Statement setting out a concise description of the characteristics of Certified Emission Reductions
Australian National Registry of Emissions Units Act 2011
Date of publication: August 2015
This is a statement setting out a concise description of the characteristics of Certified Emission Reductions (CERs), except temporary Certified Emission Reductions and long-term Certified Emission Reductions. This statement is published, and will be kept up-to-date, under section 61 of the
Australian National Registry of Emissions Units Act 2011 (ANREU Act 2011). It is not a Product Disclosure Statement within the meaning of Part 7.9 of the
Corporations Act 20011.
This statement is general in nature and does not apply to any particular situation, transaction or organisation. It is not legal or financial advice. You should seek your own legal or financial advice with particular reference to your own circumstances and requirements. This statement does not provide specific information or advice concerning, among other things, the detailed characteristics of CERs, the costs associated with them, their legal status, their taxation treatment and the potential benefits and risks of dealing in them.
Neither the Commonwealth of Australia nor the Clean Energy Regulator (the Regulator), nor any of their officers or related bodies, make any representation as to the future nature, characteristics or performance of CERs. Nor can they provide any specific advice concerning CERs. You may obtain professional advice from a person who holds an Australian Financial Services Licence (AFS licence) that authorises them to provide financial advice in relation to CERs or is exempt from the requirement to hold an AFS licence for this purpose. You can visit the
ASIC website to search the register of AFS licensees, or visit the
Money Smart website for more information on obtaining professional financial advice.
Please note that any financial product which is related to or associated with a CER, such as a derivative or a managed investment scheme, may require a Product Disclosure Statement to be provided by the person offering or recommending that financial product.
Section 4 of the
ANREU Act 2011 provides that a CER is ‘a certified emission reduction issued outside Australia in accordance with the relevant provisions of the Kyoto rules’.
Under the Kyoto rules, a CER is a tradable unit representing one tonne of carbon dioxide-equivalent (tCO2-e) of emissions abatement or sequestration.
CERs are issued for projects registered under the Clean Development Mechanism (CDM), which operates in countries that are non-Annex I Parties to the United Nations Framework Convention on Climate Change (UNFCCC)2 and Kyoto Protocol (developing country Parties).
Annex I Parties to the UNFCCC and the Kyoto Protocol (developed country Parties) can use CERs to meet their emissions reduction or limitation commitments. CERs are only valid for the commitment period for which they are issued, unless they are ‘carried-over’ by a Party in accordance with Kyoto rules3.
Each CER has a serial number made up of a number of different elements which, when combined, create a unique identifier for the CER. The serial number identifies the fact that the unit is a CER, the Kyoto Party that issued the CER, the Kyoto commitment period for which the CER was issued and the CDM project number of the CER.
The CDM is governed by the CDM Executive Board (the Board). Following independent verification of emission reductions achieved by a registered CDM project, the Board may issue one CER for each tonne of CO2-e sequestered or abated into the relevant project participant/s’ CDM Registry account.
The relevant project participant/s may arrange for the transfer of the relevant CERs from their CDM Registry account to a nominated account in a national registry (such as the Australian National Registry of Emissions Units (Registry)) through the International Transaction Log.
See further information on the
Clean Development Mechanism.
A CER is represented as an electronic entry in the Registry account in which the CER is held4. The entry for a CER consists of its unique serial number5. A Registry account can only be opened by a person after the Regulator has considered whether they are a ‘fit and proper person’6.
The Regulator may correct the Registry if the Regulator becomes aware of any defect in the registered holder’s title to a CER, for example, if the Regulator becomes aware that the CER had been entered in the registered holder’s account in error or as a result of fraudulent conduct7.
CERs can be carried over in accordance with the Kyoto rules. However the Governments policy intent is that CERs issued for the first commitment period will not be carried over to the second commitment period if they are held in private registry accounts. If CERs issued for the first commitment period are held in these accounts at the end of the final period of accounting (10AM 19th November 2015 AEST) they will be cancelled.
More information is available on the Department of Environments website where the
draft regulations for carry over are published.
A CER held in a Registry account is personal property for the purposes of Chapter 5 of the
Corporations Act 2001, the
Bankruptcy Act 1966, the law relating to wills, intestacy and deceased estates, the
Personal Property Securities Act 2009 and the
Proceeds of Crime Act 20028.
