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Understanding carbon abatement contracts

31 October 2018

Under the Emissions Reduction Fund, you can enter into a contractual arrangement to sell Kyoto Australian carbon credit units (ACCUs) to the government if you are successful at the Emissions Reduction Fund auction. This is referred to as a carbon abatement contract (a contract).

When you enter into a contract, you are entering into a commercial arrangement with the Clean Energy Regulator on behalf of the Commonwealth of Australia, including rights and obligations enforceable through the courts—similar to other contractual arrangements entered into between parties. You are advised to seek your own legal advice about the ​contract before participating in an Emissions Reduction Fund auction.

In entering into a contract, you are agreeing to provide a set number of Kyoto ACCUs at a set price for the duration of the contract. The number of Kyoto ACCUs you agree to provide is called the ‘agreed quantity’, and you can schedule these to be delivered across the duration of the contract. A contract begins when the Clean Energy Regulator notifies you that you had a successful bid at auction, and ends when the final delivery of Kyoto ACCUs has occurred and all payments have been made.

Each contract is tied to at least one Emissions Reduction Fund project, however, each project can only be the subject of one contract at any one time. Once you have fulfilled your contractual obligations for one project, you may bring forward the same project to another auction.

It is up to you to ensure you are able to deliver the agreed quantity of Kyoto ACCUs in accordance with the delivery schedule you have provided. When planning the agreed quantity and delivery schedule you should ensure that:

  • the number of Kyoto ACCUs you have agreed to provide under the contract can be generated by your project, and delivered before the end of the contract, and
  • each date in the schedule allows sufficient time for you to undertake necessary audits and reporting, and to apply to the Clean Energy Regulator for Kyoto ACCUs.

If your project cannot deliver the agreed quantity, you are required to source the difference from other projects you run or from the secondary market.

To help you establish a contract delivery schedule, the Clean Energy Regulator has developed an interactive contract delivery schedule calculator. The calculator provides an indication of optimal management of key project timeframes, and helps you consider whethe​r your allocated time for some project processes is achievable. The results from the calculator should not be considered as assurance that your project will meet delivery milestones as required under contractual obligations.

Parts of a carbon abatement contract

The four components to a carbon abatement contract

Code of Common Terms

The documentasset::Code of Common Terms sets out the rights and obligations of the parties under the contract. It is non negotiable, and all participants for each auction must agree to the same terms.

You must agree to the Code of Common Terms when qualifying to participate in an auction.

Archived Code of Common Terms

This code of common terms differs from those in force for projects contracted at previous auctions.Refer to Auction results for the version in force for each auction.

Documentasset: Code of Common Terms – version 1 archived

Documentasset: Code of Common Terms – version 2 archived

Commercial terms

The commercial terms set out details about who you are, and the project(s) that you are bringing forward to the auction. The commercial terms also includes any conditions precedent that must be met before abatement can be delivered through the contract.

The information to support the commercial terms must be provided when qualifying to participate in an auction.

Delivery terms

The delivery terms sets out when and how many Kyoto ACCUs you will deliver, and the term (in years) of your contract. Delivery terms must be provided when registering to participate in an auction.

Financial terms

The financial terms set out the price per Kyoto ACCU you will be paid for delivering abatement under contract. The price paid per Kyoto ACCU is determined through the auction bidding process.

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