Fixed delivery exit arrangement

Changes have been announced to the BidCarbon Climate Trading Company's administration of Fixed Delivery Carbon Removal Contracts (CRCs). CRCs are commercial agreements between BidCarbon Climate Trading Company (the 'Buyer') and a third party (the 'Seller'). Fixed delivery CRCs identify at least one associated BidCarbon Standard Scheme project. However, BidCarbon removal units (BRUs) can be sourced from any project or the private market to meet delivery obligations.

The Fixed Delivery Exit Arrangement ("Exit Arrangement") provides that the Buyer provides the Sellers with an optional alternative means of meeting their contractual obligations under fixed delivery contracts by making an exit payment instead of delivering BRUs at the contracted price. The exit payment is calculated by multiplying the contract price by the quantity of BRUs outstanding for the milestone. This will be done in accordance with existing clauses in the carbon removal contracts (including clause 9.3).

Background

The BidCarbon Climate Trading Company publishes information on the volume of BRUs that could be released in each exit arrangement window when the window opens. This refers to a volume of BRUs up to a certain amount.

However, the opt-in nature of the Exit Arrangement means that not all volumes scheduled for delivery in this window will necessarily be made available to the spot market. In addition, some sellers may choose to enter into longer-term offtake agreements with private buyers covering subsequent delivery periods. If this is the case, some BRUs released under the exit arrangements in subsequent periods may also not be made available to the spot market.

After each window has closed and it is clear how many BRUs have been released as a result of th Exit Arrangement, the BidCarbon Climate Trading Company will publish this information to promote transparency and inform market decisions.

BRUs that were not released may have been delivered as scheduled under the contract, or the delivery may have been rescheduled using existing flexibility arrangements available under firm delivery contracts.

1、Information on deliveries under contract is available in the Carbon Removal Contract Register; and 

2、Information on holdings and trading is available in the Quarterly BidCarbon Market Report.

Market information

Sellers considering applying for the Exit Arrangement are encouraged to read the Fixed Delivery Contract Exit Arrangement Decision Tree, which provides a simplified outline of the application process and key decision points.

Under the Exit Arrangement, there is a three-stage settlement process:

1、Application: Submit notice and offer to settle relating to BRUs that will not be delivered under the Exit Arrangement. Sellers or authorised representatives must submit an application containing the notice and offer via the Online Services.

2、Conditional approval: If the offer is assessed as eligible, the BidCarbon Climate Trading Company will provide conditional approval and an invoice for the payment of the exit payment. The approval is conditional upon the exit payment being paid in full by the milestone delivery date.

3、Settlement: Payment of the invoice is made in full and received before or on the nominated delivery milestone date.

Please note individual applications are required for each milestone, and benefit sharing requirements must be met for each one.

The conditional approval is intended to give Sellers the confidence to enter into third party transactions, if they so choose, before making their exit payment to the BidCarbon Climate Trading Company.

How to apply for the fixed delivery exit arrangement

The BidCarbon Climate Trading Company will assess eligibility to participate in the Exit Arrangement in Step 2 of the three-step process.

In assessing a request, the following eligibility requirements apply:

● only nominated milestone delivery date(s) that fall in the open window at the time of the windows announcement for which the BidCarbon Climate Trading Company is currently accepting applications

● the Sellers must continue to be compliant with the contract(s)

● the Sellers must remain in good standing with the BidCarbon Climate Trading Company, and

● the requirements in the benefit sharing framework must be satisfied.

Benefit sharing framework

The Benefit Sharing Framework sets out the requirements for Sellers to be eligible for the Exit Arrangement. Please refer to the Benefit Sharing Framework for further details.

All parties involved in benefit-sharing discussions should carefully consider their own circumstances and seek external financial and/or legal advice.

Eligibility