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Government announces proposed carbon trading framework, reporting on emissions now mandatory

October 10, 2008

Government announces proposed carbon trading framework, reporting on emissions now mandatory

On 16 July, the government released its Green Paper on the Carbon Pollution Reduction Scheme. It proposes to set up an emissions trading scheme which will begin in 2010. The proposal is a cap and trade system which will effectively place a price on carbon emissions to reduce emissions and link with similar schemes which operate overseas.

The Green Paper itself is very detailed and runs to 532 pages and sets out the government’s preferred position on a permit scheme to reduce Australia’s carbon emissions to prevent or alleviate climate change.

While the scheme is intended to be very broad in coverage, the government also recognises the effect on emissions-intensive industries in the traded sector by proposing to allocate a number of free permits to the most affected activities. Also as a transitional measure, it proposes to provide a limited amount of direct assistance to ‘strongly affected industries’ including electricity generators with existing coal-fired power stations. In the longer term, there is intended to be a price cap if the price of carbon permits rises beyond a certain level.

The government proposes to establish an independent scheme regulator and to conduct independent reviews of the scheme every five years. The regulator - analogous to regulators like ASIC and the ACCC - would be responsible for auctioning and allocating permits, maintaining the emissions registry, monitoring and enforcing compliance and reporting to government.

The scheme would be established under commonwealth legislation with the states and territories engaging through the Council of Australian Governments.

It is intended that exposure draft legislation will be released for comment by the end of 2008.

Further, the National Greenhouse and Energy Reporting Act 2007 came into effect on 1 July 2008. Controlling corporations of company groups that exceed the stated thresholds now have to report greenhouse gas emissions, reductions, removals and offsets, and energy consumption and production. The legislation also imposes penalties for non-compliance. The reporting regime dovetails with the emissions trading regime and is intended to:

● provide data as an input to the proposed emissions trading scheme

● allow reporting of abatements and offsets prior to emissions trading

● provide information to the public on greenhouse and energy performance.

Controlling corporations (or facilities under their control) must register and report if they emit greenhouse gases, produce energy, or consume the specified quantities of energy each financial year. Corporations are required to register and report if:

● their corporate group emits 125 kilotonnes or more greenhouse gas CO2 equivalent (CO2-e), or produces or consumes 500 terajoules or more of energy or

● they control facilities that emit 25 kilotonnes or more of CO2-e, or produce or consume 100 terajoules or more of energy.

Tighter reporting requirements will be phased in over subsequent financial years. Companies must register by 31 August, and report by 31 October, following the financial year in which they meet a threshold. Data will be published subsequently.

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