BILLS DIGEST NO. 68, 2011–12, 28 October 2011

Clean Energy Bill 2011

Kai Swoboda, Economics Section 
Juli Tomaras, Law & Bills Digest Section
Alan Payne, Science, Technology, Environment and Resources Section

Law and Bills Digest Section

Date introduced:  13 September 2011

House:  House of Representatives

Portfolio:  Climate Change and Energy Efficiency

Commencement:  Royal Assent for sections 1 and 2. The date on which clauses 3 - 87 of the Bill will come into effect is contingent on the Royal Assent of other related Acts and is thus not specified (though the carbon pricing mechanism is proposed to commence on 1 July 2012).

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Glossary

Biofuel

Biodiesel, ethanol used as a fuel in an internal combustion engine. Thus biofuel has the same meaning as in the National Greenhouse and Energy Reporting Regulations 2008.

Carbon pollution cap

A limit to the total of CO2-e emissions placed on sectors covered by the carbon pricing mechanism set by Regulations for a financial year, commencing in 2015–16. The carbon pollution cap is the sum of the total number of auctioned carbon units, the total number of free carbon units issued under the Jobs and Competitiveness Program and the total number of free carbon units issued under the Energy Security Fund program.

Carbon pollution cap number

The total of CO2-e emissions set by Regulations for a financial year, commencing in 2015–16. Should the Regulations not take effect, a ‘default’ cap that is based on a trajectory consistent with Australia’s unconditional target of reducing national emissions to 5 per cent below 2000 levels by 2020, will come into effect.  This will take into account projections for emissions not covered by the carbon pricing mechanism.

Carbon pricing mechanism (or mechanism)

The creation of property rights for greenhouse gas emissions for specified sectors of the economy that are required to be purchased (or allocated) and surrendered to meet a facility’s annual emissions. From 2015–16, the mechanism operates under a total ‘carbon pollution cap’ on emissions covered by the mechanism and allows entities to purchase rights to emit, at auction or through a market mechanism, to meet their emission obligations.

Carbon Unit

Eligible Emissions Units which are sold or auctioned by the Clean Energy Regulator, or provided as compensation. Issued under clause 94.

CO2-e

The basis for comparing the warming effect of a greenhouse gas as compared to carbon dioxide. It is calculated as the global warming potential of a given mass of non-CO2-e greenhouse gas (based on its ability to absorb heat and its lifetime in the atmosphere) compared to CO2.  Referred to as ‘carbon dioxide equivalent’.

Covered emissions

CO2-e emissions from sectors specifically included in the carbon price mechanism - stationary energy; industrial processes; fugitive emissions (other than from decommissioned coal mines); and emissions from non-legacy waste.

Eligible Australian carbon credit units (EACCU)

Eligible Emissions Units which are carbon offset units within the meaning (issued under) the Carbon Credits (Carbon Farming Initiative) Act 2011. Thus, a Kyoto Australian carbon credit unit, or a non-Kyoto carbon credit unit (within the meaning of the Act).

Eligible Emissions Unit (EEU)

Umbrella term for carbon permits which liable entities will be required to purchase and surrender under the scheme. Thus, EEU means a carbon unit, eligible Australian carbon unit, or an eligible international emissions unit.

Eligible International Emissions Units (EIEU)

carbon units created in accordance with the rules of the Kyoto Protocol or another international agreement, or a unit issued outside Australia under a law of a foreign country. Thus, an EIEU has the same meaning as in the Australian National Registry of Emissions Units Act 2011.

Facility

Refers generally to an activity, or a series of activities (including ancillary activities), that involve the production of greenhouse gas emissions, the production of energy or the consumption of energy and form a single undertaking or enterprise. Thus, a facility has the same meaning as in the Australian National Registry of Emissions Units Act 2011.

Greenhouse gas (GHG)

A gas that contributes to global warming including carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, specified hydrofluorocarbons and specified perfluorocarbons.

Liability transfer certificate

An agreement, endorsed by the Clean Energy Regulator, to transfer liability for emissions to a related company.

Operational control

A corporation, or member of the corporation’s group, that has the authority to introduce and implement a range of operating policies including health & safety and environmental policies. Operation control may also be imposed on a controlling corporation or another member of the corporation’s group by an officer under the National Greenhouse and Energy Reporting Act 2007.

Person

Includes an individual person as well as a range of legal entities including a body corporate, trust, corporation sole, body politic and local governing body.

Scope 1 emission

Emissions that are the direct result of activities (including ancillary activities) that relate to fuel combustion, industrial processes and emissions released from the decomposition of waste material or emissions mainly released from the extraction, production, processing and distribution of fuels. (Defined in National Greenhouse and Energy Reporting (Measurement) Determination 2008)

Unit shortfall charge

A fee imposed on a liable entity when it fails to surrender the number of ‘eligible emissions units’ equal to its annual emissions.

Purpose

The Clean Energy Bill 2011 and related Bills establish a framework to meet specified emissions‑reduction targets by creating incentives for the reduction of greenhouse gas emissions through the implementation of measures that impose the costs of emissions on selected sectors of the economy.

Structure of the legislative package and supporting information

Note:  If passed this Bill and the associated Bills will constitute a significant change to Australia’s economic arrangements. They involve significant and novel areas of law, science and policy, hence this Digest is unusually lengthy, a necessary feature of any publication attempting to give a guide and commentary to such wide ranging changes.

There has been some controversy over the appropriate terminology to be used when referring to this Bill’s impost.  The question of whether it constitutes a tax has legal implications as well as political implications.  The Government, and others, refer to the introduction of a carbon price, whereas the Coalition, and others, refer to it as the introduction of a carbon tax.  The legislative package is structured so as to accommodate the constitutional requirements governing the introduction of a tax.  This Digest uses both the terms ‘a carbon price’ and ‘a carbon tax’, depending on the context of the reference.

The Clean Energy legislative package of measures includes 18 Bills. The Clean Energy Bill 2011 (the ‘Main Bill’) creates the framework for establishing a carbon price. The material accompanying the bills provides a description of the main features of each Bill:

Table 1: Clean Energy legislative package

Clean Energy Bill 2011

•          Sets out the structure of the carbon price mechanism and process for its introduction. These include:

•          entities and emissions that are covered by the mechanism

•          entities’ obligations to surrender eligible emissions units

•          limits on the number of eligible emissions units that will be issued

•          the nature of carbon units

•          the allocation of carbon units, including by auction and the issue of free units

•          mechanisms to contain costs, including the fixed charge period and price floors and ceilings

•          linking to other emissions trading schemes

•          assistance for emissions-intensive, trade-exposed activities and coal-fired electricity generators

•          monitoring, investigation, enforcement and penalties

•          administrative review of decisions, and

•          reviews of aspects of the mechanism over time.

Clean Energy Regulator Bill 2011

•          Sets up the Regulator, which is a statutory authority that will administer the mechanism and enforce the law.

•          The responsibilities of the Regulator include:

•          providing education on the mechanism, particularly about the administrative arrangements of the mechanism

•          assessing emissions data to determine each entity’s liability

•          operating the Australian National Registry of Emissions Units (the Registry)

•          monitoring, facilitating and enforcing compliance with the mechanism

•          allocating units including freely allocated units, fixed charge units and auctioned units

•          applying legislative rules to determine if a particular entity is eligible for assistance in the form of units to be allocated administratively, and the number of other units to be allocated

•          administering the National Greenhouse and Energy Reporting System (NGERS), the Renewable Energy Target (RET) and the Carbon Farming Initiative (CFI), and

•          accrediting auditors for the CFI and NGERS.

•          Climate Change Authority Bill 2011

•          Sets up the Climate Change Authority, which will be an independent body that provides the Government with expert advice on key aspects of the mechanism and the Government’s climate change mitigation initiatives.

•          The Government will remain responsible for carbon pricing policy decisions.

•          This Bill also sets up the Land Sector Carbon and Biodiversity Board which will advise on key initiatives in the land sector.

•          Clean Energy (Consequential Amendments) Bill 2011

•          Makes consequential amendments to ensure:

•          NGERS supports the mechanism

•          the Registry covers the mechanism and the CFI

•          the Regulator covers the mechanism, CFI, the Renewable Energy Target and NGERS

•          the Regulator and Authority are set up as statutory agencies and regulated by public accountability and financial management rules

•          that emissions units and their trading are covered by laws on financial services

•          that activities related to emissions trading are covered by laws on money laundering and fraud

•          synthetic greenhouse gases are subject to an equivalent carbon price applied through existing regulation of those substances

•          the Regulator can work with other regulatory bodies, including the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC) and the Australian Transaction Reporting and Analysis Centre (Austrac)

•          the taxation treatment of emissions units for the purposes of GST and income tax is clear, and

•          the Conservation Tillage Refundable Tax Offset is established.

•          Clean Energy (Unit Shortfall Charge—General) Bill 2011, Clean Energy (Unit Issue Charge – Fixed Charge) Bill 2011, Clean Energy (Unit Issue Charge–Auctions) Bill 2011, Clean Energy (Charges—Excise) Bill

•          2011, Clean Energy (Charges—Customs) Bill 2011, Clean

•          Energy (International Unit Surrender Charge) Bill 2011, Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Bill 2011 and Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Bill 2011

•          Procedural Bills on those elements of the mechanism which oblige a person to pay money are implemented through separate bills that comply with the requirements of section 55 of the Constitution.

•          Clean Energy (Excise Tariff Legislation Amendment) Bill 2011, the Clean Energy (Customs Tariff Amendment) Bill 2011, Clean Energy (Fuel Tax Legislation Amendment) Bill 2011

Impose an effective carbon price on aviation and non-transport gaseous fuels through excise and customs tariffs and reduce the business fuel tax credit entitlement of non-exempted industries for their use of liquid and gaseous transport fuels, in order to provide an effective carbon price on business through the fuel tax system.

•          Clean Energy (Household Assistance Amendments) Bill 2011, Clean Energy (Tax Laws Amendments) Bill 2011 and the Clean Energy (Income Tax Rates Amendments) Bill 2011

Amend relevant legislation to provide payment increases for pensioners, allowees and family payment recipients and provide income tax cuts and establish new supplements for low and middle-income households.

Source: Clean Energy Bill 2011, Explanatory Memorandum, pp. 24–26.

A separate Bill for assistance to the steel industry, the Steel Transformation Plan Bill 2011, is also related to the Clean Energy legislative package. As at the date of publication of this Bills Digest, the Parliamentary Library has published the following Bills Digests:

•          Clean Energy (Income Tax Rates Amendments) Bill 2011 [and] Clean Energy (Tax Laws Amendments) Bill 2011

•          Clean Energy (Household Assistance Amendments) Bill 2011

•          Clean Energy Regulator Bill 2011

•          Steel Transformation Plan Bill 2011

A large amount of associated material has been issued by the Government, including economic modelling.  The Department of Treasury’s modelling of the Clean Energy package included examining the projected impact of the carbon price measures on emissions, the economy, households and business sectors. The modelling is based on a range of assumptions including the extent of complementary international action, population growth and technology change.[1] Details of the modelling, including key outcomes and assumptions underpinning the modelling results, are examined in Appendix 2.Furthermore the regulation impact statement on the Clean Energy legislative package was undertaken by the Department of Climate Change and Energy Efficiency (and was assessed as adequate by the Office of Best Practice Regulation).[2]

Background

The development of Australian emissions reduction policy took place against the background of increased concerns about climate change, in particular these concerns were generated by scientists in various international bodies.  The science and a historical account of these concerns in Australia is provided in Appendix 1.

