How ACCUs and SMCs Work in Australia’s Carbon Market?

Australian Carbon Credit Units (ACCUs) come from projects that avoid emissions or store carbon. Safeguard Mechanism credit units (SMCs) come from eligible facilities that emit less than their limit under Australia’s Safeguard Mechanism. The two units meet in the same market when a facility goes over that limit and needs to cover the gap.

A facility can cover the full gap with ACCUs alone, SMCs alone or a mix of both. Companies can also use ACCUs voluntarily, even if they have no facilities covered by the Safeguard Mechanism. SMCs are used for Safeguard compliance. That difference matters if your company buys credits for more than one purpose.

Where do ACCUs come from?

Each ACCU represents one tonne of greenhouse gas emissions avoided or carbon stored by an eligible Australian project. It’s measured in carbon dioxide equivalent, or CO₂-e. This gives projects that deal with different greenhouse gases, such as methane and carbon dioxide, a common way to measure their results.

The activity behind an ACCU depends on the project. Some projects reduce emissions that would otherwise occur. Others store carbon in vegetation or soil. Here are a few examples.

• Landfill gas capture. Capture and destroy methane released as waste breaks down.
• Native tree planting. Store carbon as planted trees and shrubs grow.
• Native forest regrowth. Change how land is managed to help native forest grow back and store carbon.
• Soil carbon. Change farming practices to increase the carbon stored in the soil.
• Savanna fire management. Use planned burns earlier in the dry season to reduce emissions from fires later in the year.

Before a project can earn ACCUs, it must register under the ACCU Scheme and follow an approved method. The method sets out what qualifies and how to measure the result. It also tells the project how to estimate what would have happened without the activity. That comparison helps determine how many tonnes can be credited.

The project then reports its results to the Clean Energy Regulator and provides an audit when required. If the claim meets the scheme’s requirements, the regulator issues ACCUs into a registry account. Some methods stop accepting new projects while existing projects continue to earn credits. For example, that’s why buyers can still see ACCUs from human-induced regeneration projects, even though the method closed to new registrations in 2023.

How does the Safeguard Mechanism work?

The Safeguard Mechanism generally applies to facilities that produce more than 100,000 tonnes of covered direct emissions in a financial year. Think of emissions from burning fuel at a plant or methane released at a mine. These are emissions from the facility’s own operations. The scheme covers sites in sectors such as mining, oil and gas, manufacturing and transport.

In 2024–25, the scheme covered 208 facilities. Together, those sites accounted for about 30% of Australia’s greenhouse gas emissions. The legal obligation sits with the company that has operational control of the facility. If a company operates several covered sites, it can have a different compliance position at each one.

How is a facility’s baseline set?

The baseline is the limit the regulator uses to assess a facility’s emissions. For most sites, it depends in part on how much the facility produces. A mine that produces more ore may have a higher baseline for the year because the calculation takes that extra output into account. Its actual emissions can rise too, so the effect on the gap depends on how both numbers move.

There’s also a separate rule that tightens the limit over time. The standard baseline decline rate is 4.9% a year through 2029–30. For many existing facilities, the calculation also gives more weight to industry benchmarks over time. If a site produces the same amount and keeps emitting at the same level, it can face a larger gap as its baseline tightens. Cutting emissions on site can reduce that gap.

How did the two schemes come together?

• 2011. Australia introduced the scheme that issues ACCUs. It gave eligible projects a way to earn credits for cutting emissions or storing carbon.
• 2016. The Safeguard Mechanism began setting emissions limits for large facilities. Many early baselines used a site’s historical emissions. Facilities could already surrender ACCUs to cover a gap.
• 2023. The reforms brought in declining baselines and introduced SMCs. Facilities gained a way to earn credits for coming in below their limits, while tighter limits increased the need for units at facilities above them.
• 2025. The regulator issued the first SMCs, for the 2023–24 compliance year. Facilities that earned them could sell them or hold them for future compliance.

Where do SMCs come from?

An eligible facility can apply for SMCs when its emissions come in below its baseline. Each SMC represents one tonne of CO₂-e below that limit. The operator can sell the units or hold them for its own future compliance. The regulator bases the number of SMCs on the facility’s emissions performance, with adjustments to account for any ACCUs already issued for the same reductions.

