Carbon Credits (Carbon Farming Initiative—Improved Forest Management in Multiple-use Public Native Forests) Methodology Determination 2026

EXPLANATORY STATEMENT

Issued by the authority of the Assistant Minister for Climate Change and Energy

Carbon Credits (Carbon Farming Initiative) Act 2011

Carbon Credits (Carbon Farming Initiative— Improved Forest Management in Multiple-use Public Native Forest) Methodology Determination 2026

Legislative Authority

The Carbon Credits (Carbon Farming Initiative— Improved Forest Management in Multiple-use Public Native Forest) Methodology Determination 2026 (the Determination) is made under subsection 106(1) of the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act) which empowers the Minister to make a methodology determination (method) by legislative instrument.

For the purposes of subsections 106(4) and (4AA) of the Act, in making the Determination, the Minister:

was satisfied that the Determination complies with the offsets integrity standards (OIS) set out in section 133 of the Act;
had regard to and agreed with the advice of the Emissions Reduction Assurance Committee (the ERAC) given to the Minister under subsection 123A(2) of the Act;

had regard to any adverse environmental, economic or social impacts likely to arise from the carrying out of the kind of projects to which the Determination applies.

For the purposes of 106(4A) and (4B) of the Act:

a project made in accordance with the Determination would provide for eligible carbon abatement; and
based on advice from the ERAC, the Determination complies with all of the OIS.

In accordance with subsection 106(11) of the Act, the Minister published a copy of the advice from the ERAC on the website of the Department of Climate Change, Energy, the Environment and Water (the Department).

In having regard to the environmental, economic, or social impacts, the Minister was satisfied that any adverse impacts resulting from projects under this Determination could be appropriately mitigated. It is essential that mitigation strategies are in place to address any adverse impacts. These mitigation strategies would rely on concerted effort from the relevant state government to manage short-term transitional effects and maximise medium to long-term economic and social opportunities.

Purpose

The Determination enables projects that increase carbon stocks in forest-related carbon pools, and avoid greenhouse gas emissions from these pools, by stopping harvesting in multiple-use public native forests that would otherwise be subject to commercial forestry.

The Determination sets out the eligibility requirements of projects and rules for calculating, crediting and reporting the abatement from undertaking eligible project activities. The Determination also provides specific reporting, record keeping, monitoring and notification requirements.

Background

The Act enables the crediting of greenhouse gas abatement generated by sequestration offsets projects, which remove carbon dioxide from the atmosphere by sequestering carbon in, and avoiding emissions of greenhouse gases from, living biomass, dead organic matter or soils. The process for establishing an offsets project, which is defined in section 5 of the Act, is set out in Part 3 of the Act. An offsets project must be covered by, and carried out in accordance with, a method.

A method sets out the requirements for a project to be an offsets project and establishes procedures for estimating abatement from eligible offsets projects, as well as the rules for monitoring, record-keeping, and reporting. Methods ensure that emissions reductions are genuine, real, and additional to business as usual.

Before making a method, the Minister must have regard to the advice of the ERAC, an independent expert panel established to advise the Minister on the integrity of methods. The Minister must not make or vary a method if the ERAC has advised that it does not comply with one or more of the OIS (set out in section 133 of the Act). In making a method, the Minister must be satisfied it complies with the OIS, and must have considered any adverse environmental, economic or social impacts likely to arise as a result of projects to which a method applies.

Offsets projects carried out in accordance with a method and administered by the Regulator (the Regulator) can generate ACCUs which represent greenhouse gas abatement achieved by eligible offsets projects.

The ACCU Review and implementation of Recommendation 5

In December 2022, an independent panel, led by former Chief Scientist Professor Ian Chubb concluded an independent review of Australian Carbon Credit Units (ACCU Review). The ACCU Review found that the current method development process ‘impedes timely and effective emissions reductions’, nor has the process for prioritising methods for development been ‘sufficiently transparent and accessible to all groups’.

Recommendation 5 of the ACCU Review is to ‘establish a transparent proponent-led process for developing and modifying methods as soon as practicable, with the Carbon Abatement Integrity Committee (CAIC) assuring the integrity of methods and the Department providing support for participants who otherwise may not be able to participate’.

On 21 May 2024, the Commonwealth invited public submissions of expressions of interests (EOIs) to develop a method or method variation. At the request of the Minister, ERAC assessed the EOIs and considered whether they would meet the OIS, the specified triage criteria and earlier method development and implementation experience. Out of 39 EOIs, ERAC identified 4 methods for prioritisation which the Commonwealth agreed to on 30 October 2024. The Determination is one of the 4 methods to have been prioritised and is the first proponent-led method to have been developed.

The Determination meets the requirements of the OIS set out in section 133 of the Act.

Additionality: A method should result in carbon abatement that is unlikely to occur in the ordinary course of events (disregarding the effect of the Act).
Measurable and verifiable: A method involving the removal, reduction or emissions of greenhouse gases should be measurable and capable of being verified.
Eligible carbon abatement: A method should provide abatement that is able to be used to meet Australia’s international mitigation obligations.
Evidence-based: A method should be supported by clear and convincing evidence.
Project emissions: Material greenhouse gas emissions emitted as a direct result of the project should be deducted.
Conservative: Where a method involves an estimate, projection or assumption, it should be conservative.

Accounting for abatement

The net abatement amount under the Determination is calculated as the difference between the carbon stock change in the project scenario and the carbon stock change in the baseline scenario, plus the emissions from post-harvest (slash) burns in the baseline scenario, minus the leakage deduction, plus the aggregate negative abatement amount under subsection 42(3) of the Determination, for all projects in the State (if any).

Consultation

An exposure draft of the Determination was first published on the Department website on 4 December 2025. The formal public consultation period opened on 2 January 2026 and closed on 30 January 2026. A public information session was held online on 21 January 2026.

The ERAC was also consulted and considered the Determination at its meeting on 18 May 2026.

Incorporation by reference

Paragraph 106(8)(b) of the Act provides that a method may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, a matter contained in an instrument or writing as in force or existing from time to time.

The Determination incorporates the following documents by reference which can all be freely accessed via the Department’s website:

the Full Carbon Accounting Model (FullCAM);
INFM Modelling Guidelines;
CFI Mapping Guidelines; and
National Vegetation Information System.

The Determination also incorporates the IPCC first order decay model which can be viewed on the Intergovernmental Panel on Climate Change’s (IPCC) website.

The Determination requires forest carbon stocks, CH4 and N2O emissions associated with post-harvest (slash) burns, and carbon stocks in harvested wood products in service to be estimated using FullCAM. FullCAM is the model used to estimate carbon stocks in vegetation and soils in Australia’s National Inventory Report under the Climate Change Convention.

The Determination sets out requirements for using FullCAM, while more detailed requirements and instructions are provided in the INFM Modelling Guidelines.

The Determination requires project proponents to prepare and maintain a digital project map that identifies the:

boundaries of the project area, the forestry region(s) in which the project area is located and any proposed carbon protection areas and any exclusion areas in relation to the project;
spatial distribution of each major vegetation group across the project area; and
age class of the public native forests in the project area within major vegetation groups (set out separately for carbon protection areas and other areas).

The project map must be prepared in accordance with the CFI Mapping Guidelines. Under the Determination, major vegetation groups must be defined in accordance with the latest publicly released version of the National Vegetation Information System.

Determination Details

The Determination is a legislative instrument within the meaning of the Legislation Act 2003.

Details of the Determination are set out in Attachment A. Numbered sections in this explanatory statement align with the relevant sections of the Determination.

Sunsetting

The Determination is not exempt from sunsetting, however, the operation of paragraph 4(b) of the Determination means that it will cease to be in force on the day before it would otherwise be repealed in accordance with subsection 50(1) of the Legislation Act 2003.

Statement of Compatibility with Human Rights

A Statement of Compatibility with Human Rights, prepared in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, is at Attachment B.

ATTACHMENT A

Details of the Legislative Instrument

Part 1—Preliminary

Section 1 – Name

Section 1 sets out the full name of the Determination as the Carbon Credits (Carbon Farming Initiative— Improved Forest Management in Multiple-use Public Native Forest) Methodology Determination 2026.

Section 2 – Commencement

Section 2 provides for the Determination to commence the day after it is registered on the Federal Register of Legislation.

Section 3 – Authority

Section 3 states that the Determination is made under subsection 106(1) of the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act).

Subsection 106(1) of the Act provides that the Minister may, by legislative instrument, make a methodology determination (method) that:

is expressed to apply to a specified kind of offsets project;
sets out requirements that must be met for such a project to be an eligible offsets project; and
provides that, if such a project is an eligible offsets project, the carbon dioxide equivalent net abatement amount for the project is taken to be equal to the amount ascertained using a method specified in the determination.

Section 4 – Duration

Section 4 sets out the period that the Determination is in force. The Determination will remain in force between the commencement date and the day before it would otherwise be repealed in accordance with subsection 50(1) of the Legislation Act 2003.

Under subparagraph 122(1)(b)(i) of the Act, a method remains in force for the period specified in the method.

Section 5 – Definitions

Subsection 5(1) provides definitions for various terms used in the Determination – noting that the definitions in section 5 of the Act also apply where applicable.

Subsection 5(2) clarifies that where there is a reference to a period of years before the making of an application for the declaration of an eligible offsets project, if there has been an interim suspension of timber harvesting of the kind referred to in subsection 10(2) during that period, the reference is to the period of years prior to the end of the last financial year during which timber harvesting was not so suspended.

Part 2—Offsets projects to which the Determination applies

Paragraph 106(1)(a) of the Act provides that the Minister may make a determination (that is expressed to apply to a specific kind of offsets project. Part 2 of the Determination contains the description of the offsets projects to which it applies.

Section 6 – Instrument applies to projects to stop timber harvesting in public native forests

Section 6 specifies that the Determination applies to an offsets project that:

removes carbon dioxide from the atmosphere by sequestering additional carbon in trees and forest debris in public native forests and avoids the emission of greenhouse gases associated with post-harvest (slash) burns in those forests, as a result of a decision of the government of a State to stop harvesting in those forests; and
can reasonably be expected to result in eligible carbon abatement.

Limiting eligibility to projects involving stopping harvesting in public native forests plays an important function in mitigating integrity risks, particularly relating to additionality.

Projects involving the deferral of harvesting in public native forests were excluded from the scope of the Determination following consultation due to concerns about additionality and permanence.

Other forest management activities that can potentially generate abatement (e.g. reduced impact logging, weed and pest control, enrichment plantings and prescribed burning) are not eligible to generate credited abatement under the Determination. They can be undertaken in the project area, but any abatement generated as a result of the conduct of these activities is not counted towards the net abatement amount.

Section 7 – Stopping timber harvesting

Subsection 7(1) clarifies that projects to stop timber harvesting may relate to stopping timber harvesting across the whole of the project area or only in one or more parts of the project area.

Subsection 7(2) provides that an area in which timber harvesting is stopped for the purposes of an offsets project under the Determination, is referred to as a carbon protection area.

Subsection 7(3) prohibits the removal of a carbon protection area from, or a reduction in the size of a carbon protection area in, an eligible offsets project. This ensures the permanence of credited forest carbon stocks by preventing a proponent from being credited for the abatement associated with stopping harvesting in a carbon protection area, only to later recommence harvesting in the area. Subsection 7(3) also clarifies that additional carbon protection areas can be included in a project and existing carbon protection areas can be increased in size.

Subsection 7(4) clarifies that forest management activities may be undertaken in the public native forests in the project area, but that forest management activities must not result in the removal of wood from a carbon protection area. ‘Forest management’ is defined in section 5 as including prescribed burns and emergency back-burning or mechanical clearing for firebreaks to prevent the spread of a wildfire. This provision ensures harvesting can occur in parts of the project area that are not included in a carbon protection area, and that forest management activities such as weeding, pest control, roading and prescribed burning can occur anywhere in the project area, even in carbon protection areas. If trees are cleared in a carbon protection area, the wood cannot be removed from the area. The net emissions from clearing events must also be deducted when calculating the net abatement amount for the project.