Australia in context

Australia is currently responsible for only about 1.5 per cent of global greenhouse gas (GHG) emissions, but will suffer the full effects of global warming arising from the emissions of other countries.[3] Hence, although Australia’s own emissions-reduction efforts will make only a small impact on global emissions, Australia has a strong interest in seeing effective global policy action to address climate change issues. Australia is also one of the largest per capita emitters in the world (figure 1), which places additional pressure on it to implement substantial domestic mitigation measures and contribute its fair share towards a global mitigation effort.

Figure 1: Overall and per capita emissions, top 21 emitting countries, 2005

Source: Climate Analysis Indicators Tool, Version 8.0 (World Resources Institute, 2011) (viewed 22 September 2011, http://cait.wri.org/cait.php?page=compcoun).  Note that land use change is excluded.

Australia is a signatory to the Kyoto Protocol and is a member country of the Conference of Parties. It is classified as an Annex II country[4] – Annex II countries are those countries listed as an Annex I country that are also members of the Organisation of Economic Co-operation and Development (OECD) and are responsible for providing financial support to developing countries to undertake action on climate change.

Australia’s carbon pricing methodology is consistent with efforts in several other countries. For example, the European Union has had an emission trading scheme (ETS) in place since 2005 and at the same time some European countries have or are considering a carbon tax and/or other green initiatives. More recently, New Zealand has implemented an ETS in 2008 and several other major economies also have plans to do so.[5] The significance of Australia heading towards an ETS is that it will facilitate the ability to link internationally and access lower-cost emissions reduction efforts with minimal compliance and transaction costs.

2010 election commitments, parliamentary agreements and the Multi-Party Climate Change Committee

2010 election policies

In the lead up to the 2010 federal election, the ALP policy position was to support a range of measures to address carbon emissions including the establishment of emissions standards for power stations, encouraging early action to reduce emissions ahead of an emissions market and encouraging the connection of renewable energy sources.[6]

When directly asked during the election campaign about the introduction of a carbon tax, the Prime Minister noted:

There will be no carbon tax under the government I lead. What we will do is tackle the challenge of climate change. We have invested record amounts in solar and renewable technologies. I want to build the transmission lines that will bring back clean green energy into the national average is the grid. I also want to make sure that we have no more dirty coal-fired power stations and make sure we tried greener cars and word from greener buildings. I will deliver those things and lead a national debate to reach a consensus about putting a cap on carbon pollution.[7]

The Coalition reiterated their opposition to an emissions trading scheme in the lead-up to the 2010 federal election, and proposed a range of ‘direct action’ measures that would purchase emissions reduction activity from business and industry, including incentives for the oldest and most inefficient power stations to reduce their emissions ‘in an orderly manner’.[8] The Coalition also proposed a range of expenditure measures aimed at boosting renewable energy production and use, harnessing soil carbons and expanding the use of solar energy in homes.[9]

The Australian Greens’ position prior to the 2010 federal election was to implement a gradual and long term shift in the tax system from work‑based taxes to taxes on natural resources and pollution including:

•          a carbon tax levied on generators of mains-supplied electricity or gas

•          a national carbon trading scheme, and

•          other ecological taxes and charges at a level sufficient that their prices reflect the full environmental cost of their production, use or disposal.[10]

Post-election arrangements

In seeking to form a Government, the Prime Minister and the Australian Greens agreed to address the impact of climate change via a carbon price. Specifically, a written agreement notes:

That Australia must tackle climate change and that reducing carbon pollution by 2020 will require a price on carbon. Therefore the Parties agree to form a well resourced Climate Change Committee which encompasses experts and representative ALP, Greens, independent and Coalition parliamentarians who are committed to tackling climate change and who acknowledge that reducing carbon pollution by 2020 will require a carbon price.[11]

Multi-Party Climate Change Committee

On 27 September 2010, the Government announced the establishment of the Multi-Party Climate Change Committee (MPCCC) to explore options for the introduction of a carbon price.[12] The Committee comprised of the Prime Minister as Chair, the Deputy Prime Minister, the Minister for Climate Change and Energy Efficiency as Deputy Chair, two representatives from the Australian Greens and one independent member of Parliament. Four expert advisers were also appointed to the MPCCC.[13] While the Opposition were invited to nominate two members, this was rejected by the Opposition on the basis that the implementation of a carbon tax was a pre-conceived outcome of deliberations and was contrary to the position adopted by the ALP in the lead up to the 2010 federal election.[14]

Over the period October 2010 until July 2011, the MPCCC commissioned a number of research papers (including an update by Professor Garnaut of his 2008 review of climate change policies).  They also received advice covering a range of issues including scientific evidence on global warming, the implementation of a carbon tax and emissions trading schemes and policy responses in other countries.[15] The MPCCC also adopted a ‘principles-based’ framework to guide the development of a carbon price mechanism.[16]

On 31 May 2011, Professor Garnaut delivered his update report to the Government. Professor Garnaut confirmed his view that since 2008, ‘advances in climate change science have broadly confirmed that the earth is warming, that human activity is the cause of it and that the changes in the physical world are likely, if anything, to be more harmful than the earlier science had suggested’.[17] Professor Garnaut supported the establishment in 2012 of a three-year fixed carbon price starting in the range of $20 to $30 per tonne carbon dioxide equivalent, rising at 4 per cent in real terms, followed by a carbon trading scheme with a floating price.[18]

On 10 July 2011, the MPCCC released a ‘Clean Energy Agreement,’ which essentially forms the basis of the Clean Energy package.[19] Elements incorporated into the Clean Energy package that were not agreed by the MPCCC included the application of a carbon price to fuel used by heavy on‑road transport from 1 July 2014 (through changes to the fuel tax credits scheme) and enhanced industry support for the steel and coal sectors.[20]

Key Features of proposed scheme

The following outline sets out the key features of the proposed scheme as set out in the Bills and the Government’s key policy document, ‘Securing a clean energy future: The Australian Government’s climate change plan’.

In many respects the proposed scheme retains many of the features of the Carbon Pollution Reduction Scheme. The original Digest for that Bill provides a useful historical perspective[21] and differences between the CPRS and the proposed scheme are summarised in a separate Parliamentary Library on-line publication ‘Carbon Pollution Reduction Scheme and Carbon Pricing Mechanism: comparison of selected features’.

Contribution to domestic emissions reductions

The Clean Energy package contains three separate targets for emissions reduction in Australia:

•          to meet Australia’s obligations under the:

–      Climate Change Convention - 5 per cent reduction from 2000 levels by 2020 regardless of what other countries do, and by up to 15 or 25 per cent depending on the scale of global action

–      Kyoto Protocol - restraining national emissions to an average of 108 per cent of 1990 levels over the first commitment period (2008 to 2012), and

•          a long-term target of reducing Australia’s net greenhouse gas emissions to 80 per cent below 2000 levels by 2050.[22]

The Government estimates that meeting Australia’s commitment to reduce emissions by 5 per cent from 2000 levels by 2020 will require abatement of at least 159 Mt CO2-e (or 23 per cent) in 2020.[23]

Carbon price and transition to an emissions trading scheme

The proposed scheme establishes a fixed carbon price of $23 per tonne (rising at 2.5 per cent per year in real terms) directly on around 500 of the largest emitters of GHGs for the period 1 July 2012 to 30 June 2015.[24] From 1 July 2015, the carbon price will become flexible, within limits, under a ‘cap and trade’ emissions trading scheme, with the price largely determined by the market.[25]

A carbon price changes the relative price of carbon-intensive goods and services. According to economic theory, this creates incentives for producers and consumers to substitute, where possible, consumption of lesser carbon-intensive goods and services, thereby reducing, where possible, their consumption of carbon-intensive goods and services.

The proposed scheme is a modified cap-and-trade scheme. Generally, in cap-and-trade arrangements:

•          the Government sets an annual limit for GHG emissions

•          the Government then either sells or issues emission permits (called, interchangeably, emission units) to liable entities or other parties

•          liable entities may reduce their emissions in line with the number of emissions units they possess; sell surplus emissions units if their emissions are lower than their current number of units; or if they have insufficient units in relation to their GHG emissions, buy additional units on a secondary market

•          each liable entity then surrenders the number of emissions units equal to its emissions over the relevant accounting period (for Australia this will be the standard financial year running from 1 July to 30 June the following year)

•          entities who do not surrender sufficient emissions units in relation to their emissions are subject to a penalty, and

•          there is generally no upper limit on the price of an emissions unit.

•           

The proposed scheme departs from the classical cap-and-trade model in two main respects:

•          a fixed price period will for the first two years of the scheme with a emissions units able to be traded from 1 July 2015

•          a lower and upper limit of emission unit prices will apply for the first three years beyond 1 July 2015.

Carbon pollution/emissions caps and trajectories

The carbon price and transition to an emissions trading scheme, is one of several measures that will be relied upon to meet Australia’s international commitment to reduce national emissions to 5 per cent below 2000 levels by 2020.

From 1 July 2015, emissions caps will be established by the Government, on the advice of the proposed ‘Climate Change Authority’.[26] The caps will be set in regulations made under the Main Bill’s resulting Act.[27] Should the regulations not be tabled or be disallowed by the Parliament, ‘default’ emissions caps will come into effect.[28] The default caps have been established to be consistent with meeting Australia’s international commitment.[29]

The Government will establish emissions caps for the first five years of the emissions trading scheme (July 2015–June 2019) by 31 May 2014. The caps will then be set annually from 30 June 2016 to give businesses five years of certainty about the emissions caps they will face.[30]

With the transition to an emissions trading scheme, the number of emissions units issued (to be known as a ‘Carbon Unit’) will be equivalent to the emissions cap, thereby leaving the price of a carbon unit to be largely determined by the market.

