ASIC’s updated RG 236 reflects changes to the structure and regulation of carbon markets in Australia following the cessation of the carbon pricing mechanism, the establishment of the Emissions Reduction Fund and the anticipated introduction of the emissions reduction safeguard mechanism in July 2016.  Carbon market participants should familiarise themselves with the new guidance which will assist them to operate their businesses in compliance with financial services laws.

ASIC has released updated Regulatory Guide 236 Do I need an AFS licence to participate in carbon markets? (RG 236) to reflect changes made to the structure and regulation of carbon markets in Australia.  Specifically, updated RG 236 now takes into account:

  • the cessation of the carbon pricing mechanism in February 2015;
  • the establishment of the Emissions Reduction Fund (ERF), taking into consideration the broader scope of project types and new participants under the ERF;
  • anticipated ERF project structures which involve multiple small-scale carbon abatement activities under a single project (an ERF aggregated project);
  • competitive ERF reverse auctions for carbon abatement contracts; and
  • the introduction of the emissions reduction safeguard mechanism in July 2016.

The updated RG 236 also reflects:

  • that carbon units, European Union Allowances and Australian-issued international units all cease to be financial products following the cessation 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 (Cth) (which will mean that a person is not required to hold an Australian financial services licence to offer advice about, or enter into, a carbon abatement contract).

The Government will monitor ERF auction participation as it considers feedback from its consultation in January 2015 on certain exemptions from the managed investment scheme and Australian financial services licencing provisions for ERF aggregated projects, aggregators and technical advisers providing advice about Australian carbon credit units.

In the meantime, RG 236 provides guidance on the application of the current financial services laws to carbon market activities under the ERF and the emissions reduction safeguard mechanism and also provides particular guidance on

  • when an ERF aggregated project may be a managed investment scheme, and
  • when the provision of carbon abatement by a person to an ERF project proponent may be a financial product.

See the ASIC media release dated 20 May 2015.