Skip Ribbon Commands
Skip to main content
Sign In

Audit requirements for programmes administered by the Clean Energy Regulator

​​​​​​​​On this page

The following types of audits may be required for programmes administered by the Clean Energy Regulator:

  • National Greenhouse and Energy Reporting audits
  • exemption certificate audits
  • Emissions Reduction Fund audits, and
  • ​Safeguard mechanism audits.

1.4.1 National Greenhouse and Energy Reporting (NGER) audits

NGER audits, or ‘greenhouse and energy audits’, are assurance and verification engagements that are conducted under the NGER legislation. The NGER Act describes the circumstances in which the Clean Energy Regulator might initiate a greenhouse and energy audit.

If the Clean Energy Regulator has reasonable grounds to suspect non-compliance with the NGER legislation, it can initiate a compliance audit by providing a written notice to the corporation to be audited.

In these types of engagements, the audited body must appoint an audit team leader from the Register of Greenhouse and Energy Auditors and arrange for the audit to be undertaken. The audited body must also arrange for a copy of the audit report to be provided to the Clean Energy Regulator (under sections 73 and 73A of the NGER Act).

As these audits occur in cases where the Clean Energy Regulator suspects non‑compliance, an audit may be undertaken as a precursor to the application of enforcement measures, including investigations by authorised officers, civil penalties and criminal proceedings.

In addition, the Clean Energy Regulator may initiate greenhouse and energy audits for reasons other than suspected non-compliance. For example, the agency may initiate audits on a risk management basis or to gather information on the regulated community’s compliance with particular aspects of the NGER Act. The agency would appoint the audit team leader and must notify the audited body before the audit engagement starts (sections 74 and 74A of the NGER Act).

The information collected through audits informs decisions on matters such as the targeting and effectiveness of capacity-building activities among registered corporations. These engagements also inform decisions on further compliance monitoring and enforcement actions.

The NGER Audit Determination specifies requirements that audit team leaders must meet when preparing for and carrying out greenhouse and energy audits. It also specifies requirements for audit team leaders in preparing an assurance engagement report and a verification engagement report.

Main features of NGER audits

The table below outlines the main elements of NGER audits.

Legislation/guidance

NGER Act, sections 73, 73A, 74, 74A, 74B and 74C
NGER Regulations, Divisions 6.3–6.7
National Greenhouse and Energy Reporting (Measurement) Determination 2008 (NGER Measurement Determination)
NGER Audit Determination
Applicable standards:

  • ASAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information
  • ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information
  • ASAE 3410 Assurance on Greenhouse Gas Statements
  • ASAE 3100 Compliance Engagements
  • ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements
  • ISO 14064-3:2006 Greenhouse gases–Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions, and
AS ISO 14064.3-2006 Greenhouse gases–Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions.
Nature of engagement

Reasonable assurance, limited assurance or verification engagement initiated by the Clean Energy Regulator, after submission of a greenhouse and energy report under the NGER Act, for compliance or monitoring purposes.

Assurance practitioner

The audit team leader must be a registered greenhouse and energy auditor, Category 2. Other members of the audit team do not need to be registered. However, the NGER Regulations do contain requirements for other members of an audit team.

Voluntary engagements or verification audits may be led by Category 1 or 2 registered greenhouse and energy auditors.

Subject matter

The registered corporation’s energy and emissions report under section 19 of the NGER Act, or specified compliance requirements.
Compliance requirements may include:

  • the controlling corporation’s scope 1 and 2 emissions, energy production and energy consumption
  • registration requirements
  • record-keeping requirements, and
  • amount of NGER uncertainty.
Criteria

Energy and emissions report (under section 19 of the NGER Act):

  • NGER Measurement Determination for emissions and energy quantification, and
  • NGER Act, sections 11, 11A, 11B or 11C, for operational control.

Selected compliance requirements:

  • NGER Act, and
  • NGER Regulations.

1.4.2 Exemption certificate audits

Applications for exemption certificates under the Renewable Energy (Electricity) Act 2000 (RET Act) and the Renewable Energy (Electricity) Regulations 2001 (RET Regulations) are required to be accompanied by an assurance report where:

  • the application is made by a prescribed person under regulations 22G to 22M of the RET Regulations, and
  • the amount of exemption applied for exceeds 15 000 megawatt hours (MWh) for the application year.

