Australia’s Emissions Reduction Fund (ERF): Comprehensive Guide

Cutting emissions is no longer just a sustainability goal - it’s a core compliance and commercial opportunity in Australia.

If you’re exploring carbon projects or considering how your business can earn Australian Carbon Credit Units (ACCUs), Australia’s Emissions Reduction Fund (ERF) is a key program to understand.

This guide breaks down how the ERF works, who can participate, the legal requirements, and the contracts you’ll likely need to manage risk and make the most of your project.

What Is Australia’s Emissions Reduction Fund (ERF)?

The Emissions Reduction Fund (ERF) is an Australian Government program administered by the Clean Energy Regulator (CER) to incentivise activities that reduce greenhouse gas emissions or increase carbon storage.

Eligible activities earn ACCUs - each unit represents one tonne of carbon dioxide equivalent (tCO₂-e) stored or avoided. ACCUs can be sold to the government (through ERF contracts) or privately to buyers such as Safeguard Mechanism liable entities, corporates pursuing net zero targets, or brokers.

The ERF operates under the Carbon Farming Initiative legislation and detailed methods (also called “activity types”) that set the rules for measurement, reporting and verification. In recent years, reforms have aimed to strengthen integrity (following the Chubb Review) and to boost demand through the Safeguard Mechanism reforms - making ACCUs more central to Australia’s decarbonisation pathway.

How Does The ERF Work?

1) Choose an Approved Method

Every ERF project must use a method approved by the CER. Methods cover activities like vegetation regeneration, reforestation, landfill gas capture, industrial energy efficiency, savanna burning and more.

The method dictates how to establish a baseline (what emissions would have been), how to measure abatement, how to monitor and report, and the evidence you need to keep.

2) Register Your Project

Project proponents (you, a group, or a special purpose entity) apply to register a project with the CER. You’ll need to show eligibility (including “newness” and “additionality”), nominate the method, describe the activities and provide landholder consents where relevant.

Once registered, you’ll be required to run the project in accordance with your method and the ERF rules.

3) Monitor, Audit and Report

Projects must monitor performance and submit offsets reports, typically annually or as the method requires. Independent audits (by registered auditors) are required at set intervals. The CER can also conduct compliance checks.

4) ACCU Issuance

When you submit a compliant offsets report, you can apply for ACCUs. The CER issues ACCUs into your ANREU account (the Australian National Registry of Emissions Units). You can hold, sell or surrender these units.

5) Commercialise ACCUs

There are two broad pathways:

• Government offtake (historically via ERF auctions leading to Carbon Abatement Contracts - fixed delivery of ACCUs over time).
• Private market sales (spot or forward contracts with corporates, Safeguard Mechanism entities, or traders/brokers).

In either case, you’ll negotiate commercial terms (price, delivery schedule, volume, risks) and manage delivery obligations over the life of the deal.

6) Permanence and Liability

Some methods (especially land-based sequestration) carry a permanence period (for example, 25 or 100 years). If carbon is reversed (e.g. bushfire, land clearing), there can be obligations to make good. Understanding ongoing liability and risk allocation is essential before you commit to a method.

Who Can Participate And What Projects Qualify?

Most types of organisations can participate - from landholders and community organisations to startups and large corporates. The key is meeting the ERF eligibility rules and method-specific requirements.

Common Project Categories

• Vegetation and land sector: Avoided deforestation, human-induced regeneration, reforestation/afforestation, soil carbon projects.
• Waste and energy: Landfill gas capture, wastewater treatment improvements, energy efficiency upgrades in industrial processes.
• Fire management: Savanna burning to reduce late dry-season emissions.
• Transport, facilities and other activity-specific methods as approved by the CER.

Key Eligibility Concepts

• Newness and additionality: The activity must be new and beyond business-as-usual, and not already required by law or other enforceable obligations.
• Ownership and consent: You must have the legal right to carry out the project and claim ACCUs (including landholder consent and clarity on carbon rights).
• Method compliance: You must meet all the conditions of your chosen method, including measurement, monitoring and reporting standards.
• Permanence (sequestration projects): You must commit to maintain carbon storage for the elected permanence period.

