Carbon Rights Act 2003

Carbon sequestration is defined as the absorption of carbon dioxide from the atmosphere by land or anything on land and the storage of carbon in land or in anything on land (s 3). Carbon release is the converse - release into the atmosphere of carbon that has been stored in land or in anything on land (s 3). These definitions are broad and include vegetation, soil, and any improvements. The Act does not prescribe how much sequestration must occur or how it must be measured; it only defines the property rights that attach to that natural process.

A carbon right is the interest in land created under s 6(1)(a). It is a separate interest in the affected land (s 6(1)(b). It is classified as a hereditament and an encumbrance (s 6(3)). This means it is an interest in land capable of being inherited and it burdens the title of the affected land. The proprietor has the benefits and risks of sequestration and release (s 8(1)), so if the land loses stored carbon (e.g., through fire, clearing), the carbon right proprietor bears that risk. The right does not include possession, so the proprietor cannot exclude others from the land or use the land itself.

An affected land is the land in respect of which a carbon right is registered (s 3). The form must describe the land or the part of the land if only part is affected (s 5(2)(c), (d)). Only one carbon right form can be registered at any time in respect of the same area of land (s 7(2)), creating a scarce statutory right. This limit prevents multiple overlapping carbon rights over the same area.

A carbon covenant is an interest in land that burdens land and attaches to the relevant carbon right (ss 12(1)(a), 12(3)). It can be a positive covenant (s 10(2)), meaning it can require the burdened land owner to take active steps (e.g., maintain vegetation, avoid burning) or permit access. The burdened land is the land in respect of which the covenant is registered as a burden (s 3). The covenant runs with the carbon right it benefits and with the burdened land (s 12(3)), so it binds successors in title. The proprietor of the covenant must always be the proprietor of the relevant carbon right (s 14(2)), meaning the covenant cannot be assigned separately from the carbon right.

Relevant carbon right is defined as the carbon right in relation to which the covenant is or is to be entered into (s 3). This ensures the covenant is always linked to a specific carbon right, preventing free-standing covenants.

The Act uses the Transfer of Land Act 1893 (TLA) definitions for land and registration (s 3). Registration is under the TLA, so carbon rights and covenants become Torrens interests subject to its rules about indefeasibility, caveats, and dealings.

The Act primarily affects owners of freehold land and the Crown (as owner of Crown land). Landowners who wish to separate carbon sequestration rights from their land title must use this Act to create a carbon right (s 7(1) prohibits any other method). This affects any landowner in Western Australia wanting to participate in carbon offset markets, whether for voluntary credits or compliance under the Commonwealth’s Emissions Reduction Fund. The Act also affects proprietors of carbon rights (any person who holds a registered carbon right), who obtain the legal and commercial benefits and risks of sequestration and release (s 8(1)). These proprietors may be separate from the landowner, giving them a proprietary interest that can be dealt with under the TLA (s 9(1)). Covenantors and covenantees under carbon covenants are affected: the covenant imposes rights, obligations, or restrictions on the burdened land (s 10), and the covenant runs with the land (s 12(3)). This means future owners of the burdened land are bound, even if they did not enter the covenant. The Registrar of Titles is affected, as carbon right forms and carbon covenant forms must be lodged for registration, meeting specific content requirements (ss 5(2), 11(2)). The Act also affects persons with an interest in land who can enter into carbon covenants with the carbon right proprietor (s 10(1)). This broad category includes mortgagees, lessees, neighbours, and possibly government agencies. The Minister or other specified bodies may receive information from carbon right proprietors if regulations require reporting under s 17(2). The Act binds the Crown in right of the State and, subject to legislative power, all other capacities of the Crown (s 4), so government agencies using Crown land for carbon projects are subject to this regime. Practitioners advising on carbon projects must consider whether the Act applies and the interaction with Commonwealth laws. Lenders may be affected because carbon rights and covenants can be the subject of a caveat or process of execution (s 9(1)(b), 14(1)(b)). The limit of one carbon right per area at a time (s 7(2)) means potential carbon right holders must race to register or negotiate with existing holders. The Act does not affect persons who have no connection to Torrens system land (e.g., some pastoral leases may not be under TLA? The definition of land from Land Administration Act 1997 may include all land, but registration under TLA is required. Persons on unregistered land may not be able to create a carbon right under this Act unless the land is first brought under TLA.

