State or territory government regulations may require some entities to meet emissions reduction obligations.
If the Commonwealth, state or territory regulatory requirement refers to reducing or offsetting emissions, but does not specify a particular activity to do so, the regulated entity might be eligible to establish an Australian Carbon Credit Unit (ACCU) Scheme project.
They may be able to use the earned ACCUs to meet their regulatory obligations.
Regulatory additionality
ACCU Scheme projects must meet the regulatory additionality requirement. This ensures that ACCUs are only credited for emission reductions that wouldn’t have otherwise occurred.
When a regulated entity is required to engage in specific activities to meet their obligations, these activities won’t be eligible for the ACCU Scheme.
Using ACCUs to meet regulatory requirements has the following benefits:
- ACCUs from the project that aren’t used to meet regulatory requirements can be made available to the market, incentivising additional abatement.
- States and territories can use the scheme framework for their carbon accounting.
Required steps for authorities and regulated entities
There are extra steps that must be taken if a regulated entity wants to use ACCUs to meet their obligations.
Before a regulated entity can submit a project application, the relevant state or territory authorities must enter into an agreement with us. This is done through a Memorandum of Understanding (in Victoria) or by exchanging letters.
This agreement may include a schedule of projects, which can be added to over time.
This agreement also:
- confirms that any ACCUs used by a regulated entity to meet its obligation will be placed into the Commonwealth Regulatory Additionality Holding Account
- allows us to trace ACCUs in the Australian National Registry of Emissions Units and share information with states and territories related to ACCU transfers made into the Commonwealth Regulatory Additionality Holding Account.
Provided an agreement exists, a regulated entity can apply to register an ACCU Scheme project. As part of registration, the entity must declare:
- relevant details of its state or territory obligation
- ACCUs used to meet this obligation will be transferred to the Commonwealth Regulatory Additionality Holding Account by the project proponent
- ACCUs from the registered project can’t be used to meet the obligation through other means, such as voluntary cancellation.
A project is registered once it meets the regulatory additionality requirement and other eligibility requirements. The process of running, auditing and reporting on a project is the same as other ACCU Scheme projects under the relevant method.
The regulated entity must determine how many ACCUs they’ll use to meet the regulatory requirements. Any additional ACCUs are treated differently than the ACCUs used to fulfil the requirements.
ACCUs used to meet regulatory requirements
A regulated entity can’t gain financial benefits from ACCUs used to meet regulatory requirements.
Instead, the regulated entity must:
- transfer the ACCUs into the Australian National Registry of Emissions Units (ANREU) Commonwealth Regulatory Additionality Holding Account
- use the relevant reporting provisions to tell the state or territory regulator that ACCUs are in the holding account.
These ACCUs must stay in the account permanently and can’t be:
- cancelled, surrendered or retired
- used to meet Safeguard Mechanism obligations
- made available to the carbon market.
The Australian Government can track the ACCUs created to meet regulatory requirements. This eliminates the risk of double counting and means these ACCUs can’t be on-sold.
ACCUs not used to meet regulatory requirements
ACCUs not placed in the Commonwealth Regulatory Additionality Holding Account can be sold to the Australian Government or in the secondary market. They can also be used to meet Safeguard Mechanism obligations.
How we check for compliance
We check compliance with regulatory additionality statements to make sure we only credit additional abatement. We do this when projects are registered and credited.
We may take compliance action on regulated entities if they try to meet their obligations with ACCUs that should have been transferred to the Commonwealth Regulatory Additionality Holding Account.