Subsection 7(5) clarifies that, even if a carbon protection area covers only a part of the project area, the whole area remains the project area for the purposes of the Determination. This assists with the management of additionality, leakage and permanence risks by ensuring that the abatement calculations are based on harvesting levels across at least one whole forest region (subject to small exclusions in accordance with section 11) and that the permanence obligations apply across the whole project area.

Part 3—Project requirements

Division 3.1—General

Paragraph 106(1)(b) of the Act requires methods to set out the eligibility requirements that must be met for a project to be declared as an eligible offsets project. Under paragraph 27(4)(c) of the Act, the Regulator must not declare that a project is an eligible offsets project, unless it is satisfied the project meets the eligibility requirements specified in the method.

Section 35 of the Act states that regulations or legislative rules may empower the Regulator to revoke a project declaration if relevant eligibility requirements in subsection 27(4) have not been met. Section 32 of the Carbon Credits (Carbon Farming Initiative) Rule 2015 (the Rule) provides the Regulator with the power to unilaterally revoke a project declaration where it is satisfied the project does not meet the requirements in subsections 27(4)(a) to (c) and (l) of the Act. The power to revoke a project declaration is contingent on the Regulator having consulted with the project proponent in accordance with section 33 of the Rule.

Section 8 – Operation of this Part

Section 8 states that, in accordance with paragraph 106(1)(b) of the Act, Part 3 of the Determination sets out requirements that must be met for a project to be an eligible offsets project.

Division 3.2—Eligibility requirements

Section 9 – Designation of public native forests for commercial forestry use

Subsection 9(1) provides that eligible offsets projects must consist only of public native forests:

that are designated for commercial forestry use at the time the project is declared under the Act as an eligible offsets project; and
that were designated for commercial forestry use for at least 10 years before the application was made under the Act for that declaration.

There are three important parts to this eligibility requirement.

It requires the project area to consist exclusively of ‘public native forests’, being land that satisfies the definition of native forest that is on Crown land. This means that, in mapping the project area, all non-forest areas must be excluded.
It requires the project area to consist exclusively of public native forests that are designated for commercial forestry use at the date of the project declaration as an eligible offsets project. ‘Commercial forestry use’ is defined for these purposes as ‘the use of a public native forest for the purposes of obtaining wood for sale’ (s 5). Subsection 9(2) specifies that a public native forest is designated for commercial forestry use if it is available for commercial forestry use under the applicable law relating to the use of the forest. Subsection 9(3) clarifies that a public native forest is still considered designated for commercial forestry use if it is designated for multiple uses, provided that its uses include commercial forestry. Subsection 9(5) clarifies that a public native forest is available for commercial forestry use even though:
1. an authority is required to be issued by a government agency for the carrying out of a particular timber harvesting operation;
2. surveys, plans or other preliminary steps are required before timber harvesting can commence;
3. particular areas or trees are required to be excluded from timber harvesting because of the size of the trees, slope of the land, the trees provide or are likely to provide habitat for particular fauna or flora or for any other reason.
It requires the project area to consist exclusively of public native forests that were designated for commercial forestry use for at least 10 years prior to the date of the submission of the application for declaration as an eligible offsets project (under section 22 of the Act).

These eligibility requirements perform an important integrity function by limiting eligible land to public native forests that, in the absence of the declaration of the eligible offsets project, are likely to be harvested.

Subsection 9(4) specifies that a carbon protection area included in an eligible offsets project may, after the project becomes an eligible offsets project, be included in a national park or other conservation reserve in order to provide for the effective management of the area, to secure the objectives of the project or for other conservation purposes.

Section 10 – No previous law or decision to stop timber harvesting in carbon protection area

Subsection 10(1) provides that an area cannot be included as a proposed carbon protection area if, at any time between 1 January 2000 and the date the project is declared as an eligible offsets project:

a law of the Commonwealth or the relevant State stopped timber harvesting in the area (even if the law has since been repealed or amended to remove that prohibition); or
the government of the relevant State decided to stop timber harvesting in the area (even if the decision has since been changed to remove that prohibition or the decision was scheduled to take effect after the date the Determination commences).

The requirement in subsection 10(1) performs an important integrity function by excluding areas where, if they were able to be included in projects, the project activities that generate the credited abatement (stopping harvesting) are likely to have happened anyway because of an existing or previous regulatory requirements, or a previous decision of a government to stop harvesting in the project area.

A decision to stop timber harvesting is intended to refer to a decision which requires or authorises the stopping of timber harvesting in the area.

Subsection 10(2) provides that the eligibility requirement in subsection 10(1) does not apply if the stopping of timber harvesting in the relevant carbon protection area was an interim measure:

to enable an assessment of the suitability of all or any part of the area as a carbon protection area in an eligible offsets project or as a national park or other conservation reserve; or
taken on condition that an instrument is made that would allow the declaration of an eligible offsets project for stopping timber harvesting in the area.

This exemption is intended to ensure State governments can assess areas for inclusion in a carbon protection area and stop harvesting in the proposed carbon protection area while the assessment is being undertaken without jeopardising its eligibility.

Subsection 10(3) provides that paragraph 10(1)(b) does not apply to a decision of the government of a relevant State to stop timber harvesting in the area if it was made in connection with an application for the declaration of an eligible offsets project that includes the area as a proposed carbon protection area and on condition that the project be declared as an eligible offsets project. This ensures eligibility is not jeopardised by a decision to stop harvesting in an area made in connection with an application for declaration of eligible offsets project.

Subsection 10(4) provides that a law of the Commonwealth or of a State that requires an approval before timber harvesting is undertaken is not a law stopping timber harvesting for the purposes of section 10. This provision is intended to prevent laws like the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), and equivalent State environmental or planning laws, that may require a government approval to be obtained before harvesting is undertaken from being interpreted as a law that stops timber harvesting for the purposes of the eligibility requirement in subsection 10(1).

By virtue of subsection 10(5), the eligibility requirements in section 10 operate in lieu of the newness and regulatory additionality requirements in subparagraphs 27(4A)(a)(ii) and (b)(ii) of the Act.

Section 11 – Minimum size of project area

Subsection 11(1) specifies that the project area for an eligible offsets project must consist of all public native forests designated for commercial forestry use (as provided by section 9) in at least one whole forestry region.

A ‘forestry region’ is defined for these purposes as (s 5):

the area covered by a Regional Forest Agreement under the Regional Forest Agreements Act 2002 on 1 July 2024; or
in the case of public native forests that were not covered by any such Regional Forest Agreement on that date—an area of those forests that is not less than 1.5 million hectares and that was, as at 1 July 2024, a separate forestry management area designated by the government of the relevant State.

To accommodate instances where there are private proprietary interests in between public native forests, subsection 11(2) provides that the project area for an eligible offsets project can exclude public native forests designated for commercial forestry use in a forestry region if a person (other than the State in which the project area is located, or a government agency or authority of that State) holds an eligible interest (within the meaning of the Act) in that land, and the eligible interest was created prior to 30 June 2024. Such an excluded area is to be referred to as an ‘exclusion area’ henceforth.

A cut-off date of 30 June 2024 was chosen to align with the date of public announcement of the proposal of the Determination, such that proponents are not able to deliberately create proprietary interests, with the knowledge of the potential development of the Determination, to facilitate the exclusion of specific public native forests from a project area.

Subsection 11(3) then provides that the combined area of public native forests in a forestry region that are excluded from the project area under subsection 11(2) must not be more than 5 per cent of the public native forests designated for commercial forestry use in that forestry region.

The requirement for eligible offsets project areas to encompass 95% to 100% of at least one entire forestry region performs an important integrity function by reducing additionality and leakage risks. If project areas were allowed to be defined at a smaller scale, proponents could selectively identify those parts of the public native forest estate that are unlikely to be harvested and include them in a project, without necessarily reducing harvesting and thereby reducing net emissions. By requiring project areas to cover 95% to 100% of the public native forests in a whole forest region, the Determination increases confidence that, in the absence of the project, the forests in the region will be harvested in line with the baseline harvest levels for the duration of the crediting period, even if it is not possible to determine which particular forests would be harvested. Further, by requiring projects to cover 95% to 100% of the public native forests in a whole forest region, it reduces the scope for activity shifting (direct leakage) – any movement of harvesting within the region is likely to be captured within the boundaries of the project and, where this occurs, is required to be accounted for in the calculation of the net abatement amount. If harvesting or clearing occurs in an excluded area, a leakage discount is applied under section 40.

Subsection 11(4) specifies that the project area must not include any area:

that is prohibited by the Determination from being included in the project area; or
that is included in the project area for another eligible offsets project under the Determination.

Subsection 11(5) provides that a division of the overall project must not result in the creation of a part of the project area that does not comprise at least all the public native forests designated for commercial forestry use in one whole forestry region (other than an exclusion area under subsection 11(2)) or takes effect during a reporting period for the project as defined under the Act.

Section 12 – Minimum reduction in volume of wood extracted from project area

Section 12 provides that stopping of timber harvesting under an eligible offsets project must be likely to achieve, during each 12 months of the whole of the 15-year crediting period, a reduction in the volume of wood extracted from the project area that meets the hurdle requirement of subsection 43(1) for eligible carbon abatement.

The Note after section 12 clarifies that the hurdle requirement for a 12-month period is that the volume of wood extracted from the project area must be at least 20% less than the baseline scenario level for the same 12-month period.

Section 13 – Published sustainable yield for public native forests

Subsection 13(1) makes eligibility contingent on the existence of a sustainable yield for the public native forests in the project area that was published by the relevant State government agency over the period 1 July 2014 to 30 June 2024. This will be relevant in calculating baseline harvest levels under section 28.

A cut-off date of 30 June 2024 was chosen, as noted above, to align with the public announcement of the proposal of the Determination being in existence. This cut-off date would prevent proponents from prospectively preparing and publishing sustainable yields, with the intention of undermining the function that the historic sustainable yield is intended to perform in setting the baseline harvest level.

Subsection 13(2) requires that the published sustainable yield had provided a forward estimate for each financial year in the period of 15 years from the declaration of the project as an eligible offsets project.

If there is no published sustainable yield that meets these requirements for the relevant public native forests, the project is not eligible.

Subsection 13(3) provides that, if more than one relevant sustainable yield was published by the relevant State government agency over the period of 1 July 2014 to 30 June 2024, the most recent estimate is to be used for the purposes of the Determination (i.e. in setting the baseline harvest level).

Section 14 – Project area mapping

Subsection 14(1) requires the project proponent to prepare a geospatial map of the project area in a digital format, known as the ‘project map’.

Subsection 14(2) requires the project map to be provided to the Regulator as part of an application for declaration of an eligible offsets project under section 22 of the Act.

Subsection 14(3) states that the project map may be prepared as part of a geospatial map identifying the project area that is prescribed under section 13 of the Carbon Credits (Carbon Farming Initiative) Rule 2015 to accompany an application for the declaration of the project.

Subsection 14(4) specifies that the project map must identify the boundaries of the project area, carbon protection areas, any areas excluded from the project area in accordance with subsection 11(2) and the forestry region or regions that constitute the project area.

Subsection 14(5) specifies that the project map must identify:

the spatial distribution of each major vegetation group across the project area; and
the age class of the native forests in the project area by major vegetation groups (set out separately for carbon protection areas and other areas).

Subsection 14(6) provides that the project map may be revised (and the revised map provided to the Regulator) at any time before the declaration of the project as an eligible offsets project.

Subsection 14(7) requires that the project map must be revised (and the revised map provided to the Regulator) in three circumstances:

when an application is made for the variation of the project area under section 29 of the Act;
when any additional carbon protection area is included in the project or an existing carbon protection area is increased in size; and
when any correction is required to the information referred to in subsection (5).

Subsection 14(8) specifies that the project map must be prepared in accordance with the CFI Mapping Guidelines.

Section 15 – Approval of government of State

Section 15 provides that, if the project proponent is someone other than the State or the government of the State in which the relevant public native forests are located, the proponent must obtain the approval of that government for the inclusion of the public native forests in a project area. That approval must accompany the application for the declaration of the project as an eligible offsets project.

Section 16 – Permanence period for project of 100 years

An important integrity element of the Determination is the requirement for all projects to be 100-year permanence period projects. This assures the credited carbon stocks persist for at least 100 years. The 100-year permanence period, in combination with the 15-year crediting period, also provide further assurance of additionality (e.g. the 100-year permanence period avoids any potential resumption of harvesting, while the 15-year crediting period, as specified in section 22 of the Determination, ensures this future avoided harvesting is not credited).