The auditor may also provide a basis of preparation or other appropriate attachments (such as process maps) in support of the audit report.

Main features of exemption certificate audits

The table below outlines the main features of exemption certificate audits.

Legislation/guidance

RET Act, paragraph 46A(2)(bb)
RET Regulations, regulation 22UB
NGER Audit Determination
Applicable standards:

  • ASAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information
  • ASAE 3100 Compliance Engagements, and
ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements.
Nature of engagement

Reasonable assurance report in accordance with the NGER Audit Determination or ASAE 3000, submitted with exemption certificate applications.

Assurance practitioner

Authorised audit company, registered company auditor or registered greenhouse and energy auditor, Category 2.

Subject matter

The relevant matters set out in regulation 22UB of the RET Regulations, including:

  • the activity set out in the exemption certificate application
  • production amount or volume of relevant product, and
expected production amount or volume of relevant product (if applicable).
Criteria

RET Regulations Schedule 6 for emissions-intensive trade exposed (EITE) activity definitions and requirements.
Measurement policies in application for the quantity of relevant product.

If applicable, RET Regulations, regulation 22ZD.

1.4.3 Emissions Reduction Fund audits

Amendments to the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) make provision for administering the Emissions Reduction Fund.

Auditing of projects under the Emissions Reduction Fund provides the Clean Energy Regulator with confidence that the abatement reported represents genuine total net abatement for a project for a nominated reporting period. It is an essential component in the decision-making by the agency to issue Australian carbon credit units.

The agency takes a risk-based approach to audits under the Emissions Reduction Fund, utilising the Clean Energy Regulator audit framework. For most projects, this will mean a minimum of three scheduled audits across the seven plus year crediting period, which are arranged and paid for by scheme participants. An audit schedule is set for projects against criteria specified in the Carbon Credits (Carbon Farming Initiative) Rule 2015 (CFI Rule). The audit schedule sets out the frequency and scope of audits required for the project.

There are three main types of audit:

  • scheduled initial audit
  • scheduled subsequent audits, and
  • unscheduled or triggered audits.

The Clean Energy Regulator may also request a compliance audit to be carried out for a project, under Part 19 of the CFI Act.

Auditors are reminded that each project must be assessed and audited individually, and that an opinion must be provided for each project.

Scheduled audits

The first scheduled audit for a project must be an initial audit and must be a reasonable assurance engagement.

An initial audit report must be submitted with the first project report, where the project report is submitted between six months to two years into the crediting period for emissions avoidance projects, or five years into the crediting period for sequestration projects.

Where allowed for in the CFI Rule, a project may be eligible to report more frequently than every six months. In these cases, the initial audit must cover a period of at least six months and must be submitted with the final report covering the six month period.

The exceptions to this are the Carbon Farming Initiative (CFI) projects that were registered before the Emissions Reduction Fund came into effect and had previously submitted an audit report. These projects will be required to submit a minimum of three additional audits at subsequent audit scope during the crediting period.

The number of scheduled audits will depend on the project size in terms of the average annual abatement expected to be generated. All projects will be required to submit an initial audit report, and depending on the amount of expected carbon abatement, projects will be required to submit two, three or five subsequent audit reports.

Unscheduled or triggered audits

There are three types of unscheduled audits:

  • threshold audits, where a single report claims abatement over 100 000 tonnes of carbon-dioxide equivalent (tCO2-e)
  • qualified or other conclusion audits, where a previous audit report did not give a reasonable assurance conclusion, and
  • variance audits, where there is variance from any one or combination of:
    • the project’s total forward abatement estimate
    • other similar projects, or
    • a general abatement profile of the method used by the project.

Project compliance with legislation

Subsequent audit reports must provide assurance that in all material respects, the project report(s) for the periods of time covered by the audit has been prepared in accordance with section 76 of the CFI Act. Where information regarding changes to a project’s compliance with eligibility or monitoring requirements has been notified with a project report, or with a previous unaudited project report, the scope of the subsequent audit will be increased to review those eligibility factors, although will not extend to reviewing previously assured eligibility criteria.

As circumstances may change over time, the Clean Energy Regulator expects any subsequent audits of a registered project to consider whether that project continues to meet the method requirements and continues to be carried out in accordance with the section 27 declaration (see section 27 of the CFI Act).

Legal right

In all circumstances, audits will be required to test the legal right of the participant to undertake the project.

