DRAFT

EMISSIONS REDUCTION FUND: PARTICIPATING IN aggregatED PROJECTS

Key questions to ask your aggregator

Participation in the Emissions Reduction Fund (the Fund) is an important business decision. As an owner of land, a building or a facility, you may participate in the Fund on your own or through an aggregated project.Aggregators and owners are both important participants in the Fund. General information about participating in the Fund can be found on the Clean Energy Regulator’swebsite.

Aggregation is the process of bringing multiple sources of emissions reductions together. Aggregating emissions reductions into one registered project or one auction bid can have many benefits. It can help meet the minimum bid size at auction, reduce administrative costs for participants, and help participants benefit from the technical expertise of aggregators. For more information, see the Regulator’s aggregation fact sheet.

Before you agree to participate in an aggregated project under the Fund, you should do research so you can make an informed assessment of the potential requirements, risks and benefits. The aim of this fact sheet is to highlight some of these for anyone participating in an aggregated project, and the kinds of questions you should ask anyone inviting you to join an aggregated project.

While this fact sheet emphasises key issues to consider, it will not be a definitive summary of important matters with respect to your own circumstances. You should seek independent legal, financial, tax and technical advice with particular reference to your own requirements.

Checklist: Key questions to ask before agreeingto participate in aggregated projects

Question / More information
/ Does the aggregator have experience doing this kind of project? / ‘Who are aggregators?’, see p.2.
/ Does the aggregator have the legal right they need from all other stakeholders to do this project? / ‘Your agreement with your aggregator’, see p.2.
/ Do I need to sign an aggregation agreement to underpin our arrangement? / ‘Your agreement with your aggregator’, see p.2.
/ Is this project already registered with the Clean Energy Regulator? / ‘Who are aggregators?’, see p.2.
/ Is the aggregator going to bid emissions reductions from this project into an auction? If not, who will buy them? / ‘Financial aspects of aggregated projects’, see p.3.
/ Are the projected emissions reductions and revenue realistic? / ‘Financial aspects of aggregated projects’, see p.3.
/ Does the aggregator need an Australian financial services licence to run this project? If so, do they have one? / ‘Australian financial services licence requirements’, see p.4.
/ Will I have any ongoing responsibilities once the project is over? Do I have to store carbon into the future? / ‘Specific cautions for sequestration projects’, see p.4.
/ Does the project already have a Carbon Abatement Contract? If so, how is it performing against its delivery obligations? / ‘Research for potential aggregation participants’, see p.5.

Being fully informed about your obligations from the start

The obligations with which you will need to comply when participating in an aggregated project may be contained in your agreement with your aggregator. Further obligations may also be imposed on you through general Fund requirements, and Commonwealth, state and territory laws.

Receiving answers to the questions set out in the checklist will help you to understand these matters. Additional suggestions for issues to investigate before entering into an aggregation agreement are set out below.

Benefits of aggregated projects

Participating in an aggregated project may provide owners with a range of potential benefits. You should consider these and weigh them up against the obligations before making a decision to enter into an agreement with an aggregator. Benefits may include:

  • reducing the energy and operating costs for a building or facility;
  • improving the productivity of activities carried out at a facility;
  • introducing new technology or upgraded plant and equipment at a lower cost;
  • receiving specialist technical advice on your activities; and
  • creating a new source of revenue.

Who are aggregators?

Aggregators provide a range of services that support participation in the Fund. Aggregators might be agents, project developers, holding companies or provide a range of expanded services. More information on aggregators can be found on the aggregation section of the Regulator’s website.

Your agreement with your aggregator

The aggregator of a project is the person who is the project proponent under the Fund and the person who enters into the Carbon Abatement Contract(Contract) with the Regulator. This means that to participate, you must give the aggregator the legal right to do the project and that the aggregator will be responsible for carrying out the project. Further information regarding legal right to carry out a project can be found on the legal right section of the Regulator’s website.

It is recommended that you formally document your agreement with the aggregator so that the rights and responsibilities of both parties are clear from the outset. This would be a binding legal agreement, and may have significant financial and other consequences. The aggregation agreement will be a different agreement to the Contract that the aggregator enters with the Regulator. The aggregation agreement can be similar to the Contract but it does not have to be. Your aggregator may also want to enter into different types of aggregation agreements with different owners.