Both a maximum price (‘ceiling’) and minimum price (‘floor’) will apply during the first three years (July 2015 to June 2018):

•          The level of the price ceiling will be set in Regulations at $20 above the international price and will rise in real terms by 5 per cent per year, and

•          The level of the price floor will start at $15 and rise in real terms by 4 per cent per year.[31]

A review of the price ceiling and price floor arrangements would be undertaken in 2017.[32]

Coverage

In 2009, total net national emissions of GHGs (including land use activities), as measured under the Kyoto Protocol accounting rules, was 564.5 Mt CO2-e.[33] Excluding net emissions of around 19 Mt CO2-e attributable to afforrestation and deforestation, the largest sources of emissions are from electricity generation (37 per cent), industrial fuel combustion (17 per cent), agriculture (15 per cent), transport (15 per cent), fugitive emissions (8 per cent), industrial processes (6 per cent), and waste (3 per cent).[34]

The Government estimates that the Clean Energy package directly covers over half of Australia’s emissions, with around two-thirds covered by a carbon price applied through various means.[35]

Greenhouse gases

The carbon pricing mechanism will directly cover four of the six greenhouse gases counted under the Kyoto Protocol – carbon dioxide, methane, nitrous oxide and perfluorocarbon emissions from the aluminium sector.[36]

The other two gases covered by the Kyoto Protocol — hydrofluorocarbons and sulphur hexafluoride — will face an equivalent carbon price.[37] This will be applied through the amendments proposed by the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Bill 2011 and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Bill 2011.[38]

Geography

The carbon price mechanism extends to specified industry sectors operating in every external territory of Australia, including to the coastal sea. However, any rights granted to foreign shipping under the United Nations Convention on the Law of the Sea will be recognised, thereby excluding foreign shipping companies from the scheme.[39]

Specific legislative provisions extend coverage to major petroleum and gas extraction projects in the ‘Joint Petroleum Development Area’ and ‘Greater Sunrise’ areas in the ocean between Australia and Timor-Leste.[40]

Industry sectors

Initially, emissions from the following sources will be covered under the carbon price mechanism:

•          stationary energy generation

•          non-legacy waste

•          industrial processes, and

•          fugitive emissions other than from decommissioned coal mines.[41]

Generally, direct obligations will apply to entities (that is, companies, trusts, partnerships and the like) or individuals, that have at least one facility that directly emits at least 25 000 tonnes of CO2-e per year or an equivalent amount on a pro rata basis if the facility is not controlled by the entity through the whole of the relevant year.[42]

Natural gas is included in the coverage of the carbon price mechanism but there is some flexibility in applying the liability from its supply and use. In general, the supplier of natural gas is liable for emissions unless a large gas consuming facility provides an ‘obligation transfer number’ to the supplier to provide for the voluntary transfer of carbon price liability for their own emissions.[43] Where natural gas is not supplied by a retailer, emissions from that natural gas will count towards the liability of covered facilities (that is, those facilities with emissions greater than 25 000 tonnes CO2-e). Where the gas is not used at a facility liable to the 25 000 tonnes CO2-e threshold, the owner of the gas will be the liable entity.[44]

While landfill facilities with a lower threshold of 10 000 tonnes of CO2-e were initially to be covered if they were located within a specified distance of another landfill facility which met the 25 000 tonnes of CO2-e threshold, the Government has proposed that these smaller landfill facilities be exempted until a review by the Climate Change Authority, to be conducted no later than 2015-16.[45]

Domestic rail, sea and aviation transport are not directly covered by the carbon price mechanism. For these sectors and for off-road transport use of liquid and gaseous fuels (except in agriculture forestry and fisheries) and non-transport use of liquid and gaseous fuels, an equivalent carbon price will be applied through changes in fuel tax credits or changes in excise.[46]

From 1 July 2014, the Government intends to expand the coverage of the carbon price to include heavy on-road vehicles.[47]

The fuel tax excise arrangements that will cover the domestic rail, sea and aviation transport will give companies covered by these arrangements the option to ‘opt in’ to the carbon price mechanism.[48]

Exemptions

Exemptions from the proposed scheme include:

•          the agricultural sector. However, farmers will be able to participate in emissions mitigation activities through the Carbon Farming Initiative, which will give farmers and other land managers an opportunity to generate income from taking action on their emissions[49]

•          emissions from operating landfill sites due to waste deposited on or before 30 June 2012[50]

•          Scope 2 emissions (indirect greenhouse gas emissions from the consumption of purchased electricity, heat or steam) and Scope 3 emissions (other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity), and[51]

•          decommissioned underground coal mines.[52]

In terms of the application of changes in fuel tax credits or changes in excise, when transport fuels are used as lubricants and solvents or in other ways that do not result in emissions the carbon price will not apply.[53]

Basis of operation

A carbon unit will be personal property with no limit on parties who may hold them.[54]

From the commencement of the carbon price mechanism on 1 July 2012, each directly covered participant, expected to be in the order of around 500 companies, will be required to purchase the required number of carbon units by from 1 April to 15 June of the financial year to which the emissions relate.[55]

In the fixed price period, covered participants are then required to surrender, by 15 June of the financial year to which the emissions relate, carbon units that equate to at least 75 per cent of the estimated emissions for that year.[56] A final surrender must be made before 1 February of the following year to the full value of the emissions.[57] Any shortfalls would be subject to a penalty charge of 130 per cent of the fixed charge issue charge.[58]

From the commencement of the emissions trading scheme on 1 July 2015, the price of carbon units will be determined at auction, but must be within the price ceiling and price floors. A final surrender of carbon units must be made by 1 February of the following financial year to avoid a penalty charge, which is set at 200 per cent of the benchmark average auction price for the previous financial year, subject to the Regulations setting a different rate.[59]

Enforcement powers provided to the Clean Energy Regulator range in seriousness from administrative penalties for failing to pay on time to criminal sanctions for dishonest or fraudulent behaviour.[60] Measures to assist compliance include:

•          requirements to make and keep records, information-gathering and monitoring powers

•          administrative and late payment penalties

•          enforceable undertakings

•          infringement notices

•          civil penalties

•          relinquishment orders

•          offences, including offences concerning administrative penalties and fraudulent conduct

•          provisions concerning liability for officers of bodies corporate, and

•          anti-avoidance provisions.[61]

Governance

There will be two new Commonwealth agencies created to advise on, and regulate the operation of the carbon price mechanism — the Climate Change Authority and the Clean Energy Regulator. These will be established by separate Bills (the Climate Change Authority Bill 2011 and the Clean Energy Regulator Bill 2011). Separate Bills Digests have been prepared for each of these Bills and therefore the following represents only a summary of the arrangements relating to each agency.

Functions and responsibilities of the Climate Change Authority will include:

•          provide recommendations to the Government on future pollution caps

•          make recommendations on the indicative national trajectories and long-term emissions budgets

•          provide independent advice to the Government on the progress that is being made to reduce Australia’s emissions to meet national targets, any indicative national trajectory or budget

•          conduct regular reviews of and make recommendations on the carbon pricing mechanism

•          conduct reviews of and make recommendations on the National Greenhouse and Energy Reporting system, the Renewable Energy Target and the Carbon Farming Initiative, and

•          provide advice to Government on the role of the price floor and price ceiling beyond the first three years of the flexible price phase.[62]

Functions and responsibilities of the Clean Energy Regulator will include:

•          providing education on the carbon pricing mechanism, particularly about the administrative arrangements of the carbon pricing mechanism

•          assessing emissions data to determine each entity’s liability

•          operating the emissions registry for emissions units

•          monitoring, facilitating and enforcing compliance with the carbon pricing mechanism

•          allocating permits including freely allocated permits, fixed price permits and auctioned permits

•          applying legislative rules to determine if a particular entity is eligible for assistance in the form of permits to be allocated administratively, and the number of other permits to be allocated

•          administering the National Greenhouse and Energy Reporting system, the Renewable Energy Target and the Carbon Farming Initiative, the regulatory functions which will be brought together with the Clean Energy Regulator to form an amalgamated independent regulator from July 2012 and

•          accrediting auditors for the Carbon Farming Initiative and the National Greenhouse and Energy Reporting System.[63]

The Productivity Commission will review both the impact of the carbon price arrangements on industry and the assistance provided. A mechanism for the Productivity Commission to undertake sectoral reviews on request and a review of fuel excise arrangements is also included as part of review arrangements.[64]

International linkages

At the commencement of the emissions trading scheme on 1 July 2015, Australian businesses will be able to purchase, with some limitations, emissions reductions achieved in other countries from ‘credible’ international carbon markets or emissions trading schemes in other countries.

Some of the limitations that apply include:

•          until 2020, Australian businesses will be required to meet at least half of their annual obligations domestically, and

•          only specified international units are able to be purchased to meet domestic obligations. At the outset this will include a limited type of certified emissions reductions (CERs) and emission reductions units (ERMs) from Kyoto Protocol ‘Clean Development Mechanism’ and ‘Joint Initiative’ projects, and some types of removal units (RMUs) issued by a Kyoto Protocol country on the basis of land-use change and forestry activities. Further types of emissions units may be allowed by regulation, for instance linking to the European Union and New Zealand emissions trading schemes is a possibility.[65]

Treasury expects that over the period to 2020, Australian businesses will purchase almost 400 Mt CO2-e of international emissions permits. Based on Treasury’s expected international carbon price over the period to 2020, Australian businesses will pay almost $A10.5 billion (in 2010 prices) for international permits over this period.[66]

Impact on households

Treasury modelling suggests that the overall price impact of the carbon price will not be significant, with the consumer price index (CPI) rising by 0.7 per cent in 2012-13 — equivalent to an average increase in household expenditure of $9.90 per week.[67]

Households will be given compensation for the implementation of a carbon price through a mix of changes to income tax arrangements, one-off direct payments to eligible households and increases in pensions and allowances.

Separate Bill Digests have been prepared to examine the details of various household assistance measures and therefore the following represents only a summary of the household assistance.[68]

Income tax changes

The income tax changes incorporate a number of separate elements that have the general effect of simplifying the income tax system for persons on incomes lower than $18 000 by:

•          increasing the nominal tax‑free threshold from $6 000 to $18 200 from 2012-13 (and then to $19 400 from 2015-16)

•          merging tax offsets for pensioners and senior Australians, and

•          reducing the low income tax offset (LITO) for 2012-13 from $1500 to $445, with a 1.5 per cent withdrawal rate on income over $37 000 (compared to a 4 per cent withdrawal rate on income over $30 000 under current arrangements). For 2015-16, the LITO is proposed to decrease to $300 with a withdrawal rate of 1 per cent on income over $37 000.[69]

The combined impact of these changes is to reduce income tax paid by those with a taxable income of less than $80 000 from 2012-13, with the largest tax cuts received by those on lower incomes. The Government also claims that this will eliminate the need for 1 million low income earners to lodge a tax return.[70]

Transfer payments

The centrepiece of the planned increases to welfare payments will be a new ‘Clean Energy Supplement’, which will equate to a 1.7 per cent increase in pensions, income support allowances and family payments. This will result in increased payments of approximately:

•          $338 per year for single pensioners and up to $510 per year for pensioner couples combined (includes Age Pension, Disability Support Pension, Carer Payment, Parenting Payment-Single, Veterans’ Service Pension)

•          $338 per year for single self-funded retirees and up to $510 per year for couples combined (retirees must be eligible for a Commonwealth Seniors Health Card)

•          $110 per child for a family that receives Family Tax Benefit Part A

•          $69 extra for families that receive Family Tax Benefit Part B

•          $218 extra per year for single income support allowance recipients and $390 per year for couples combined (includes Newstart Allowance and Youth Allowance) and

•          $234 per year for single parents in addition to the increased family payments they receive.

The Clean Energy Supplement will be a more identifiable form of support than that envisaged under the Carbon Pollution Reduction Scheme (CPRS), where such support was to have been mainly provided through (and somewhat hidden within) increases in the rate of payments and bringing forward indexation.

Payment of the Clean Energy Supplement will begin prior to the introduction of the carbon price in the form of lump sums (known as the Clean Energy Advance) in May–June 2012. Thereafter, it will change to fortnightly payments from March 2013 for pensions and most allowances, July 2013 for family payments and January 2014 for students on Youth Allowance. The Clean Energy Advance is intended to ensure that people are already receiving compensation when prices start to rise.

For pensioners and most allowance recipients, the lump sum payment will be equivalent to nine months of the extra annual payment and for families the lump sum will be equivalent to a full year of the extra payment.