If multiple parties are involved - for example, a landholder, a project developer and a financier - it’s common to formalise roles and revenue sharing before registration. A well-drafted Joint Venture or participation agreement can reduce the risk of disputes later.

Step-By-Step: How To Register And Run An ERF Project

Step 1: Scoping And Feasibility

Start by reviewing the available methods and identifying one that fits your activity and operational capacity. Consider:

• Project boundaries and baseline data
• Measurement and monitoring capability (including data systems)
• Permanence obligations (if land-based) and potential reversal risks
• Indicative abatement volumes and project cash flows
• Landholder engagement and consents
• Audit costs, compliance overheads and delivery risks

At this stage, many proponents form a special purpose entity and set their governance foundations (for example, a company set up with a board-approved risk framework). If you have co-founders or investors, align decision-making and equity through a Shareholders Agreement early.

Step 2: Secure Rights And Permissions

Confirm that you (or your entity) hold the legal right to run the project and claim ACCUs. This can involve:

• Landholder consents and recognition of carbon rights
• Indigenous land use agreements or cultural heritage approvals (where applicable)
• Access agreements for measurement and monitoring
• Third-party service contracts (e.g. project developers, advisors, auditors)

Where you’re collaborating with a landholder or another proponent, capture key terms (like revenue sharing and responsibilities) in a clear contract and consider whether the document should be executed as a deed. If you’re unsure when a deed is appropriate, read more about what a deed is under Australian law.

Step 3: Apply To Register With The CER

Prepare your project application with the CER. You’ll nominate the method, define the project, and provide evidence (including consents).

The CER will assess eligibility and register the project if it meets the requirements. From there, statutory obligations begin - so it’s important that your governance, contracts and data systems are ready.

Step 4: Set Up Monitoring, Data And Audit Readiness

Establish the systems you’ll use to collect and retain evidence. You’ll need to keep detailed records to support calculations and audit reviews, including geospatial data, activity logs, sampling results and any contractor outputs.

If you’re building a digital platform for field data or customer programs, implement a compliant Privacy Policy and appropriate terms for users (for example, Website Terms and Conditions).

Step 5: Reporting And ACCU Issuance

Submit offsets reports in line with your method’s reporting period. Arrange audits when needed and address any findings promptly.

Once the CER issues ACCUs to your ANREU account, you can hold, sell or deliver them under your offtake arrangements.

Step 6: Commercialise (Government And Private Contracts)

Decide whether you’ll pursue government offtake contracts or sell ACCUs privately. Private offtake can provide flexibility (and sometimes price upside), but places the negotiation on you. Key issues include pricing formulas, delivery schedules, make-good provisions and force majeure.

Before signing, a targeted contract review helps clarify risks and align the deal with project realities and permanence obligations.

Legal And Commercial Issues To Get Right

ERF projects are legal projects before they are technical projects. Getting the legal architecture right early can save significant cost and stress down the track.

Project Ownership, JV And Revenue Sharing

Many projects involve multiple stakeholders - developers, landholders, investors, or service providers. Clearly identify who is the “project proponent” for ERF purposes (the party registered with the CER) and how revenues and responsibilities are allocated.

Use a robust collaboration framework (for example, a Joint Venture or project development agreement) to document roles, decision-making, cost-sharing, step-in rights and dispute resolution.

Carbon Rights And Land Access

Land-based projects require clear recognition of carbon rights, land use permissions and access for monitoring. Misunderstandings here can result in project delays or invalid ACCU claims.

Check titles, easements, native title considerations and any state-based carbon rights regimes that may apply to your land.

Data, Evidence And Confidentiality

Evidence is everything in an ERF audit. Define who owns the data created by the project and how it will be stored, accessed and shared. Where you involve consultants or technology vendors, ensure confidentiality and IP provisions protect your position - a straightforward Non-Disclosure Agreement is a good starting point before detailed contracts are signed.

