What is an Australian Carbon Credit Unit?

Carbon credits, also known as carbon offsets, are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. Globally, Carbon Credits be verified or certified by a recognized third party like the Carbon Development Mechanism (CDM), Gold Standard or Verra. In Australia however it is governed by Clean Energy Regulator - https://www.cleanenergyregulator.gov.au/

In Australia, the Clean Energy Regulator has defined Carbon Credits for simplification and standardization purposes in Australia as a ACCU (Australian Carbon Credit Unit). An ACCU is defined as a unit issued to a person by the Clean Energy Regulator (Regulator) by making an entry for the unit in an account kept by the person in the electronic Australian National Registry of Emissions Units (Registry).

Each ACCU represents one tonne of carbon dioxide equivalent greenhouse gas emissions stored or avoided. There are various types of projects but emission avoidance projects can earn carbon credits for up to seven years. Savanna burning projects and those that store carbon dioxide are able to earn carbon credits for up to 25 years.

In addition to emissions stored or avoided and earning carbon credits, ACCU development projects can provide a range of other direct benefits, called co-benefits. Examples co-benefits can include:

• Improving water quality, reducing soil erosion and reducing salinity through revegetation activities.

• Improving farm resilience and sustainability through increased diversity of land-use activities.

• Improving the productivity of farms by replenishing the carbon content of soils.

• Valuing traditional knowledge on fire management and providing an economic opportunity for indigenous communities while reducing late season wildfire damage in savanna areas.

• Increasing biodiversity and providing increased habitat for native species.

• Lowering the emissions profile and reducing energy costs by increasing energy efficiency for Australian businesses.

Currently, the general market for carbon in Australia faces two key challenges. First, there is a growing level of demand for carbon credits, including from businesses looking to voluntarily reduce their emissions profile. Second, the market does not always operate in an efficient or entirely transparent way. The acquisition process involves entering into a physical contract, which is often negotiated by lawyers with specialist expertise. The involvement of brokers as intermediaries can add to costs.

The Clean Energy Regulator has gone to market seeking the Australian Carbon Exchange, which is intended to operate in a similar way to an online stock exchange. The platform would enable the purchase, clearing and settlement of ACCUs, and possibly other forms of carbon credits, by both individuals and businesses. The Clean Energy Regulator anticipates that proposals will be evaluated in the first quarter of 2022 with the platform to then be launched in 2023. It is estimated that by 2030 the Australian Carbon Exchange will save the corporate sector up to $100 million in transactional costs when trading ACCUs.

Carbon trading platforms represent a potential solution to such problems. The ability to more directly connect suppliers of carbon credits with potential purchasers could increase price transparency, reduce the need for intermediaries and significantly reduce the costs of participating in the carbon market. Platforms may also enable exchange of carbon credits on standard terms, with a reduced need for negotiation.