Australian carbon credit units are classified as financial products under the Corporations Act 2001. This means that some participants may require an Australian financial services licence to buy, sell and trade in the carbon market.
The Australian Securities & Investments Commission (ASIC) is responsible for issuing licences under financial law, and monitoring businesses that provide financial services in financial products.
Who needs an Australian financial services licence?
Carbon markets participants who provide financial advice, trade, or make and operate and market in Australian carbon credit units, or derivatives of these units, require an Australian financial services licence.
Participants who conduct other financial services such as operating a registered managed investment scheme, or custodial or depository services must also hold an Australian financial services licence.
Licence exemption for carbon abatement contracts
Under the Corporations Act 2001, carbon abatement contracts are not considered a financial product or a derivative of a financial product. This means that all Emissions Reduction Fund participants who provide advice about, or enter into a carbon abatement contract with the government are not required to hold an Australian financial services licence.
See the Australian Securities & Investments Commission regulatory guide Do I need an Australian financial services licence to participate in carbon markets? for more information about Australian financial services licence requirements and exemption conditions.
Operating carbon financial markets
Entities who wish to establish and operate a financial market dealing in carbon units may be required to obtain an Australian market licence. Australian market licences can be granted by the Minister for Financial Services and Superannuation on advice from the Australian Securities & Investments Commission (ASIC).
Contact ASIC by email marketsregulation@asic.gov.au, or see the ASIC regulatory guide (RG 172), Australian market licences: Australian operator for more information.