Carbon Price Mechanism
Explanatory notes to amendments to the
LGA Model Waste and Recycling Collection Contract
The following clauses in paragraphs A-E (inclusive) are to be inserted into the Model Waste
and Recycling Collection Contract. By way of explanation, the clauses operate as follows:
A – these amendments relate to the definition of the costs covered by the relevant clauses
and the definition of relevant documents to be produced by the Contractor to the Council to
justify the claim for carbon costs from time to time.
B – this clause ensures that the Clean Energy Act 2011 is incorporated within the list of
relevant obligations covered by the Contract.
C – this clause requires the Contractor to maintain records which are required to satisfy the
Council as to the amount of the carbon costs which will be claimed from time to time under
the Contract.
D – this is the operative clause relating to the payment of carbon costs. The clause creates
an obligation for Council to reimburse the Contractor for costs actually incurred in purchasing
carbon units. Unless and until the carbon units have been purchased by the Contractor, there
is no liability for the Council to make a payment on account of those costs.
The clause provides that the Contractor will make a claim for those costs spelling out in
documentary form the information necessary to enable the Council to determine the
accuracy of that claim. The information will be sufficient for the Council to determine the
carbon intensity of the waste, the volume of the waste and the emissions from the waste that
are to be paid for in that particular year. The information will also enable the Council to
determine the price for the carbon units that the Contractor has paid. There is a positive
obligation in clause 14.4 for the Contractor to secure the lowest cost emission units available
on the market at the relevant time.
There is an obligation on the Council to pay the claim for carbon costs if it does not dispute
the amount within 20 business days. Equally, if there is a dispute about any part of the claim
then the dispute resolution procedure in clause 13 of the Agreement applies.
It is important to recognise that the emissions from the waste covered by the Agreement will
continue to be generated beyond the term of the contract. A mechanism is required to
account for those carbon costs that will be paid by the Contractor after the expiry of the
Contract.
Clause 10.5 gives Council the option to make a lump sum payment to the Contractor at the
end of the contract to cover all future liabilities associated with future emissions or
alternatively continue to pay the Contractor as the emissions are generated. It is a
commercial matter for the Council as to whether the Council wants to finalise all existing
liabilities with the landfill operator with a lump sum payment or whether it wants to continue to
pay for the emissions as they are generated. The clause provides that the Council needs to
make that election prior to the termination of the agreement.
E – this clause requires the Contractor to secure the lowest cost emission permits so that the
costs that are passed on to the Council to the mechanism of this clause is the lowest cost
possible.
DME 83338
Amendments to the Model Waste and Recycling Collection Contract
Local Government Association of South Australia – Explanatory notes
CARBON COST CONTRACTUAL CLAUSE
A.
To be inserted into clause 1.2.1 of the Model Waste and Recycling Collection Contract
– Section C Conditions of Contract:
"Carbon Costs" means all costs incurred by the Contractor under the Clean Energy
Act 2011 (Commonwealth) for the purchase of Emissions Units to acquit the
Contractor's liability associated with the Waste.
"Claim for Carbon Costs" means an annual statement prepared by the Contractor,
containing such information as the Contract Administrator may require, which sets out
the Carbon Costs which are due and payable for the previous financial year.
"Emissions Units" means an Australian Government Carbon Unit, an Australian
Carbon Credit Unit or an Eligible International Emissions Unit.
"Future Carbon Costs" means the cost required to compensate the Contractor for the
ongoing liability under the Clean Energy Act 2011 (Commonwealth) associated with the
Waste.
"Statement of Future Carbon Costs" means the statement prepared by the
Contractor in the form described in clause 10.5.1.
B.
To be inserted into clause 4:
4.1 Contractor to comply with Statutory and Legal Obligations
(c) ...including but not limited to the:
 Clean Energy Act 2011 (Commonwealth);
C.
To be inserted as clause 4.4 after the existing clause 4.3:
4.4 Contractor to Maintain Records of Carbon Costs
The Contractor must maintain:
(a) records of Carbon Costs it incurs from time to time in connection with the
Waste;
(b) copies of all invoices for Emissions Units purchased to account for emissions
for which the Contractor is liable under the Clean Energy Act 2011
(Commonwealth), in connection with the performance of the Services;
(c) records detailing the:
 composition and volume of the Waste;
 remaining life of the landfill that receives the Waste;
 price of Emissions Units at the time of purchase by the Contractor; and
 efficiency of gas collection systems at the landfill that receives the Waste.
D.
