ASIC Consultation Paper 378

ASIC has released Consultation Paper 378 'Safeguard mechanism reforms: Updates to RG 236' (CP 378) which proposes to update Regulatory Guide 236 Do I need an AFS licence to participate in carbon markets (RG 236). The updates will address safeguard mechanism reforms which commenced on 1 July 2023 and allow the Clean Energy Regulator to issue a new type of carbon product - Safeguard Mechanism Credit units (SMCs).  The Clean Energy Regulator will be able to issue SMCs from January 2025.

RG 236

The current RG 236 provides guidance on whether market participants require an AFS licence to participate in or give financial advice in relation to the carbon market. RG 236 has not been updated since May 2015.

On 1 July 2023 the safeguard mechanism reforms commenced which allow the Clean Energy Regulator to issue SMCs as a type of Eligible International Emission Unit (EIEU).  EIEUs are a regulated financial product under the Corporations Act.

Proposed updates

ASIC is proposing to update RG 236 to specifically address SMCs and the implications of providing advice, dealing in or making a market in SMCs. In addition to these changes ASIC is seeking industry feedback on its proposals to update guidance on:

• when a person may be providing financial product advice in relation to offset projects;
• when a project proponent may be making a market in relation to Australian Carbon Credit Units (ACCUs) and SMCs; and
• when an entity will provide financial advice in relation to SMCs.

Additionally, ASIC proposes to provide updated examples of the types of financial products that may involve emissions units other than ACCUs and SMCs, such as derivative and managed investment schemes.

Next steps

ASIC is seeking feedback from stakeholders in relation to the updates by 3 June 2024. In the second half of 2024, ASIC proposes to update RG 236 and Information Sheet 156 Regulated emissions units: Applying for or varying an AFS licence (INFO 156).