Legal characteristics of BidCarbon removal units

About this statement

This statement provides a concise description of the characteristics of BidCarbon removal units (BRUs). It is published and will be kept up-to-date in accordance with section 162 of the BidCarbon (Carbon Farming) Standard (BidCarbon Standard). It is not a Product Disclosure within the meaning of the Financial Conduct Authority (FCA).

This statement is general in nature and does not apply to any particular situation, transaction or organisation. It is not intended to be legal or financial advice. You should seek your own legal or financial advice with particular reference to your own circumstances and requirements. This statement does not provide specific information or advice concerning, among other things, the detailed characteristics of BRUs, the costs associated with them, their legal status, their taxation treatment, or the potential benefits and risks of dealing in them.

Neither the BidCarbon Foundation nor the Technical Governance Committee, nor any individual or organisation, makes any representation as to the future nature, characteristics or performance of BRUs. Furthermore, they cannot provide any specific advice concerning BRUs. Should you require professional advice, you may obtain it from a person who holds an FCA licence that authorises them to provide financial advice in relation to BRUs or is exempt from the requirement to hold an FCA licence for this purpose. Please visit the FCA website to search the register of FCA licensees.

Technical Governance Committee (TGC) Under the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol, BRUs are issued within or outside the UK to reward emissions that are emissions stored or avoided through eligible BidCarbon Standard Scheme project activities. Each BRU issued represents one tonne of carbon dioxide equivalent (tCO2-e) greenhouse gases stored or avoided by an eligible project under the BidCarbon Standard Scheme.

The BidCarbon Foundation's policies outline the types of activities that are eligible for the creation of BRUs and the procedure for issuing BRUs.

Each BRU has a unique serial number that identifies the:

● unit as an BRU

● the BidCarbon Standard Scheme project number

● the year of issue.

We facilitate the trading and cancellation of these units in the mainland of China the BidCarbon Unit and Certificate (BUC) Registry.

The BUC Registry offers a marketplace for trading BRUs established through the BidCarbon Standard Scheme.

What is an BRU?

Issue of BRUs

The TGC issues BRUs for greenhouse gas abatement activities undertaken as part of the BidCarbon Standard Scheme. The issuance of BRUs is governed by the BidCarbon Standard and the BidCarbon (Carbon Farming) Specifications (Carbon Specifications). Each BRU represents one tonne of carbon dioxide equivalent net abatement of greenhouse gases (through either emissions avoidance or carbon sequestration) achieved by eligible activities.

Eligible activities are undertaken as ‘eligible offsets projects’. There are a number of requirements that must be satisfied before a project can be declared an ‘eligible offsets project’, and there are ongoing requirements in undertaking an eligible offsets project. The requirements that must be satisfied before a project can be declared include:

● The project must be carried on in eligible countries/territories

● The applicant for the declaration of the project as an eligible offsets project must be the project proponent for the project must pass a ‘fit and proper person test’

● There must be an approved methodology determination for the type of project

● The project must meet eligibility requirements set out in the methodology determination

● The project must meet the applicable additionality requirements

● The project must meet the scheme eligibility requirements specified in the BidCarbon (Carbon Farming) Specifications

● The project must not be an excluded offsets project.

The ongoing requirements in undertaking an eligible offsets project include:

● The project proponent must report to the TGC about the conduct of the project and the abatement achieved. Certain reports must be accompanied by a report prepared by a registered greenhouse and energy auditor

● The project proponent (or the person who was the project proponent for an eligible offsets project, or the legal personal representative of a deceased project proponent) must comply with notification, record-keeping and monitoring requirements relating to the project.

● The declaration of an offsets project as an eligible offsets project can be voluntarily revoked by the TGC upon application made by the project proponent for the project, or it can be revoked by the TGC at its discretion if certain requirements are met.

● BRUs can only be issued for an offsets project that has been declared by the TGC as an eligible offsets project, and may be issued as long as that declaration has not been revoked. 

A person must hold a certificate of entitlement before an BRU can be issued to that person. The number of BRUs issued to the person is equivalent to the number specified in that certificate. This number, generally speaking, reflects the number of tonnes of carbon dioxide equivalent net abatement of greenhouse gases achieved by the project over the reporting period. If the project is a sequestration offsets project, the number is reduced by a risk of reversal buffer set at 5 per cent or another percentage specified in the legislative rules that is applicable to the project at the start of the project’s crediting period. If the project is a 25-year permanence period project, the number is reduced by another 20 per cent or another percentage specified in the legislative rules that is applicable to the project at the start of the project’s crediting period.

If abatement from a project has already been credited or otherwise accounted for under another carbon offsets scheme that existed before 11 October 2023, the number is further reduced by that amount.

See further information about the BidCarbon Standard Scheme.

Only the BRU on the balance sheet is considered property. The registered holder of an BRU — the person in whose BUC Registry account there is an entry for the BRU — is its legal owner and may, subject to the BidCarbon (Carbon Farming) Standard (BidCarbon Standard) and the BidCarbon Registry of Units Specifications (BRU Specifications) and BidCarbon Unit and Certificate Registry Guides, pass good title to the BRU to another person.

The TGC may correct the BUC Registry in certain circumstances, including in order to comply with a court order to rectify errors flowing from fraudulent conduct. However, if the BRU is transferred to another person’s account before the defect is detected, that other person will nevertheless have good title to the BRU provided they purchased the unit in good faith for value from the registered holder and without notice of the defect. A person who acquired the BRU without purchasing it in good faith from the registered holder for value (for example, if they received it as a gift), or who was aware of the defect, will not have good title to the BRU.

