On 25 August 2023, the Federal Government released for public consultation the ACCU Review Discussion Paper (Discussion Paper). The release of the Discussion Paper follows the publication of the Final Report of the review of the integrity of Australian Carbon Credit Units (ACCUs) and Australia’s carbon crediting framework (ACCU Review) in January 2023, which set out the recommendations from the ACCU Review (read more about the Final Report in our article here). It also follows the release of the Implementation Plan for the ACCU Review in June 2023, which outlines the timing and approach to implementing each ACCU Review recommendation.           

The Discussion Paper details the proposed implementation of recommendations from the ACCU Review, which was undertaken by an independent panel appointed by the Federal Government (Panel). The Discussion Paper specifically focuses on recommendations from the ACCU Review that concern:

• the ACCU Scheme Principles;
• information publication requirements;
• the role of the Federal Government in purchasing ACCUs;
• new processes for method development;
• the functions of the Carbon Abatement Integrity Committee (Integrity Committee); and
• Native Title consent.

To implement the recommendations from the ACCU Review as proposed in the Discussion Paper, the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) and the Carbon Credits (Carbon Farming Initiative) Rule 2015 (Cth) (CFI Rule) would need to be amended. The Discussion Paper also outlines other proposed changes to the CFI Act. The Federal Government has proposed to bring forward these legislative changes as part of the reform package made to implement the ACCU Review recommendations. Views on these additional proposed changes to the CFI Act can be shared during the public consultation period for the Discussion Paper.

Submissions regarding the proposed implementation of the recommendations from the ACCU Review are due by 3 October 2023.

ACCU Scheme Principles

The Panel found that introducing ACCU Scheme Principles could improve the transparency of the administration of the ACCU Scheme. The Panel recommended that the Offset Integrity Standards (OIS) be supplemented with ACCU Scheme Principles to support their consistent application in method development and project implementation and administration. The ACCU Scheme Principles are proposed to guide how the ACCU Scheme is administered rather than be required to be met or complied with as is the case for the OIS.

The ACCU Scheme Principles proposed in the Discussion Paper have been informed by the findings of the Panel, the Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles, international schemes such as California’s Cap-and-Trade program and the 2022 Climate Change Authority’s Review of International Offsets. The proposed ACCU Scheme Principles are:

• integrity;
• transparency;
• equitable access, participation, and benefit sharing;
• practicality;
• environmental and regional sustainability; and
• respect for First Nations.

Some concepts contained in international guidance material are already contained in the CFI Act, including in the OIS, such as no double counting and additionality. Therefore, they are not proposed to be replicated in the proposed ACCU Scheme Principles. The Federal Government proposes to incorporate the new ACCU Scheme Principles into the ACCU Scheme’s legislative framework via a legislative rule. The Federal Government is seeking feedback on whether the proposed ACCU Scheme Principles are fit for purpose and how they should be applied to improve the governance and integrity of the ACCU Scheme.

Additional information publication requirements for ACCU Scheme

Increasing transparency in the method development process

As detailed below, the Panel recommended a new method development process which involves expressions of interest (EOIs) being submitted by method developers for consideration by the Integrity Committee. It is proposed that to increase transparency, any method developer who submits an EOI will receive the reasons for the Integrity Committee’s decision. Additionally, it is proposed that the Integrity Committee will be able to publish a de-identified record of all EOIs received and a summary of why specific EOIs were either approved or rejected. This could cause privacy concerns, so it is proposed that all commercially sensitive data remain confidential where requested.

Publishing additional project information

Certain project information is already published by the Clean Energy Regulator (CER) in the Project Register. For example, the project proponent, project name, and registration date of each project is recorded in the Project Register. To improve ACCU Scheme transparency, it is proposed that the CER publish additional information in the Project Register. For example:

• the start date of project crediting periods;
• the estimation approach that is used for a project;
• the entities involved in a project’s management such as carbon service providers; and
• whether adverse fit and proper person findings or enforceable undertakings have been issued.

The Discussion Paper notes that whilst the publication and transparency of ACCU Scheme information is in the public interest, there are issues that come with additional reporting obligations such as privacy concerns and a larger reporting burden for project proponents. Therefore, it has been proposed that when requested, information is withheld, for example:

• on privacy grounds; and/or
• on cultural or biocultural grounds by First Nations peoples.

The Federal Government is seeking views on whether there are additional circumstances where information should be withheld, such as an exemption for existing projects.

Publishing ACCU holding information

Earlier this year the Safeguard Mechanism (Crediting) Amendment Act 2023 (Cth) amended the Australian National Registry of Emissions Units Act 2011 (Cth) to allow information regarding ACCU and Safeguard Mechanism Credit holdings to be published publicly. The Federal Government is seeking views on what information about unit holdings should be disclosed. Disclosure options include publishing:

• all information;
• information of holdings over a certain size; or
• de-identified information only.

The Federal Government is also seeking views on whether other information should be published or collected to improve the transparency of the ACCU Scheme.

The role of the Federal Government in purchasing ACCUs

Currently, the Federal Government’s ACCU purchases have focused on purchasing ‘least cost’ abatement. The Federal Government is seeking views on whether it should continue to focus its purchasing on least cost abatement, and if not, what other considerations should be prioritised. For example, the Federal Government could purchase more ACCUs from projects that deliver additional benefits such as social, cultural, environmental, and economic benefits, new method development or innovation.