Rights:

• A person may lodge a carbon right form with the Registrar to create a carbon right (s 5(1)). There is no prohibition on who can lodge - it need not be the landowner, but the form must comply with requirements.
• Upon registration, the person becomes proprietor of a carbon right - a separate interest in land (s 6(1)(b).
• The proprietor has the legal and commercial benefits and risks of carbon sequestration and release (s 8(1)). This includes, for example, the right to sell credits from carbon sequestration, but that right is not itself created by this Act; it flows from the proprietary interest, which can be transferred.
• The carbon right can be dealt with as a separate interest in land (s 9(1)(a)), including assignment, lease? The Act says “dealt with” but expressly prohibits variation (s 9(1)(a) - cannot be varied). It can be the subject of a caveat or execution (s 9(1)(b)). Dealings are subject to TLA Division 2A of Part IV and other applicable TLA provisions (s 9(2)).
• The proprietor of a carbon right may enter into a carbon covenant (s 10(1)) with any person who has an interest in land, for a right, obligation (including positive covenant) or restriction.
• The carbon covenant can grant a licence to enter to inspect or remedy a default (s 15(b)), even though the covenant itself cannot confer possession (s 15(a)).
• The carbon covenant runs with the relevant carbon right and burdens the burdened land (s 12(3)), providing enduring rights.
• A carbon covenant can be dealt with as a separate interest in the relevant carbon right, and can be subject to a caveat or execution (s 14(1)), subject to the requirement that the proprietor of the covenant must always be the proprietor of the relevant carbon right (s 14(2)).
• The proprietor may register a surrender of the covenant in whole or part (s 16).

Duties:

• A carbon right form cannot be registered unless it contains the required information: statement that it is for a carbon right, land description, identification of part if applicable, term (including perpetuity), and compliance with TLA s 104B (s 5(2)).
• A carbon covenant form must contain similar details: description of the carbon right, land description for burdened land, terms of right/obligation/restriction, identity of proprietor (must be proprietor of carbon right), specified commencement day (not before the carbon right creation day) and term (not longer than carbon right term), compliance with TLA s 104G (s 11(2)).
• The proprietor of a carbon covenant must at all times be the proprietor of the relevant carbon right (s 14(2)). This imposes a duty not to assign the covenant separately from the carbon right.
• Carbon right proprietors may be required by regulations to provide information about the area of affected land, quantity and form of carbon sequestered or released, and other relevant matters for state, national, or international reporting (s 17(2)). This is a potential duty if regulations are made.
• Contravention of regulations is an offence (s 17(3)), penalty up to $5,000.

Limitations: Carbon rights cannot be created in any way other than under Part 2 (s 7(1)). No more than one carbon right can be registered at any time per area (s 7(2)). Carbon rights cannot confer possession (s 8(2)(a)). Carbon rights cannot be varied (s 9(1)(a)). Carbon covenants cannot be created in any way other than under Part 3 (s 13). The covenant cannot confer possession (s 15(a)), and is not a licence to use or occupy land (s 15(c)). The covenant cannot have a term longer than the underlying carbon right (s 11(2)(h)(ii)). The covenant cannot be created before the carbon right exists (s 11(2)(h)(i)).