Auditors must be aware that, for aggregated projects under the Emissions Reduction Fund, the legal right over at least one or more specified sites or assets must be demonstrated to carry out that project at the time of project registration.

The information required to demonstrate the legal right to carry out the project varies depending on the role or position within the project.

Where consent is required to demonstrate legal right, evidence provided to the Clean Energy Regulator must include the following information:

  • a clear statement from the relevant stakeholder that the participant is able to carry out the project for the length of the crediting period
  • a clear statement from the relevant stakeholder that the participant is able to obtain financial benefit from the project including through the Emissions Reduction Fund for the length of the crediting period, and
  • a brief description of the activities being undertaken as part of the project.

It is noted that where consents were not available at eligibility and relevant to the first project report, the initial audit will cover whether the information provided demonstrates legal right.

An initial audit report must note that legal right has been tested.

If there is any change or addition to the participant’s legal right to carry out the project at any time after the first project report, the Clean Energy Regulator must be notified and a subsequent audit will cover whether the information provided demonstrates legal right since the change occurred.

Again, it must be noted in the subsequent audit report that legal right has been tested, including over additional sites for aggregated projects.

The table below outlines the evidence required to be registered as a participant.

Evidence requiredParticipant is the site/asset ownerParticipant is the site/asset lesseeParticipant is the service provider
Declaration of legal right to undertake the project for the length of the crediting period

Tick to indicate yes  

--
Consent from the site/asset owner to undertake the project for the length of the contract period-

Tick to indicate yes  

Tick to indicate yes  

Consent from relevant rights holders to undertake the project for the length of the contract period

Tick to indicate yes  

Tick to indicate yes  

Tick to indicate yes  

Declaration of intention to gain consents (where they are not available at eligibility)

Tick to indicate yes  

Tick to indicate yes  

Tick to indicate yes  


See further information on legal right.

Technical questions

In providing reasonable assurance opinions over projects, auditors must refer to the relevant methods, explanatory statements and method guidance. The method determinations can be complex and each poses its own technical questions that a reasonable assurance engagement needs to address. The determinations are also subject to periodic change and auditors need to ensure they are accessing the most recent version of them.

Information regarding the determinations is available under Emissions Reduction Fund. Additional guidance related to specific methods may also be provided on the website. It is suggested that audit team leaders refer to such guidance, if available, prior to conducting an audit.

Clean Energy Regulator initiated engagements

The Clean Energy Regulator may initiate an assurance engagement or agreed-upon procedures engagement (verification) on one or more aspects of a project participant’s compliance with the CFI Act or associated provisions for compliance or monitoring purposes.

While the subject matter of these engagements is at the Clean Energy Regulator’s discretion, the main Emissions Reduction Fund compliance requirements relate to whether the project activity conforms to the applicable method, including unit entitlement calculators, data collection, monitoring, reporting and record keeping, and other legislative requirements.

Main features of Emissions Reduction Fund audits

The table below outlines the main features of audits of Emissions Reduction Fund projects.

Legislation/guidance

CFI Act, sections 13 and 76
CFI Rule, Part 6, Division 3
Carbon Credits (Carbon Farming Initiative) (Audit Thresholds) Instrument 2015 (CFI Audit Thresholds Instrument)
Applicable standards:

  • ASAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information
  • ASAE 3100 Compliance Engagements
  • ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements
  • ISO 14064-3:2006 Greenhouse gases – Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions, and
AS ISO 14064.3-2006 Greenhouse gases – Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions.
Nature of engagement

Reasonable assurance engagement report in accordance with the NGER Audit Determination, submitted with an application for an abatement statement (formerly known as a certificate of entitlement) for an Emissions Reduction Fund registered project and with lodgement of a project report.

Assurance practitioner

The audit team leader must be a registered greenhouse and energy auditor, Category 2.

Other members of the audit team do not need to be registered. However, the NGER Regulations do contain requirements for other members of an audit team.

Types of audit

Subject matterCriteria
Initial audits

Scheme participant‘s project report and application for Australian carbon credit units.
Compliance of project with:

  • section 27 declaration of project in operation for the project
  • applicable method for the project, and
  • requirements of the CFI Act.
Project participant‘s compliance with applicable method.