Other features of the household assistance paid through the welfare payments system include:

•          a new $300 annual Low Income Supplement will be available to households who do not receive enough assistance through tax cuts or government payments to offset their average expected cost impact under a carbon price

•          a new Single Income Family Supplement of up to $300 to assist single income families with incomes between $68 000 and $150 000—this is to compensate such families for the fact that unlike dual income families, these single income families only get one tax cut

•          aged care providers will receive around half of the additional assistance paid through the Age Pension in recognition of the additional costs (such as electricity costs) borne by providers

•          people who hold Commonwealth concession cards and who rely on certain medical equipment will  receive an annual cash payment of $140 a year in order to cover the average electricity price increase from the use of their medical equipment due to the carbon price.

Industry assistance

There are a range of targeted industry, and sector-specific, assistance programs as well as general assistance programs available to most businesses that are part of the Clean Energy package. These assistance measures take a number of forms, including tax incentives, free and discounted emissions permits, matched grants programs and information and advisory services. The Government has also provided for review mechanisms, to be primarily conducted by the Productivity Commission, to guide future decisions about industry assistance measures.

The Government has allocated around 40 per cent of the revenue raised by the carbon tax revenue to fund industry assistance measures.[71] This will be supplemented by additional funding for several industry-specific measures. In total, the Government has estimated that industry assistance measures implemented as part of the Clean Energy package will cost more than $17 billion between 2011–12 and 2014–15.[72]

Further details about industry assistance measures follow.

Fuel tax credit reduction exemptions

As noted previously, transport fuels such as diesel fuel and LPG are not directly covered by the carbon pricing mechanism but will face an equivalent carbon price through changes in excise and tax credit reductions. The cost of not permanently including the agriculture, fisheries and forestry sectors from these tax credit changes and excluding heavy on-road transport until 1 July 2014 is estimated to be $1.8 billion over the period 2012–13 to 2014–15.[73]

Energy security measures

An Energy Security Fund will provide $3 billion over the period to 2014–15 to provide for the allocation of cash and/or free carbon permits to:

•          pay for the closure of ‘around 2 000’ megawatts of coal-fired generators with an emissions intensity of greater than 1.2t CO2-e per MWh of electricity on an ‘as generated’ basis.[74] This will apply to mainly brown coal-fired generators such as Hazelwood power station and Yallourn power station in Victoria and the Playford power station in South Australia.[75]

•          to generators with an emissions intensity of greater than 1.0t CO2-e per MWh of electricity on an ‘as generated’ basis. This threshold will again apply to mainly brown coal‑fired generators in Victoria and South Australia. It does not appear the black coal-fired facilities are above this threshold.[76] Shares of free carbon permits and cash will be based on the extent to which each generator’s emissions intensity exceeds 0.86t CO2-e /MWh on an ‘as generated’ basis and the generator’s historical energy output. Individual generator’s emissions that exceed 1.3t CO2-e /MWh will be capped at this level.

•          loans to electricity generators for the purchase of future vintage carbon permits (that is, a permit to emit in a specified future year) for the first three years of carbon permit auctions. The Government may also consider making loans available where generators need to refinance their existing debt and finance is not available from the private market.[77]

The issue of free carbon permits to electricity generators is subject to two conditions:

•          A ‘power system reliability test’ seeks to promote the secure supply of electricity by preventing the withdrawal of generation capacity. This can be achieved in one of three ways: (i) the ‘nameplate rating’ (that is, the generator’s maximum continuous electrical output in MW as registered with the relevant energy market regulator) remains the same or exceeds that rating as at 1 July 2010; (ii) certification by the relevant energy market regulator that a proposed withdrawal of generation capacity will not affect power system reliability within 2 years; and (iii) by substituting low‑emissions replacement capacity for any existing capacity withdrawn.[78]

•          The development and submission to the Minister for Resources and Energy for publication of a ‘Clean Energy Investment Plan’. The plan should include information such as the plans (if any) for investment in new generation capacity, investing to reduce the emissions intensity of the generation complex for which free carbon units are issued, and for investment in research and development in clean energy technologies.[79]

Jobs and Competitiveness Program

The Jobs and Competitiveness Program provides $9.2 billion over the period 2012–13 to 2014–15 in the form of free carbon permit allocations for companies primarily in emissions-intensive trade-exposed industries, such as steel, aluminium, glass and chemicals manufacturing.[80] This assistance program is basically the Emissions-Intensive Trade-Exposed support package that was negotiated under the CPRS.

The Government’s main argument in providing industry assistance to these industries is that there is a risk of ‘carbon leakage’, whereby production (and associated emissions) shifts from Australia to those international competitors who do not face a carbon price, with consequent job losses and other economic implications.[81]

Eligibility is based on industry-based thresholds of trade exposure and emissions intensity. The Government estimates that 40 to 50 activities will be eligible for such assistance.[82]There will be two levels of assistance provided depending on the relative emissions intensity:

•          activities with an emissions intensity of at least 2 000t CO2-e per $1 million revenue or at least 6 000t CO2-e per $1 million value added will receive permits to the value of 94.5 per cent of the industry average baseline. Activities that are likely to meet this threshold include aluminium smelting and steel manufacturing.[83]

•          activities with an emissions intensity between 1 000 t CO2-e per $1 million and 1,999t CO2-e per $1 million revenue or between 3 000t CO2-e per $1 million and 5 999t CO2-e per $1 million value added will receive permits to the value of 66 per cent of the industry average baseline.[84] Activities that are likely to meet this threshold include some plastics and chemical manufacturing and ethanol production.[85]

•          LNG projects will receive a supplementary allocation to ensure they receive free permits to cover at or above 50 per cent of all the emissions associated with the LNG production process each year.[86]

•          New entities conducting emissions-intensive trade-exposed activities will have their allocations limited by regulations in a manner to avoid windfall gains from assistance, and also, in the case of significant expansions, ‘the Regulator will be afforded the discretion to determine an allocation for the expected production in a given year’.[87]

The value of free permits will decline by 1.3 per cent per year, with the Productivity Commission to undertake a review of the program in 2014–15.[88] In addition to this scheduled review, from
2012–13, firms may make a request to the Government to have the impact of a carbon price on their sector assessed.[89]

Importantly, the Jobs and Competitiveness Program specifically excludes the extraction of coal as an emissions-intensive trade-exposed activity.[90]

Steel and coal industry-specific assistance

The steel and coal industries will receive separate targeted assistance, outside of those agreed by the MPCCC. These measures are funded from outside the carbon pricing mechanism.[91]

The Steel Transformation Plan will provide assistance worth up to $300 million over five years to encourage investment and innovation in the Australian steel manufacturing industry. Funding under the Steel Transformation Plan will be in addition to assistance for steel makers under the Jobs and Competitiveness Program.[92]

The Coal Sector Jobs Package will provide $1.3 billion over six years to coal mines with fugitive emissions in 2008–09 of at least 0.1t CO2-e per tonne of saleable coal produced. Assistance will be provided to eligible mines for up to 80 per cent above the threshold.[93] The Coal Sector Jobs Package will not assist new mines or expansions of production in existing mines.[94]

The Coal Mining Abatement Technology Support Package provides $70 million over six years in the form of co-contributory grants to assist the coal industry implement carbon abatement technologies.[95]

Clean Technology Program

The Clean Technology Program provides $1.2 billion over seven years from 2011–12 ($717 million to 2014–15) to provide support to the manufacturing industry through three separate programs:

•          under the Clean Technology Investment Program, manufacturing businesses with facilities that have an annual electricity consumption of at least 300 megawatt hours or 5 terrajoules of natural gas or are directly liable under the carbon pricing mechanism, are eligible for $800 million in competitive grant funding over seven years from 2011-12 (minimum grant $25 000) to invest in energy efficient capital equipment and low-emissions technologies, with a co‑investment of three dollars for every dollar of grant funding

•          under the Clean Technology Food and Foundries Investment Program, manufacturers in the metal forging and foundry sector and the food processing sector, are eligible for $200 million in competitive grant funding ($50 million allocated to metal forging and foundries and $150 million to food processing) over six years from 2011-12 (minimum grant $25 000) to invest in energy efficient capital equipment and low-emissions technologies, with a co‑investment of three dollars for every dollar of grant funding. In the event that funding under this program is exhausted, eligible businesses will be able to apply under the Clean Technology and Investment Program.

•          Under the Clean Technology Innovation Program, any business (including companies controlled by universities and public sector research organisations) is eligible for $200 million in competitive grant funding over five years from 2012–13 (of between $50 000 to $5 million) to support investment in low‑emissions research and development in areas of renewable energy, low-emissions technologies and energy efficiency.[96]

Small business asset write-off

The small business asset write-off proposes to further increase the instant asset write-off from $5 000 to $6 500 for businesses with an aggregate turnover of less than $2 million per year from 2012–13.[97] The cost for this measure is estimated to be $200 million in foregone revenue over the period to 2014–15.[98] It is important to note that this measure is contingent on the passage of the ‘Minerals Resource Rent Tax’.[99]

Other measures

There are a range of further targeted and general assistance measures that are part of the Securing our Clean Energy package. These include:

•          competitive grants to industry associations and non-government organisations to provide energy efficiency advice and assistance which will cost $40 million over the period to 2014–15[100]

•          funding of $90 million over 2012–13 to 2014–15 has been set aside to provide assistance for regions ‘strongly’ affected by the introduction of a carbon price[101]

•          the Clean Energy Skills Program will provide $32 million over the period to 2014–15 to assist educational institutions and industry develop the materials and expertise to promote ‘clean energy’ skills[102]

•          the Clean Technology Focus for Supply Chains Programs provides an additional $5 million over the period to 2014–15 targeting clean technology businesses under existing industry assistance programs.[103]

Support for energy efficiency and renewable energy measures research and development

Although not identified as part of the Clean Energy Bills package, two government agencies will be created to administer funding and programs aimed at supporting research and development activities in energy efficiency and renewables.

The Clean Energy Finance Corporation (CEFC), with funding of $10 billion over five years from 2013–14, will be established to invest in the commercialisation and deployment of renewable energy and enabling technologies, energy efficiency and low-emissions technologies.[104] It will not invest in carbon capture and storage technologies.[105]

The CEFC will provide finance for projects through commercial loans, concessional loans, loan guarantees and equity. Capital will be reinvested with the CEFC.[106] The Prime Minister will appoint the Chair of the CEFC to report back to the Government by early 2012 on a range of governance arrangements.[107]

Legislation to establish the CEFC is expected to be introduced in early 2012.[108]

The Government will establish the Australian Renewable Energy Agency (ARENA) to oversee $3.2 billion of existing programs to support research and development, demonstration and the commercialisation of renewable energy technologies delivered by a range of agencies including the Australian Centre for Renewable Energy, the Australian Solar Institute and the proposed Australian Biofuels Research Institute.[109] ARENA will also receive future funding from discretional dividends paid by the Clean Energy Finance Corporation and a share of future carbon pricing revenue notionally allocated to the Jobs and Competitiveness Program should it be freed following Productivity Commission reviews.[110]

The Bill to establish ARENA was introduced in the House of Representatives on 12 October 2011.[111]

Land sector measures

Although largely excluded from the application of a carbon price, the agricultural sector will be able to participate in a range of programs which are aimed at offsetting emissions in other sectors or mitigating the impact of climate change on natural resources.

