Introduction
Australia introduced the Safeguard Mechanism in 2016 under the National Greenhouse and Energy Reporting Act 2007. It sets limits of emissions from large facilities. Together with carbon farming initiative legislation (CFI Legislation), demand for carbon credits has been created.
CFI Legislation includes the Carbon Credits (Carbon Farming Initiative) Act 2011, the CFI Regulations, and the CFI Rule. It is administered by the Clean Energy Regulator (“Regulator”) which is responsible for developing methodologies that enable the quantification of emissions reductions from different types of projects. When a project meets the requirements of the CFI Legislation, it is assessed by the Regulator as eligible to generate Australian Carbon Credit Units (ACCUs).
Australia’s carbon credit market is regarded as one of the established and regulated compliance offset systems globally.
Carbon capture and storage (CCS) is a technology that captures CO₂ from industrial processes or hydrocarbon operations and permanently stores it underground. In Australia, large scale CCS projects have been introduced relatively early to support the government’s effort to reduce emissions.
In 2021, CCS projects became eligible to generate ACCUs. Project proponent can earn one ACCU for each tonne of CO₂ equivalent stored or avoided. These ACCUs can be traded on both government and secondary markets.
The purpose of this article is to inform how CCS projects in Australia are approved for ACCUs, and to provide a reference for Vietnam in developing its carbon credit certification procedure.
Apply for a certificate of entitlement
The project proponent needs to apply to the Regulator for a certificate of entitlement. This is the first step to establish the legal basis for the issuance of ACCUs.
This application must be submitted in an approved written form and be accompanied by an offsets report detailing the amount of greenhouse gas emissions that the project has actually reduced, avoided, or stored, together with any required supporting documents, including audit reports prepared by registered greenhouse and energy auditors where applicable. The Regulator retains the power to request further information and may refuse to consider the application if such information is not provided within the specified timeframe.
The Regulator will assess the application to determine whether it satisfies the statutory criteria. There are five key criteria, including: (i) the project proponent meets the “fit and proper person” test, (ii) the project complies with the CCS method, (iii) the project meets the additionality test, (iv) project proponent has the legal right to carry out the project, and (v) the project proponent has obtained the necessary regulatory approvals and consents.
Issuance of the certificate of entitlement
Once the project proponent meets all the requirements, the Regulator must issue a certificate of entitlement. This certificate confirms how many ACCUs the project will receive, based on the approved method.
For CCS projects, this involves calculating how much CO2 has been stored, and then applying adjustments (for example, to account for risks such as long-term leakage or environmental impacts) to ensure the credits are accurate and reliable.
Guidelines for calculating the amount of CO₂ stored are provided under National Greenhouse and Energy Reporting Act 2007 and the National Greenhouse and Energy Reporting (Measurement) Determination 2008.
Creation of ACCUs
The project proponents must open an account in the Australian National Registry of Emissions Units under the Australian National Registry of Emissions Units Act 2011 (Registry Account) in order to receive and manage ACCUs once ACCUs are issued.
After the certificate of entitlement is issued, the Regulator creates ACCUs by making an entry in the proponent’s Registry Account. This entry converts verified CO2 abatement into ACCUs recorded in the Registry, at which point the ACCUs become monetised and tradable.
Government’s role as an ACCUs buyer
Australian government plays an important role as an active buyer of ACCUs, particularly in the early stages of the scheme. The Regulator is empowered can enter into carbon abatement contracts with project proponents, usually through auctions or tender processes.
Importantly, these carbon abatement contracts can be signed before ACCUs are issued, which allows project proponents to secure future income and obtain financing for their projects. Once a contract is in place, the project proponent agrees to deliver a certain number of ACCUs over time.
This system helps giving businesses confidence to invest while allowing the government to purchase emissions reductions in a cost-effective way. ACCUs can also be traded in the market or sold directly to companies that need them for compliance or voluntary climate commitments.
Safeguard Mechanism
The Safeguard Mechanism works by setting a legal emissions baseline for Australia’s largest industrial facilities. These facilities must stay within their baseline. If they reduce emissions, they comply; if they exceed their baseline, they must buy and surrender ACCUs or Safeguard Mechanism Credits (SMCs).
The first full compliance year under the reformed system was 2024, and it has already created an active market. In practice, some facilities have reduced emissions and earned credits. Approximately 62 facilities generating around 8.3 million SMCs while others have exceeded their limits and purchased ACCUs to meet their obligations.
This system is starting to have measurable outcomes: total emissions from covered facilities have fallen by about 1.9%. Because the baselines are set to tighten each year by about 4.9%, facilities are expected to rely more on ACCUs over time, increasing demand in the market.
CCS project particulars
For CCS Projects, project proponent must commit to manage the stored carbon for a long period, typically either 25 or 100 years. This ensures that the carbon is kept safely underground and does not leak back to the atmosphere.
If a project is cancelled after ACCUs have already been issued, the proponent must return the same number of credits. This rule protects the integrity of the system by ensuring that only real and lasting emissions reductions are counted.
If the ACCUs have not been issued, the Regulator is empowered to revoke a project declaration unilaterally if he sees there are integrity risks. These risks include: (i) the project conditions have not been met, (ii) eligibility requirements are no longer satisfied, (iii) the project proponent fails to meet the “fit and proper person” test, (iv) responsibility for the project is no longer properly held, or (v) where false or misleading information has been provided in connection with the project.
A distinctive feature of the ACCU Scheme for CCS projects is that obligations can be linked to the land itself. Information about the project may be recorded on the land register, so that future owners or users are aware of the ongoing obligations. This ensures that long-term responsibilities continue even if the land changes owners.
Conclusion
Overall, Australia’s ACCU Scheme provides a well-developed framework for generating and managing carbon credits. CCS projects are subject to clear rules on eligibility, monitoring, and long-term carbon storage for credits to be issued and traded.
For emerging carbon markets such as Vietnam, Australia’s experience provides a useful reference point. A working system depends on clear methodologies, regular reporting, independent oversight, and enforceable legal frameworks in supporting confidence that emissions reductions are real and credible.
Lam Nguyen Hoang Thao – In-house Lawyer at TotalEnergies Australia – Formerly Russin & Vecchi in Vietnam