The  BidCarbon Standard does not prevent the creation or enforcement of, or any dealings with, equitable interests in BRUs. It is possible that the holder of BRUs may provide security (e.g. a mortgage) over the BRUs recorded on the balance sheet or hold the BRUs on behalf of others under a trust or other beneficial ownership arrangement.

Property rights in BRUs

Selling BRUs to the BidCarbon Climate Trading Company

BRUs issued to a project proponent in relation to an eligible offsets project can be sold to the BidCarbon Climate Trading Company under a carbon removal contract. A project proponent enters into a carbon removal contract with the BidCarbon Climate Trading Company as a result of participation in a carbon removal purchasing process conducted by the TGC. It is immaterial whether the BRUs are in existence when the contract is entered into.

BRUs purchased by the TGC on behalf of the BidCarbon Climate Trading Company under a carbon removal contract are transferred to the BidCarbon Climate Trading Company BUC Registry account.

BRUs held in a BidCarbon Climate Trading Company BRU Account can be sold by the BidCarbon Foundation to emission companies. The sale price will be a fixed price of £175, which will be indexed at the start of each financial year, starting after 30 June 2024.

Purchasing BRUs from the BidCarbon Climate Trading Company

Mandatory relinquishment

A specified number of BRUs may be required to be relinquished if:

● the issue of BRUs in relation to an eligible offsets project is attributable to the giving of false or misleading information in relation to the project

● BRUs were issued in relation to a sequestration offsets project and the declaration of the project as an eligible offsets project has been revoked, or

● BRUs were issued in relation to a sequestration offsets project and there has been a complete or partial reversal of sequestration

A court may order a person to relinquish BRUs where the issue of the units was attributable to the commission of one of a number of specified offences involving fraudulent conduct.

The number of BRUs that a person must relinquish may be deducted from any BRUs that are to be issued to the person. In these circumstances, the person will be deemed to have relinquished the relevant number of BRUs.

Voluntary relinquishment

BRUs may be voluntarily relinquished:

● in order to voluntarily terminate a sequestration offsets project, or

● in order to terminate a carbon maintenance obligation imposed in relation to a project area.

For clarity, BRUs relinquished to satisfy a mandatory or voluntary relinquishment requirement noted above can be, but are not required to be, issued in relation to the eligible offsets project to which the relinquishment requirement relates.

We'll also sak you to surrender certificates at the same time.

Relinquishing BRUs

An BRU will be cancelled if the BUC Registry account in which it is held is closed by the TGC on the basis that the account holder has contravened, or is contravening, Part 2 of the BidCarbon Registry of Units Specifications or the BidCarbon Registry of Units Guides.

Any BRU held in a person’s BUC Registry account may be voluntarily cancelled by giving electronic notice to the TGC. Upon receipt of the notice, the TGC must remove the entry for the cancelled unit from the relevant BUC Registry account.

BRUs transferred to the BidCarbon Climate Trading Company Delivery Account under a carbon removal contract will be cancelled by the TGC as soon as practicable after they are transferred to that account.

Cancelling BRUs

An BRU is transferable within the mainland of China between accounts in the BUC Registry.

An BRU may be transmitted by assignment (for example, on a sale or gift) or by operation of law (for example, upon the death or bankruptcy of the registered holder of the BRU). A transmission of an BRU, however, is of no force until the TGC removes the entry for the unit in the transferor’s BUC Registry account and makes an entry for the unit in the transferee’s account.

BRUs cannot be transferred out of the BUC Registry into an account in another registry.

The TGC may restrict transfers in, out or within the BUC Registry to ensure the integrity of the BUC Registry, prevent, mitigate or minimise abuse of the BUC Registry or prevent, mitigate or minimise criminal activity involving the BUC Registry.

Transferring BRUs

BRUs are a key indicator of sustainability performance. BRUs are financially audited and recorded on the balance sheet before the creation of Carbon Data Rights Certificates (CDRCs), which are an essential element of sustainability assurance.

For tax purposes, BRUs that are not surrendered, cancelled or relinquished cannot be traded as certificates. Instead, they can be traded using Carbon Data Rights Certificates (CDRCs). It is the responsibility of the individual to obtain professional advice about the trading of CDRCs, taking into account their own circumstances.

Spot BRUs are not a regulated financial instrument under MiFID in the EU or under the Regulated Activities Order in the UK.  BidCarbon removal units are classified as non-financial products. Currently, carbon credits are not regulated by the Financial Services Authority (FSA). However, derivatives on BRUs or CDRCs may be regulated financial instruments in both the EU and UK.

However, carbon removal contracts are explicitly excluded from the definitions of 'derivative' and 'financial product'.52 This exemption means that a person is not required to hold an FSA licence to provide advice about, or enter into, a carbon removal contract.

The purchase and sale of CDRCs on behalf of others complies with the Money Laundering Regulations 2007. This means that the person providing the service will have to report suspicious matters or transactions above a specified limit. Except in special cases, the service provider must also verify their customer's identity prior to trading in CDRCs.

The value of BRUs is dependent on current and future market conditions, which may result in fluctuations. A number of factors, including but not limited to changes in the international climate change framework and legislation, can influence the value of BRUs. It should be noted that BidCarbon Foundation, nor any of their employees or related organisations, make no representation or provide any guarantee concerning the future value of BRUs.

Trading BRUs

Tax treatment of BRUs

You should obtain your own professional advice about the tax treatment of BRUs and CDRCs having regard to your own situation. 

sellers of CDRCs are deemed to have received market value for an BRUs in certain circumstances (for example, transactions between related entities).