This consultation is now closed. We have published the outcomes on this page.
We want feedback on how to ensure the fair sharing of financial benefits that result from the fixed delivery arrangement in the Emissions Reduction Fund (now the Australian Carbon Credit Unit Scheme).
Background
On 4 March 2022, changes were announced to the Commonwealth Government administration of fixed delivery carbon abatement contracts.
The fixed delivery exit arrangement provides that the buyer would make an optional alternative pathway to satisfy contractual obligations for fixed delivery contracts available to sellers, by making an exit payment instead of delivering Australian carbon credit units (ACCU) for the contracted price. The process will be undertaken in accordance with existing clauses in carbon abatement contracts (including clause 9.3).
On 9 March 2022, we announced that feedback will be sought on how to ensure a fair sharing of the financial benefits that result from the exit arrangement.
Timeline
- Consultation: 29 March to 11 April 2022
- Benefit sharing arrangements finalised: 27 May 2022
Consultation documents
Consultation stages
Find out more about each stage of the consultation process.
On 4 March 2022, the Minister for Industry, Energy and Emissions Reduction announced changes to the fund's fixed delivery contracts. Current holders of fixed delivery contracts are able to pay an exit payment to be released from fixed delivery obligations to the Commonwealth.
Additional information was released on 9 March 2022 in relation to our announcement on 4 March 2022. We consulted on how to ensure a fair sharing of the financial benefits that result from exiting fixed-contract delivery obligations between the parties involved.
Parties were invited to register their interest in the consultation process at ERF-contracts@cer.gov.au.
This benefit sharing framework consultation paper provides a proposed framework for the benefit sharing arrangement, as well as key questions for your consideration and feedback. Include the benefit sharing framework submission cover sheet with your submission.
Consultation submissions were due 5 pm AEST Monday 11 April 2022. Any submissions received after this date will be considered at our discretion.
15 submissions, (9 of which are confidential), were received from a cross-section of stakeholders, including carbon service providers, project proponents, landholders and industry groups.
Submissions are not owned by the Clean Energy Regulator, and we cannot guarantee that they meet accessibility requirements.
- Benefit sharing framework submission – Australian Land Conservation Alliance
- Benefit sharing framework submission – Arnhem Land Fire Abatement
- Benefit sharing framework submission – Carbon Market Institute
- Benefit sharing framework submission – Corporate Carbon
- Benefit sharing framework submission – National Farmers Federation
- Benefit sharing framework submission – Oliver Yates
The benefit sharing arrangements were finalised on 27 May 2022.
Outcomes
We have finalised the benefit sharing framework, taking into account feedback received during the consultation.
All submissions were generally supportive of benefit sharing, although views differed as to the preferred model. A broad overview of feedback was received, and our response is outlined in the table. Some submissions also raised issues beyond the scope of benefit sharing, which have not been included in the table.
| What we heard | What we are doing about it |
Most submissions recommended that the benefit sharing framework should be flexible and broadly applicable to a wide range of business models. Some submissions sought more stringent requirements, such as a default percentage share to be applied when an agreement can't be reached. | We have taken an approach to the benefit sharing framework that deliberatively minimises consequences for other private market arrangements. Specifically, the benefit sharing framework has been designed in a way that reduces the need for renegotiation of existing third-party contracts where possible. The framework does not require specific sharing outcomes, and we will not assess the adequacy or appropriateness of agreements, nor intervene or mediate agreements, which will be up to the relevant parties to agree. |
Some submissions noted that their existing contractual arrangements already appropriately share benefits between relevant parties. Where this is the case, the need to seek further agreement unnecessarily introduces administrative burden and uncertainty. | We have updated the framework to include a streamlined declaration pathway where appropriate benefit sharing already exists (and is based upon a flexible, scalable or percentage-based outcome). Under these circumstances, sellers are required to provide evidence of this benefit sharing. |
| Some submissions noted that it was not possible or feasible to seek agreement in scenarios where carbon abatement contracts (CAC) were indirectly serviced by multiple projects. | We have updated the framework to specify that the benefit sharing framework is only applicable to CAC holders and the landholder/facility owners of the projects nominated in the CAC and parties who receive a direct benefit from the CAC (through an identified long-term relationship or delivery agreement associated with the CAC), rather than through broader Emissions Reduction Fund project activities or other market activities. |
| There were mixed views on whether landholders who are also CAC holders should be able to access the exit arrangement without a benefit sharing arrangement with the carbon service provider. | For consistency across different business models, we have taken the position that landholders must share benefits with carbon service providers who undertake contractual activities as listed agents for the CAC to be eligible for the exit arrangement. |
Some submissions noted that landholders must not be left worse off, as there may be information and power asymmetry between carbon service providers and landholders. The submissions recommended that additional resources and support should be provided to landholders. | The benefit sharing framework intends to support more transparent, fair and reasonable outcomes. However, any agreements to provide for benefit sharing are private commercial arrangements between the relevant parties. It is therefore primarily a matter for agreement between those parties. All relevant parties involved in benefit sharing discussions should carefully consider their own circumstances and seek external advice. |