Section 16 requires as an eligibility requirement of the Determination that projects have a permanence period of 100 years.

Section 17 – Information collection and reporting about private native forestry

Section 17 provides that there must be a mandatory requirement in the State in which the project area for an eligible offsets project is located, that information about the volume of logs produced from relevant private native forests in the State is collected and reported to the relevant responsible government agency. Such a mandatory requirement will enable the project proponent to calculate leakage.

Section 18 – Cancellation of Australian carbon credit units if timber harvesting increases

The integrity of projects may be undermined if the projects prompt an increase in harvesting in other native forests in the relevant State (leakage), or if harvesting is resumed after the crediting period ends. During the crediting period, the risk of leakage is addressed through the leakage deductions that are applied in the calculation of the net abatement amount. After the crediting period has ended, the risk of leakage into other native forests may remain (intertemporal leakage). To address this risk, a project proponent that is a State or the government of a State must request the Regulator to cancel issued Australian carbon credit units (ACCUs) if, after the end of the 15-year crediting period but before the end of the 100-year permanence period there is a ‘relevant increase in timber harvesting’.

Subsection 18(2) sets out that a ‘relevant increase in timber harvesting’ is:

timber harvesting, or clearing to facilitate timber harvesting, that occurs during any 2-year period of the relevant period in an exclusion area within the project area for the project; or
timber harvesting during any 2-year period of the relevant period that results in any of the following:
- the volume of wood extracted from the project area exceeding the harvest level in the baseline scenario for the project;
- the volume of wood extracted from the public native forests in the State in which the eligible offsets project is located (other than such forests in the project area for the project in question, or for any other eligible offsets project covered by the Determination and declared as eligible before the start of the relevant 2-year period)) exceeding the direct leakage baseline harvest level under section 39;
- the volume of wood extracted from private native forests in the State in which the project is located exceeding the private native forests leakage baseline harvest level under section 40.

Subsection 18(3) provides for how the exceedances mentioned in subsection (2) are to be worked out by referring to Equation 9 for subparagraphs (2)(b)(i) and (2)(b)(ii) and Equation 12 for subparagraph (2)(b)(iii).

Subsection 18(4) sets out how the number of ACCUs that must be requested to be cancelled is to be calculated (in tonnes CO2-e). This ensures that the number of ACCUs to be cancelled directly correlates to the kind of ‘relevant increase in timber harvesting’ as set out in subsection 18(2).

Subsection 18(5) provides further guidance on how exceedances and the number of ACCUs to be cancelled are to be calculated:

the references to ‘reporting period i’ in sections 38, 39 and 40 is to be treated as references to the applicable 2-year period; and
for the purposes of paragraph (3)(a) and subparagraph (2)(b)(i), the references in section 39 to the direct leakage baseline harvest level is to be treated as references to the harvest level in the baseline scenario, and the references to the relevant public native forests as references to the project area; and
other substitutions to the terms used in sections 38, 39 and 40 may be made as necessary.

Subsection 18(6) requires that the cancellation request be made under section 64B of the Australian National Registry of Emissions Units Act 2011 within 120 days of the occurrence of a relevant increase in timber harvesting for the purposes of paragraph (2)(a), or otherwise, the end of the 2-year period in which the relevant increase in timber harvesting occurred.

Subsection 18(7) provides that before making a cancellation request, the project proponent must ensure that it is the registered holder of the applicable number of ACCUs, and if not, the proponent must acquire them. This subsection clarifies that the proponent is responsible for acquiring the relevant number of ACCUs to ensure that there is sufficient ACCUs in the relevant Australian National Registry account.

Subsection 18(8) clarifies that section 18 does not apply if the Regulator has given the project proponent a notification to relinquish their ACCUs in accordance with subsection 90(2) of the Act, or if another project proponent for another eligible offsets project covered by the Determination has made a cancellation request under section 18.

Division 3.3—Management plan for project area

The Determination requires project proponents to prepare and maintain a management plan for the project area and to manage the public native forests in the project area in accordance with the management plan. The management plan can be amended over the course of the project, provided the amendments do not increase the volume of wood proposed to be extracted from the project area during each 12 months of the crediting period. To promote transparency, the current version of the management plan must be published on the proponent’s website at all times over the life of the project.

The management plan enables the Regulator to assess the project against the eligibility requirements and ensures transparency in key integrity measures, including the harvest level in the baseline scenario, the direct leakage baseline harvest level and the private native forests leakage baseline harvest level. It also mitigates integrity risks by ensuring the proponent adheres to the planned reduction in harvesting and preventing increases in harvesting after the project has commenced. Notably, failure to comply with the management plan provides a basis for the Regulator to unilaterally revoke a project’s declaration as an eligible offsets project under section 32 of the Carbon Credits (Carbon Farming Initiative) Rule 2015.

The obligations regarding the preparation, maintenance and implementation of management plans for eligible offsets projects are contained in sections 19, 20 and 21.

Section 19 – Preparation of management plan

Subsection 19(1) requires the project proponent to prepare a management plan for the project area.

Subsection 19(2) requires an application for the declaration of an eligible offsets project under the Determination to include a management plan.

Subsection 19(3) specifies that the management plan must include:

an estimate of the harvest level in the baseline scenario for the project area (in m3 of logs produced and hectares harvested) calculated in respect of each 12 months of the project’s crediting period by reference to calculations in Division 5.4;
estimates of the direct leakage baseline harvest level and the private native forests leakage baseline harvest level for the project (in m3 of logs produced) calculated in respect of each 12 months of the project’s crediting period by reference to the calculations in Division 5.7;
an estimate of the volume of wood to be extracted from the project area during each 12 months of the project’s crediting period (noting minimum volume requirement in section 12); and
information about how the carbon protection areas will be managed and the extent of the reduction in the volume of wood extracted from the project area as a result of the creation of those carbon protection areas.

Section 20 – Amendment and publication of management plan

Paragraph 20(1)(a) provides that the project proponent must update the management plan that had been prepared under section 19 if since the application for declaration of the project as an eligible offsets project was made, there has been or is likely to be changes to the values provided under the management plan.

Paragraph 20(1)(b) states that the project proponent may otherwise amend the management plan.

An update to or amendment of the plan is referred to as an ‘amendment’ of the plan (or amended plan) for the purposes of the rest of section 20.

Subsection 20(2) specifies that the project proponent must, within 30 days after any amendment of the management plan, notify the Regulator and give the amended plan to the Regulator.

Subsection 20(3) states that the management plan may be amended at any time before or after the declaration of the project as an eligible offsets project.

Subsection 20(4) requires that an amended management plan include the information required under Division 3.3, which includes the information detailed in subsection 19(3).

Subsection 20(5) prevents an amended management plan from increasing the volume of wood proposed to be extracted from the project area during each 12 months of the project’s crediting period. This means that the first management plan that is submitted sets a limit on the volume of wood that can be extracted from the project area. Any subsequent amendments to the management plan can only maintain this volume or further reduce it.

Subsection 20(6) provides that the initial version of the management plan (and the project map) given to the Regulator must be published on the proponent’s website within 30 days after the declaration of the project as an eligible offsets project. An amended plan (or amended project map) must be published on the proponent’s website within 30 days after it is given to the Regulator.

Section 21 – Compliance with management plan

Section 21 requires that the public native forests in the project area are managed in accordance with the management plan prepared under Division 3.3.

Making it an eligibility requirement for eligible offsets projects under the Determination that they comply with the management plan means the Regulator can unilaterally revoke a project declaration in the event of non-compliance with the plan. If a project declaration is unilaterally revoked, the Regulator can require the proponent to relinquish ACCUs under section 89 of the Act.

Part 4—Crediting period for projects

Section 22 – Crediting period for projects of 15 years

Subsection 69(2) of the Act provides that the crediting period of a sequestration project (or designated savanna project) can be either 25 years or another period specified in the applicable method.

Section 22 of the Determination specifies that the crediting period for eligible offsets projects under the Determination is 15 years.

Shortening the crediting period to 15 years is intended to mitigate the risk that, in the absence of the declaration of an eligible offsets project, there could have been future reductions in harvesting in the project area due to policy or other changes that are unrelated to the incentive provided by the ACCU scheme.

Part 5—Net abatement amount

Division 5.1—Preliminary

Section 23 – Operation of this Part

Section 23 provides that, for the purposes of subsection 106(1)(c) of the Act, Part 5 of the Determination specifies the method for calculating the carbon dioxide equivalent net abatement amount for eligible offsets projects in a reporting period.

Section 24 – Carbon pools and emission sources relevant to calculating net abatement amount

Section 24 contains the details of the carbon pools (‘the included carbon pools’), emissions sources and greenhouse gases that are relevant to calculating the net abatement amount. These are summarised in the table in subsection 23(1).

Subsection 24(2) excludes the following carbon pools and emissions sources in calculating the net abatement amount:

soil organic carbon;
CH4 and N2O emissions from wildfires or non-harvest related prescribed burns;
emissions from the combustion of fossil fuels (e.g. associated with harvesting, processing harvested logs or forest management).

The soil organic carbon pool is excluded because there is a high degree of uncertainty about the effects of harvesting, and stopping or reducing harvesting, on soil organic carbon stocks. In most cases, stopping or reducing harvesting in public native forests should increase soil organic carbon stocks. However, whether and the extent to which this occurs is uncertain. Due to this, the exclusion of the soil organic carbon pool promotes conservativism in the calculation of the net abatement amount.

The exclusion of CH4 and N2O emissions from wildfires and non-harvest related prescribed burns is based on the conservative assumption that the extent and severity of these fires are unaffected by harvesting. Due to this, it is conservatively assumed that, in the absence of the eligible offsets project (and the associated reduction in harvesting), the extent and severity of wildfires and non-harvest related prescribed burns would be the same as in the project scenario.

The exclusion of emissions from the combustion of fossil fuels is based on the assumption that they are likely to be the same in both scenarios or higher in the baseline than the project scenario (meaning their exclusion is conservative).

Section 25 – Summary of method for calculating net abatement amount

Section 25 summarises the method for calculating the net abatement amount.

Subsection 25(1) explains that the net abatement amount for a project for a reporting period is calculated in accordance with Equation 1 as the difference between the carbon stock change in the project scenario and the carbon stock change in the baseline scenario, plus the emissions from post-harvest (slash) burns in the baseline scenario, minus the leakage deduction, plus the aggregate negative abatement amount under subsection 42(3) of the Determination, for all projects covered by the Determination and carried out in the same State.

Subsection 25(2) summarises the main steps involved in calculating the net abatement amount.

Division 5.2— Calculation of net abatement amount

Section 26 – Equation for calculating net abatement amount

Subsection 26(1) contains Equation 1, being the equation for the calculation of the net abatement amount.

Subsection 26(2) provides that the project proponent must model the relevant baseline and project scenarios in accordance with Part 5.

Subsection 26(3) states that the calculation of the net abatement amount is subject to the hurdle requirement in section 43.

Division 5.3— Representative model plots and baseline estate model

Section 27 – Development of representative FullCAM model plots and baseline forest estate model

Section 27 details the representative FullCAM model plots and baseline estate models that the project proponents must develop.

Project proponents must develop:

representative FullCAM model plots based on timber harvesting in the 5-year period prior to the end of the financial year prior to the making of the application for the declaration of the project as an eligible offsets project (‘prior period’) (the representative harvest plots required under section 28(1));
representative FullCAM model plots that simulate the clearing of forests that was undertaken to facilitate timber harvesting (e.g. for roading, logging trails and log landings) in the project area in the prior period (the representative clearing plots required under section 28(3)); and
a prior period FullCAM forest estate model that provides estimates of the total net harvested area (in hectares) in, and logs produced (in cubic metres (m3) of logs produced) from, the project area that are within ±5% of the actual values for the prior period.

This is Step 1 in the summary of the method for calculating the net abatement amount (as detailed in section 25 of the Determination).

There are two initial points to note concerning the operation of this step in the method.