The Carbon Farming Initiative (CFI), for which legislation was passed by the Parliament in August 2011, is a program that allows farmers and land managers to generate credits, which then can be traded with companies who have a liability under the carbon price mechanism, for actions that reduce emissions or increase carbon storage. These can include:

•          reforestation and revegetation

•          reduce fertiliser emissions

•          native forest protection, and

•          reduced emissions from legacy landfill waste.[112]

Not all credits generated under the CFI can be used within the emissions trading scheme, with certain activities, such as soil carbon management, not yet recognised under the Kyoto Protocol.

The Government will allocate $250 million over six years from 2012–13 to purchase non-Kyoto compliant Carbon Farming Initiative credits, which cannot be purchased by liable entities for the purposes of the carbon pricing mechanism.[113]

The Carbon Farming Futures Fund comprises of $429 million over six years from 2011-12 to assist landholders benefit from carbon farming. It comprises of four components:

•          Filling the research gap — funding for research into abatement technologies and practices

•          Developing estimation methodologies — funding to convert research from Filling the research gap into carbon estimation methodologies

•          Action on the Ground — funding for on-farm abatement, including support for farmers to adopt more sustainable, conservation tillage farm equipment, and

•          Extension and outreach — new extension officers to help farmers benefit from carbon farming.[114]

The Biodiversity Fund will comprise of $946 million over six years from 2011-12 to:

•          establish biodiverse carbon plantings in areas of high conservation value such as wildlife corridors, riparian zones and wetlands

•          prevent the spread of invasive species across connected landscapes, and

•          manage existing biodiverse carbon stores, including on land already under conservation covenants or subject to land clearing restrictions, and publicly owned native forests.[115]

Additional measures that target farmers, Indigenous Australians and other landholders include:

•          an additional $22 million over five years from 2012–13 for the Indigenous Carbon Farming Fund for specialists to work with Indigenous communities to develop carbon farming projects, and development of low-cost estimation and reporting tools for abatement activities likely to have high Indigenous participation, such as savanna fire management

•          a Regional Natural Resources Management Planning and Climate Change Fund of $44 million over five years from 2011–12 for regional natural resource management (NRM) organisations to plan for climate change, the production of NRM plans to a highly professional, nationally consistent standard; and the development of scenarios on regional climate change impacts.

•          an additional $4 million over five years from 2011–12 for the ongoing Carbon Farming Skills initiative to fund the development of a new nationally accredited qualification for carbon service providers, accreditation of carbon brokers and aggregators operating in the Carbon Farming Initiative, and information workshops for farm extension officers, catchment authorities and rural service providers about carbon farming. [116]

Committee consideration

The Bill was referred to the Joint Select Committee on Australia’s Clean Energy Future Legislation for inquiry and report by 8 October 2011. Details of the inquiry are at http://www.aph.gov.au/house/committee/jscacefl/index.htm.

The majority report of the Committee recommended that the Senate and the House of Representatives should pass the 19 Bills that comprise the Clean Energy legislative package.[117] The majority report also highlighted three issues the Government should re-examine: the treatment of LPG, the regulation of synthetic greenhouse gases, and information and guidance being provided to those directly affected by the mechanism and related reforms.[118]

A dissenting report by Coalition members of the Committee disagreed with the majority report and recommended that the Clean Energy legislative package not be passed.[119] Supplementary remarks by the Australian Greens indicated that they have yet to finalise their position on the additional assistance to the steel industry proposed by the Steel Transformation Plan Bill 2011.[120] The Australian Greens subsequently announced that they would move an amendment in the Senate to the Steel Transformation Plan Bill 2011 to pay particular regard to the Green Jobs Illawarra Action Plan and any other similar plans in other affected regions, but would support the Bill through both Houses of Parliament.[121]

On 7 October 2011, the Senate Select Committee on the Scrutiny of New Taxes tabled an interim report for its inquiry into Carbon Pricing Mechanisms. Details of the inquiry are at http://www.aph.gov.au/senate/committee/scrutinynewtaxes_ctte/carbontax/index.htm

The majority report of the Committee recommended that the Clean Energy legislation should be opposed.[122] A dissenting report by Government Senators disagreed with the recommendations of the majority report.[123] Additional comments by Senator Xenophon indicated that the Senator would not be supporting the Clean Energy legislative package.[124]

Position of major interest groups

This section discusses the views and major issues canvassed by national business, environmental and other interest groups. It does not include the views of state-based organisations.

Some business and industry organisations support the need to reduce emissions. However, some business groups are opposed to the Clean Energy legislative package because of concerns about the impact of the carbon price mechanism on international competitiveness. In general, environmental groups support the carbon price mechanism measures.

Industry and business views

The Business Council of Australia has generally offered its support for government action to address the impacts of climate change and has stated that while a market-based mechanism for emissions reduction should be the primary vehicle, other supporting policies, investments and initiatives will be required to ensure the research and development necessary to identify technology solutions – including low-emissions technologies, improve energy efficiency, and build Australia’s adaptation capabilities.[125] Research commissioned by the BCA into the risks to the Commonwealth Budget position should emission permit prices beyond 2015–2016 be lower than expected, found that the cumulative fiscal shortfall of the Clean Energy package would be around $18.6 billion over the period 2015–16 to 2019–20.[126]

The Australian Industry Group (AiG) supports the removal of uncertainty so that decisions can be made regarding major long-term investments, but considers that this certainty should not come at the cost of a loss of competitiveness that sends jobs and emissions offshore or risks the continuity of energy supply.[127]

The Australian Chamber of Commerce and Industry (ACCI) is opposed to the Clean Energy package in the absence of a legally binding agreement and concerted international action to reduce greenhouse gas emissions.[128] Research commissioned by the ACCI on the impact of the carbon tax on small and medium enterprises (SMEs) found that energy intensive SMEs are likely to suffer a cut in profitability of between 10 per cent and 20 per cent under the tax.[129]

The Minerals Council of Australia (MCA) consider that the carbon tax will erode the competitiveness of Australia’s export and import competing sectors without any environmental benefit.[130] The MCA estimate that the minerals industry will face costs of $25 billion between 2012 and 2020 under the carbon tax package and that the decision to include emissions from coal mines is unique, with these emissions exempted under the European Union emissions trading scheme.[131]

The Australian Coal Association (ACA) supports the introduction of a long term price on carbon as part of an international agreement, recognising that actions by Australia alone will be ineffective and costly to our economy and our international competitiveness.[132]

The ACA recently commissioned economic consultants ACIL Tasman to examine the effects of application of greenhouse gas emissions pricing to the black coal mining sector in Queensland and New South Wales. Some of the key findings by ACIL Tasman included:

•          conservative estimates of employment foregone in 2020-21 from applying emissions pricing to existing coal mines would be around 4,700 jobs in coal mines and 14,100 jobs in the Australian economy. Export coal sales foregone in 2020/21 are estimated to be around $3.64 billion. The total loss of coal sales over the period from implementation of emissions pricing to the end of 2020/21 would exceed $22 billion. These estimates include only losses from premature mine closures. They do not include employment losses from operating economies made within surviving mines

•          conservative estimates of employment losses from applying emissions pricing to potential new coal mining developments would be elimination of 25-37 per cent of potential new jobs. These estimates relate to employment lost in mines rendered unviable by emissions pricing. They do not include job losses from changes to production rates in response to emissions pricing imposts.[133]

The Australian Petroleum Production and Exploration Association (APPEA) supports ‘a national climate change policy that delivers abatement at least cost and facilitates investment decisions consistent with there being an international price on carbon’.[134]

The Australian Institute of Petroleum (AIP) consider that major international competitors will not have to bear a carbon price for many years and that as a result there is a risk of production moving offshore without any reduction in global emissions unless emissions-intensive, trade-exposed industries like oil refining are assisted.[135]

The Association of Australian Mining and Exploration Companies (AMEC) supports a phased transition to a low-carbon Australian economy and the development and deployment of low emissions technologies.[136] AMEC is opposed to the Clean Energy package and argue its cost will be borne disproportionately by the mineral exploration and mining sector because companies will have little opportunity to reduce costs through alternative energy sources.[137]

The Cement Industry Federation (CIF) consider that the recent focus on emissions trading schemes and carbon prices have ignored the importance of technology solutions such as international technology partnerships and research, development and demonstration support.[138] One of the CIF’s major concerns is the design of industry assistance measures for emissions-intensive trade-exposed industries.[139]

The Electricity Supply Association of Australia (ESAA) has long supported the introduction of ‘an efficient, equitable and enduring emissions trading scheme’.[140] On announcement of the Clean Energy package, the ESAA noted that seeking expressions of interest to close a limited number of highly emissive generation plants will help the sector reduce its emissions and could provide timely signals to new investors in lower emission generation, but ‘the potential significant impairment of a greater number of generation assets could send a chilling message to future energy sector investors’.[141]

The Australian Pipeline Industry Association (APIA) supports the introduction of an ‘efficient’ carbon price.[142] While the industry welcomed the likely increase in demand for natural gas, many member companies would also face higher input costs.[143]

The Australian Aluminium Council (AAC) considers that ‘the most appropriate response to climate change is a globally consistent approach, which would include a globally consistent price on carbon’.[144] The AAC’s policy position notes that in the absence of a global response ‘Australian policy must preserve the international competitiveness of Australian industries and the economic and social dividends they deliver’.[145]

The National Farmers Federation (NFF) is opposed to the carbon tax on the basis that it erodes the competitiveness of the agricultural industry in domestic and international markets.[146] The NFF have estimated that the average Australian farmer will incur an additional $1,500 a year in costs under a carbon price of $23 per tonne (fuel excluded), eroding their net farm income by 2.4 per cent.[147]

The Australian Landfill Owners Association (ALOA) ‘supports initiatives for Australia to develop and implement an early response to climate change’.[148]

The Australian Tourism Export Council (ATEC) consider that the carbon price mechanism will impact significantly on the tourism industry, at a time when the high Australian dollar and declining domestic tourism are impacting on the sector.[149] Research commissioned by the ATEC found that Australian tourism businesses face electricity increases of 30 per cent or more, with a significant impact on operators reliant on diesel or aviation fuel who face a reduction in their Fuel Tax Credit of 18 per cent.[150]

The Housing Industry Association (HIA) consider that the carbon tax mechanisms will lead to job losses within the housing sector as input costs rise and production shifts offshore.  In the alternative they support policies to make new energy efficient housing more affordable and to provide incentives for current home owners to make their homes more energy efficient.[151] The HIA estimate that the carbon tax mechanism will add between $5 000 and $6 000 to the cost of a house on an average house and land package.[152]

The Australian Food and Grocery Council (AFGC) support a national approach to carbon pricing policy which maintains the competitiveness of Australian export and import industries, without exposing industry to costs not faced by regional competitors.[153] The AFGC had lobbied for an industry assistance package to assist businesses become more energy efficient and, while noting that the Clean Technology Food and Foundries Investment Program would assist in this regard, the AFGC consider that the competitiveness of the industry would be affected due to supply chain cost increases.[154]

The Australian Retailers Association (ARA) consider that the carbon tax mechanism ‘spelt disaster for the retail sector as planned tax cuts failed to adequately compensate retailers for being the catchment point of price rises passed through the supply chain, leaving the majority of households out of pocket due to the increased cost of goods and living expenses’.[155] An ARA-commissioned survey of 500 retailers in August 2011 found that almost 85% of retailers expect a carbon tax to have a negative impact on business profitability and over a third of retailers will pass on price increases to consumers.[156]

