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Navigating Carbon Contracts

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Business Innovations

To assist landholders and carbon sector providers to develop project partnerships, the Carbon Market Institute (CMI) has produced a useful guide and contract clauses using legal terminology that assists both parties to navigate a win-win arrangement and understand their risk and obligations under such a contract.

Farming sector carbon projects are partnerships with a long-term cycle compared to most land management decisions or income cycles, therefore contracts require good foresight to cater for changing circumstances across that time period.

Generally speaking the landholder’s main responsibility is to manage the physical project on their land to maximise the chances of sequestering carbon. If it’s a revegetation project, this involves maintaining firebreaks, stock-proof fencing, and avoiding commercial removal of woody material from the project site across the 25 or 100 year permanency period.

For soil projects, it means a 25 year commitment to managing soils within the project area according to your proposed new activities as described in the project’s Land Management Strategy. If the management system changes significantly the Land Management Strategy is adjusted to inform the Clean Energy Regulator (CER) of changes to the project site (not the entire farm), particularly if that may reduce or reverse the project’s carbon storage potential.

Three key contract clause documents are available. The first is a useful overview and Guidance Note to help increase understanding of what’s involved and help landholders become conversant with carbon farming terminology.

The second Services Agreement - Example Clauses is for the circumstance where the landholder is the project proponent and is contracting services using a fee-for-service arrangement (or ACCU share) to pay a carbon service provider.

The third Project Development Agreement - Example Clauses will help navigate the landholder partnership where the carbon project developer is the proponent. Under this arrangement the Project Developer is issued with the ACCUs and then distributes the landholder’s share of ACCUs or proceeds from sale of ACCUs, depending on the agreement.

All of these can be found on this page Example Contract Clauses - Carbon Market Institute along with other useful Carbon Market information and resources.