Audit covers the period specified at section 74 of the CFI Rule.
Project operated and implemented in accordance with section 27 declaration.
Project in accordance with relevant methodology determination.
Participant meets requirements of relevant methodology determination under subsection 106(3) of the CFI Act.
Project report prepared in accordance with section 76 of the CFI Act.
CFI Act requirements, including notification and record keeping.
Relevant methods for:

  • offset activity quantification
  • content of project report
  • information to be provided to the Clean Energy Regulator, and
record keeping and monitoring.
Subsequent audits

Scheme participant’s abatement or sequestration number and whether the project report(s) has been prepared in accordance with section 76 of the CFI Act.
Where there is a previously unaudited change in a project, for example a change relating to eligibility requirements, monitoring requirements, scope or location of the project, the continued compliance of the project with:

  • section 27 declaration of project in operation for the project
  • applicable method for ​the project, and
  • requirements of the CFI Act.
Project participant‘s compliance with applicable method.

Number of subsequent audits is in accordance with section 75 of the CFI Rule and the CFI Audit Thresholds Instrument.

Project report prepared in accordance with section 76 of the CFI Act.

Changes to the project are reported in accordance with section 76 of the CFI Rule.

CFI Act requirements, including notification and record keeping.

Relevant methods for:

  • offset activity quantification
  • content of project report
  • information to be provided to the Clean Energy Regulator, and
  • record keeping and monitoring.
Triggered audits—threshold or variance

The project’s abatement number and whether the project report has been prepared in accordance with section 76 of the CFI Act.

Any other matter notified in writing by the Clean Energy Regulator.

Project report prepared in accordance with section 76 of the CFI Act.
CFI Act requirements, including notification and record keeping.
Relevant methods for:

  • offset activity quantification
  • content of project report
  • information to be provided to the Clean Energy Regulator, and
record keeping and monitoring.
Triggered audits – qualified or other conclusion

The matter in relation to which the reasonable assurance conclusion was not given has been appropriately addressed and the project has operated and been implemented in accordance with:

  • the section 27 declaration that is in operation for the project
  • the method used for the project
  • the requirements of the CFI Act, and
any other aspect of the project notified in writing by the Clean Energy Regulator.

Project report prepared in accordance with section 76 of the CFI Act.
Compliance of the project with:

  • section 27 declaration of project in operation for the project
  • applicable method for the project, and
  • requirements of the CFI Act.

Any other aspect of the project required by the Clean Energy Regulator.

Project participant‘s compliance with applicable method.

Note:​ An individual audit opinion must be provided for each individual project. A single audit opinion should not cover multiple projects to ensure appropriate levels of assurance have been given for each project or audit. Multiple projects may be listed on a single report, however the opinion must only cover one project at a time.

1.4.4 Safeguard mechanism audits

The safeguard mechanism​ ensures that emissions reductions purchased through the Emissions Reduction Fund are not offset by significant increases in emissions above business-as-usual levels elsewhere in the economy. It does this by encouraging large businesses not to increase their emissions above historical levels.

Facilities whose total amount of covered emissions exceed the safeguard threshold, which is currently 100 000 tonnes of carbon dioxide or equivalent, must keep their emissions at or below a baseline set by the Clean Energy Regulator.

Emissions baselines represent the reference point against which future emissions performance will be measured under the safeguard mechanism.

Baselines are set in different ways depending on whether the facility is new or well-established, how much historical data has been reported for it under the National Greenhouse and Energy Reporting (NGER) scheme and, in some instances, what type of facility it is.

A baseline may be adjusted to accommodate economic growth, natural resource variability or other circumstances where historic emissions are not representative of future business-as-usual emissions performance for the facility.

Responsible emitters who reasonably expect their facility emissions to exceed the baseline have a number of options available. For example, a responsible emitter may purchase Australian carbon credit units (ACCUs) and surrender them to offset the excess emissions, or generate their own ACCUs by carrying out a project under the Emissions Reduction Fund. They may also apply for a calculated baseline or access other management options.

The safeguard mechanism will be administered through the NGER scheme and is designed to minimise additional mandatory reporting requirements. As well as the requirement for emissions to remain below the baseline, safeguard facilities are subject to the usual reporting and recordkeeping requirements of the NGER scheme.

The NGER Audit Determination applies to all safeguard mechanism audits. Safeguard mechanism guidance material is available.

Main features of safeguard audits

The table below outlines the main features of audits under the safeguard mechanism.