The delineation of the prior period is affected by subsection 5(2) of the Determination. The effect of subsection 5(2) is that it requires the winding back of the end year of the prior period in cases where, during the 5-years prior to the application for declaration as an eligible offsets project, an interim measure was in place to stop harvesting in the project’s carbon protection areas, as defined under subsection 10(2). Where this applies, the prior period runs to the end of the last financial year before timber harvesting was suspended under the interim measure.
The net harvest area is defined for these purposes as the area subject to actual harvesting over the relevant period (other than an area cleared to facilitate timber harvesting) (see s 5). The net harvested area excludes any area covered by the crowns of canopy trees that remain after the relevant harvesting events. For example, if trees are removed from 30% of a 10 hectare forest coupe in a harvest event, the net harvest area is 3 hectares.

The representative harvest plots must reflect the forest types (at the major vegetation group level) in which harvesting occurred and the harvesting practices used to harvest wood from each of the forest types over the prior 5-year period. There must be one representative plot for each forest type and harvest practice combination.

One representative clearing plot must be developed for each forest region in the project area. The representative clearing plot developed for a forest region must reflect the average carbon density of the forests that were cleared in the region to facilitate harvesting over the prior period.

The representative harvest plots, representative clearing plots and prior period FullCAM forest estate model are used for four purposes.

The prior period FullCAM forest estate model is used to convert the volume of wood harvested in the baseline scenario (in m3) into the net harvested area in the baseline scenario.
The plots and model are used to develop the baseline FullCAM forest estate model and project FullCAM forest estate model.
The plots and model are used to calculate the direct leakage deduction.
The plots and model are used to calculate the private native forests leakage deduction.

The approach to the development of the representative FullCAM model plots and prior period FullCAM forest estate model is intended to reduce the scope for gaming by promoting transparency and verifiability.

The requirements governing the development of the representative FullCAM model plots and prior period FullCAM forest estate model are set out in subsections 27(1)-(6).

Subsection 27(1) requires the project proponent to develop representative FullCAM model plots that simulate harvesting in public native forests in the project area based on the forest types and harvest practices from the prior period (5-years prior to the end of the last financial year prior to the making of the application for the declaration of the project as an eligible offsets project).

Subsection 27(2) specifies requirements that the representative harvest plots under subsection (1) must satisfy. Key aspects of these requirements include the following.

The plots must simulate the establishment, harvesting, re-establishment, re-harvesting and then re-planting of 1 hectare of the public native forests. The re-harvest events are intended to reflect the harvesting that occurred during the prior period, while the re-planting event is intended to reflect the subsequent re-establishment of the forest after the harvesting event. The modelled events prior to the re-harvest are necessary to ensure the debris pool is representative of the dead biomass that is likely to have been on site at the time of the harvest events in the prior period (i.e. they perform a calibration function).
The forest types (at the major vegetation group level) in which harvesting occurred in the prior period must be reflected through the number assigned to the maximum live above-ground biomass (represented by the parameter M in FullCAM) in the plots. Each forest type must be assigned one estimate of M only, calculated as the average from the area covered by each forest type in the project area.
The harvest practices from the prior period must be reflected through modelled re-harvesting events. The modelled re-harvest events must:
- assume the re-harvest event affects 100% of the forest;
- have the proportion of stem biomass assigned to wood products that is prescribed, for the relevant harvest type and the State in which the eligible offsets project is located, in the INFM Modelling Guidelines; and
- only include a post-harvest (slash) burn where they are listed as being undertaken, for the relevant harvest type and the State in which the eligible offsets project is located, in the INFM Modelling Guidelines.
The representative plots must assume average climate conditions throughout the simulation period. This is achieved by modelling the events using a future date. The intent here is that the simulation start date will be chosen so the modelled re-harvest event in the simulation occurs on the same day and month as the day after the date of the declaration of the project as an eligible offsets project (for the first reporting period) or the day after the start of the reporting period (for subsequent reporting periods), only in a future year that corresponds to the same point in the leap year cycle in the Gregorian calendar. The use of a future date will result in the FPIi/FPIave in FullCAM being 1 so the simulation will assume average climate.
The representative plots must be able to support the development of a prior period forest estate model that meets the accuracy requirements in subsection (6) (see below).

Subsection 27(3) requires the project proponent to develop representative FullCAM model plots that simulate clearing in the project area in the prior period that was undertaken to facilitate timber harvesting of public native forests (e.g. for roads, logging trails and log landings).

Subsection 27(4) specifies requirements that the representative clearing plots under subsection (3) must satisfy. Key aspects of these requirements include the following.

Each representative clearing plot must simulate the establishment, harvesting, re-establishment and then clearing of 1 hectare of the public native forests. The clearing event in the sequence is intended to reflect the clearing that occurred during the prior period. The modelled establishment, harvesting, re-establishment events are intended to ensure the debris pool is representative of the dead biomass that is likely to have been on site at the time of the clearing events in the prior period (i.e. they perform a calibration function).
One representative plot must be developed for each forestry region in the project area.
The representative plot for a forestry region must reflect the average carbon density of the public native forests that were cleared in the region to facilitate harvesting in the prior period. This is achieved as follows.
1. The number assigned to the maximum live above-ground biomass (represented by the parameter M in FullCAM) in the plot must be the average across the relevant forest types that were affected by the clearing in the prior period.
2. The clearing must be assumed to occur when the live above-ground biomass in the plot reaches 75% of its maximum, after the modelled re-establishment event.

The representative plots must also reflect the specified assumptions under paragraph (4)(d) and assume the average climate conditions throughout the simulation period (the same as the representative harvest plots) (paragraph (4)(e)). The representative plots must be developed in accordance with the INFM Modelling Guidelines (paragraph (4)(f)).

Subsection 27(5) requires the proponent to develop the prior period FullCAM forest estate model in accordance with the INFM Modelling Guidelines using only the representative FullCAM model plots. The prior period FullCAM forest estate model must be designed to estimate the changes in forest carbon stocks, and emissions of CH4 and N2O from post-harvest (slash) burns, from the timber harvesting (including activities undertaken to facilitate timber harvesting, such as clearing) that occurred in the project area in the prior period.

Subsection 27(6) contains the accuracy requirements for the prior period forest estate model. These require prior period forest estate model’s estimates of the total net harvested area (in hectares) in, and logs produced (in m3) from, the project area for the prior period must be within ±5% of the actual values for that period. This calibration step ensures the model is sufficiently accurate for its designated uses under the Determination.

Division 5.4—Baseline harvest levels

Division 5.4 requires the proponent to:

calculate the baseline harvest level in cubic metres (m3) of wood harvested and then to convert this into the net area subject to harvesting in the baseline scenario (baseline net harvest area); and
calculate the area cleared to facilitate harvesting in the baseline scenario.

This is Step 2 in the summary of the method for calculating the net abatement amount (in section 25).

The baseline harvest level, baseline net harvest area and the area cleared to facilitate harvesting in the baseline scenario are used to model carbon stock changes and emissions in the baseline scenario. They are intended to reflect a conservative estimate of the harvest related activities in the project area in the absence of the declaration of an eligible offsets project under the Determination.

Section 28 – Calculating baseline harvest levels, in volume of wood harvested

Subsection 28(1) specifies that the harvest level in the baseline scenario (in m3 of logs produced) in a reporting period is the latest modified sustainable yield for the period. It then establishes a tiered process for determining the modified sustainable yield.

If there is a sufficient correlation for the project between the sustainable yield and log production during the baseline period (R2≥0.7)—the modified sustainable yield is the unmodified sustainable yield that applies to the reporting period, calculated in accordance with subsection (4), multiplied by:
1. if the average log production to sustainable yield ratio over the baseline period is equal to or less than 0.9—that ratio; or
2. if the average log production to sustainable yield ratio over the baseline period is greater than 0.9—0.9.
If there is not a sufficient correlation for the project between the sustainable yield and log production during the baseline period (R2<0.7)—the modified sustainable yield is either:

if the average log production to sustainable yield ratio over the baseline period was equal to or greater than 0.8—the unmodified sustainable yield that applies to the reporting period, calculated in accordance with subsection (5), multiplied by 0.8; or
if the average log production to sustainable yield ratio over the baseline period was less than 0.8—the unmodified sustainable yield that applies to the reporting period, calculated in accordance with subsection (5), multiplied by the lower of the average log production to sustainable yield ratio over the baseline period and 0.6.

The baseline period is defined in subsection 28(3) (see below).

Subsection 28(2) contains the requirements governing the calculation of the unmodified sustainable yield. The following are specified.

Where the project area is covered by a regional forest agreement (RFA) under the Regional Forest Agreements Act 2002, the unmodified sustainable yield must be calculated in accordance with the method used to estimate the sustainable yield for the purposes of the most recent five-year sustainable yield review under the agreement.
Where the project area is not covered by a RFA, the unmodified sustainable yield must be calculated in accordance with a method that is consistent with the method used to calculate the sustainable yield in an area covered by a current RFA (and the method used for the area covered by a current regional forest agreement must be that used for the area in the most recent five-year sustainable yield review under the applicable regional forest agreement).
The unmodified sustainable yield must:
1. include sawlogs (high and low quality), pulplogs, veneer logs (including peelers), poles, piles and girders (where they are, or would otherwise be, produced from the forests in the project area); and
2. exclude residues (e.g. firewood).

This requirement is included to ensure consistency and comparability in the wood volumes that are used for these purposes and to prevent the over-estimation of the baseline harvest level. Notably, all wood extracted from relevant forests, including residues, must be included when calculating the direct leakage deduction and the private native forests leakage deduction. This is to prevent gaming, whereby a proponent may be tempted to falsely label sawlogs and other commercial logs as residues.

The area available for harvest that is used to calculate the unmodified sustainable yield must:
1. subject to subparagraph (ii), account for laws of the Commonwealth or the relevant State, including restrictions imposed under those laws, that affect the ability to harvest timber in the project area that were in force when the project was declared to be an eligible offsets project (even if the relevant laws or restrictions imposed under the laws are subsequently repealed or amended);
2. account for the impact of any EPBC Act forestry-related decision (made after the project was declared to be an eligible offsets project) that affects the ability to harvest timber or undertake other related operations in the project area.;
3. account for operational factors that affect the ability to harvest timber in specific parts of the project area, including the slope and accessibility of the land;
4. ignore actions taken by the proponent or the relevant State after the declaration of the project as an eligible offsets project to stop timber harvesting in the project area; and
5. ignore the impacts of the Act that affect the ability to harvest timber in the project area.

The intent of these requirements is that the unmodified sustainable yield should be prepared as if the laws that affect harvesting in the forestry region were frozen as at the date the project was declared as an eligible offsets project, except any EPBC Act forestry-related decision that is made after declaration as an eligible offsets project. This means that, if an EPBC Act forestry-related decision is made during the crediting period, the unmodified sustainable yield (and modified sustainable yield) will need to be changed to reflect any harvesting conditions imposed in the decision, to account for any ceasing of timber harvesting required under the EPBC Act. It is important for baseline harvest levels to appropriately account for any restrictions imposed under the EPBC Act, or that would have been imposed in the absence of the eligible offsets project under this Determination. This helps ensure the additionality of credited abatement and clarifies that a project proponent cannot avoid their obligations under the EPBC Act by simply ceasing timber harvesting in the project area. Where the method that is used to calculate the unmodified sustainable yield provides for an allowance to be applied to account for uncertainty, the allowance must not increase the sustainable yield by more than 10%. This prevents the baseline harvest level from being inflated via increasing the uncertainty allowance.

The unmodified sustainable yield must constitute a conservative estimate (based on continued use of the forests for commercial forestry purposes) of the long-term wood yield from the forests in the project area that could be maintained in perpetuity under the forest management strategies and sustainable use objectives that applied immediately prior to the declaration of the project as an eligible offsets project, adjusted where relevant to reflect the impacts of any EPBC Act forestry-related decision made after the declaration of the project that affects the ability to harvest timber or undertake other related operations in the project area. For this purpose, conservative means the estimate is more likely to under-estimate than over-estimate the applicable long-term wood yield, accounting for the application of any uncertainty allowance (as clarified by subsection 28(3)).
If the unmodified sustainable yield that is calculated in accordance with the above steps is higher than the sustainable yield published by the relevant government agency in the State (as referred to in section 13) for the reporting period, the sustainable yield referred to in section 13 is the unmodified sustainable yield.
If the sustainable yield published by the relevant government agency in the State (as referred to in section 13) for a reporting period does not cover all the relevant log types referred to in paragraph (c), the published sustainable yield must be converted into a sustainable yield that covers all the relevant log types by multiplying the sustainable yield by the average ratio between the log types (in m3 of logs produced) included in the sustainable yield and the log types excluded from the sustainable yield so published over the baseline period.