To be inserted into clause 10 as sub-clauses 10.4 – 10.6 with the remaining subclauses to be renumbered accordingly:
10.4
Payment of Carbon Costs
10.4.1 Submission of Claims for Carbon Costs
(a) On or before the date nominated by the Contract Administrator for each year
during the Contract Term, the Contractor shall deliver to the Council a Claim
for Carbon Costs in respect of the previous financial year together with a copy
of the records maintained by the Contractor under clause 4.4.
(b) The Claim for Carbon Costs must be supported by written evidence of the
amount claimed by the Contractor, as shown in the records maintained by the
Contractor under clause 4.4.
(c) The Council shall approve or dispute the Claim for Carbon Costs in writing to
the Contractor within ten (10) Business Days of submission of the Claim for
Carbon Costs.
(d) Where the Council disputes a Claim for Carbon Costs, the Council shall notify
the Contractor in writing of its objection, setting out grounds for the dispute,
within ten (10) Business Days of submission of the Claim for Carbon Costs by
the Contractor.
DME 83338
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Amendments to the Model Waste and Recycling Collection Contract
Local Government Association of South Australia – Explanatory notes
(e) Upon receipt of written notification by the Council, the parties must resolve the
dispute in accordance with the procedure set out at clause 13.
10.4.2 Payment of Claims for Carbon Costs
The Council must:
(a) within twenty (20) Business Days of approval of the Claim for Carbon Costs,
pay to the Contractor the amount set out in the Claim for Carbon Costs.
(b) within (20) Business Days of the resolution of any dispute in connection with a
Claim for Carbon Costs, pay the Contractor the amount due and payable as
determined in accordance with the procedures set out in clause 13.
10.5
Option to Pay Future Carbon Costs
10.5.1 Statement of Future Carbon Costs
(a) Within one year of expiry of the Contract Term or termination under clause 11,
the Council may require the Contractor to deliver to the Council a Statement
of Future Carbon Costs, which sets out the:
 quantity of Waste collected or to be collected by the Contractor until the
date of expiry of the Contract or termination under clause 11.
 volume of projected emissions to be generated by the Waste after the
expiry of the Contract or termination under clause 11.
 cost required to compensate the Contractor for the ongoing liability under
the Clean Energy Act 2011 (Commonwealth) associated with the Waste
after the expiry of the Contract or termination under clause 11 (Future
Carbon Costs).
(b) The Contractor must deliver, with the Statement of Future Carbon Costs, a
copy of the records maintained by the Contractor under clause 4.4 over the
duration of the Contract Term.
(c) The Future Carbon Costs must be supported by written evidence, as shown in
the records maintained by the Contractor under clause 4.4.
(d) The Council shall approve or dispute the Statement of Future Carbon Costs in
writing to the Contractor within ten (10) Business Days of receipt of the
Statement of Future Carbon Costs.
(e) Where the Council disputes the Statement of Future Carbon Costs, the
Council shall notify the Contractor in writing, setting out grounds for the
dispute, within ten (10) Business Days of delivery of the Statement of Future
Carbon Costs by the Contractor.
(f) Upon receipt of written notification by the Council, the parties must resolve the
dispute in accordance with the procedure set out at clause 13.
10.5.2 Payment of Future Carbon Costs
(a) The Council must:
 within twenty (20) Business Days of approval of the Statement of Future
Carbon Costs, pay to the Contractor the Future Carbon Costs.
 within (20) Business Days of the resolution of any dispute in connection
with the Statement of Future Carbon Costs, pay the Contractor the Future
Carbon Costs, as determined in accordance with the procedures set out in
clause 13.
(b) This payment is a full and final payment by the Council for all Future Carbon
Costs.
(c) In accepting payment of the Future Carbon Costs, the Contractor relinquishes
any future claim for payment in connection with the Carbon Costs associated
with the Waste.
DME 83338
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Amendments to the Model Waste and Recycling Collection Contract
Local Government Association of South Australia – Explanatory notes
10.6
E.
Survival of Clause 10.4
(a) Clause 10.4 shall survive termination or expiration of the Contract unless the
Council exercises its right under clause 10.5.
(b) Clause 10.4 shall expire when the Contractor is no longer liable under the
Clean Energy Act 2011 (Commonwealth) in respect of the Waste.
To be inserted into clause 14 which is to be renamed "TAX PAYMENTS AND
CARBON COSTS":
14.4
Payment of Carbon Costs
(a) The Contractor shall comply at all times with the requirements of the Clean
Energy Act 2011.
(b) When purchasing Emissions Units to account for emissions produced in
connection with the performance of the Services, the Contractor agrees to
purchase Emissions Units with the lowest cost available on the market as at
the date nominated by the Council.
DME 83338
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