Independent review of government purchasing of ACCUs

Government purchasing of ACCUs is under review following the Independent Review of Australian Carbon Credit Units. The information on this page reflects the previous process for establishing a contract.

Find out how the Department of Climate Change, Energy, the Environment and Water is implementing the review recommendations.

A carbon abatement contract is an agreement to sell Australian carbon credit units (ACCUs) to the Australian Government.

Deciding to enter a carbon abatement contract is an important business decision. Make sure you understand the options and how a carbon abatement contract works before you proceed.

A carbon abatement contract is a commercial agreement. It includes legally enforceable rights and obligations. You should seek your own legal advice before you enter a carbon abatement contract.

There are 2 types of carbon abatement contracts:

  • fixed delivery
  • optional delivery.

Fixed delivery contracts

Under a fixed delivery contract, you agree to sell us a set number of ACCUs for a set period of time at a set price.

A fixed delivery contract might be suitable if:

  • the project can consistently produce and deliver the agreed quantity of ACCUs
  • you want to protect against potential fluctuations in market prices.

  • Fixed price
  • set delivery schedule
  • flexible durations up to 10 years
  • ability to source ACCUs from anywhere.

  • Each contract is linked to at least one ACCU project.
  • Each project can only be the subject of one contract at a time.
  • The agreed quantity of ACCUs is scheduled for delivery throughout the contract's duration.
  • A project can be eligible for multiple fixed delivery contracts during its crediting period. This includes up to 10 immediate-delivery contracts and 3 short-term contracts per project.

You must ensure you can deliver the agreed quantity of ACCUs as per the delivery schedule.

A fixed delivery contract includes making good provisions. This means you must deliver the agreed quantity of ACCUs regardless of how the project is performing.

When planning the agreed quantity and delivery schedule, you should consider:

  • if your project can generate the agreed quantity of ACCUs before the contract ends
  • how much time you need in the schedule for audits, reporting, and applying for ACCUs.

If your project can’t deliver the agreed quantity of ACCUs, you can source the difference from your other projects or the secondary market.

Conditions precedent are only available for fixed delivery contracts.

These are conditions that must be met or waived before the contract to deliver and purchase ACCUs becomes valid. Conditions precedent could include things like securing financing or obtaining regulatory approvals for a project. The contract won't start until these conditions are fulfilled.

You need to make reasonable efforts to meet these conditions as soon as possible. Both parties must notify each other as soon as they become aware a condition has been met or waived.

If a conditions precedent is not met by the conditions precedent expiry date, the contract may terminate.

Conditions precedent aren't available for optional delivery contracts with no obligation to deliver ACCUs.

Fixed delivery contracts include some provisions for flexibility. You can:

  • deliver ACCUs in instalments over the contract term
  • deliver ACCUs sourced from any project, not just the project nominated at the auction
  • negotiate conditions precedent for each contract
  • deliver ACCUs early in the same financial year or across financial years with approval
  • vary the delivery schedule subject to mutual agreement.

Find out more about how to manage a contract.

If you cannot deliver in accordance with your delivery schedule, you may be able to make an exit payment. This is a way to meet your contractual delivery obligations.

Find out more about fixed delivery exit arrangements.

Optional delivery contracts

Under an optional delivery contract, you have the right to sell us ACCUs at a set price within a set timeframe, but you don't have to.

An optional delivery contract might be suitable if:

  • you want to choose whether to deliver ACCUs based on market conditions
  • the project has varying levels of ACCU generation or uncertainty.

An optional delivery contract helps you control risks related to the price and supply of ACCUs. If prices go down, you can still sell to the Australian Government at the agreed price.

You can also use optional contracts when dealing with lenders to show that the government is willing to buy your ACCUs at a certain price.

The quantity we will purchase is agreed at auction.

  • No obligation to deliver
  • Fixed price
  • ACCUs must be sourced from a single project (set at auction)
  • Flexible durations up to 10 years

  • The project associated with the optional delivery contract can be new or existing.
  • The project cannot have been previously contracted under a fixed delivery contract.
  • The project can't be connected to, or part of, a portfolio of projects used to fulfil existing contractual obligations.
  • A project is only eligible for one optional delivery contract.

If you don’t deliver ACCUs against a scheduled milestones, your right to deliver ACCUs against that milestones lapses.

Milestone extensions are available in limited circumstances. They must be mutually agreed.

Optional delivery contracts are highly flexible. You are able to:

  • deliver between zero and 100 per cent of a scheduled milestone without penalty
  • structure ACCU deliveries in instalments over the contract term
  • deliver ACCUs early in the same financial year or across financial years with approval.

Find out more about how to manage a contract.

Understanding contract terms

A carbon abatement contract is a commercial agreement. Before you enter a contract, you should make sure you understand your rights and obligations.