Subsection 28(4) defines the baseline period that is used to calculate the modified sustainable yield as:

The 10-year period prior to the end of the last financial year before the making of the application for the declaration of the project as an eligible offsets project; but
if, during that 10-year period, more than 25% of the net harvestable area in the project area is affected by wildfire in a particular financial year, that financial year and the 2 subsequent financial years may be excluded from the baseline period.

The interpretation of subsection 28(4) is affected by subsection 5(2) of the Determination. The effect of subsection 5(2) is that it requires the winding back of the end year of the baseline period in cases were, during the 5-years prior to the application for a section 27 declaration, an interim measure was in place to stop harvesting in the project’s carbon protection areas, as defined under subsection 10(2). Where this applies, the baseline period runs to the end of the last financial year before timber harvesting was suspended under the interim measure.

The integrity of the Determination depends on ensuring the projection of harvesting in the baseline scenario is conservative, in the sense of being more likely to underestimate than overestimate the level of harvesting in the project area in the absence of the project. The Determination achieves this by deeming that the unmodified sustainable yield for a reporting period is the lower of (s 28(5)):

the most recent unmodified sustainable yield for the reporting period calculated in accordance with subsection (2);
any previous unmodified sustainable yield for the reporting period calculated in accordance with subsection (2);
the sustainable yield published by the relevant government agency in the State (as referred to in section 13) for the reporting period.

Subsection 28(6) specifies that the modified and unmodified sustainable yield must be calculated:

prior to the end of the first reporting period (the initial modified sustainable yield); and
within the 6-month period commencing on the 5th and 10th anniversary of the declaration of the project as an eligible offsets project (the revised modified sustainable yield); and
within 6 months of a major disturbance event (the revised modified sustainable yield); and
within 6 months of the making of an EPBC Act forestry-related decision that affects the ability to harvest timber or undertake other related operations in the project area (the revised modified sustainable yield).

Subsection 28(7) provides that the initial and revised modified sustainable yields and associated unmodified sustainable yields must be verified by an independent qualified assessor.

An ‘independent qualified assessor’ is defined under section 5 as the following:

independent qualified assessor: a person is an independent qualified assessor if the Regulator is satisfied of all of the following at the time of the person’s proposed or actual performance of an action mentioned in this instrument:

the person is not employed by the project proponent or, if the project proponent is an authority of a State, by that State (disregarding any employment that relates to performing the action, or to performing a similar action under this instrument or another methodology determination);
the person has the requisite expertise and experience to perform the action;
the person was not significantly involved in applying for the declaration of the project as an eligible offsets project, conducting the project, or developing this instrument.

This requirement sets out that the qualified assessor must be sufficiently independent from the project proponent. The qualified assessor may not be a current employee of the project proponent or, if the proponent is a state authority, the relevant state government. However, any employment relating to undertaking such an assessment under the Determination, or another method is not captured by this provision. This ensures that otherwise eligible independent qualified assessors are not excluded due to undertaking this role for a proponent on previous occasions. The independent qualified assessor must also have the requisite expertise and experience to perform the verification required under this section. Finally, the independent qualified assessor must not have been significantly involved in the application process for the declaration of the project as an eligible offsets project under section 22 of the Act, or have been involved in conducting of the project, or developing this Determination. The Regulator must be satisfied that all three requirements are met. This provision ensures that calculations under this Determination are independently verified without any conflicts of interest with the project proponent, and that the integrity of the Scheme is upheld.

Section 29 – Calculating baseline harvest levels, in net harvested area

Section 29 provides that the baseline harvest levels in net harvested area can be calculated by dividing the estimate of logs produced (in m3) by the area-weighted average log yield (in m3 per hectare) from the prior period forest estate model.

The area-weighted average log yield is the average of the representative FullCAM model plots developed under section 27, with the yield from each plot weighted in proportion to the area modelled as harvested using each plot in the prior period.

Section 30 – Calculating area cleared to facilitate harvesting in baseline scenario

Section 30 provides that the area cleared to facilitate timber harvesting in the baseline scenario (in hectares) for the reporting period is to be calculated by:

dividing the area cleared to facilitate timber harvesting in the project area in the prior period by the logs produced in the project area in the prior period (this provides a ‘clearing to logs ratio’); and
multiplying the clearing to logs ratio from paragraph (a) by the harvest level in the baseline scenario for the reporting period, as calculated under section 28.

Division 5.5— Carbon stock change

Division 5.5 specifies how the carbon stock changes in the forest carbon pools (live above and below ground biomass and debris), and CH4 and N2O emissions associated with post-harvest (slash) burns, in the project and baseline scenarios must be calculated. This must be done using FullCAM and following the requirements in the INFM Modelling Guidelines.

This is Step 3 in the summary of the method for calculating the net abatement amount (in section 25).

The modelling must be undertaken using the representative harvest plots and representative clearing plots developed under Division 5.3, supplemented with additional model plots as necessary to reflect forest clearing events that are not directly related to timber harvesting. Generally, the same representative model plots are required to be used in the baseline and project scenarios, with harvest events (including post-harvest (slash) burns) and clearing events undertaken to facilitate forest harvesting (e.g. for roading, logging trails and log landings) included (baseline scenario) are excluded (project scenario) as relevant to reflect the nature of the project activities. The main exception to this relates to forest clearing events that are not directly related to timber harvesting, which are modelled in the project scenario but excluded from the baseline scenario.

Section 31 – Calculating carbon stock change in included carbon pools

Section 31 contains Equation 2, which is used to calculate the carbon stock change in the included carbon pools over the reporting period in both the project and baseline scenarios. The carbon stock change in the included carbon pools in the project and baseline scenarios are used in Equation 1 (section 26) to calculate the net abatement amount.

Section 32 – Calculating included carbon stocks

Section 32 contains Equation 3, which is used to calculate the carbon stock in included carbon pools at the end of the reporting period (for the purposes of Equation 2). As detailed in Equation 3, the included carbon pools for these purposes are:

the forest carbon pools (live trees and forest debris) at the end of the reporting period;
harvested wood products from the project area that are in service at the end of the reporting period; and
harvested wood products from the project area that are in landfills at the end of the reporting period.

Section 33 – Estimation of carbon mass of trees and forest debris

Section 33 specifies how the carbon mass of trees and forest debris (‘forest carbon stocks’) is to be estimated.

Subsection 33(1) requires that the forest carbon stocks at the end of the reporting period in the project and baseline scenarios (for the purposes of Equation 3) is to be determined using FullCAM in accordance with the INFM Modelling Guidelines.

Subsection 33(2) specifies how the forest carbon stocks must be estimated in the baseline scenario for the first reporting period, using the following 7-step method:

Step 1 (paragraph 33(2)(a))

Calculate the proportion of the total net harvested area for the prior period allocated to each of the representative harvest plots from subsection 27(1) in the prior period FullCAM forest estate model.

Step 2 (paragraph 33(2)(b))

Calculate the net harvested area in the baseline scenario (in hectares) in the reporting period by dividing the net harvested area in the baseline scenario for each financial year covered by the reporting period by 12 (to derive an average baseline harvested area for each month) and summing the average baseline harvested area for each month in the reporting period.

Step 3 (paragraph 33(2)(c))

Calculate the modelled baseline harvest area by subtracting the net harvested area in the reporting period (in hectares) from the net harvested area in the baseline scenario (in hectares) over the reporting period from paragraph 33(2)(b). This means the only harvest events that are modelled are those that are avoided in the project scenario, based on the assumption that the other harvesting that occurs in the project scenario would have occurred in the baseline scenario (i.e. there is no relevant change in carbon stocks between the two scenarios).

Step 4 (paragraph 33(2)(d))

Allocate the modelled baseline harvest area (from paragraph 33(2)(c)) to the representative harvest plots from subsection 27(1) by multiplying the proportion from paragraph 33(2)(a) for each plot by the total modelled baseline harvest area for the reporting period. The use of this approach assumes the harvesting that occurred in the prior period is representative of what would have occurred in the absence of the eligible offsets project.

Step 5 (paragraph 33(2)(e))

Establish the basis for modelling the clearing to facilitate timber harvesting in the baseline scenario by calculating the modelled baseline cleared area for the reporting period and allocating the area to the representative clearing plots from subsection 27(3). This is done in two stages.

Calculate the modelled baseline cleared area for the reporting period by:
- multiplying the logs harvested in the project area in the reporting period (in cubic metres, m3) by the clearing to logs ratio (from paragraph 30(a)); and
- subtracting the result from sub-subparagraph 33(2)(e)(i)(A) from the area cleared to facilitate timber harvesting in the baseline scenario (in hectares) from section 30.
Allocate the modelled baseline cleared area to the representative clearing plots from subsection 27(3) in proportion to the volume of wood harvested in the baseline scenario in each forestry region in the project area.

Step 6 (paragraph 33(2)(f))

Develop a baseline forest estate model that meets the following specifications:

Harvesting in the project area must be simulated using the representative FullCAM model plots developed under subsection 27(1) and the allocated modelled baseline harvested area from paragraph 33(2)(d) (Step 4) (with the re-harvesting events scheduled to occur on the day after the date of the declaration of the project as an eligible offsets project).
Clearing to facilitate timber harvesting must be simulated using the representative FullCAM model plots developed under subsection 27(3) and the allocated modelled baseline cleared area from subparagraph 33(2)(e)(ii) (Step 5) (with the clearing events referred to in subparagraph 27(4)(d)(iv) scheduled to occur on the day after the date of the declaration of the project as an eligible offsets project).

Step 7 (paragraph 33(2)(g))

Estimate the forest carbon stocks at the end of the reporting period using the baseline forest estate model determined at Step 6 above under paragraph 33(2)(f).

Subsection 33(3) specifies certain procedures for how the forest carbon stocks must be estimated in the baseline scenario for subsequent reporting periods.

Subsection 33(4) specifies how the forest carbon stocks must be estimated in the project scenario for the first reporting period using the following 9-step method:

Step 1 (paragraph 33(4)(a))

The modelled avoided harvest area (in hectares) for the reporting period must be calculated in accordance with the procedures in paragraphs 33(2)(b) and (c).

Step 2 (paragraph 33(4)(b))

Allocate the modelled avoided harvest area (in hectares) in Step 1 above (paragraph 33(4)(a)) to the representative FullCAM model plots from subsection 27(1) by multiplying the proportion from paragraph 33(2)(a) for each plot by the total modelled avoided harvest area for the reporting period.

Step 3 (paragraph 33(4)(c))

Remove the re-harvesting events referred to in subparagraph 27(2)(b)(iv) and the re-planting events referred to in subparagraph 27(2)(b)(v) from the representative FullCAM model plots, developed under subsection 27(1).

Step 4 (paragraph 33(4)(d))

The modelled avoided cleared area to facilitate timber harvesting (in hectares) for the reporting period must be the same as in subparagraph 33(2)(e)(i).

Step 5 (paragraph 33(4)(e))

Allocate the modelled avoided cleared area from paragraph 33(4)(d) to the representative FullCAM model plots developed under subsection 27(3), to simulate clearing in proportion to the volume of wood harvested in the baseline scenario in each forestry region in the project area.

Step 6 (paragraph 33(4)(f))

Remove the clearing events referred to in subparagraph 27(4)(d)(iv) from the representative FullCAM model plots developed under subsection 27(3).

Step 7 (paragraph 33(4)(g))

Establish the basis for modelling clearing of public native forest in the project area over the reporting period (this does not include clearing for timber harvesting or to facilitate timber harvesting) by:

Estimating and spatially identifying the relevant cleared area in accordance with the CFI Mapping Guidelines; and
developing a representative FullCAM model plot of the area cleared in accordance with the requirements in subparagraph 33(4)(g)(ii);

Step 8 (paragraph 33(4)(h))

Develop a project forest estate model that meets the following specifications.

