What are the key considerations for contract agreements with Carbon Project Developers?
DISCLAIMER: This general information has been prepared by Landcare Australia (AR 1315198 of Australian Carbon Traders Pty Ltd AFSL 425512) for farmers and landholders who are eligible to be treated as wholesale clients. It does not take into account your objectives, needs or situation. ACCUs and derivatives are financial products. While we have outlined common benefits, risks and constraints here, we strongly recommend you seek independent financial and legal advice before acting on any decision to invest. Click here for further regulatory information.
If you decide to work with a carbon project developer you will be asked to enter into a commercial contract or agreement for the ACCU Scheme project. Any contract must be described to you in detail as part of a Free, Prior and Informed Consent (FPIC) process.
When you are considering signing an agreement with a project developer, there are several key contracting requirements and considerations to keep in mind:
- The terms on which you give them legal right
- Your obligations when it comes to conducting project activities
- The payment terms, including any upfront payments, milestone payments, and revenue from ACCU sales
- How costs and revenues will be shared between you and the project developer. This includes initial setup costs, ongoing maintenance, and the sale of ACCUs
- Define who will be responsible for the day-to-day management and maintenance of the project. This includes planting, monitoring, and reporting activities
- Ensure there are clear responsibilities for compliance with ACCU scheme requirements, including regular reporting to the Clean Energy Regulator
- Identify potential risks and permanence obligations and allocate responsibilities for managing these risks
- Establish a process for resolving disputes that may arise during the project.
- Make sure you understand what you are signing and are confident the agreement is fair and equitable.
- Make sure your agreement sets out the rights and obligations for ongoing registration of the project. This is important if the carbon service provider ceases to be a project proponent or if you want to exit the arrangement.
- Seek professional legal and financial advice.
- Enquire about the carbon service provider including their services and experience.
The Carbon Market Institute’s Example Contract Clauses and guidance can assist in understanding what is involved in entering into an agreement with a carbon developer, where either the carbon developer or the farmer or land manager will be the project proponent.
In a commercial agreement, what are your obligations as the Landholder vs the Carbon Developer?
When entering into a commercial agreement you need to be aware of your obligations, the obligations of the carbon developer and shared obligations. General responsibilities are outlined below.
Carbon Developer Responsibilities
Project Design and Planning
- Undertake desktop and site assessments to determine the best feasibility and eligibility of a reforestation project.
- Develop a detailed project plan, including methodologies for carbon accounting, species selection, and site preparation.
- Complete and submit all documentation for registration of the project with the CER.
Financial Management
- Manage funding for the project, including any costs related to planting, maintenance, and monitoring.
- Handle the sale of carbon credits, ensuring financial returns from the project are maximised.
Implementation and Maintenance
- Coordinate the actual planting and initial establishment of the reforestation project.
- Develop maintenance plans, including ongoing care and monitoring of tree health.
Monitoring and Reporting
- Conduct regular monitoring of the reforestation area to measure growth and carbon sequestration over time.
- Conduct FullCAM modelling to confirm ACCUs generated by the project.
- Manage compliance with regulatory requirements, including preparing reports for the Clean Energy Regulator.
Auditing
- Engage third-party auditors to audit the project according to the schedule set by the CER for the project.
Risk Management
- Identify potential risks (e.g., fire) and implement strategies to mitigate them throughout the project lifecycle.
- Develop the permanence plan.
Farmer Responsibilities
Land Availability and Access
- Provide access to the land designated for the reforestation project.
- Maintain rights to the land, ensuring no conflicting land use practices are in place.
Collaboration with the Developer
- Work collaboratively with the carbon developer throughout the project planning and implementation phases.
- Share local knowledge that may inform site selection and species choice.
Ongoing Management
- Depending on the agreement, the farmer may be involved in some aspects of land management, particularly if they have existing practices that complement the reforestation efforts.
- Ensure that agricultural practices do not conflict with the reforestation goals.
Compliance with Regulations
- Support the carbon developer in maintaining compliance with local, state, and federal regulations that may apply to land use and environmental protection.
Communication and Reporting
- Support the carbon developer to facilitate communication with local stakeholders, including neighbours or community groups, as needed.
- Provide any land-related information or data required for compliance and reporting processes.
Shared Responsibilities
Project Goals and Objectives
Align on project objectives, ensuring both parties understand and agree on expectations for ACCU generation and environmental outcomes.
Agreement on Financial Terms
Negotiate profit-sharing arrangements, including how ACCUs will be valued and sold.
Risk Management
Assess and manage shared risks related to land use and project success, collaborating on management and permanence plans.