Because most baselines adjust for production, a site can sometimes qualify for SMCs even if it emits more in total than it did the year before. A plant might produce more while cutting the emissions it releases per tonne of product. If it stays below its calculated baseline and meets the relevant conditions, it can earn SMCs. The credit tells you how the site performed against its limit for that period.

There are exceptions. A landfill gas project can earn ACCUs under an approved method, while landfills are excluded from SMC issuance under the Safeguard Mechanism. The scheme also has provisions that let some previously covered facilities keep earning SMCs after their emissions fall below the coverage threshold.

How do ACCUs and SMCs compare?

Say a facility finishes the year 10,000 tonnes above its baseline after any applicable adjustments. It can cover that gap by surrendering 10,000 units. Each unit counts for one tonne in the compliance calculation. The facility could use 10,000 ACCUs, 10,000 SMCs or any mix that adds up to 10,000. This is how SMC supply can meet demand that would otherwise go to ACCUs.

In practice, facilities use both units, with ACCUs making up the larger share. For 2024–25, facilities surrendered 13.4 million units, almost 50% more than the previous year. ACCUs accounted for about four in every five units surrendered. The figures show how much the market relied on ACCUs even with SMCs available for the same purpose.

The regulator issued 6.7 million SMCs for 2024–25, while facilities surrendered 2.6 million. The regulator says the difference suggests many facilities are holding SMCs for future years. So the number of SMCs issued gives you a sense of the market’s size, while the number available to buy depends in part on what holders choose to sell.

What affects how many units a facility needs and when?

A facility starts with its expected emissions and baseline. It can then account for units it already holds and any approved arrangements that change its limit or the timing of compliance. These rules matter when a company has several sites or when an emissions reduction project will take more than a year to deliver results.

Banking. A company can hold units it has bought or earned for a later year. Under current rules, banked SMCs can be used for any compliance year through 2029–30. The Australian Government is reviewing how SMCs can be used after that, alongside how quickly baselines should decline and the future role of ACCUs.

Borrowing. An eligible facility can apply to bring forward part of its baseline from the following year. It can borrow up to 10% of its baseline for the current year. Next year’s limit falls by the amount borrowed plus an extra 10% of that amount. A facility that raises its baseline this way is ineligible for SMCs in the year it borrows.

Multi-year monitoring. A facility with a credible plan to reduce emissions can apply to be assessed over two to five years, ending by June 2030. This can give a project, such as a plant upgrade, time to make a difference. The regulator assesses total emissions against the combined baseline at the end of the period. The facility then covers any remaining gap with units, or it may qualify for SMCs if it finishes below the combined limit.

Trade-exposed baseline adjustments. A facility that faces international competition and meets the regulator’s financial tests can apply for a slower decline rate for three years. The rate can be as low as 1% for eligible manufacturing facilities or 2% for other eligible facilities, compared with the standard 4.9%. A slower decline can reduce the number of units the site is likely to need over those years.

The ACCU explanation requirement. If the ACCUs surrendered reach 30% or more of a facility’s baseline for the period, the operator must explain why it didn’t cut more emissions on site. For a baseline of 200,000 tonnes, the explanation is due if the facility surrenders 60,000 ACCUs or more. The facility can still cover the full gap with ACCUs. The explanation is part of the surrender process, and the regulator publishes it.

What happens when a company uses the units?

Both units are held and transferred through Australia’s Unit and Certificate Registry. To use ACCUs or SMCs for Safeguard compliance, the facility’s operator submits a request and surrenders the units through the registry. The regulator then counts them toward that facility’s compliance.

For a standard financial-year reporting period, new SMCs are typically issued in late January. The last day to surrender units is 31 March, ahead of the 1 April compliance deadline. A facility using units for that deadline needs time for the registry transaction to go through, including any approvals.

For voluntary use, a company cancels ACCUs in the registry. This permanently removes the units from circulation. The account holder can record who the cancellation is for and its purpose, and can request a verification certificate. That gives the company a record of the units it used and the purpose it recorded for them.

Looking to buy ACCUs?

CnerG supplies ACCUs for Safeguard compliance and voluntary use. If you know the volume and when you need the units, we can discuss available supply and delivery timing. If you’re still working through what to look for, our guide covers project types, credit documentation and what to clarify before requesting a quote. Read our ACCU buying guide.

Talk to the CnerG team.