ANREU Act 2011 does not prevent the creation or enforcement of, or any dealings with, equitable interests in CERs9. It may be possible for the holder of a CER in the Registry to grant security over (for example, to mortgage) the CER or hold the CER on behalf of others under a trust or other beneficial ownership arrangement.
More information on taking security over CERs is available on the Australian Government’s
Personal Property Securities Register website.
Under Australian law, CERs can be traded. You should obtain your own professional advice about the trading of CERs having regard to your own situation.
A CER is a ‘financial product’ under the
Corporations Act 2001 and the
Australian Securities and Investments Commission Act 200110.This means that people who provide financial services in relation to CERs and related financial products and services in Australia may require an AFS licence which authorises them to provide those services.
Buying and selling CERs on behalf of another person will also be a ‘designated service’ for the purposes of the
Anti-Money Laundering and Counter-Terrorism Financing Act 200611. This means that the service provider will have to report suspicious matters or transactions above a specified limit. Except in special cases, the service provider will also have to verify their customer’s identity prior to trading in CERs.
The value of CERs is determined by the current and future markets for them and may go up or down. The value will be influenced by a wide range of factors including, but not limited to, availability and type of CDM projects and changes to the international climate change framework and Australian legislation. Neither the Commonwealth of Australia or the Clean Energy Regulator, nor any of their officers or related bodies, make any representation or provide any guarantee concerning the future value of CERs.
A CER is transferable (for instance, where it has been traded):
Potential restrictions apply to transferring CERs between accounts. The Regulator:
CERs are valid for the commitment period in relation to which they were issued.
CERs can be carried over in accordance with the Kyoto rules.
However the Governments policy intent is that CERs issued for the first commitment period will not be carried over to the second commitment period if they are held in private registry accounts. If CERs issued for the first commitment period are held in these accounts at the end of the final period of accounting (10AM 19th November 2015 AEST) they will be cancelled.
You should obtain your own professional advice about the tax treatment of CERs having regard to your own situation. Generally, the following applies to CERs:
1 Generally speaking, Subdivision 4.1A of Part 7.9 of the Corporations Regulations 2001 provides that provisions in Part 7.9 of the Corporations Act 2001 dealing with the need to give a Product Disclosure Statement do not apply in relation to eligible international emissions units, including CERs. Part 19 of Schedule 10A to the Corporations Regulations 2001 modifies Part 7.9 of the Corporations Act 2001 so that a person who would otherwise be required to give a Product Disclosure Statement in relation to an eligible international emissions unit is instead required to direct its clients to this statement.
2 On 30 December 1992 Australia ratified the UNFCCC. It is an Annex 1 Party. Australia ratified the Kyoto Protocol on 3 December 2007, adopting a Quantified Emissions Limitation or Reduction Obligation (QELRO) limiting Australia’s emissions growth over the first commitment period to 108 per cent of 1990 levels. In 2012, the Protocol was amended to establish a second commitment period from 2013 to 2020. Australia submitted a second commitment period QELRO of 99.5 per cent, consistent with the Government’s unconditional target to reduce emissions by five per cent below 2000 levels by 2020.
3 Under the Kyoto rules Parties the quantity of CERs carried-over by the Party must not exceed 2.5% of that Party’s allowed quantity of AAU issuance for the Commitment Period.
4 Sections 9(3), 17(2), 30, ANREU Act 2011.
5 Section 30, ANREU Act 2011.
6 Regulation 13(2)(c), Australian National Registry of Emissions Units Regulations 2011 (ANREU Regulations 2011).
7 Sections 19 and 22, ANREU Act 2011.
8 Section 45, ANREU Act 2011; regulation 48, ANREU Regulations 2011.
9 Section 46, ANREU Act 2011.
10 Section 764A(1)(kb), Corporations Act 2001; section 12BAA(7)(la), Australian Securities and Investments Commission Act 2001.
11 Item 33(bb) of the table in section 6(2), Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
12 Section 34, ANREU Act 2011; regulation 36, ANREU Regulations 2011.
13 Section 36, ANREU Act 2011; regulation 40, ANREU Regulations 2011.
14 Section 35, ANREU Act 2011; regulation 39, ANREU Regulations 2011.
15 Regulations 39(5), 40(2)(a), ANREU Regulations 2011.
16 Section 41, ANREU Act 2011; regulation 41, ANREU Regulations 2011.
17 Sections 28A-28D, ANREU Act 2011.
18 Section 38-590, A New Tax System (Goods and Services Tax) Act 1999.
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