A carbon abatement contract is between the seller and the buyer. The seller must be the project proponent for the project and win at auction. The buyer is the Clean Energy Regulator on behalf of the Commonwealth of Australia.

A contract has 4 key parts:

  • Code of Common Terms
  • commercial terms
  • delivery terms
  • financial terms.

The Code of Common Terms sets out the rights and obligations of the parties under the relevant contract. It is non-negotiable. All participants for each auction must agree to the same terms.

You must agree to the Code of Common Terms when qualifying to participate in an auction.

The commercial terms set out:

  • the seller's name and address
  • the seller's Australian National Registry of Emissions Units (ANREU) account
  • the seller's bank details
  • the project(s) covered by the contract
  • any conditions precedent (note: conditions precedent are not available for optional delivery contracts)
  • the buyer's name and address
  • the buyer's ANREU account.

The contract term is the duration of the contract in years. This is how long you must deliver ACCUs to us. It is also called a delivery period.

The delivery period continues until the contract expires. A contract expires when it has been completed or terminated. The contract will be completed when all scheduled ACCUs have been delivered and all payments have been made.

The delivery period may vary depending on the type of project. The maximum is 10 years.

You must nominate the delivery period during auction qualification. It will be locked in if you win the contract during the auction.

There are 3 different contract durations.

Standard contract

Standard contracts have a duration of 7 to 10 years.

The most common standard contract length is 7 years. If your project has a crediting period of 10 years or more, you can apply for a 10 year contract term.

Short-term contract

A short-term contract has multiple deliveries over a period less than 7 or 10 years.

Immediate contract

An immediate delivery contract is an agreement to deliver ACCUs within 30 calendar days of the auction.

The minimum quantity for immediate delivery contracts is 2,000 ACCUs.

The nominated ACCUs must be available in your ANREU account at the time you register for the auction.

The delivery terms contain the delivery schedule. The delivery schedule sets out:

  • how many ACCUs you will deliver
  • the dates you'll deliver them.

The auction guidelines for each auction round may place limits on the quantity you can deliver. Make sure you are familiar with these limits before you propose a delivery schedule.

Before you participate in an auction, you need to develop your own delivery schedule.

Plan your delivery schedule

When planning your delivery schedule, you should consider:

  • how long it will take to set up your project
  • when your project will start reducing emissions and be eligible for ACCUs
  • how much time you should allow to audit and report on your project
  • the process to apply for ACCUs, including allowing up to 3 months for us to issue ACCUs
  • how many deliveries are possible under your contract.

It can take up to 9 months from the end of a project reporting period before you can deliver ACCUs. If the process takes less time, the contract allows you to deliver ACCUs early.

Change your delivery schedule

Your delivery schedule is set at the auction registration stage. If you want to change it after that time, you need to negotiate a variation in accordance with the Code of Common Terms.

Find out more about how to vary a contract.

The financial terms set out:

  • the price we will pay per ACCU
  • date of the auction
  • date of the contract.

The price is decided by bidding at auction.

Partial and third-party contracting

We offer flexible contracting options to encourage project development and participation.

In a partial contracting arrangement, you can choose to sell a portion of the ACCUs you expect to generate from your project. You don’t have to commit the whole amount.

You can enter into this arrangement by bidding at auction to sell a specific quantity of ACCUs from your project. This allows you to test the market and manage project risk by not committing to deliver the full amount upfront.

Third-party contracts

Third-party contracts can provide you with additional options for selling ACCUs.

Under a third-party contract, you can enter a carbon abatement contract if you already have an agreement to sell ACCUs to a third party. The third party might be:

  • a financier
  • an organisation buying ACCUs to offset emissions
  • a safeguard facility surrendering units to meet liability requirements.

You must have already entered into a separate written agreement with the third party at the time of the auction.

Third-party contracts give you the security of a carbon abatement contract while you try to sell the remaining abatement to a third party. This helps reduce the risk of developing projects. It also increases the number of ACCUs in the private market.

​We worked with the Clean Energy Finance Corporation to develop a tripartite deed to support financing of ACCU projects.

A tripartite agreement is a standard agreement between 3 parties. It is often required by a project financier before they commit funds for a project.

Under our tripartite deed, a financier can include a carbon abatement contract in a finance security package. If you can't deliver the required amount of ACCUs, the financier takes responsibility for the carbon abatement contract.

This agreement can help to:

  • give added security to the financier
  • lower the risk of investing in ACCU Scheme projects
  • provide a secure government-backed cash flow stream for the financier
  • enhance your credit profile
  • provide more financing opportunities for projects and contribute to greater emissions reductions in the Australian economy.

You can use the standard agreement with any financier. Find out more about potential financing options on the Clean Energy Finance Corporation website.