Legislation or guidance National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 (the Safeguard Rule)
NGER Audit Determination
NGER Act
NGER Regulations
NGER Audit Determination
Applicable standards:
  • ASAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information
  • ASAE 3100 Compliance Engagements
  • ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information
  • ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements
  • ISO 14064-3:2006 Greenhouse gases–Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions, and
  • AS ISO 14064.3-2006 Greenhouse gases–Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions.
Nature of engagement Reasonable assurance and/or limited assurance engagement conducted by the designated large facility in accordance with the Safeguard Rules and NGER Audit Determination, submitted with an application for baseline determination.
Assurance practitioner The audit team leader must be a registered greenhouse and energy auditor, Category 2.
Other members of the audit team do not need to be registered. However, the NGER Regulations do contain requirements for other members of an audit team.

Types of audits

Subject matterCriteria
Calculated-emissions baseline determination auditsApplications for calculated-emissions baseline determination audits must be accompanied by an audit report which complies with section 28 of the Safeguard Rule.

The matters to be audited and covered by the audit report are whether, in all material respects:

Reasonable assurance:

  • if the new facility criteria, significant expansion criteria, inherent emissions variability criteria or initial calculated baseline criteria are satisfied, and
  • the application has been prepared in accordance with section 27 of the Safeguard Rule, and is presented fairly.

Limited assurance:

  • The estimates of the quantity of each production variable under paragraph 27(1)(c) and emissions intensity of each production variable are:
    • based on the applicants assumptions which provide a reasonable basis for the emissions, and
    • calculated on the basis of the applicant’s assumptions and any historical data that is stated fairly, and (if related to emissions intensity) reasonably expected to reflect the emissions intensity of the facility in the financial year determined under paragraph 27(1)(c), and
    • reasonable.
    • Audit conducted in accordance with the NGER Audit Determination.

Benchmark-emissions baseline determination audits
Note: The benchmark-emissions baseline determination to which the application relates is to commence on or after 1 July 2020
Applications for benchmark-emissions baseline determinations must be accompanied by an audit report which complies with section 36 of the Safeguard Rule.

The matters to be audited and covered by the audit report are whether, in all material respects:

Reasonable assurance:

  • If the significant expansion criteria are relied upon by the applicant, those criteria are satisfied, and
  • That the application has been prepared in accordance with section 35, and presented fairly.

Limited assurance:

  • The estimates of the quantity of each production variable under paragraphs 35(1)(b), (2)(b) and (2)(c):
    • meet the requirements in subsection 35(3)
    • are based on the applicant’s assumptions which provide a reasonable basis for the estimates
    • are calculated on the basis of the applicant’s assumptions and any historical data that is fairly stated, and
    • are reasonable.

Audit conducted in accordance with the NGER Audit Determination.

Production-adjusted baseline determination auditsApplications for production-adjusted baseline determinations must be accompanied by an audit report which complies with section 42 of the Safeguard Rule.​

The matters to be audited and covered by the audit report are whether, in all material respects:

Reasonable assurance:

  • The selection of the production variable for the facility:
    • if the determination is to commence after a benchmark-emissions baseline determination or paragraph 40(1)(b) applies – is applicable to the facility in accordance with the Benchmark Emissions-Intensity Index, and
    • is supported by historical data that is fairly stated.
  • The application has been prepared in accordance with section 41, and presented fairly, and
  • The estimates of the quantity of each production variable under paragraph 41(1)(a) or (2)(a) meet the requirements in subsection 41(3) and are supported by historical data that is fairly stated.

Audit conducted in accordance with the NGER Audit determination.

Variation of baseline determination for reduction in emissions intensity auditsApplications for variation of baseline determination for reduction in emissions intensity must be accompanied by an audit which complies with section 46 of the Safeguard Rule.

For a facility that is not a landfill facility, the matters to be audited and covered by the audit report are whether, in all material respects:

Reasonable assurance:

  • The emissions intensity test is satisfied
  • The application has been prepared in accordance with section 48, and presented fairly
  • That the estimates of the quantity of each production variable meet the requirements of subsection 48(2) or paragraph 48(3)(a) and are supported by historical data that is fairly stated, and
  • The calculation of the emissions intensity of each production variable meets the requirements of subsection 47(4) and is supported by historical data that is fairly stated.

Audit conducted in accordance with the NGER Audit determination.

​​

Documents on this page Documents on this page

Was this page useful?

LEAVE FEEDBACK
preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only