There are any number of matters that an agreement with your aggregator might cover. For instance, your agreement might set out:

  • when it will commence;
  • who pays for the capital and operating expenses;
  • how you will be paid and what is your ranking for payments compared to other parties in the aggregated project;
  • what will happen if you do not deliver your estimated emissions reductions;
  • what will happen if the overall project does not deliver the estimated emissions reductions;
  • what will happen if either party defaults or another party in the aggregated project defaults; and
  • the arrangements that will apply to the project if the land, building or facility is sold during the contract period.

Financial aspects of aggregated projects

It is important to understand the financial aspects of your aggregation arrangement.

The quantity of emissions reductions issued for an aggregated project is calculated according to the rules in an approved ‘method’ under the Fund. Methods set out how emissions reductions projects should be undertaken. Some methods require the use of specific models and tools to calculate abatement, so you may wish to confirm that your aggregator has access to, and understands, these models and tools. You could also confirm that the assumptions your aggregator has applied under the method are sound, as these could have implications for projected emissions reductions.

Only registered projects can qualify to bid into an auction. There is no guarantee that a project application submitted to the Regulator by your aggregator will be successful or that, if the project is registered, it will make a given quantity of emissions reductions over a particular timeframe. This means that you may want to discuss with your aggregator who will be responsible if the project application is unsuccessful, or if the project fails to make the estimated emissions reductions.

The primary purchaser of emissions reductions will be the Regulator on behalf of the Australian Government through a Contract. In general, Contracts will only be awarded to successful bidders following a sealed bid, reverse auction. Unless a Contract is awarded, the Australian Government does not provide any guarantee that it will purchase emissions reductions from projects.

In addition to the Australian Government, other purchasers of emissions reductions generated from your project could include:

  • other Fund participants who have a Contract with the Regulator but who need more emissions reductions to make up a shortfall under it;
  • businesses covered by the safeguard mechanism seeking to offset their emissions; and
  • businesses or organisations who wish to buy carbon offsets under the Australian Government’s voluntary carbon offset scheme, the National Carbon Offset Standard’s Carbon Neutral Program, or to achieve voluntary corporate sustainability goals.

The price obtained for the emissions reductions generated from a project cannot be guaranteed until a bid is successful at an auction and a Contract has been awarded to your aggregator. Once this happens, the price of emissions reductions that the Regulator will pay to your aggregator is fixed for the term set out in the Contract.

You may wish to consider having a fixed timeframe for your aggregator to register the project or to successfully bid your project into an auction to ensure that your land, building or facility is not committed to the aggregator for an unreasonably long period of time.

You should also consider what financial return you want to receive from the project, and how this is to be paid. For example, it could be paid as a fixed fee, an amount determined by reference to the sale price of the emissions reductions, or as a co-benefit from doing the project (such as reduced energy costs).

You may further wish to consider whether your agreement with the aggregator needs to provide you with security in relation to those emissions reductions, to ensure that you will be paid. Emissions reductions – in the form of Australian Carbon Credit Units – are issued into the Australian National Registry of Emissions Units account held by the project proponent, which in this instance will be your aggregator. Under the Contract, these units are transferred to the Regulator who will then pay the aggregator.

Australian financial services licence requirements

Australian Carbon Credit Units are financial products for the purposes of the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001.

Businesses that provide ‘financial services’ in relation to ‘financial products’ may need to hold an Australian financial services licence (AFS licence), and may need to provide you with a Financial Services Guide. Your aggregator should be aware of financial regulation that may apply to them and their proposed arrangements, and where necessary must hold an AFS licence unless exempt. You can also check whether your aggregator holds such a licence on the Australian Securities and Investments Commission (ASIC) register. Further information about AFS licensing and carbon markets can also be found on the carbon markets page of ASIC’s website.

An aggregated project may also be a managed investment scheme and, if so, the aggregator may be required to provide you with a Product Disclosure Statement.

Whether or not your aggregator is a registered project proponent or holds an AFS licence covering Australian Carbon Credit Units, you may still need to do research to ensure they have the knowledge, capacity and financial backing required to do your project.

