A carbon abatement contract is an agreement to sell Australian carbon credit units (ACCUs) to the Australian Government. The seller agrees to deliver ACCUs and the Commonwealth, represented by the Clean Energy Regulator (CER), agrees to buy them at a fixed price. Purchases are made under Part 2A of the Carbon Credits (Carbon Farming Initiative) Act 2011.
Key points
- Sale of ACCUs to the Commonwealth at a fixed price
- Fixed delivery contracts require delivery whatever the project yields
- Optional delivery contracts carry no delivery obligation
- Permanent exit available after 25% minimum delivery
Fixed delivery contracts
The seller must deliver a set number of ACCUs over a set period at a set price, on a set delivery schedule, with durations of up to 10 years. The obligation stands regardless of how the project performs. If the project falls short, the seller must still deliver, sourcing ACCUs from other projects or the secondary market.
Optional delivery contracts
The seller has the right, but not the obligation, to sell ACCUs to the CER at a set price within a set timeframe. The ACCUs must come from a single designated project. The seller can deliver anywhere from none to all of a scheduled milestone without penalty, which leaves room to sell to other buyers instead.
Exiting a contract
A permanent exit arrangement lets a seller make a discounted exit payment instead of delivering ACCUs. It becomes available once a minimum of 25 per cent of contracted ACCUs has been delivered.
Where contracts are published
The CER publishes the ACCU Scheme project and contract register, which shows projects and their contracts with the Australian Government.
How contracts fit the ACCU market
Carbon abatement contracts are one source of demand for ACCUs. Others include Safeguard facilities meeting their obligations, state and territory governments, and organisations reducing their emissions voluntarily. Delivery under a contract is made through the seller’s ANREU account in the Unit and Certificate Registry.
Who administers contracts
The Clean Energy Regulator manages carbon abatement contracts as part of administering the ACCU Scheme, alongside assessing applications, issuing ACCUs and publishing registers. The Department of Climate Change, Energy, the Environment and Water oversees scheme policy.
References & sources
Primary regulatory documents and authoritative references underpinning this answer.