Carbon markets
Updated regulatory guidance
We have updated Regulatory Guide 236 Do I need and AFS licence to participate in carbon markets? (RG 236) following the changes to the structure and regulation of carbon markets in Australia (refer: 15-117MR). The updated guidance will assist carbon market participants – in particular, carbon abatement project developers and aggregators – to operate their businesses in compliance with the financial services laws. We have also updated Information Sheet 156 Regulated emissions units: Applying for or varying an AFS licence (INFO 156).
RG 236 has been updated to take into account:
- the end of the carbon pricing mechanism in February 2015
- the startup of the Emissions Reduction Fund (ERF), including the broader scope of project types and new participants under the ERF
- anticipated ERF project structures that involve multiple small-scale carbon abatement activities under a single project (i.e. ‘ERF aggregated projects’ carried out by an ‘aggregator’)
- competitive ERF reverse auctions for carbon abatement contracts, and
- the introduction of the emissions reductions safeguard mechanism in July 2016.
RG 236 has also been updated to reflect:
- that carbon units, European Union allowances and Australian-issued international units ceased to be financial products from the end of the carbon pricing mechanism, and
- the exemption of carbon abatement contracts from the definitions of ‘derivative’ and ‘financial product’ for the purposes of the Corporations Act 2001 (Corporations Act).
This exemption means that a person is not required to hold an Australian financial services (AFS) licence to provide advice about, or enter into, a carbon abatement contract.
RG 236 also provides particular guidance on:
- when an ERF aggregated project may be a managed investment scheme, and
- when the arrangement for the provision of carbon abatement by a person to an ERF project proponent may be a financial product.
In January 2015, the Australian Government consulted on further exemptions from the managed investment scheme and AFS licence obligations for ERF aggregated projects, aggregators and technical advisers providing advice about ACCUs – and, as set out in the Explanatory Statement to the Corporations Amendment (Emissions Reduction Fund Participants) Regulation 2015, the Australian Government will monitor participation in ERF auctions as it continues to consider these exemptions and the feedback from the submissions to consultation.
In developing this guidance, ASIC has worked closely with the Department of the Environment and the Clean Energy Regulator to anticipate a variety of different structures of ERF aggregated projects that may emerge under the ERF. ASIC will, however, monitor the need to more closely align its guidance to emerging and evolving ERF practices.
The Clean Energy Regulator has also published information about aggregation under the Emissions Reduction Fund.
Given the broad range of financial services that may be provided in carbon markets and the different types of ERF aggregated projects, we encourage carbon market participants to seek their own professional advice to find out how the Corporations Act and other applicable laws apply to their particular circumstances, because it is their responsibility to determine their obligations.
| ASIC's role | ASIC's role in regulating entities and individuals providing financial services and operating financial markets in regulated emissions units, and monitoring the activity in the carbon markets, including providing financial services in relation to the Emissions Reduction Fund. |
| Financial services licensing | Do you need an AFS licence for regulated emissions units? |
| Markets licensing | Information for entities wishing to establish facilities or platforms to allow the trading of regulated emissions units. |
| Compliance | AFS licensees have ongoing obligations, including business requirements, conduct, disclosure, training and dispute resolution. |
| Training | Training of financial product advisers providing advice to retail clients on regulated emissions units. |
| Other resources | Resources for financial services professionals in carbon markets, including links to other websites. |
| AFS licensees | Search the ASIC Professional Registers Search to see whether an AFS licensee is authorised to provide financial services in relation to emissions units. |
