the technical expertise or administrative resources to manage your project.

    However, if you engage an agent you, not your agent, are still legally accountable to the Clean Energy Regulator for carrying out the project and meeting all obligations. You also retain ultimate control of the project and are issued carbon credits generated by your project into your ANREU account. If engaging an agent to assist you, we recommend you obtain legal advice before signing any agreement as the Clean Energy Regulator cannot intervene in any dispute between you and your agent.

    Giving someone else the right to be the project proponent

    If you choose to give the right to be the project proponent to another party, they will control the project and are legally responsible for carrying out the project and meeting all obligations. They also receive the carbon credits from the project on your land, and if they have a contract with the Clean Energy Regulator receive funds from the sale of the carbon credits to the Clean Energy Regulator.

    You can engage a carbon service provider to be the project proponent. Broadly, carbon service providers are private businesses or organisations, independent of government, that offer a range of services in developing and running carbon abatement projects. They may also be called aggregators or project developers. Engaging a carbon service provider as the project proponent may be the right choice for you if you do not want to be the party that has direct control over the project and is accountable for conducting it. It may also be the right choice if you do not have the technical expertise or administrative resources to manage your project.

    If you are engaging a carbon service provider to be the project proponent, you will have a commercial agreement with them setting out the terms on which you give them ‘legal right’, your obligations with regards to the conduct of the project activities and the financial return you will receive. It’s important to understand what you are signing and to be confident the benefit sharing agreement is equitable. You should also consider carefully any obligations and restrictions to which you are committing in light of your present and future plans. The Clean Energy Regulator is not involved in these contracts and is not responsible for the terms of any private agreements or for their enforcement. The Clean Energy Regulator cannot intervene in any dispute that may arise between you and the carbon service provider. If you are not satisfied with the way a project is being conducted on your land you would need to take your own action under your agreement with the project proponent.

    It's important to note that: If legal right is given to a carbon service provider, the Clean Energy Regulator's legal relationship is with the carbon service provider as the project proponent, not with the owner of the land on which the project is carried out. It's a good idea to seek professional legal and financial advice before entering into any agreement with a carbon service provider. You should also make enquiries about the carbon service provider including about their services, experience and any government licences they may hold. If a carbon service provider is providing financial service advice they should hold an Australian Financial Services Licence (AFSL) issued by the Australian Securities and Investments Commission (ASIC).

    If a registered project proponent loses the legal right to carry out the project, the project may be at risk of being revoked, or cancelled and no longer eligible to receive carbon credits. You should ensure your agreement for a carbon service provider to be your project proponent, clearly deals with rights and obligations in respect of the ongoing registration of the project. This is important should the carbon service provider cease to be a project proponent or if you are looking to exit the arrangement where you have given legal right.

    Other considerations

    Eligible Interest Holder Consents

    Regardless of whether you are the project proponent or appoint a carbon service provider, the project will need consents from any eligible interest holders before carbon credits can be issued for carbon abatement from the project.

    Eligible interest holders can include financial institutions with a mortgage over your property or a Registered Native Title Body. For a pastoral lease, in some states you may need to obtain the approval of the State government.

    Permanence obligations

    If your project is one that stores carbon in vegetation or soils (sequestration), the carbon will need to be protected for the permanence period (25 or 100 years). This is the responsibility of the landholder even if project registration is revoked. As such it’s important to understand the permanence obligations.

    Changing the project proponent

    There is a range of circumstances where projects may transfer to another person who has the legal right to carry out the project and wishes to continue it. They include:

    • death or insolvency of a registered project proponent
    • sale of project property
    • end of legal arrangement conferring legal right
    • abandonment of the project by the registered project proponent
    • the registered project proponent fails the fit and proper person test
    • making of an application for project revocation

    A change of project proponent needs to satisfy certain conditions set out in section 24 of the Carbon Credits (Carbon Farming Initiative) Rule 2015. See Vary the participants for your project for more detail.

    Further information

    The Department of Industry, Science, Energy and Resources has information on Working with carbon service providers in the Emissions Reduction Fund and the Carbon Market Institute has a voluntary Code of Conduct which sets out best practice and working with a signatory may provide some assurance when selecting carbon service providers.


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