Avoided timber harvesting events must be modelled using the modified representative model plots from paragraph 33(4)(c) (Step 3) and the allocated modelled avoided harvest area from paragraph 33(4)(b) (Step 2) (with the initial forest establishment events referred to in subparagraph 27(2)(b)(i) scheduled to occur on the same day as they are in the corresponding plots in the baseline forest estate model).
Avoided clearing (to facilitate timber harvesting) events must be modelled using the modified representative FullCAM model plots from paragraph 33(4)(f) (Step 6) and the allocated modelled avoided cleared area from paragraph 33(4)(e) (Step 5) (with the initial forest establishment events referred to in subparagraph 27(2)(b)(i) scheduled to occur on the same day as they are in the corresponding plots in the baseline forest estate model).
Clearing events (other than to facilitate timber harvesting) must be modelled using the estimated cleared area from subparagraph 33(4)(g)(i) and the representative cleared area model plot from subparagraph (g)(ii) (Step 7) (with the clearing events scheduled to occur the day after the date of the declaration of the project as an eligible offsets project).

Step 9 (paragraph 33(4)(i))

Estimate the forest carbon stocks at the end of the reporting period using the project forest estate model.

Subsection 33(5) sets out specific procedures for how the forest carbon stocks (carbon mass of trees and forest debris) must be estimated in the project scenario for subsequent reporting periods.

Section 34 – Estimation of carbon stocks in harvested wood products in service

Subsection 34(1) requires the harvested wood products (HWP) carbon pool (carbon mass of HWP) for products in service to be modelled in the baseline and project scenarios using FullCAM (for the purposes of Equation 3). Subsection 34(4) requires the modelling for these purposes to be carried out in accordance with the INFM Modelling Guidelines.

Section 34(2) provides that, in the baseline scenario, the volume of wood modelled as harvested in a reporting period must be within ±1% of the baseline harvest levels (in m3 of logs produced) for the reporting period, calculated by:

dividing the baseline harvest level for each financial year covered by the reporting period by 12 (to derive a monthly baseline harvest level); and
summing the baseline harvest level for each month in the reporting period

Section 34(3) provides that, in the project scenario, the volume of wood modelled as harvested in a reporting period must be within ±1% of the actual logs harvested over the reporting period, excluding pulplogs and residue logs (e.g. firewood). The exclusion of pulplogs from the modelled HWP in service is the equivalent of assuming all pulplogs are instantly oxidised in the project scenario. This is a deliberate measure to increase the conservatism of the abatement estimates.

Section 35 – Estimation of carbon stocks in harvested wood products in landfill

Subsection 35(1) requires the carbon mass of harvested wood products from the project area that are in landfills at the end of the reporting period in the baseline and project scenarios to be calculated using the IPCC first order decay model and the model parameters in the table set out.

Subsection 35(2) requires the modelling for these purposes to be carried out in accordance with the INFM Modelling Guidelines. The modelling of HWP in landfills, irrespective of whether they are in Australia or elsewhere, increases the conservatism of the abatement estimates (i.e. because the inclusion of the carbon stocks in HWP in landfills acts as a discount on credited abatement). CH4 emissions from the anaerobic decomposition of harvested wood products from the project area in landfill were excluded from the abatement calculations to further increase conservatism.

Division 5.6—Emissions from included sources

Division 5.6 details how emissions of CH4 and N2O from post-harvest (slash) burns in the baseline scenario must be calculated.

Other emission sources are excluded on the basis they are likely to be the same or lower in the project scenario relative to the levels that would have occurred if the eligible offsets project had not been declared (baseline scenario).

Section 36 – Calculating emissions from post-harvest (slash) burns in the baseline scenario

Subsection 36(1) contains Equation 4, which is used to calculate CH4 and N2O emissions (in tonnes CO2-e) from post-harvest (slash) burns in the reporting period in the baseline scenario (for the purposes of Equation 1).

Subsection 36(2) contains Equation 5, which is used to calculate CH4 emissions (in tonnes CO2-e) from post-harvest (slash) burns (for the purposes of Equation 4).

Subsection 36(3) contains Equation 6, which is used to calculate N2O emissions (in tonnes CO2-e) from post-harvest (slash) burns (for the purposes of Equation 4).

Subsection 36(4) requires emissions of CH4 and N2O from post-harvest (slash) burns to be determined using FullCAM in accordance with the INFM Modelling Guidelines and the modelling procedures in section 33.

Division 5.7—Leakage deductions

Division 5.7 specifies how the leakage deduction must be calculated for the purposes of Equation 1 when determining the net abatement amount for a reporting period.

The leakage deduction is comprised of four components:

the exclusion area leakage deduction;
the direct leakage deduction;
the private native forests leakage deduction; and
the indirect leakage deduction.

The deemed attribution of exceedances to the eligible offsets project is deliberately conservative and provides an incentive for proponents to constrain harvesting and clearing in exclusion areas and forestry areas in the state that are outside of the project area.

If there are two or more eligible offsets projects in a state, any exceedances above the direct leakage baseline harvest level and private native forests leakage baseline harvest level are allocated between the projects based on the log production from the public native forests in the project areas over the 10-year period before the end of the last financial year before the application was made for the declaration of the first eligible offsets project in the State (adjusted in accordance with subsection 5(2) to account for periods affected by interim measures to stop harvesting in the project’s carbon protection areas). This amount is adjusted if a new eligible offsets project is declared in the State during a project’s reporting period.

The leakage deduction complements the other mechanisms in the Determination to address leakage risks, including the:

requirement for project areas to comprise 95-100% of the public native forests designated for commercial forestry use in at least one whole forestry region (which reduces the scope for direct leakage through activity shifting);
hurdle requirement (which mitigates the risk of leakage through cross-subsidisation by ensuring there is a structural shift in the native forest industry in the relevant region); and
mandatory 100-year permanence period and additional permanence provisions in section 17, which mitigates the risk of activity shifting after the crediting period.

Section 37 – Leakage deduction for reporting period (LDi)

Section 37 contains Equation 7, which is used to calculate the leakage deduction (LDi) in the reporting period (for the purposes of Equation 1). The leakage deduction is calculated for these purposes as the sum of the exclusion area leakage deduction, direct leakage deduction, private native forests leakage deduction and indirect leakage deduction.

Section 38 – Exclusion area leakage deduction (EALDi)

The exclusion area leakage deduction must be applied if timber harvesting or clearing occurs in an exclusion area (excluded in accordance with subsection 11(2)) in the reporting period. If there is harvesting or clearing in an exclusion area, it is deemed to be attributable to the eligible offsets project and credited abatement is reduced accordingly. This is intended to address the risk of direct leakage through activity shifting.

Subsection 38(1) specifies that section 38 applies to each exclusion area in relation to the project area for a project for a reporting period (see ‘exclusion area’ under subsection 11(2)).

Subsection 38(2) specifies that an exclusion area leakage deduction applies if timber harvesting or clearing occurs in any part of an exclusion area in the relevant reporting period.

Subsection 38(3) provides that, where applicable, the exclusion area leakage deduction must be calculated in accordance with Equation 8. Equation 8 requires the deduction to be calculated as the carbon stocks in forest carbon pools (live trees and forest debris) in a 1-hectare modelled plot at the end of a 100-year simulation undertaken in accordance with subsection 38(5), multiplied by the area harvested or cleared during the period, multiplied by 10. The application of the 10x multiplier serves to disincentivise harvesting or clearing in exclusion areas.

Subsection 38(4) requires timber harvesting or clearing in exclusion areas to be estimated and spatially identified in accordance with the CFI Mapping Guidelines.

Subsection 38(5) contains the method for the conduct of the modelling of the forest carbon stocks for the purposes of Equation 8. These require the proponent to develop representative FullCAM plots of the area harvested or cleared. The representative plots must satisfy the requirements set out in subsection 38(5).

For the purposes of Equation 8, the carbon stocks in the forest carbon pools is the carbon mass of trees and forest debris at the end of the 100-year of the simulation. This approach is deliberately conservative (i.e. results in a large deduction).

Section 39 – Direct leakage deduction (DLDi)

The direct leakage deduction must be applied if the volume of wood extracted from the excluded sections of the proponent’s public native forest estate exceeds the direct leakage baseline harvest level. If the direct leakage baseline harvest level is exceeded, the exceedance is deemed to be attributable to the eligible offsets projects in the State and credited abatement is reduced accordingly. This is intended to address the risk of direct leakage through activity shifting.

Subsection 39(1) specifies that, subject to subsections 39(7) and (8), the direct leakage deduction provisions in section 39 apply to the public native forests that are designated for commercial forestry use in the State in which the eligible offsets project is located, other than those:

in the project area for the project;
in the project area for another eligible offsets project covered by the Determination that was declared to be eligible prior the start of the reporting period i for the relevant project; or
in an exclusion area (as per subsection 11(2)).

Subsection 39(2) specifies that a direct leakage deduction applies in calculating the leakage deduction for a reporting period if there is a direct leakage exceedance.

Subsection 39(3) provides that there is a direct leakage exceedance if the exceedance volume for the relevant public native forests for the reporting period is greater than zero.

Subsection 39(4) provides the equation for the calculation of the exceedance volume (Equation 9), which involves the subtraction of the direct leakage baseline harvest level for the reporting period from the wood volume extracted from the relevant public native forests over the reporting period, and the multiplication of the result (where it is positive) by the ‘project allocation factor’ calculated under subsection 39(6).

Subsection 39(5) provides that the direct leakage baseline harvest level (in m3) for the reporting period is the lower of the:

average volume of wood extracted from the relevant sections of the public native forest estate over the baseline period, multiplied by the number of months in the reporting period; and
modified sustainable yield for the relevant sections of the public native forest estate over the reporting period.

Subsection 39(6) contains the equation for the calculation of the project allocation factor (AF) (Equation 10). The project allocation factor represents the proportion of the exceedance volume for the relevant public native forests (if any) that is attributable to each eligible offsets project in the State. The allocation factor is based on the:

volume of wood extracted from the public native forests in the relevant project areas in the 10-year period before the end of the last financial year before the application was made for the declaration of the first eligible offsets project in the State; and
number of months each eligible offsets project was declared over the reporting period (adjusted in accordance with subsection 5(2) to account for periods affected by interim measures to stop harvesting in the project’s carbon protection areas).

Subsection 39(7) contains rules governing situations where public native forests are included in an eligible offsets project during the reporting period of a project.

Subsection 39(8) contains rules governing situations where new areas of public native forest are designated for commercial forestry use after the first eligible offsets project in the State is declared.

Subsection 39(9) contains the rules for calculating the direct leakage deduction (DLDi in Equation 7) where a direct leakage deduction applies.

Paragraph 39(9)(a) provides that a modelled harvested area must be derived by dividing the exceedance volume (calculated by Equation 9) by the area-weighted average log yield from the prior period FullCAM forest estate model developed under section 27.

Paragraph 39(9)(b) provides Equation 11 to determine the direct leakage deduction (DLDi). DLDi is calculated by determining the difference between the net emissions from harvesting and not harvesting the modelled harvest area over a 5-year simulation period.

Subsection 39(10) specifies how the parameters in Equation 11 must be calculated. The use of a 5-year simulation period for these purposes is conservative as it tends to maximise the difference in net emissions between the two scenarios.

Section 40 – Private native forests leakage deduction (PNFLDi)

The private native forests leakage deduction must be applied if the volume of wood extracted from private native forests in the jurisdiction in which the project is located exceeds the private native forests leakage baseline harvest level. If the private native forests leakage baseline harvest level is exceeded, the exceedance is deemed to be attributable to the eligible offsets projects in the State and credited abatement is reduced accordingly. This is intended to address the risk of indirect leakage to private native forests.

Subsection 40(1) specifies that section 40 applies to private native forests in the State in which the eligible offsets project is located.

Subsection 40(2) specifies that a private native forests leakage deduction applies in calculating the leakage deduction for a reporting period if there is an indirect leakage exceedance.

Subsection 40(3) provides that there is an indirect leakage exceedance for the purposes of subsection (2) if the exceedance volume from the relevant private native forests for the reporting period is greater than zero.