The Federal Government is also considering whether the current exit arrangements for fixed delivery contracts should be made permanent, as they were initially only commenced as a pilot in 2022. The exit arrangements were commenced in response to concerns about rising ACCU prices in 2021 in order to provide market stability.

New process for method development in ACCU Scheme

The Panel recommended that the Federal Government commence a proponent-led approach to method development which seeks to promote of the development of new and innovative methods by giving carbon service providers, stakeholders and others the opportunity to propose and develop methods for use in the ACCU Scheme. Currently, only the Federal Government can develop methods for use under the ACCU Scheme. The Discussion Paper highlights multiple aspects of the proposed new process for method development. We detail some of these below.

Expressions of interest and triage

The new process for method development will start when a method developer submits an EOI to either vary an existing method or develop a new method or module to the Integrity Committee for its consideration. An EOI should detail how the proposal will comply with the OIS, its potential to deliver carbon abatement and how it aligns with the ACCU Scheme Principles where relevant. The Integrity Committee will then use the information provided to assess the EOIs potential to be developed into methods through a triage process. This triage process will assist the Integrity Committee in prioritising its work. It has been proposed that when assessing EOIs, the Integrity Committee will consider, amongst other things:

• whether the EOI provides sufficient evidence that the proposed method will be able to meet the OIS when it is fully developed;
• the abatement potential of the proposed method; and
• opportunities for the proposed method to generate environmental, social, economic, and cultural co-benefits and/or increase the participation of First Nations people or regional communities in the ACCU Scheme.

In relation to this stage of the new method development process, the Federal Government is seeking feedback on, amongst other things:

• what assistance or guidance method developers need in order to participate effectively in this stage of the process;
• whether the proposed content of an EOI provides enough detail to enable an appropriate assessment, whilst also limiting the investment required upfront to a reasonable level; and
• whether the triage approach is efficient and whether it promotes participation.

Developing a method or module

It is proposed that the method development stage would involve method developers building on their EOIs to develop a method or module. This would involve describing the project activity or activities, baseline emissions and abatement calculations. The method developers would need to provide strong evidence and demonstrate that the proposed method aligns with the OIS and the ACCU Scheme Principles where relevant.

As developing a method or module is both time and resource intensive, the Federal Government is proposing to provide the following assistance to method developers:

• legislative drafting;
• assistance working with public officials;
• advice on policy landscapes; and
• education regarding the ACCU Scheme.

It is also proposed the Integrity Committee would provide feedback to method developers during the process. The Federal Government is seeking feedback on whether the proposed areas where the Department could provide assistance during method development are the right areas or skill gaps to focus on.

The newness requirement

The newness requirement, which is a part of the additionality test and currently applies to all new projects under the ACCU Scheme, requires all projects to be ‘new’ when they are registered. However, under a proponent-led process, method developers are likely to have undertaken activities that would make projects not meet the newness requirement. For example, method developers may undertake trials to test emissions abatement of new technologies to inform the calculations that are to be used in a proposed method.

Clarity on where the newness requirement applies with the proposed new proponent-led approach could be provided through legislative amendments. For example, reforms could allow method developers to undertake research to inform the development of a method and also undertake a project under that method in the future where the project would only be registered due to the incentives provided by the ACCU Scheme. The Federal Government is seeking feedback on whether the proposed approach to deal with the newness requirement is appropriate to support participation in any research, trials and demonstration projects needed to support method development.

The role of the Integrity Committee

The Integrity Committee is intended to be an independent expert committee that has the responsibility of assuring method integrity under the new proponent-led method development process using the OIS. It is proposed that the Integrity Committee have the following set of defined functions:

• triaging EOIs;
• coordinating consultations regarding method proposals;
• assessing method proposals; and
• reviewing methods.

The Federal Government is seeking feedback on whether the proposed scope of the Integrity Committee’s role may compromise its primary role as an independent ACCU Scheme assurer.

Eligible interest holder consents

Under the CFI Act as it is currently drafted, ‘area based’ projects are allowed to be conditionally registered without obtaining all eligible interest holder (EIH) consents, as long as the project proponent has the legal right to run the project. The Panel found that the ACCU Scheme should be aligned with the principles of free, prior and informed consent (FPIC) and recommended that the option to conditionally register a project without EIH consent be removed. This recommendation recognises the importance of early engagement with First Nations people before projects are commenced.

The Federal Government has proposed that the ACCU Scheme allow Native Title registered bodies to give written, unconditional, or conditional consent to a project being registered, and that written agreement must be required before projects are able to commence. Under the proposed approach, Native Title holders would be allowed to withdraw their initial agreement to a project’s registration before their full consent is provided prior to commencement. The Federal Government is seeking views on whether the ACCU Scheme should allow this preliminary form of EIH consent, and if so what form the preliminary consent should take.

The Panel also recommended that resources be provided to First Nations communities to ensure they have access to the resources and support needed to freely participate in consent processes. To improve participation, the Federal Government is seeking feedback on what support First Nations eligible interest holders, project proponents and communities need when considering or providing consent to a project under the ACCU Scheme.

Next Steps in the process of implementing the recommendations from the ACCU Review

The consultation period for the Discussion Paper closes on 3 October 2023. To engage in the consultation process, members of the public can draft a written submission in response to the Discussion Paper.

Additionally, the Department will host multiple workshops on specific topics detailed in the Discussion Paper to help ensure all members of the public have an opportunity to inform the implementation of the recommendations from the ACCU Review.

If you would like further information about the proposed implementation of the recommendations from the ACCU Review or any assistance in the preparation of a submission, please contact our team.