The Act itself creates no direct offences for breaches of its substantive provisions. The only source of penalties is s 17(3), which provides that regulations may prescribe offences with a maximum penalty of $5,000. No regulations have been made under this Act that are publicly available as at compilation. This means the primary enforcement mechanism for carbon rights and covenants is through the Transfer of Land Act 1893 (TLA) and general property law. Because carbon rights and covenants are registered interests under the TLA, they are subject to the TLA’s provisions on caveats (s 9(1)(b) allows a caveat to be lodged), execution (the interest can be taken in execution of a judgment), and the Registrar’s powers to correct the register. The Act specifically subjects dealings to Part IV Division 2A of the TLA (ss 9(2)(a), 14(3)(a)), which deals with qualified indefeasibility and priority notices. Breach of a carbon covenant would be enforceable as a breach of a proprietary interest - the covenantee (the carbon right proprietor) could seek an injunction, specific performance, or damages, depending on the terms of the covenant. Because the covenant runs with the land and the carbon right (s 12(3)), successors in title are bound, so enforcement can continue against later owners of the burdened land or later holders of the carbon right. The registration of a surrender of a covenant (s 16) releases the burden. For a carbon right, there are no statutory enforcement mechanisms specific to the Act; the right is proprietary and can be protected by caveat or enforced through TLA remedies (e.g., action for recovery of an interest). The $5,000 maximum penalty under regulations is modest, suggesting the legislature did not intend administrative penalties to be the primary enforcement tool. If a person creates a carbon right or covenant outside this Act (s 7(1) and s 13 prohibit that), the purported interest is void and would not be recognised. The Act does not create a specific right for the state to enforce compliance beyond the regulation-making power. The Registrar can refuse registration if forms do not comply.

The Act is explicitly tied to the Transfer of Land Act 1893 (TLA). Carbon rights and covenants are registered under the TLA (definition of “registered” in s 3). The forms must comply with TLA sections 104B (for carbon right) and 104G (for carbon covenant) - these TLA sections deal with the form and content of dealings and the Registrar’s power to require additional information. The carbon right and covenant are “land” within the meaning of the TLA because the TLA includes hereditaments (s 6(3) note; s 12(4) note). The TLA’s provisions on indefeasibility, caveats, and priority will apply. For example, a carbon right that is registered before an unregistered interest will generally have priority. The Act also ties into the Land Administration Act 1997 for the definitions of “Crown land” and “land” (s 3). Crown land is subject to carbon rights (s 5(1)), but the Crown has its own regulatory regime under the Land Administration Act for dealings with Crown land, and the Crown consent may be required (the Carbon Rights Act does not exempt the Crown from its own management acts). The Planning and Development Act 2005 is referenced in ss 8(2)(b) and 15(c) to exclude carbon rights and covenants from being treated as subdivisions. This means creating a carbon right or covenant does not trigger subdivision approval. The Act is silent on interaction with Commonwealth carbon laws, such as the Carbon Credits (Carbon Farming Initiative) Act 2011. The state Act creates a property interest that can underpin carbon projects registered under the CFI. The CFI requires legal right to the carbon sequestration, and a carbon right under this Act would satisfy that requirement for land in WA. However, the CFI also has its own registration and reporting requirements. The Act does not address stamp duty, but as a transfer of an interest in land, dealings in carbon rights and covenants may be dutiable under the Duties Act 2008 (WA) as “land”. Practitioners should check. The Act binds the Crown (s 4), so state and local government activities are subject to its property regime. The Interpretation Act 1984 will govern construction. The Limitation Act 2005 may affect actions for breach of covenant, but is not mentioned. The Act does not interact with the Personal Property Securities Act 2009 (Cth) because carbon rights are interests in land, not personal property. There is no explicit interaction with native title, but if Crown land is subject to native title, the creation of a carbon right may require compliance with the Native Title Act 1993 (Cth) as it is a “dealing” in land. The Act does not address this. The Environment Protection and Biodiversity Conservation Act 1999 (Cth) may also be relevant if carbon projects involve clearing or planting, but the Act only creates property rights, not activity approvals.

The Act was originally enacted as the Carbon Rights Act 2003 (WA) No. 38 of 2003, receiving assent on 30 June 2003. It commenced on 24 March 2004 by proclamation (Gazette 23 March 2004 p. 975), subject to the condition that it could not commence before section 64 of the Transfer of Land Amendment Act 2003 came into operation (s 2(2)). This ensured the TLA had the necessary provisions to accommodate carbon rights and covenants (specifically the new Divisions for forms).

