ASIC has today released its updated regulatory guidance for carbon market participants in Regulatory Guide 236 Do I need an AFS licence to participate in carbon markets? (RG 236).
RG 236 provides guidance for participants in the carbon markets including people involved in the Australian Carbon Credit Unit (ACCU) scheme, responsible emitters for safeguard facilities, market intermediaries and advisers to participants in the carbon market.
The guidance will assist participants in carbon markets in deciding whether they need an AFS licence to engage in activities associated with participation in the carbon market. These activities may involve providing a financial service, such as providing financial product advice, or dealing in emissions units regulated as financial products, including ACCUs and Safeguard Mechanism Credits (SMCs).
The updates to RG 236:
- address the safeguard mechanism reforms that commenced on 1 July 2023; and
- reflect changes to the ACCU Scheme that have occurred since RG 236 was last re-issued in May 2015.
ASIC is updating RG 236 following consultation with stakeholders initiated by Consultation Paper 378 Safeguard mechanism reforms: Updates to RG 236 (CP 378). ASIC received 19 submissions in response to CP 378, including six confidential submissions. Respondents were supportive of our proposals to update RG 236, and to provide updated guidance in relation to derivatives, managed investment schemes, financial product advice and making a market.
A summary and a copy of the non-confidential submissions made to ASIC as well as an outline of ASIC’s response to the submissions received is available on CP 378.
ASIC will also update Information Sheet 156 Regulated emissions units: Applying for or varying an AFS licence (INFO 156) to address the safeguard mechanism reforms and updates made in RG 236. We expect to publish the update in Q4 2024.
Background
The Safeguard Mechanism reforms were introduced under the Safeguard Mechanism (Crediting) Amendment Act 2023 and National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 and commenced on 1 July 2023. Under the Safeguard Mechanism, the Clean Energy Regulator may issue SMCs to entities responsible for large industrial facilities to whom the Safeguard Mechanism applies (i.e. responsible emitters) from January 2025. Like ACCUs, SMCs are regulated as a financial product under the Corporations Act.
The regulation of SMCs as a financial product may have implications for responsible emitters under the Safeguard Mechanism, advisers to responsible emitters and carbon market participants that trade in SMCs or derivatives involving SMCs. The updated guidance in RG 236 will assist these carbon market participants to consider whether they may require an AFS licence.
ASIC is Australia’s corporate, markets and financial services regulator.