Financing And Security

If a lender or investor is funding development or future ACCU deliveries, they may take security over project rights or ACCUs (present and future). Make sure any security interests are properly documented and, where relevant, registered under the Personal Property Securities Act (PPSA). If you need help, consider support to register a security interest correctly.

Change Of Control, Assignment And Exit

Projects can change hands. Build in clear rules around assignment, step-in and novation if you sell the project or transfer delivery obligations. When transferring contractual obligations, a formal Deed of Novation is commonly used to move rights and obligations to a new party.

Safeguard Mechanism And Demand For ACCUs

Safeguard Mechanism reforms (from 2023) drive ACCU demand by requiring large facilities to reduce emissions intensity over time, with the option to use ACCUs to meet shortfalls. This is expanding the private market, but it also means offtake contracts are becoming more sophisticated. Price, quality, delivery certainty and integrity claims sit under commercial and reputational scrutiny - another reason to focus on strong contracting.

Compliance, Audits And Enforcement

Failure to meet method requirements or contract delivery can trigger penalties, make-good obligations or reputational risk. Plan for audits from day one, and keep your compliance documentation in order. Assign responsibility for record-keeping and internal reviews, not just field execution.

What Contracts And Documents Will I Need?

Every project is different, but the following documents are commonly required to establish clear rights, manage delivery risk and protect your revenue:

• Project Development Agreement: Sets out roles, milestones, fees and responsibilities between the project proponent and developer/service provider.
• Landholder Agreement: Grants access, recognises carbon rights, sets out permanence obligations and defines revenue sharing with the landholder.
• Joint Venture Agreement: If multiple proponents share ownership or costs, a JV document clarifies governance, capital contributions and exit mechanisms. A formal Joint Venture framework is typical for multi-party projects.
• Offtake Agreement (Government or Private): Covers ACCU sales, price, volumes, delivery schedule, title and risk transfer, make-good, force majeure and termination.
• Deed Of Novation/Assignment: Used to transfer rights and obligations (for example, when selling a project SPV or changing offtakers). See Deed of Novation.
• Security Documents (PPSA): If you pledge project rights or ACCUs to a financier, ensure the security package and any PPSA registrations are correct - you can arrange to register a security interest.
• Shareholders Agreement: Where a company vehicle holds the project, a Shareholders Agreement aligns founders and investors on decision-making, dividends and exits.
• Privacy Policy And Data Terms: If you use digital tools, mobile apps or portals to capture project data or participant details, implement a compliant Privacy Policy and user terms (e.g. Website Terms and Conditions).
• Consultancy/Services Agreements: For auditors, ecologists, carbon advisors or software providers - lock in scope, deliverables, IP, confidentiality and liability caps. A dedicated contract review can help tailor these to your risk profile.
• Heads Of Agreement/Term Sheet: A non-binding summary of key commercial terms before you finalise detailed documents - helpful for speed and alignment.

Not every project needs every document. The right bundle depends on your method, partners, financing and offtake strategy. The important thing is that your paperwork mirrors your project’s reality - and your obligations under the method and any permanence commitments.

Key Takeaways

• The ERF rewards eligible projects that reduce or store emissions with tradable ACCUs - but each project must follow an approved method and strict reporting rules.
• Success starts with sound scoping: choose the right method, confirm legal rights (including landholder consents and carbon rights) and set up reliable data and audit processes.
• Commercial returns depend on well-negotiated offtake arrangements. Align delivery schedules and make-good obligations with your project’s technical realities.
• Treat your ERF project as a legal project too: clear JV or landholder agreements, security arrangements, and assignment/novation pathways reduce risk over the long term.
• Digital tools and data-sharing mean privacy and IP terms matter - implement a fit-for-purpose Privacy Policy and clear user terms early.
• Get the contracts right from day one. Strong documents and ongoing compliance will protect your ACCU revenue and your reputation.

If you’d like a consultation on planning, contracting and de-risking your ERF or ACCU project, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.