Subsection 40(4) provides the equation (Equation 12) for the calculation of the exceedance volume for relevant private native forests, which involves the subtraction of the private native forests leakage baseline harvest level for the reporting period from the wood volume extracted from the relevant private native forests over the reporting period, and the multiplication of the result (where it is positive) by the ‘project allocation factor’.

Subsection 40(5) specifies that the private native forests leakage baseline harvest level for the reporting period (PNFLBHLi) is the average volume of wood (in metres cubed per month) extracted from the relevant private native forests over the 4-year period before the end of the last financial year before the section 22 application was made under the Act, multiplied by the number of months in the reporting period.

Subsection 40(6) provides what should be used to estimate the average volume of wood extracted from the relevant private native forests over the 4-year period for the purposes of the private native forests leakage baseline harvest level under subsection 40(5).

private native forests leakage baseline harvest level;
average volume of wood (in metres cubes per month) extracted from the relevant private native forests over the prescribed period.

Using the average of the two most authoritative estimates of log production from private native forests promotes conservatism in the abatement calculations. Paragraph 40(6)(b) is intended to be used in exceptional circumstances only because it is an eligibility requirement that the government agency responsible for the regulation of private native forestry in the State have reported volume of logs harvested (under section 17).

Subsection 40(7) specifies that volume of wood extracted from the relevant private native forests (WVi) in the reporting period for the purposes of subsection 40(4) must be calculated as the higher of the volume:

derived by subtracting the estimate of logs produced from public native forests in the State from the estimate of logs produced from all native forests in the State over the period; and
reported by the government agency responsible for the regulation of private native forestry in the State.

The combination of using the average of the two most authoritative estimates of log production to derive the baseline, and the higher of the two sources to derive the estimate of log production during the reporting period, ensures conservatism in the abatement calculations.

Subsection 40(8) provides that, where the reporting period does not correspond to the period over which the data are reported in the relevant government reports, the volume of wood extracted from the private native forests in the reporting period must be derived by dividing the data reported for the financial or calendar years that overlap the reporting period by the number of months in the relevant years and then multiplying the monthly average by the number of months in the reporting period. This is required to accommodate the fact that government data on private native forests is generally published on a calendar or financial year basis.

Subsection 40(9) specifies that the project allocation factor (AF) for the purposes of Equation 12 must be calculated in accordance with Equation 10 in subsection 39(6).

Subsection 40(10) provides Equation 13 and contains the rules for calculating the private native forests leakage deduction (PNFLDi in Equation 7) where a private native forests leakage deduction applies.

Section 41 – Indirect leakage deduction (ILDi)

The indirect leakage deduction is intended to account for the risk that an eligible offsets project could prompt a net increase in emissions outside the project area, including outside Australia, because of the reduction in log production (relative to the baseline harvest level) associated with the project that is not captured by the other leakage deductions. The indirect leakage deduction must be determined by an independent qualified assessor engaged by the proponent at the completion of each reporting period. The indirect leakage deduction must be between 0% and 40% of the net abatement amount for the reporting period after the application of the other leakage deductions but before the application of the aggregate negative abatement amount.

Section 41 contains the rules regarding the calculation of the indirect leakage deduction for the purposes of Equation 7 ((ILDi). The section requires the indirect leakage deduction is intended to be calculated as:

ILDi = ((ΔCSp,i – ΔCSb,i) + ESBb,i i– (EALDi + DLDi + PNFLDi)) × ILDPi

Where:

ILDi is the indirect leakage deduction (in tonnes CO2-e) for reporting period i.

ΔCSp,i is the carbon stock change (in tonnes CO2-e) in included carbon pools in the project scenario over reporting period i, calculated in accordance with Equation 2.

ΔCSb,i is the carbon stock change (in tonnes CO2-e) in included carbon pools in the baseline scenario over reporting period i, calculated in accordance with Equation 2.

ESBb,i is the emissions of CH4 and N2O (in tonnes CO2-e) from post-harvest (slash) burns in the baseline scenario over reporting period i, calculated in accordance with Equation 4.

EALDi is the exclusion area leakage deduction (in tonnes CO2-e) for reporting period i (if applicable) calculated in accordance with Equation 8.

DLDi is the direct leakage deduction (in tonnes CO2-e) for reporting period i (if applicable) calculated in accordance with Equation 11.

PNFLDi is the private native forests leakage deduction (in tonnes CO2-e) for reporting period i (if applicable) calculated in accordance with Equation 13.

ILDPi is the indirect leakage deduction percentage, determined by an independent qualified assessor.

Subsection 41(1) provides that the indirect leakage deduction (in tonnes CO2-e) for a reporting period is the indirect leakage deduction percentage for the reporting period multiplied by the net abatement amount for the reporting period after the application of the other leakage deductions but before the application of the aggregate negative abatement amount (if any).

Subsection 41(2) states that the indirect leakage deduction percentage is the percentage:

determined by an independent qualified assessor in accordance with section 41; and
set out in an indirect leakage assessment report prepared by that assessor and included in the offsets report for the reporting period.

Subsection 41(3) specifies that the indirect leakage deduction percentage must be:

expressed as a percentage of the net abatement amount for the reporting period after the application of the other leakage deductions but before the application of the aggregate negative abatement amount (if any); and
between 0% and 40%.

Subsection 41(4) requires the indirect leakage deduction percentage to constitute a conservative estimate (expressed in percentage terms) of the likely net change in emissions and removals outside the project area because of the reduction, relative to baseline harvest levels, in log production in the project area, except any:

change in emissions and removals referrable to timber harvesting that has been accounted for in another leakage deduction; and
emissions associated with the harvesting and haulage of substitute logs or with the production of substitute non-wood products.

For this purpose, conservative means the estimate is more likely to over-estimate than under-estimate the net increase in emissions and removals.

Subsection 41(5) provides that the emissions and removals taken into account in calculating the indirect leakage deduction percentage must be limited to those caused by the substitution in relevant markets of the logs that would have been produced from the project area but for the project (and the wood products that would have been derived from those logs) with the logs, wood products and non-wood products referred to in subsection (7). This includes emissions and removals related to changes in investment in wood production that result from reductions in log production from the project area.

Subsection 41(6) specifies the substituted logs, wood products and non-wood products that are relevant to the assessment of the indirect leakage deduction percentage.

Subsection 41(7) specifies various matters that the independent qualified assessor must take into consideration when preparing the indirect leakage assessment report.

Subsection 41(8) requires the indirect leakage deduction percentage to be reduced to account for the sequestration associated with the establishment of plantations on previously cleared land used for agriculture by or with the support of the State in which the project is located. However, the reduction in the deduction percentage does not apply if the relevant plantations form part of an eligible offsets project declared under another methodology determination. This ensures there is no double counting of the sequestration associated with the plantations.

Subsection 41(9) provides that, for the purposes of subsection 41(8), the support of the relevant State means the provision of government grants or concessional loans, where the value of the resulting subsidy is more than 10 percent of the current value of the total plantation establishment costs. This value includes land costs. This subsection provides what the relevant level of support is from the State for the purposes of subsection 41(8).

Under section 41, the independent qualified assessor must provide the results of their assessment in an indirect leakage assessment report. An indirect leakage assessment report must include specified items as set out under subsection 41(10).

An ‘independent qualified assessor’ is defined under section 5 as the following:

the person is not employed by the project proponent or, if the project proponent is an authority of a State, by that State (disregarding any employment that relates to performing the action, or to performing a similar action under this instrument or another methodology determination);
the person has the requisite expertise and experience to perform the action;
the person was not significantly involved in applying for the declaration of the project as an eligible offsets project, conducting the project, or developing this instrument.

This requirement sets out that the qualified assessor must be sufficiently independent from the project proponent. The qualified assessor may not be a current employee of the project proponent or, if the proponent is a state authority, the relevant state government. However, any employment relating to undertaking such an assessment under the Determination, or another method is not captured by this provision. This ensures that otherwise eligible independent qualified assessors are not excluded due to undertaking this role for a proponent on previous occasions. The independent qualified assessor must also have the requisite expertise and experience to perform the verification required under this section. Finally, the independent qualified assessor must not have been significantly involved in the application process for the declaration of the project as an eligible offsets project under section 22 of the Act, or have been involved in conducting of the project, or developing this Determination. The Regulator must be satisfied all three requirements are met. This provision ensures that calculations under this Determination are independently verified without any conflicts of interest with the project proponent. This safeguard ensures that the integrity of the Scheme is upheld.

Subsection 41(11) clarifies that a reference to emissions and removals in section 41 is a reference to emissions of greenhouse gases and removal of carbon dioxide from the atmosphere by the sequestration of carbon.

Division 5.8—Aggregate negative abatement amount

Section 42 – Calculating the aggregate negative abatement amount

Section 42 provides that project proponent must establish and maintain an aggregate negative abatement account for all eligible offsets projects in the State in which the eligible offsets project is located. Where the net abatement amount for an eligible offsets project is negative, the amount must be added to the proponent’s aggregate negative abatement account. The aggregate negative amount in the account at the end of the reporting period (if any) is applied in the calculation of the net abatement amount for the relevant project. The amount applied in calculating the net abatement amount for the project is deducted from the account. However, if the project has a negative abatement amount after the application of the aggregate amount, the negative abatement amount for the reporting period must be added to the account, ensuring it can be applied to the next eligible offsets project to report in the State.

The requirements to maintain and apply the account reduce the scope for gaming and ensure the robustness of the provisions for addressing the risk of direct leakage into other parts of the public native forest estate and the private native forest estate in the relevant jurisdiction.

Subsection 42(1) contains the requirement for the project proponent to establish and maintain the aggregate negative abatement account for all eligible offsets projects in the State in which the eligible offsets project is located.

Subsection 42(2) requires any negative abatement amount for an eligible offsets project in the State to be added to the account.

Subsection 42(3) specifies that, when calculating the net abatement amount for a reporting period using Equation 1, the aggregate negative abatement amount (ANAAi) must be calculated as follows:

if the aggregate negative abatement amount in the account at the end of the reporting period is zero—then ANAAi in Equation 1 is zero.
if the aggregate negative abatement amount in the account at the end of the reporting period is less than zero—then ANAAi in Equation 1 is equal to the amount in the account at the end of the reporting period.

Subsection 42(4) provides that, if the reporting periods for 2 or more projects in the same State end on the same day, the aggregate negative abatement amount must be applied sequentially to the projects, based on the assumption they report one after the other.

Subsection 42(5) provides that, where a negative abatement amount from the account is applied in the calculation of the net abatement amount for a project, the amount must be deducted from the account. This ensures there is no double counting of any negative abatement.

Division 5.9—Hurdle for eligible carbon abatement

Division 5.9 contains the hurdle requirement, which provides that projects are only eligible to receive ACCUs in a reporting period if the volume of wood extracted from the project area is at least 20% below the levels in the baseline scenario, both in each 12-month segment of the reporting period (or part thereof if the final part of the reporting period is less than 12 months) and on aggregate since the date of project declaration through to the end of the reporting period. This is given effect by making the net abatement amount zero unless these requirements are met. Under section 12 in Division 3.2, to be eligible for declaration, the reduction in the volume of wood extracted from the project area relative to the baseline harvest level must be likely to exceed the 20% hurdle in each 12-month segment of the crediting period.

The hurdle requirement mitigates the risk of:

crediting minor, short-term fluctuations in harvesting associated with market or other business-as-usual conditions—for credits to be issued, there must be a significant reduction in harvesting that goes beyond normal interannual variability; and
leakage through cross-subsidisation by ensuring the level of crediting reflects the extent to which there is a structural shift in the native forest industry in the relevant region.

Section 43 – Minimum reduction in volume of wood extracted from levels in baseline scenario

Subsection 43(1) provides that the net abatement amount in relation to a reporting period is zero if the volume of wood (in cubic metres) extracted from the project area during each 12 months of the reporting period is not at least 20% less than the levels in the baseline scenario for each such 12-month period.

The note to subsection 43(1) clarifies that, if a reporting period is greater than 12 months, the hurdle for eligible carbon abatement applies to each 12-month period sequentially, measured for any such 12-month period against the baseline scenario for that 12-month period. For example, if a project had a 2.5-year reporting period, the hurdle requirement would be evaluated for three periods:

months 1 to 12 (period 1);
months 13 to 24 (period 2); and
months 25 to 30 (period 3).