The Australian Trucking Association considers that the trucking industry should be permanently exempt from an equivalent carbon price.[157] This is based on the view that trucking businesses are predominantly small businesses and as such, should not be treated differently to other small businesses which are excluded and that the trucking industry has already improved its environmental performance.[158]

Environmental group views

The Total Environment Centre is generally supportive of the Clean Energy package, noting that while there were transitional issues to be addressed, the plan ‘contains sufficient dynamic and interrelated components to change the way energy and business decisions are made’.[159]

While the $23 carbon price was less than that advocated by the Australian Conservation Foundation, the Foundation welcomed the establishment of the Climate Change Authority to recommend targets when the emissions trading scheme commences and the legislated 80 per cent emissions reduction target by 2050.[160]

The Climate Institute has been an ongoing supporter of an Australian emissions trading scheme, noting that ‘the Clean Energy Future package is a vital and long overdue step forward with great potential for Australia to cut pollution, clean up the economy, reduce energy waste and join the global effort to tackle climate change’.[161]

The World Wildlife Fund (WWF) consider that the Clean Energy package is ‘an important first step towards meeting Australia’s obligations to act on climate change’.[162] The WWF support the cap and trade policy approach as they consider that it provides certainty around emission reduction targets, that it minimises national budgetary risk, it delivers least cost abatement in covered sectors and that it sends a long-term price signal for large-scale investment.[163]

Other interest groups

The Australian Council of Social Services (ACOSS) supports the introduction of the Clean Energy package, considering that it was ‘a historic opportunity to tackle the problem of climate change and build a cleaner future whilst ensuring low income households are adequately looked after’.[164] However, ACOSS was concerned that the package does not explicitly recognise or address the likely impacts of a carbon price on the capacity of community service organisations, particularly in the areas of food and energy.[165]

The Australian Bankers Association (ABA) ‘supports carbon being priced as part of Australia’s efforts to bring about global action on climate change and to meet our domestic obligations’.[166]

The Australian Local Government Association (ALGA) supports a price on carbon but considers that ‘care needs to be taken to ensure that the mechanism can actually achieve emissions reduction’.[167] The ALGA note that local government authorities will be significantly affected by the carbon price mechanism through increased energy charges and the inclusion of landfill facilities, with estimates that the additional local government electricity costs for the provision of street lighting could be up to $17.5 million and the total costs of electricity for local government up by around $29 million.[168]

The Australian Council of Trade Unions (ACTU) support a price on carbon emissions, considering that ‘Australia needs to take prompt and decisive action to remain competitive and benefit from the global clean energy economy’.[169] The ACTU concede that the rate of economic growth would be lower with a carbon price than without but that households and business would be supported to adjust to the price and that ‘the benefits for the Australian economy and environment from action on climate change would ultimately outweigh any small slowing in the rate of growth’.[170]

The Construction, Forestry, Mining and Energy Union (CFMEU) consider that carbon pricing is inevitable in Australia and that there is a risk that Australia will not benefit from associated industrial innovation and investment.[171] The CFMEU advocate that a range of industry assistance and regional adjustment measures should be available to support employees and communities that are affected by power station closures.[172]

Early in 2011, Mr Paul Howes from the Australian Workers’ Union (AWU) was critical of the carbon tax, stating that he would not support it if it was to cost one job.[173] However, more recently, the AWU have expressed their support for the Clean Energy package, but have concerns about industry assistance measures to protect jobs.[174]

The Transport Workers’ Union (TWU) does not support a carbon tax, with TWU national president Tony Sheldon labelling the carbon tax a ‘death tax’.[175] The TWU believe that truck drivers would be unable to pass on the $150 to $200 a week impact of the tax.[176]

The Southern Cross Climate Coalition (SCCC), an alliance of the Australian Conservation Foundation, the Australian Council of Trade Unions, the Australian Council of Social Service and The Climate Institute, is generally supportive of the Clean Energy package but noted that the final package differs from its preferred position in a number of ways. These include:

•          the scheme should apply to the broadest possible section of the economy and a timeline should be developed for the inclusion of uncovered sectors, and

•          the scheme lacks new commitments on how Australia will assist the world’s poorest and most vulnerable countries to reduce pollution, protect their forests and manage the unavoidable impacts of climate change.[177]

Policy position of non-government parties/independents

The Coalition

While the Coalition remain committed to Australia’s international target of a 5 per cent reduction in 2000 emissions levels by 2020, the Coalition have indicated that they will oppose the Bills.[178] Further, the Coalition have stated that they would repeal the legislation if elected to govern.[179] The main grounds for the Coalition’s opposition to the Bills are that:

•          the Prime Minister does not have a mandate to introduce such measures, particularly given that she stated in the lead up to the 2010 federal election that ‘there will be no carbon tax under the government I lead’

•          by imposing costs on Australian businesses without similar action being taken by Australia’s international competitors, industries and jobs will move offshore without any reduction in emissions

•          small businesses and regional economies will suffer disproportionately, with no direct assistance offered to small business and the ‘gap between the city and country will just get bigger’, and

•          the ‘direct action’ policy is a strong and effective policy that will reduce carbon emissions by 5 per cent by 2020 without a new tax.[180]

Australian Greens

As previously noted, a written agreement in September 2010 between the leaders of the Australian Greens and the Prime Minister and Treasurer to implement a price on carbon, underpinned the development of the Clean Energy package through the MPCCC.

There are several aspects of the final Clean Energy package that were not the subject of agreement by the MPCCC. These include applying an effective carbon price to heavy on-road transport from 1 July 2014 and industry assistance measures for the steel and coal mining industry.[181] The Australian Greens have indicated that they will move amendments to the Steel Transformation Plan Bill 2011 in the Senate:

that the Government, in allocating funds under the Steel Transformation Plan, pay particular regard to the Green Jobs Illawarra Action Plan and any other similar plans in other affected regions.[182]

The Australian Greens are reported to have agreed to pass the Bills through the parliament before the end of 2011.[183]

Independents

In the House of Representatives, Mr Wilkie supported the legislative package.[184] Both Mr Oakshott and Mr Winsdor, as members of the Multi-Party Climate Change Committee which developed key aspects of the Clean Energy package, also supported the legislation.[185] Mr Katter is opposed to the legislative package.[186]

Senator Xenophon supports a policy approach that is based on penalising emitters where their emissions intensity is above a set standard and rewarding them if their emissions intensity is below a set standard but has indicated that he ‘ultimately cannot support’ the legislative package.[187] Senator Xenophon proposed a number of amendments to the draft bills, including:

•          increasing the target for emissions reduction to 10 per cent less than 2000 levels by 2020

•          establishing a ‘clean energy standard’ for the electricity generation sector that provides incentives through a declining free allocation of permits based on a benchmark for each year

•          establishing a national energy efficiency scheme based on existing state-based schemes

•          recognising voluntary action so that such action is rewarded

•          requiring greater compliance by emissions-intensive trade-exposed industries  by requiring that they demonstrate that they are both economically viable and environmentally responsible to be eligible to receive assistance.[188]

Financial implications

Table 1 contains an outline of the proposed scheme’s financial impact on the federal budget. This includes measures that were not agreed by the MPCCC, such as the Steel Transformation Plan.[189]

Table 1: Estimated impact of the Clean Energy package on the Federal Budget, 2011–12 to 2014–15

Fiscal impact ($ million)

Forward estimates

2011–12

2012–13

2013–14

2014–15

Revenue from the sale of units

0

7 740

8 690

9 190

25 620

Revenue from the application of carbon price via other measures (a)

0

290

320

320

930

Fuel tax credit reductions (b)

0

570

70

70

710

Household assistance measures

-1 534

-4 230

-4 809

-4 830

-15 403

Assistance for low- to middle-income households

-1 470

-4 125

-4 672

-4 700

-14 967

-          increases in transfer payments (c)

-1 470

-775

-2 302

-2 380

-6 927

-          tax reform

0

-3 350

-2 370

-2 320

-8 040

Low Carbon Communities – redesign and extension

-5

-39

-83

-90

-217

Other household energy efficiency measures (d)

-7

-13

-15

-13

-48

Household assistance implementation

-51

-54

-39

-28

-172

Support for jobs

-26

3 017

-3 475

-3 773

-10 291

Jobs and competitiveness Program

0

-2 851

-3 059

-3 312

-9 222

Clean Technology Program (e)

-19

-142

-245

-312

-717

Increased small business instant asset write-off

0

0

-100

-100

-200

Regional structural adjustment

0

-10

-50

-30

-90

Other business energy efficiency measures (f)

-7

-15

-21

-19

-62

Clean Energy Finance Corporation (g)

-2

-21

-467

-455

-944

Energy security and transformation (h)

-1 009

-1

-1 003

-1 042

-3 054

Land and biodiversity measures

-69

-131

-506

-489

-1 194

Carbon Farming Initiative

0

-47

-65

-81

-193

Biodiversity Fund

-37

-35

-250

-251

-572

Carbon Farming Futures Program

-31

-30

-113

-102

-276

Carbon Farming Initiative Non-Kyoto Carbon Fund

0

-1

-50

-47

-97

Regional Natural Resource Management Planning

0

-13

-23

-4

-40

Other land and biodiversity measures (i)

-1

-5

-5

-4

-16

Governance

-78

-90

-106

-107

-382

Clean Energy Regulator

-68

-68

-61

-59

-256

Coverage of synthetic greenhouse gases

-1

-2

-26

-31

-60

Climate Change Authority

0

-6

-9

-9

-25

Productivity Commission Reviews

-4

-4

-5

-5

-18

Other governance

-5

-9

-5

-4

-23

Additional Government measures

-223

1 110

-1 285

-1 116

-4 008

Coal Sector Jobs Package

-222

0

-231

-243

-696

Coal Mining Abatement Technology Support Package

0

-11

-16

-15

-41

Steel Transformation Plan

-1

-38

-75

-75

-189

Additional fuel tax credit reductions for heavy on-road transport from 2014–15

0

0

0

510

510

Total impact

-2 940

1 061

-1 607

-938

-4 424

Notes: (a) Includes revenue from synthetic greenhouse gases and changes to aviation excise. (b) Ongoing fuel tax credit reductions with permanent shielding for heavy on-road transport, agriculture, fisheries and forestry and net of fuel tax credit increase for aviation that opts-in to the mechanism. (c) Includes transfer payments for pensioners and beneficiaries, income support for veterans, Essential Medical Equipment payment, CPI indexation and residential aged care assistance. (d) Includes development of a national energy savings initiative, ABS Household Energy Consumption and Expenditure Survey, Household Advice and Support - extension of Living Greener website and the Remote Indigenous Energy Program. (e) Includes the Clean Technology Investment Program, the Clean Technology Food and Foundries Investment Program and the Clean Technology Innovation Program. (f) Includes Energy Efficiency Information Grants and Clean Technology Focus for Supply Chain Programs. The Clean Energy Skills Package has been allocated $32 million over four years, which is to be fully offset from existing resourcing. (g) Assumes investment of $2 billion per annum from 2013-14. The new Australian Renewable Energy Agency has been allocated $3.2 billion over the period to 2019-20 from existing grant funding programs. (h) Includes the Energy Security Fund and loans to generators for the purchase of future vintage carbon units at advance auctions. (i) Includes the Indigenous Carbon Farming Fund, the Carbon Farming Skills Initiative and the Land Sector Carbon and Biodiversity Advisory Board.

