Australia’s corporate, markets, and financial services regulator, ASIC, has released updated regulatory guidance for carbon market participants named ‘Regulatory Guide 236: Do I need an AFS licence to participate in carbon markets?’ (RG 236). The revised guide offers crucial information for individuals and entities involved in carbon markets, including participants in the Australian Carbon Credit Unit (ACCU) scheme, responsible emitters under safeguard facilities, market intermediaries, and advisors.
The updated RG 236 helps carbon market participants determine whether they need an Australian Financial Services (AFS) licence for their activities. These activities may include providing financial services such as financial product advice or dealing in emissions units, which are regulated as financial products. This includes ACCUs and Safeguard Mechanism Credits (SMCs).
Key updates to RG 236 include addressing the safeguard mechanism reforms that took effect on 1 July 2023 and reflecting changes to the ACCU scheme since the guide was last revised in May 2015.
ASIC updated the guidance following consultations with stakeholders initiated through Consultation Paper 378 (Safeguard Mechanism Reforms: Updates to RG 236). ASIC received 19 submissions, with respondents broadly supporting the proposed updates, including guidance related to derivatives, managed investment schemes, financial product advice, and market-making activities.
ASIC also plans to update ‘Information Sheet 156: Regulated Emissions Units: Applying for or varying an AFS licence’ (INFO 156) to align with the safeguard mechanism reforms and updates in RG 236. The publication of the updated INFO 156 is expected in Q4 2024.
The Safeguard Mechanism reforms, introduced under the Safeguard Mechanism (Crediting) Amendment Act 2023 and the National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015, commenced on 1 July 2023. Under this mechanism, from January 2025, the Clean Energy Regulator will issue SMCs to entities responsible for large industrial facilities (responsible emitters) covered by the safeguard rules. Like ACCUs, SMCs are regulated as financial products under the Corporations Act.
The regulation of SMCs as financial products may affect responsible emitters, advisers, and carbon market participants engaged in SMC or derivative trading. The updated RG 236 aims to assist these stakeholders in determining their AFS licence requirements.