Subsection 43(3) provides that the net abatement amount in relation to a reporting period is also zero if the volume of wood (in cubic metres) extracted from the project area during the period from the declaration of the project until the end of the reporting period is not at least 20% less than the levels in the baseline scenario for that period.

Subsection 43(4) specifies that section 43 does not apply if the net abatement amount calculated under Part 5 is (but for section 43) a negative amount. This ensures negative abatement amounts are carried over into subsequent reporting periods.

The hurdle performs an important function in mitigating additionality and leakage risks. It mitigates the risk of crediting minor, short-term fluctuations in harvesting associated with market or other business-as-usual conditions that would have occurred anyway, without the incentive provided by the ACCU Scheme.

For credits to be issued, there must be a significant reduction in harvesting that goes beyond normal interannual variability. The hurdle also mitigates the risk of leakage through cross-subsidisation by ensuring there is a structural shift in the native forest industry in the relevant region.

Division 5.10—Factors and parameters from external sources

Section 44 – Factors and parameters from external sources

Subsection 44(1) provides that, if a calculation in the Determination includes a factor or parameter that is defined or calculated by reference to another instrument or writing, the factor or parameter to be used for a reporting period is the factor or parameter referred to in, or calculated by reference to, the instrument or writing as in force at the end of the reporting period.

Subsection 44(2) specifies that subsection 44(1) does not apply if the Determination specifies otherwise or it is not possible to define or calculate the factor or parameter by reference to the instrument or writing as in force at the end of the reporting period.

Subsection 44(3) contains mandatory procedures for cases where paragraph 44(2)(b) applies. These require the proponent to:

ascertain the factor or parameter by reference to an earlier version of the instrument or writing; or
make a conservative estimate of the factor or parameter by reference to the following, as applicable:
- any applicable measurement or estimation approaches or requirements in the National Greenhouse and Energy Reporting (Measurement) Determination 2008;
- any relevant historical data for the project, or other project data that the proponent considers relevant; and
- any other matters that the proponent considers relevant.

These rules provide backup procedures to ensure conservativism and operability in the event of gaps in relevant legislative instruments or incorporated documents.

Division 5.11—Transparency in abatement calculations

Section 45 – Publication of data and methods

Section 45 requires the project proponent to publish all necessary information, including full details of methods and all relevant data, to enable third parties to replicate the calculation of the carbon dioxide equivalent net abatement amount for each reporting period. This approach to transparency accords with international best practice, as reflected in The Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles (criterion 3.1).

The main transparency obligation is contained in subsection 45(1), which requires the proponent to publish all necessary information to enable third parties to replicate the calculation of the net abatement amount for each reporting period, including (without limitation) information to replicate:

the representative FullCAM model plots developed under subsections 27(1) and (3) and the prior period forest estate model; and
the calculations used to derive the modified and unmodified sustainable yields under section 28; and
the calculation of the hurdle requirement under section 43.

Subsection 45(2) clarifies that the information required to be published includes all relevant methods, data, representative FullCAM model plots and forest estate models.

Subsection 45(3) specifies that the information must be published as soon as practicable and no later than 30 days after the Regulator has informed the project proponent that the offsets report for the reporting period satisfies the applicable requirements for the offsets report.

Subsection 45(4) provides that the information must be published on the website of the project proponent.

These transparency requirements complement the requirements to publish the management plan and project map, contained in Division 3.3.

Part 6—Reporting, record keeping, monitoring and notification requirements

The Act contains general record keeping, monitoring and notification requirements. However, methods can include additional requirements that supplement the general requirements. Methods can also extend the time periods for the submission of offset reports after the end of reporting periods. Part 6 of the Determination contains additional requirements for these purposes as well as an extension of the time period for the submission of offset reports to ensure proponents have the time to gather relevant information.

Division 6.1—Reporting requirements

Section 46 – Operation of this Division

Section 46 specifies that, for the purposes of paragraphs 106(3)(a) and 76(4)(e) of the Act, Division 6.1 sets out reporting requirements for eligible offsets projects.

Section 47 – Information required in offsets reports

Subsection 47(1) provides that offsets reports for a reporting period must include:

a copy of the project map for the project;
the current management plan for the project;
any other forest management plans that are required to be prepared in relation to timber harvesting and other forest management actions in the project area as at the end of the reporting period;
details of the measures taken to promote the effective management of carbon protection areas (including in relation to the conservation of biodiversity and to the engagement of Aboriginal people in forest management actions in that area);
the verification under subsection 28(7) of the independent qualified assessor of the initial and revised sustainable yields and associated unmodified sustainable yields;
the indirect leakage assessment report prepared under section 41 for the reporting period; and
details of the aggregate negative abatement account maintained under section 42, including details of all additions and removals from the account in the reporting period.

These provisions are intended to promote integrity and transparency in the operation of eligible offsets projects.

Subsection 47(2) specifies that, if in modelling a management action or disturbance event in FullCAM in accordance with the FullCAM guidelines, the project proponent specified that a portion of the project area was affected by a FullCAM event, the offsets report must describe how the portion was estimated.

Subsection 47(3) specifies that if a calculation in the Determination includes a factor or parameter that is defined or calculated by reference to another instrument or writing as in force from time to time, and it is not possible to define or calculate the factor or parameter by reference to the instrument or writing as in force at the end of the reporting period, the offsets report must include:

if an earlier version of the instrument or writing was used –the versions of the instrument or writing used and the start and end dates of each use; and
the reasons why it was not possible to define or calculate the factor or parameter by reference to the instrument or writing as in force at the end of the reporting period.

Section 48 – Timing of offsets reports

Under subparagraph 76(4)(e)(i) of the Act, offset reports are required to be submitted within 6 months of the end of the reporting period, unless, under subparagraph 76(4)(e)(ii) of the Act, the applicable determination provides for a longer period.

Section 48 of the Determination allows for offsets reports for eligible offsets projects to be given to the Regulator within 48 months after the end of the reporting period.

The extended time to submit offsets reports is needed to ensure data on log production from public and private native forests are available. These data are required for the calculation of the direct leakage deduction under section 39 and private native forests leakage deduction under section 40.

Division 6.2—Record-keeping requirements

Section 49 – Operation of this Division

Section 49 specifies that, for the purposes of subsection 106(3)(c) of the Act, Division 6.2 sets out record-keeping requirements for eligible offsets projects.

Section 50 – Records relating to abatement calculations

Section 50 requires the project proponent to make and keep records of all information required to be published under section 45.

Section 51 – Records relating to timber harvesting and clearing to facilitate timber harvesting

Section 51 requires the project proponent to make and keep records that evidence the timber harvesting and areas cleared to facilitate timber harvesting in the project area in each reporting period, including the extent of harvesting and clearing and the harvesting practices that were used. This is to apply in circumstances where timber harvesting was undertaken during a reporting period.

Section 52 – Records relating to monitoring of harvesting and clearing events

Section 52 requires the project proponent to make and keep records that result from the monitoring of harvesting and clearing under section 58 and evidence the monitoring actions that were undertaken in the project area.

Section 53 – Records relating to major disturbance events

Section 53 requires the project proponent to make and keep records on all major disturbance events that occur in the project area during each reporting period, including on the extent and impact of the event.

Section 54 – Mapping and imagery of harvested and cleared areas

Section 54 specifies that the records that are made and kept for the purposes of Division 6.2 must include:

maps of the areas harvested and cleared that are prepared in accordance with the CFI Mapping Guidelines; and
date-stamped and geo-referenced remotely sensed imagery of the harvested and cleared areas.

Section 55 – Records relating to aggregate negative abatement account

Section 55 requires the project proponent must make and keep records of the aggregate negative abatement account that is required to be established and maintained under section 42, including all additions and removals from the account.

Section 56 – Records to be kept for at least 7 years

Section 56 requires the project proponent to retain, for at least seven years after the record is made, a record required to be kept under Division 6.2 or a copy of the record.

Division 6.3— Monitoring requirements

Section 57 – Operation of this Division

Section 57 specifies that, for the purposes of section 106(3)(d) of the Act, Division 6.3 sets out monitoring requirements for eligible offsets projects under the Determination.

Section 58 – Monitoring of harvesting, clearing and other activities

Section 58 requires project proponents to monitor:

a relevant increase in timber harvesting for the purposes of section 18;
other timber harvesting and clearing events (including post-harvest (slash) burns) in the project area that are required to be modelled under the Determination in the project scenario;
forest management activities in the project area and, in particular, any such activities in a carbon protection area that may result in the removal of wood and the possible relinquishment of ACCUs; and
whether any timber harvesting or clearing occurs (other than as mentioned in paragraph (58(a)) occurs in an exclusion area.

Division 6.4— Notification requirements

Section 59 – Operation of this Division

Section 59 specifies that, for the purposes of section 106(3)(b) of the Act, Division 6.4 sets out notification requirements for eligible offsets projects covered by the Determination.

Section 60 – Matters to be notified to Regulator

Section 60 requires the project proponent to notify the Regulator, in writing, of each of the following:

a failure to manage the public native forests in the project area in accordance with the current management plan for the project prepared;
the making of an EPBC Act forestry-related decision relating to the project area, noting that a project proponent is still required to comply with any relevant EPBC Act requirements relating to the project area;
timber harvesting in a carbon protection area or clearing in a carbon protection area that is unrelated to the management of the area;
timber harvesting or clearing in any part of an exclusion area (in accordance with subsection 11(2)) of which the project proponent becomes aware;
timber harvesting that exceeds the baseline harvesting level in a financial year;
timber harvesting in which the volume of timber extracted from public native forests covered by section 39 is likely to exceed the direct leakage baseline harvest level in a reporting period;
timber harvesting in which the volume of timber extracted from native forests covered by section 39 is likely to exceed the private native forests leakage baseline harvest level in a reporting period;
A relevant increase in the timber harvesting for the purposes of section 18 that has occurred in any 2-year period that is, or is part of, a reporting period for the project.

The inclusion of these notification requirements is intended to assist the Regulator in the performance of its administrative functions, including ensuring compliance with the Determination’s requirements.

Section 61 – When matters to be notified

Subsection 61(1) requires the project proponent to notify the matters in section 60 as soon as practicable and no later than 90 days after the relevant matter or event occurs.

Subsection 61(2) states that the matter in paragraph 60(h) (i.e. a relevant increase in timber harvesting for the purposes of section 18) must be notified within 30 days of the end of the reporting period mentioned in that paragraph.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Carbon Credits (Carbon Farming Initiative— Improved Forest Management in Multiple-use Public Native Forest) Methodology Determination 2026

This Disallowable Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

Subsection 106(1) of the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act) empowers the Minister to make, by legislative instrument, a methodology determination.

The Carbon Credits (Carbon Farming Initiative— Improved Forest Management in Multiple-use Public Native Forest) Methodology Determination 2026 (the Determination) aims to incentivise ‘improved native forest management’ projects that increase carbon stocks in forest-related carbon pools, and avoid greenhouse gas emissions from these pools, by stopping harvesting in multiple-use public native forests (INFM projects).

The Determination does this by providing rules for the declaration and implementation of INFM projects under the Act. INFM projects that are declared under the Act can generate ACCUs, which are able to be sold to entities that want to, or are required to, offset their emissions. The ability to generate and sell ACCUs provides a way of incentivising INFM projects. Allowing entities to rely on ACCUs to meet their mitigation obligations and commitments reduces abatement costs, thereby contributing to Australia’s efforts to meet its mitigation obligations under the Paris Agreement to the United Nations Framework Convention on Climate Change (the Climate Change Convention). However, for ACCUs to perform this function, they must:

represent abatement that is real, additional to business-as-usual (i.e. it would not occur in the absence of the incentive provided by the Act and ACCUs); and
be permanent (i.e. any credited sequestration must persist in the relevant carbon stocks for at least the length of the permanence period).

The Determination contains rules governing:

eligibility for establishing and managing INFM projects;
the calculation of abatement generated by INFM projects for the purpose of issuing ACCUs; and
reporting, record keeping, monitoring and notification requirements.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

The Hon Josh Wilson MP

Assistant Minister for Climate Change and Energy

Administered by Department of Climate Change, Energy, the Environment and Water

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