Specific cautions for sequestration projects

A sequestration project involves removing carbon dioxide from the atmosphere by storing carbon in a relevant carbon ‘pool’, such as through the planting of trees or storing carbon in soil.

Sequestration projects must make sure that the stored carbon is not lost during a specified period, known as the ‘permanence period’ (running for either 25 years or 100 years). If you participate in an aggregated sequestration project, there will be ongoing obligations imposed as a result of the permanence period. You should make sure you understand the nature of these obligations, and have thought about what would happen if you decide to sell your land or wish to exit the project. More information about permanence periods can be found in the Regulator’s Permanence fact sheet.

Reporting false or misleading claims

The Australian Consumer Law prohibits businesses from making false or misleading representations in trade or commerce when supplying goods and services other than for financial products or services. This includes businesses that provide false and misleading information to consumers about the benefits or returns which may arise from participating in the Fund. Penalties greater than $1million per contravention can be imposed by the Federal Court of Australia.

The Corporations Act 2001also prohibits persons from making false and misleading statements and other deceptive or dishonest conduct regarding dealing in financial products or otherwise providing financial services. Offences under the Corporations Act 2001may incur both criminal and civil penalties. ASIC provides on its Moneysmart website a list of companies that you should not deal with.

The Australian Competition and Consumer Commission also has information on documented scams on its SCAMwatch website.

Many overseas regulators further maintain lists of unregulated or fraudulent companies, which you should check if any overseas company offers you services as an aggregator under the Fund.

While the above websites are useful tools to enhance your understanding of a potential aggregation arrangement, they are also not definitive and should not replace obtaining your own independent advice on these matters.

Finally, if you suspect dishonest conduct or fraudulent behaviour relating to aggregation activities under the Fund, you should contact the Regulator by calling 1300 553 542 or sending an email to .

Research for potential aggregation participants

There are a number of other documents that will help you to become familiar with the operation of the Fund:

  • Legislation: The Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act). The CFI Act and supporting regulations and rules set out the requirements which need to be satisfied for a project. Further details can be found on the Regulator’s website. The CFI Act can also be found onComLaw.
  • Method:The method that applies to your project sets out the detailed rules about how the project must be conducted to generate emissions reductions. Your aggregator cannot register a project unless there is a method for it. Available methods can be found on the Department’s website.
  • Register: The Regulator’sEmissions Reduction Fund Register contains information about registered projects, including a description of the project, its location, the amount of Australian Carbon Credit Units issued, and whether the project has been awarded a Contract.
  • Registry: The Australian National Registry of Emissions Units holds Australian Carbon Credit Units that are issued for registered projects. Accounts exist under this registry, and your aggregator will need to hold an account to be issued units. Further details can be found on the Regulator’s website.
  • Contract: The Regulator’s Carbon Abatement Contract – the contract that your aggregator will be bound by if successful at auction – is available on the Regulator’s website. This is not the agreement that will be entered into by you and your aggregator, but it will be useful for you to understand the nature and extent of the obligations under it that the aggregator must perform for the Australian Government.

More information

More detail about the Fund can be found at

Other useful websites are:

Note: While the Commonwealth has made reasonable efforts to ensure the accuracy, correctness or completeness of the material contained in this document, the Commonwealth does not guarantee, and accepts no liability whatsoever arising from or connected to, the accuracy, reliability, currency or completeness of this material. Any references to the potential costs or benefits of undertaking an activity in accordance with an emissions reduction method are estimates only. This material is not a substitute for independent professional advice and entities should obtain professional advice suitable to their particular circumstances.

© Copyright Commonwealth of Australia, 2015.


Emissions Reduction Fund: Participating in aggregated projects - Consumer protection fact sheetis licensed by the Commonwealth of Australia for use under a Creative Commons Attribution 4.0 Australia licence with the exception of the Coat of Arms of the Commonwealth of Australia, the logo of the agency responsible for publishing the report, content supplied by third parties, and any images depicting people. For licence conditions see:

This report should be attributed as ‘Emissions Reduction Fund: Participating in aggregated projects - Consumer protection fact sheet, Commonwealth of Australia 2015’.

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