To enter into a carbon abatement contract with the Commonwealth is to enter into a commercial arrangement with rights and obligations enforceable through the courts, similar to other contractual arrangements entered into between parties.
You are to seek your own legal advice about the contract prior to participating in the Emissions Reduction Fund auctions process. Each party will bear its own costs and expenses in connection with the preparation, negotiation and entering into or execution of the contract.
The Clean Energy Regulator will enter into carbon abatement contracts (contract), on behalf of the Commonwealth, with participants to purchase emissions reductions.
The contract starts when the Clean Energy Regulator notifies you that you had a successful bid at an
Emissions Reduction Fund auction.
If you are successful at an auction the carbon abatement contract automatically comes into effect. If there are no
conditions precedent the sale and purchase obligations under the contract commence when the contract comes into effect. Otherwise those obligations will commence when all conditions precedent have been fulfilled or waived.
If you have nominated an authorised representative at the auction qualification stage to act as an agent on your behalf in relation to the contract, the authorised representative can agree to:
An authorised representative can also send, on behalf of the seller, all certificates, consents, approvals, waivers and other communications in connection with the contract.
The contract ends when the final delivery of ACCUs is made in line with the contract’s delivery schedule and payment for the ACCUs delivered is made. A contract will be effective for the entire term of the contract unless
terminated due to default of either party or by mutual agreement between the parties.
Three contract durations are available:
You choose the contract duration during stage two of the auction process –
The carbon abatement contract is a standardised sale and purchase agreement that obligates the seller (a participant successful at an auction) to deliver a quantity of Kyoto Australian carbon credit units (ACCUs) to the Clean Energy Regulator (the buyer), and the Clean Energy Regulator to purchase those ACCUs at the contracted price over a set delivery schedule for the duration of the contract.
The contract is a
standardised contract that will be used for all successful auction bids.
The contract allows you to deliver units from any source so that you can make good any underperformance of your project with units from another project or purchased in the secondary market.
The contract is made up of four parts as illustrated below.
The code of common terms sets out the rights and obligations of the parties under the contract. It is non-negotiable.
You must agree to the code of common terms when
qualifying to participate in an auction.
The other three parts of the contract (commercial terms,
delivery terms and
financial terms), set out information that is particular to each contract as determined by the seller and will be put forward to the Clean Energy Regulator as part of the bidding process. The Clean Energy Regulator will not agree to amend the code of common terms, the financial terms, the agreed quantity (total abatement over the contract) or the contract duration.
carbon abatement contract – code of common terms.
The commercial terms (auction qualification) identify:
You must agree to the commercial terms of the contract when qualifying to participate in an auction.
The delivery terms (auction registration) set out:
You must agree to the delivery terms of the contract during auction registration.
The financial terms (auction bid) set out:
You agree to the financial terms of the contract when submitting your auction bid.
A conditions precedent is a condition that must be fulfilled or waived before the obligation to deliver and purchase ACCUs under the contract comes into effect. For example, the contract will not commence until certain conditions such as financing or regulatory approvals for the project have been met. Conditions precedents may be specified in the commercial terms by the seller or the Clean Energy Regulator or mutually.
All reasonable endeavours must be used to fulfil conditions precedents as soon as possible. Both parties must notify each other as soon as they become aware of a fulfilment or waiver of conditions precedent.
The conditions precedent expiry date is the date by which the conditions precedents must have been fulfilled or waived or the contract terminates automatically.
Conditions precedents and the conditions precedent expiry date are specified in the commercial terms and are assessed as part of the auction qualification stage.
The contract offers several flexible options including:
In line with normal commercial practice, the contract also makes provisions for damages that could be payable by the seller if emissions reductions are not delivered.
To find out the meaning of any of the terms used in contracting with the Clean Energy Regulator, see the
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