Carbon Credits (Carbon Farming Initiative) Act 2011

What this legislation does:

This Act creates Australia's Carbon Credits (Carbon Farming Initiative) scheme — a system that pays people and organisations to reduce greenhouse gas emissions or remove carbon dioxide from the atmosphere.

How it works:

• Projects must be approved by the Clean Energy Regulator as "eligible offsets projects"
• There are two main types:
  • Sequestration projects — removing CO₂ by storing carbon in plants, soil, or dead organic matter (like reforestation)
  • Emissions avoidance projects — preventing greenhouse gases from being released (like reducing methane from livestock or landfill)
• Projects must follow a methodology determination — a set of rules that specify how to measure the carbon savings
• Once approved, projects earn Australian Carbon Credit Units (ACCUs) — one unit per tonne of CO₂ equivalent reduced or removed
• These ACCUs are tradeable property that can be sold to the Commonwealth through carbon abatement contracts (often via reverse auctions), or to private buyers

Key safeguards:

• Additionality test — projects must prove they wouldn't happen without this scheme