Source: Clean Energy Bill 2011, Explanatory Memorandum, pp. 40–41.

The Government intends that all revenue raised from the sale of carbon permits will be directed to assist households and businesses ‘adjust and move Australia to the low pollution economy of the future’.[190]

Main issues

There are several key issues that emerge from the announced Clean Energy package. These include:

•          what are the appropriate targets, actions and future prospects for Australia to take to reduce greenhouse gas emissions?

•          is a cap and trade scheme the best instrument to achieve Australia’s emissions reduction targets, in concert with the other proposed measures?

•          what are some of the recent developments in international carbon markets?

•          will the proposed scheme cause significant carbon leakage?—that is, the movement of industrial activities/additional investment in emissions-intensive trade-exposed activities to a country that is not subject to emissions constraints, and

•          is the proposed scheme a cost-effective and efficient way of reducing emissions given its coverage, administrative arrangements and linkages to international carbon markets?

International climate policy after Copenhagen – is Australia a leader or laggard in taking action on climate change?

Assessing Australia’s international commitments to reduce GHG emissions, and the measures and progress Australia has made in meeting them relative to the rest of the world, gives some indication of the contribution Australia is making to reduce global greenhouse gas emissions.

There are a range of views about whether Australia’s targets and efforts to address global emissions reduction, ranging from those who consider that Australia should be doing more[191], doing less[192], delaying action[193] or has the appropriate approach.[194] The following section addresses international targets, actions and future prospects.

Targets

Australia is not alone in setting targets for the reduction of GHG emissions. There are currently at least 35 other countries that have chosen to, or are in the process of, putting a price on GHG emissions.[195] Also, there many jurisdictions within the US that have implemented, or are developing, initiatives that put a price on GHG emissions. Most of the GHG emission pricing mechanisms employed by other countries in the world are in the form of an emissions trading scheme. However, there are countries/jurisdictions that have implemented a carbon tax or energy tax and there are many more that have put them on their agenda. For example Finland (the first country to implement a carbon tax in 1990), Denmark, Sweden, Italy, United Kingdom and the Netherlands all have a carbon tax while France, Japan and China have considered the introduction of a carbon tax due to the surge in energy prices, the increasingly serious problems with energy security and the energy savings and emissions reductions targets imposed on many countries.[196]

A comparison with other country targets is shown in the table below. The table illustrates the 2020 targets in absolute reductions compared to 1990 levels, as well as per capita reductions compared to 1990 levels. Long–term targets (2050 absolute reduction targets) are also shown relative to 1990 levels. Most targets listed in Table 2 are conservative and therefore represent the country’s unconditional commitment to those targets. However, most countries are aiming for targets that are higher than those listed in Table 2–Germany hopes to achieve a 95 per cent reduction by 2050 based on 1990 levels. The upper targets are generally conditional upon the realisation of an international agreement with comparable commitments from other developed countries and implementation of emissions reduction measures from developing countries.

Table 2: Absolute emissions and per capita reduction targets for different countries and the EU with respect to 1990 levels

Country/Entity

Stated 2020 target

2020 absolute target below 1990 levels

2020 per capita target below 1990 levels

2050 absolute target below 1990 levels

Australia (a)

At least 5 % below 2000 levels

1%

33%

79%

European Union (b)(c)

At least 20% below 1990 levels

At least 20% below 1990 levels

29%

At least 80%

United Kingdom (d)

At least 34% below 1990 levels

At least 34% below 1990 levels

42%

80%

Germany (e)

At least 40% below 1990 levels

At least 40% below 1990 levels

41%

80%

Canada (f)

At least 3 per cent below 1990 levels

At least 3 per cent below 1990 levels

28%

At least 52 per cent below 1990 levels

United States (g)

In the range of 17% of 2005 levels

In the range of 4% of 1990 levels

28%

79%

New Zealand (h)

At least 10% below 1990 levels

At least 10% below 1990 levels

38%

50%

Note: (a) Australia states its targets with respect to 2000 levels and therefore, for consistency, the target baseline has been re calculated to reflect 1990 levels. (b) European Commission, European Environment Agency Website, 2020 target, viewed 10 October 2011, http://ec.europa.eu/clima/documentation/package/docs/climate_package_en.pdf (c) European Commission, European Environment Agency Website, 2050 target, viewed 10 October 2011, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0112:FIN:EN:PDF (d) Department of Energy and Climate Change (UK), Climate Change Act 2008, viewed 10 October 2011, http://www.decc.gov.uk/en/content/cms/legislation/cc_act_08/cc_act_08.aspx (e) Federal Ministry of the Environment (Germany), Federal Environment Minister Gabriel launches 400 million euro climate protection programme, press release, 19 June 2008, viewed 10 October 2011, http://www.bmu.de/english/current_press_releases/pm/41999.php (f) http://unfccc.int/files/meetings/cop_15/copenhagen_accord/application/pdf/canadacphaccord_app1.pdf (g) United States Department of State, Office of the Special Envoy for Climate Change, viewed 10 October 2011, http://unfccc.int/files/meetings/cop_15/copenhagen_accord/application/pdf/unitedstatescphaccord_app.1.pdf. Estimates have been recalculated using 1990 as the base year. (h) N Smith, Minister for Climate Change Issues (NZ), Agreement sent to UNFCCC on behalf of New Zealand, viewed 10 October 2011, http://unfccc.int/files/meetings/cop_15/copenhagen_accord/application/pdf/newzealandcphaccord_app1.pdf; Ministry of the Environment (NZ), Gazetting New Zealand's 2050 Emissions Target, Minister's Position Paper, viewed 1 October 2011, http://www.mfe.govt.nz/publications/climate/nz-2050-emissions-target/. Compiled by the Parliamentary Library. Conversions to 1990 baseline were calculated based on UNFCCC total GHG emissions including LULUCF inventory data; (http://unfccc.int/ghg_data/items/3800.php) with population data projections from the UN Population Division Population Database (http://esa.un.org/unpd/wpp/unpp/panel_population.htm). The population projections are based on the medium variant. EU per capita reductions are based on the 15 EU member states that have combined and internally reallocated their commitments under the Kyoto Protocol. Individual country commitments are from various sources as listed in endnotes.

The following figure provides a graphical illustration of the different 2020 targets with respect to 1990 levels of the countries listed in Table 2.

Figure 2: Absolute emissions and per capita reduction targets for different countries and the EU with respect to 1990 levels

Note: Produced by the Parliamentary Library from sources noted in Table 2.

In considering the comparisons in Table 2 and Figure 2, three relevant points should be noted:

•          Unlike the other countries listed, Australia was allocated an increase in emissions under the Kyoto Protocol. This means although Australia‘s 2020 emissions reduction targets are significantly lower than targets of European countries when referred to the 1990 baseline, the difference is less pronounced when expressed as a reduction relative to current emission levels (both Australia and the EU are on track to meet their Kyoto commitments).

•          Australia‘s absolute targets are lower than all other countries/jurisdictions targets that are tabled in Table 1. Australia‘s economic structure more closely resembles those of the US and Canada than those of EU countries and is therefore more comparable to the US and Canada. Australia, the US and Canada are all large, resource–rich countries that are relatively sparsely populated. European countries, on the other hand, are much more densely populated and their economies are generally more service-orientated. These differences are largely responsible for the difference in energy efficiency and GHG intensity relative to growth and population of the two groups of countries.

•          The per capita emissions reduction targets are not as disparate as the absolute targets. The populations of Australia, the US and Canada are projected to grow by 48, 34 and 33 per cent respectively between 1990 and 2020, while those of the European Community will on average grow by only 12 per cent. Hence, a given absolute emissions reduction will require much steeper reductions per person in the countries with expanding populations.

Actions

There is no clear momentum for strong international action on reducing emissions. While some countries have implemented a range of mandatory approaches at a national level and appear to be transitioning to setting long-term measures, in other countries domestic political support has declined, resulting in planned actions being cancelled or sub-national approaches being developed. These are discussed below.

Recent analysis by the Productivity Commission of carbon policies in key economies found that virtually all of the major countries studied (China, Germany, India, Japan, New Zealand, South Korea, the United Kingdom and the United States) have implemented a large number and variety of emissions-reduction measures, ranging from (limited) emissions trading systems, to policies that support particular types of abatement technology.[197]

In the United States, support at a federal level for an emissions trading scheme has largely evaporated. At a sub-national level, some states and regions are adopting emissions trading but others are backing away from such an approach:

•          In California, an emissions trading scheme is scheduled to commence in 2012. Originally to be part of the Western Climate Initiative that was to cover seven US states and four Canadian provinces, several states have withdrawn, another is in doubt and several others are unlikely to have legislation in place to commence as scheduled.[198]

•          The future of the Regional Greenhouse Gas Initiative (RGGI), a mandatory cap and trade CO2 only reduction program that initially covered electricity in 10 states in the north east of the United States, is unclear, with New Jersey exiting the scheme, a move which may cause other participants to withdraw.[199]

New Zealand commenced an emissions trading scheme in 2008 covering forestry, electricity generation, transport fuels and industrial processes. Waste and synthetic gases are scheduled to be covered from 2013, and agriculture from 2015.[200] A review of the New Zealand scheme, released on 15 September 2011, largely considered that the phased planned expansion of sectors should be continued, but that agriculture should only be required to surrender half of the emissions permits required for the first two years that it is included.[201] While under current legislation a one‐for‐two obligation (one emissions unit for every two tonnes of emissions) and price cap are currently due to end completely in 2012, the review recommended that this be modified so that the one‐for‐two obligation be phased out to 2015 and the price cap, currently set at $NZ25 per emissions unit, be increased by $NZ5 per annum in 2013 and beyond.[202]

The European Union emissions trading scheme will enter its third phase of operation from 2013. A centralised EU-wide cap on emissions allowances is targeted to deliver an overall reduction of 21 per cent below 2005 verified emissions by 2020. At least 50 per cent of emissions allowances will be auctioned from 2013, compared to 3 per cent in phase 2 (2008–2012). In most EU member states there will be 100 per cent auctioning for the power generation sector. The aviation sector, including all flights arriving at and departing from EU airports, is scheduled to be included in the scheme in 2012.[203]

While a pilot voluntary emissions trading scheme is in operation in Japan, plans to adopt an emissions trading scheme were deferred in December 2010.[204] The recent earthquake and tsunami and associated nuclear safety concerns may cause the Japanese government to reconsider its energy plans and climate change policies.[205]

In South Korea, a trial emissions trading scheme commenced in January 2010, to operate until 2012.[206] Uncertainty over the future of a mandatory emissions trading scheme remains, although the government intends that the scheme will commence from 2015. Legislation is yet to pass the parliament.[207]

While China is a significant participant in establishing, and trading, emissions permits derived from the Kyoto-based Clean Development Mechanism, it is relying largely on programs aimed at reducing emissions intensity to reduce emissions. Several Chinese cities have implemented voluntary emissions trading schemes.[208]

Future prospects

There is considerable uncertainty about the likely outcomes of international emissions reduction negotiations.

