If you are steering your business to a net zero emissions path, the carbon markets and Australian Carbon Credit Units (ACCU) are two important things you should be paying attention to.
Net zero emissions refer to striking a balance between greenhouse gas emissions produced and emissions taken out of the atmosphere.
Put simply, a net zero emissions business must not create more greenhouse emissions into the atmosphere than it takes out.
A business should assess its carbon footprint and quantify its scope emissions when plotting a path to net zero.
While it is not mandatory for any business to reach a net zero emissions status, consumers are increasingly giving more business to entities that are trying to reduce their carbon footprint.
Treasurer Josh Frydenberg has also gone on record to say that the day may soon come that if businesses do not offset carbon emissions, they may be hit with financial consequences on the international market.
There are several measures that businesses can take to reduce their carbon footprint, such as installing rooftop solar, purchasing renewably sourced energy, or improving energy efficiency.
Another measure to compensate for their emissions is purchasing carbon offsets, and in particular, Clean Energy Regulator-approved Australian Carbon Credit Units (ACCU).
These will be traded on the Australian Carbon Exchange when it commences operations in 2023.
What is an ACCU and how do they work?
An ACCU can be thought of as a carbon offset token issued to a person or organisation by the Clean Energy Regulator (CER).
The ACCU is stored in the electronic Australian National Registry of Emissions Units until it is purchased by another organisation to offset its carbon emissions.
Each ACCU represents one tonne of carbon dioxide units that have been stored, captured, or avoided.
The process of vetting projects that qualify for the status of ACCU under the Australian Government’s Emissions Reduction Fund is rigorous and the CER must establish that they are “fit and proper”.
The most common forms of carbon offset projects include carbon capture through afforestation and revegetation.
The Carbon Farming Initiative (CFI) approves Australian Carbon Credit Units (ACCUs) for:
- Reducing or avoiding emissions of methane and nitrous oxide from livestock
- Reducing or avoiding emissions of methane and nitrous oxide from burning off
- Reducing or avoiding emissions of methane and nitrous oxide from soil
- Reducing or avoiding emissions of methane from rice fields or plants
- Projects that remove carbon dioxide from the atmosphere by sequestering carbon in living biomass, dead organic matter or soil.
What are Kyoto and non-Kyoto ACCUs
The Kyoto Protocol is an initiative that was launched back in 1997 by the United Nations, binding countries into individual agreements to reduce their greenhouse gas emissions to fight climate change.
Australia ratified the Protocol in 2007, Australia committed to limiting increases in net GHG emissions to 108 percent of its 1990 levels from 2008 to 2012.
ACCUs are issued as either Kyoto ACCUs or non-Kyoto ACCUs. Kyoto ACCUs are issued if the relevant offsets project is an eligible Kyoto project and the reporting period ends on or before the Kyoto abatement deadline.
Non-Kyoto ACCUs are issued if the relevant offsets project is an eligible non-Kyoto project, or if the relevant project is an eligible Kyoto project but the reporting period ends after the Kyoto abatement deadline.
Kyoto ACCUs can be used to meet liabilities under the carbon pricing scheme and also be exchanged for Kyoto units and sold into overseas compliance markets.
Non-Kyoto ACCUs can be traded only in voluntary markets.
The carbon markets are a free market and therefore the value of ACCUs is determined by current and future markets and may go up or down.
Value can be influenced by a wide range of factors including the international climate change framework and Australian legislation.
The cost of acquiring an ACCU is tax-deductible.
How do I purchase Australian Carbon Credit Units?
The CER issued a call for expressions of interest to create an exchange for carbon offsets in April 2021.
Even though no regulated exchange exists yet, businesses and individuals can still purchase ACCUs. The CER recommends:
- Searching the Carbon Market Institute’s Carbon Marketplace to identify parties that may have ACCUs for sale or can facilitate a sale
- Searching the Emissions Reduction Fund project register to identify parties that may have ACCUs for sale.
- Checking the CERs Quarterly Carbon Market Report
- The Carbon Neutral Biodiverse Reforestation Carbon Offsets (BRCO) enables organisations to purchase offsets to counter the emissions. Carbon Neutral then uses these funds to plant native trees in the Yarra Yarra Biodiversity Corridor.
Are international carbon offset credits valid in Australia?
Yes, they are. It is important to make sure that your business only considers purchasing reputable projects.
The most renowned credits include:
- The Gold Standard
The Gold Standard is a Swiss-based, globally recognised regulatory framework for the deployment of capital into climate, environmental, and development projects.
- Verified Carbon Standard
The Verified Carbon Standard is based in Washington DC and manages standards and frameworks for a range of international environmental and sustainable development projects.
How can my own business generate Australian carbon credits units?
The CER states that the following are all viable options for businesses to generate their own ACCUs within Australia and carbon credits through overseas projects.
Australia’s Carbon Exchange is expected to commence trading in 2023. ACCUs hit an all-time high of $26 in September 2021.
Just a few years ago, ACCUs were expected to hit a price of $30 by 2030, but the market projections have changed drastically and the sky really is the limit for ACCU prices.
Investing in carbon offset projects can lead to very attractive financial returns.
Revegetation projects and afforestation are amongst the most popular and effective ways to reduce greenhouse gasses. Activities could include protecting existing bushland or regenerating Australian and overseas forests.
Agriculture activities could include building soil carbon through changed farming practices or establishing higher quality pastures.
Fire management projects aim to reduce the frequency and scale of dry season fires in northern Australian savannas.
Mining, oil, and gas
Mining, oil, and gas activities could include capturing, destroying, or converting methane gas from coal mines into benign substances and reducing fugitive emissions.
Energy efficiency activities could include reducing energy consumption in businesses or improving energy efficiency in lighting systems, heating & cooling systems, and insulation.
Transport projects could include improving fuel efficiency, less damaging fuels, and electric vehicles charged solely by renewable energy.
Waste projects could include reducing the amount going to landfills through composting, resource recovery, or separating organic waste.
Is your business a good fit for onsite solar generation and battery storage?
Both also give a fantastic return on investment value.
Keep an eye out for parts IV and V of our net-zero series.