The only substantive amendment is by the Planning and Development (Consequential and Transitional Provisions) Act 2005 (No. 38 of 2005), which came into operation on 9 April 2006. Section 15 of that Act amended sections 8(2)(b) and 15(c) of the Carbon Rights Act. The amendment replaced the reference to “section 135 of the Planning and Development Act 2005” (which was the correct reference in the 2005 Act) - the original Act had referenced “section 135 of the Town Planning and Development Act 1928”. This was simply an updating of cross-references to the new planning Act. The substance was unchanged - both provisions confirm that a carbon right or covenant is not a subdivision needing planning approval. The note in the compilation table lists this amendment. No other amendments have been made. The Act has remained static since 2005. The regulations making power in s 17 has not been exercised as far as the compiled text shows (no regulations are included in the compilation). This means the Act has operated for nearly 20 years without significant legislative change, which suggests either that the Act works as intended or that it is underused. The lack of amendment also means any unresolved uncertainties (e.g., interaction with the Commonwealth carbon farming framework) remain.

The Act itself contains no references to any court cases. There is no judicial interpretation of its provisions publicly recorded in the compiled text. This is not unusual for a niche statutory property regime. However, practitioners should be aware that the Act’s concepts may be tested in litigation concerning the definition of carbon sequestration (e.g., disputes over what constitutes “storage in land” - does it include biomass that later decays?) or the enforceability of positive carbon covenants against successors. Because the covenant can include positive obligations, the common law rule that positive covenants do not run with land may be abrogated by s 12(3), which says a carbon covenant “burdens, attaches to, and runs with, the burdened land”. This could be challenged if a covenant imposes a personal obligation that is not intrinsically related to the land. The Act’s interaction with the Torrens system may also generate litigation about priority of carbon rights versus other registered interests (mortgages, easements) and whether a carbon right form that does not comply with s 5(2) can be registered or challenged. There is no reported case in WA specifically on this Act. Litigation in other states on equivalent carbon rights legislation may be persuasive but is not binding. The absence of litigation may indicate low usage or that disputes are resolved privately. If the Act becomes more widely used, expect cases on the meaning of “carbon sequestration” (e.g., does it include soil carbon enhancement?), the requirement that a carbon right cannot be varied (s 9(1)(a) - can it be partially assigned? The Act does not prohibit assignment, only variation), and the obligation that the covenant proprietor must be the carbon right proprietor (s 14(2)) - if the carbon right is transferred, the covenant transfers automatically, but s 14(2) requires the covenant proprietor to be the carbon right proprietor, so transfer of the carbon right without also transferring the covenant would breach this section. The Act does not provide a remedy for breach of s 14(2). The Registrar might refuse to register such a dealing.

1. Carbon rights cannot be varied (s 9(1)(a)). If circumstances change (e.g., the area of land changes, or the term needs extension), you cannot simply amend the carbon right. You would need to surrender it and create a new one, which may cause priority issues or require consent. This is a rigid design.

2. Only one carbon right per area at a time (s 7(2)). This creates a monopoly for the first registered right. If the right holder fails to use it, no other person can register a competing right over the same area. This could be anti-competitive and could lock up carbon rights indefinitely if the holder is inactive (the right can be in perpetuity). A diligent landowner should ensure they hold the carbon right or have a covenant to protect their interests.

3. Carbon covenant term cannot exceed the carbon right term (s 11(2)(h)(ii)). If you create a carbon right for 50 years and a covenant for 50 years, but later the carbon right is surrendered early, the covenant also ceases because it runs with the carbon right (s 12(3)(a)). Ensure the covenant term matches the expected duration of the carbon right.

4. The proprietor of a carbon covenant must always be the proprietor of the relevant carbon right (s 14(2)). This means you cannot assign the covenant alone; it must go with the carbon right. If you wanted to assign the benefit of a covenant to a third party without transferring the carbon right, you cannot. This prevents separation of the benefit of the covenant from the underlying right.

5. Carbon rights and covenants do not confer any right of possession (ss 8(2)(a), 15(a)). So if you hold a carbon right over land, you cannot enter the land to maintain vegetation unless you have a separate licence (which can be included in a covenant - s 15(b)). A bare carbon right gives no access. Always ensure the covenant or a separate licence grants a right to enter.

6. The carbon covenant can grant a licence to enter to inspect or remedy a default (s 15(b)). This is a helpful exception, but note it only applies to the covenant, not the carbon right. If you only have a carbon right, you have no right to enter unless you also have a covenant with such a licence.

7. Compliance with TLA sections 104B and 104G is required (ss 5(2)(f), 11(2)(j)). These sections impose additional requirements (e.g., signature, execution, identity of parties). A failure to comply means the form cannot be registered, so careful drafting is essential.

