Carbon trading

Investing in carbon credits or carbon credit projects

Australians have been able to trade in carbon credits for a few years. Here we outline how carbon trading works, how it is regulated in Australia and how to check if a carbon investment is legitimate.

What is carbon trading?

Carbon trading is when you buy and sell carbon credits (also called carbon offsets). Carbon credits are tradable units that often relate to emissions reduction or sequestration activities, such as tree planting, improving energy efficiency or capturing methane from landfill.

Emissions Reduction Fund 

Carbon trading can also involve households, small businesses and farmers participating in carbon credit projects that are set up to generate carbon credits and compete in tenders to sell them to the Commonwealth Government's Emissions Reduction Fund. These projects usually involve a project promoter (an aggregator) who oversees individual emissions reductions or sequestration activities as part of a single, umbrella project (an aggregation) that shares in the revenue from carbon credit sales.

Project promoters can also set up separate projects for individual businesses and farmers. The promoters can then oversee the generation and sale of carbon credits from each project.

The Clean Energy Regulator has more information about the Emissions Reduction Fund.

Which carbon credits are regulated?

Unregulated carbon credits

Some carbon credits are not regulated in Australia as financial products. These are usually bought online from suppliers or through companies that operate a carbon trading platform and are used to offset people's personal household or travel emissions.

Just because these credits are unregulated doesn't mean that they are illegal or invalid. It means that the people promoting or selling them don't need to be licensed by ASIC. 


Carbon credits, including regulated carbon credits, are not backed by any assets and don't pay any dividends or interest. The value of different types of carbon credits can be very different depending on how they are created and issued and what they are used for. If you are offered an investment in 'cheap' carbon credits, be suspicious. A seller may suggest you are getting a bargain compared to the price of other carbon credits but that doesn't mean they will rise in price to match the value of other types of carbon credits.

 Regulated carbon credits

The only types of carbon credits that are regulated by ASIC in Australia are:

  • Australian carbon credit units ( ACCUs) - Issued for Australian emission reduction or sequestration projects regulated by the Clean Energy Regulator.
  • Eligible international emissions units (EIEUs) - Issued under the Kyoto Protocol, also known as certified emission reductions (CERs) and emission reduction units (ERUs) and removal units (RUs).

Projects that are aggregations may be regulated as managed investment schemes, particularly where the returns from the project area share in the collective revenue from ACCU sales. The Clean Energy Regulator's types of units webpage gives more details about regulated carbon credits. 

Types of aggregations 

Aggregations can vary from relatively simple arrangements for households to more complex projects for small business or farmers.

For example, a household may upgrade to more energy efficient appliances that have benefits such as energy savings. This kind of project usually does not involve revenue from the sale of ACCUs.

More complex projects for small business or farmers may be more reliant on ACCU sales to make the project worthwhile. There may also be upfront and ongoing costs for the project and financial penalties payable to the aggregator if the agreed or expected emission reduction targets are not met.

To learn more about aggregation and how it works see the Clean Energy Regulator's webpage Aggregation under the Emissions Reduction Fund.

Questions to ask about aggregations 

Before you agree to participate in an aggregated project make sure you do your research so you know what is required of you, the features, risks and benefits of the aggregation. Here are some of the questions you should ask before you invest in an aggregation project.

  • Who you are dealing with - What are the skills, experience and track record of the promoter or aggregator? If they cannot demonstrate experience and expertise, you should be extra cautious.
  • Income - What income or benefits do you get from participating in the project? For example, will you get a pre-agreed payment from the aggregator, a share in the sale of ACCUs, a reduction in energy costs or a mixture of these?
  • Costs - What is the upfront investment and what are the ongoing costs?
  • Timeframe - Is there a certain amount of time you must remain in the project?
  • Registration - Is it the type of project that is able to be registered with the Clean Energy regulator? Is the project already registered? What happens if the project doesn't get registered by the Clean Energy Regulator?
  • Risks - How certain are the future financial benefits? If your activity or the other participants' activity doesn't generate the agreed emissions reductions, will this affect how much you will get paid? Will you have to pay penalties to the aggregator?

Many aggregations are structured as managed investment schemes. If an aggregation is a managed investment scheme you should read its product disclosure statement to help you answer the questions above. If you have further questions about an aggregation you may also consider getting professional financial advice.

Check for a licence or registration before you trade

Financial advisers, project promoters and investment companies must generally hold an Australian Financial Services (AFS) licence or operate on behalf of a licensee if they:

  •  advise you to trade in regulated carbon credits
  •  offer to sell you regulated carbon credits
  •  invite you to participate in an aggregation
  •  invite you to invest in a managed fund that earns any type of carbon credit

You can check their names on ASIC Connect's Professional Registers to make sure they hold an AFS licence or are authorised to provide services on behalf of a licensee. Financial service providers that are not licensed or authorised by a licensee are operating illegally.

If you are concerned that a person is operating without a licence, or if you have problems with a licensed person you should complain to ASIC.

You can find out if a project is registered by the Clean Energy Regulator by viewing the Emissions Reduction Fund project register.

Documents you must be given

Before they provide you with any services, the promoter or financial adviser must give you their financial services guide which will explain:

  • the financial services being offered
  • the fees charged
  • how the person or company providing the service will deal with complaints

If the financial services relate to carbon credits, they must also tell you how to find the Clean Energy Regulator's concise descriptions of the units.

If you are considering participating in an aggregation that is a managed investment scheme, the project promoter or your financial adviser must give you the product disclosure statement of the scheme.

Carbon scams

Be wary of calls or emails out of the blue offering you carbon credits for sale as they could be scams.
If the caller claims they can generate Australian carbon credit units through a carbon offset project, check if the project is listed on the Clean Energy Regulator's Emissions Reduction Fund project register. If it is not it could be a scam. If you think someone is making false claims about a carbon offset project you should complain to ASIC.

You can also complain to the Clean Energy Regulator by emailing

Find out more about investment scams.

Investing in carbon credits or carbon credit projects can range from simple investments to more complex arrangements. Before you invest make sure you understand the features, risks and benefits. If you are unsure seek professional financial advice to help you decide if carbon trading is right for you.

Related links

Last updated: 29 Jul 2016