8. The regulations power is broad: s 17(2) allows regulations to require carbon right proprietors to provide information about the quantity and form of carbon sequestered or released, for state, national or international reporting. This is a potential ongoing compliance cost that is not defined. If such reporting is required, it could be expensive (e.g., measuring soil carbon). There is no grandfathering.

9. $5,000 penalty for regulation offences is modest, but if regulations require reporting, non-compliance could also affect the validity of carbon credits or cause reputational harm.

10. Crown land carbon rights may require Crown consent - the Act says a carbon right can be created over Crown land (s 5(1)), but the Land Administration Act 1997 may require the consent of the Minister or the relevant authority before granting an interest. The Carbon Rights Act does not override that. Always check.

Compliance with the Carbon Rights Act 2003 involves a series of procedural steps for creating and dealing with carbon rights and covenants, plus adherence to any regulations made under s 17.

Creating a carbon right:

1. Determine the land. It must be freehold land under the TLA, or Crown land that can be the subject of a carbon interest (with necessary Crown consent).
2. Prepare a carbon right form (approved by the Registrar - contact Landgate).
3. Ensure the form contains: a statement that it is for a carbon right under this Act; a description of the land (or part with words/sketch); the term (including perpetual); and compliance with TLA s 104B (which requires the form to be executed by the registered proprietor of the land and contain a description of the interest).
4. Lodge the form with the Registrar for registration under the TLA.
5. Upon registration, the carbon right exists as a separate interest. The registered proprietor is the person named.
6. Note: only one carbon right per area at a time. If someone else already has a registered right over the same land you cannot register a second.

Creating a carbon covenant:

1. Ensure you are the proprietor of the relevant carbon right (the covenant must be attached to a carbon right - s 10(1) requires the covenantee to be the carbon right proprietor).
2. Identify the burdened land (which can be different from the affected land - s 10(3)).
3. Negotiate the terms of the covenant: the right, obligation (which can be positive) or restriction.
4. Prepare a carbon covenant form (approved by the Registrar).
5. Ensure the form contains: statement that it is for a carbon covenant; description of the carbon right; land description for burdened land; terms; identification that the proprietor of the proposed covenant will be the proprietor of the relevant carbon right; commencement day (not before the carbon right is created) and term (not longer than the carbon right term); compliance with TLA s 104G (which requires execution by the proprietor of the carbon right and the proprietor of the burdened land).
6. Lodge the form with the Registrar.
7. Upon registration, the carbon covenant exists as a separate interest in the carbon right and burdens the land.

Dealings:

• Carbon rights can be dealt with (assigned, leased, mortgaged) but cannot be varied. Any dealing must comply with TLA provisions (s 9(2)). Lodge the appropriate TLA dealing form.
• Carbon covenants can be dealt with but only together with the relevant carbon right (s 14(2)). You cannot separately assign the covenant.
• Surrender: lodge a form of surrender (s 16). Registration extinguishes the covenant. Partial surrender is possible.

Reporting:

• If regulations are made under s 17(2) requiring information, carbon right proprietors must provide the specified information (area, quantity/forms of carbon, other relevant matters) to the Minister or prescribed body. Monitor the WA Government Gazette for such regulations. Currently no such regulations exist in the compiled Act.

Record keeping: Maintain accurate records of the carbon right and covenant registration numbers, term, and any dealing documents. Ensure all dealings are registered to maintain priority under Torrens.

Interaction with other laws: Obtain advice on whether the creation of the carbon right or covenant triggers stamp duty under the Duties Act 2008 (as a transfer of an interest in land). Comply with the Commonwealth CFI requirements if seeking Australian carbon credit units - the state interest is necessary but not sufficient.

Avoiding pitfalls: Do not attempt to create a carbon right or covenant outside this Act (ss 7(1), 13). Do not assume the carbon right gives a right to enter land - get a licence in the covenant. Ensure the carbon covenant term matches the carbon right term duration. If the carbon right is in perpetuity, the covenant can also be in perpetuity. If the carbon right is for 30 years, the covenant cannot be for 40 years. For Crown land, confirm with the relevant department that the carbon right is permitted and that the proponent has the necessary authority.