In late November 2011, the 17th Nations Framework Convention on Climate Change will be held in Durban, South Africa.[209] One of the key issues to be addressed is progress towards a second commitment period of the Kyoto Protocol (under which developed countries would take on legally-binding commitments post-2012), with other issues for discussion to include the process for reviewing the adequacy of the long-term global goal, and climate finance and technology arrangements.[210]

Some commentators consider that given the United States did not ratify the Protocol and with Japan, Canada and the Russian Federation all recently declaring that they will not join in a second commitment period, the number of countries willing to work towards a second commitment period is much reduced.[211] However, given the recent commitment by the European Union to work towards achieving a second binding cap, pressure may build on China to commit to a stronger legal agreement, even without the agreement of the United States.[212] A joint submission in September 2011 by Australia and Norway under the Cancun agreements has proposed that mitigation targets and actions in a new legally binding Protocol for all Parties be delayed until 2015.[213]

Prospects for progress on international agreements to reduce GHG emissions include multilateral forums such as the G20 and the Major Economies Forum on Energy and Climate.[214] However, given current global financial circumstances, these fora are unlikely to engage in emissions reductions issues in the near term. In the absence of, or in association with such agreements, progress could also be made on developing regional agreements with countries such as Indonesia and Papua New Guinea, who could benefit from investment in low-cost abatement options.[215]

Pros and Cons of an emissions trading scheme relative to other economic approaches

From 1 July 2015, the carbon price mechanism develops into an emissions trading scheme with the price of an emissions unit being determined, within limits, by the market relative to the overall cap set by the Government.[216] There are a number of claimed advantages and disadvantages of a cap and trade approach. These are summarised below.

Advantages

•          the cap fixes an overall limit for emissions – this is a major difference between a cap and trade scheme and all other approaches

•          potentially delivers emissions control and reduction at the least overall cost

•          allows for unforseen reductions in emissions across the economy[217]

•          provides the greatest incentive for further technical innovation[218]

•          avoids heavy handed direct regulation, instead allowing participants to tailor their own emissions abatement programs to their own particular circumstances

•          is more flexible, allowing firms to react quickly to unexpected developments, such as changes in required overall emissions reductions levels as a result of better measurement of actual emissions produced

•          emissions trading copes with uncertain demand and supply responses for emissions permits without overt government intervention

•          emissions trading schemes allow the signalling of future emissions permit prices through a forward contract system. This allows participants to potentially fix their costs in advance

•          allows firms to be rewarded for emissions reductions by enabling their unused permits to be sold to other market participants (that is, provides a positive incentive for emissions reduction, as well as a negative incentive)

•          such schemes appear to be the favoured approach for emissions control. Without an emissions trading scheme Australia would forego the benefits of eventually linking its emissions control efforts to those of other countries or an evolving international emissions trading scheme, and

•          international emissions trading arrangements already exists under the Kyoto Protocol arrangements through the trading of the emissions credits generate by projects under the Clean Development and Joint Implementation mechanisms.

Disadvantages

•          they are complex to design and administer

•          the design of such schemes must be very carefully thought out to minimise adverse market distortion and economic impacts

•          the initial emissions permit allocation decision may be open to either state or economic sector bias

•          their implementation has long lead times, often requiring a slow start in target emissions reduction. Significant results do not appear to be achieved over the short term

•          there is some concern that emissions trading provides additional avenues for profit to large financial institutions, and

•          a related concern is that emissions trading may lead to unjustified third party hoarding of emissions permits.

Alternative approaches

Economic theory suggests that a government may efficiently control the price of emissions, or their quantity, but not both at the same time.[219] Broadly, approaches to GHG emissions control have favoured either controlling prices, or quantities – but not both at the same time. The cap and trade approach controls the emissions quantity. Other such approaches are:

•          the emissions intensity approach involves setting a benchmark emissions intensity for particular production processes, for instance in tonnes of CO2-e per unit of output. Then the government legislatively reduces the permitted emissions intensity for liable parties over time[220]

•          the hybrid approach, where each country establishes their own emissions trading scheme without any explicit international target for emissions reduction. Each scheme features both short term and long term emissions reductions targets. Individual countries may then link their schemes if they wish and each scheme features a cap on the price of its particular permits. In the short term the cap may be breached if the price of the emissions permits exceeds a certain pre set level.[221]

•          the baseline and credit approach where the emphasis is on offsetting emissions made rather than reducing such emissions[222], and

•          the regulatory approach, where the government simply sets targets for emissions and fines those entities whose emissions breach the set targets.

The Coalition’s direct action approach

As noted earlier, a key part of the Coalition’s approach to meeting Australia’s greenhouse gas reduction targets is a ‘direct action’ approach.

In summary, this approach involves the creation of an ‘emissions reduction fund’ that will purchase, through a tender process, projects that will:

•          reduce CO2 emissions

•          deliver additional practical environmental benefits

•          not result in price increases to consumers

•          protect Australian jobs, and

•          not otherwise proceed without Fund assistance.[223]

The fund was proposed to commence operation in 2011-12 with an initial allocation of $300 million, increasing to $500 million in 2012-13, $750 million in 2013-14 and $1 billion by 2014-15. An annual average of around $1.2 billion in direct CO2 emissions reduction activities was to be funded through to 2020.[224]

Recent Treasury analysis considered that the economic costs of direct action to achieve a 5 per cent reduction in emissions in 2020 (compared to 2000 levels) would be higher than the costs of the market-based mechanism modelled as part of the Clean Energy package.[225]

Economic analysis of policy approaches

In its recent review of carbon emission policies in key economies, the Productivity Commission estimated the impact of a range of implicit abatement subsidies[226] for selected demand and supply-side policy measures in reducing greenhouse gas emissions.[227]

The Productivity Commission’s analysis suggests that implicit abatement subsidies vary widely between sectors and measures.

•          For supply-side measures in the electricity generation sector, implicit abatement subsidies varied from a low of between A$8–10/t CO2-e in New Zealand to a high of between
A$225–401/t CO2-e in South Korea. Australia ranked at the lower end of costs at between
A$44–99/t CO2-e.

•          For those countries/regions where an emissions trading scheme was part of the supply-side measures (New Zealand, United Kingdom and Germany), the implicit abatement subsidies were lower than other measures, with the implicit abatement subsidy varying from between
A$8–29 /t CO2-e.[228]

Developments in international carbon markets and international linkage

From 1 July 2015, entities liable under the emissions trading scheme will be able to purchase eligible international emissions units to meet up to 50 per cent of their liabilities.[229] The quality and price of international carbon units are an important component of the proposed emissions trading scheme, with the Government considering that international linking allows Australian businesses to pursue credible, cheaper carbon pollution reduction opportunities whenever they are available.[230]

As noted previously, there are a number of established and proposed mandatory and voluntary emissions trading schemes and carbon offset schemes that generate carbon savings which are, or may be eligible for, trade between schemes.

Mechanisms that will initially be eligible for linkage to the carbon price mechanism from 1 July 2015 include units from the Clean Development Mechanism and Joint Implementation program,[231] which can generally be traded between countries that have ratified the Kyoto Protocol and Annex 1 countries to the Kyoto Protocol respectively.[232]

In 2010, the World Bank estimated the value of the ‘carbon market’—comprising of a number of segmented markets based on emissions allowances created under various mandatory and voluntary schemes—to be in the order of $US142 billion, of which 97 per cent was attributed to the European Union ETS.[233] The value of the market had not grown significantly since 2008 (figure 3).

Figure 3: Carbon market evolution, $US billion, 2005–2010

Source: World Bank, State and trends of the carbon market 2011, p. 9, viewed 13 September 2011, http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_Updated_June_2011.pdf

It is not the case that there is a single ‘global’ carbon market and therefore carbon price. Prices for different emissions units reflect their quantitative and qualitative characteristics and the extent to which they are transferable across countries and emissions trading systems. In recent years, the prices of the most highly traded emissions units in the European ETS, European Union ETS units and CER units, have declined to around $A22/t CO2-e and $A17/t CO2-e respectively in mid 2011 (figure 4).[234]

Figure 4: Daily European emissions trading scheme prices for European Union emissions trading units and Certified Emission Reductions units ($A/tonne CO2-e)

Note: EAU=European Union Allowance permit, CER = Certified Emission Reductions — reductions achieved by Clean Development Mechansim projects.

Source: Treasury, Strong Growth, Low Pollution, Modelling a Carbon price, Chart Data, Chapter 3: Chart 3.5, viewed 23 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter3.asp

In recent years, confidence in carbon markets has been affected by instances of carbon market fraud within the European Union ETS including:

•          January 2011 discovery of an EU ETS-wide theft of €45 million of EU emissions allowances, which led to the closure of national carbon registries, the suspension of EU spot trade and the implementation of an EU-wide upgrade of regsitry security

•          November 2010 incident of unauthorized access to EU ETS registry accounts in Romania results in the theft of 1.6 million EUAs, and

•          March 2010 sale by Hungary of CERs that had already been surrendered to it under the EU’s emissions trading scheme. In response, the EU amends the registry regulations to prevent CER recycling.[235]

The current uncertainty over future developments in international agreements in emissions reductions and the take-up by countries of market mechanisms have been identified as an important factor for the future of international emissions trading.[236] Further issues identified as detrimental to international emissions trading include the volatility in market prices,[237] the risk of countries withdrawing from a linked emissions trading scheme[238] and the integrity of some offset mechanisms.[239]

Nevertheless, participants in carbon markets appear to be optimistic about the future of emissions trading and the potential for future intercountry trading.

•          A recent World Bank survey noted that particpants in global carbon markets consider that an international framework based on non-binding multilateral accords is more likely in the short term, with greater optimism that a legally-binding international agreement will emerge after 2020.[240]

•          A recent survey of carbon market participants by Point Carbon found that a majority of respondents expect a second commitment of the Kyoto Protocol, with those expecting a global carbon price to emerge nominating a price range of between €20–€30 for 2020.[241]

Carbon leakage and industry assistance

Briefly the term carbon leakage refers to either:

•          the relocation of emissions intensive industries away from regulatory environments that control those emissions, and/or

•          the direction of investment funds to facilities in regulatory environments that do not include controls on GHG emissions, or which have less stringent controls.

The emissions continue to be made, or increase, in the alternative location, rather than being reduced or controlled in the original site. These relocations occur due to the activity, as originally situated and regulated, losing a competitive advantage in international trade.

The Jobs and Competitiveness Program is primarily aimed at addressing carbon leakage issues, with one of the objects of the program ‘to reduce the incentives for [emissions-intensive trade-exposed activities] to be located in, or relocated to, foreign countries as a result of different climate change policies applying in Australia compared to foreign countries’.[242] As previously noted, assistance under the program involves an allocation of free permits to entities operating in emissions-intensive trade-exposed industries to the value of 94.5 per cent or 66 per cent of the industry’s average emissions intensity.

Further information about issues associated with carbon leakage, including industry assistance arrangements under the EU and New Zealand emissions trading schemes, is provided in Appendix 3.

Representatives of heavy industry and business, including the Australian Coal Association (ACA), have argued that the implementation of an emissions trading scheme in Australia, in the absence of similar arrangements by other countries, will lead to carbon leakage.[243] ACA-commissioned analysis estimated that employment losses from applying emissions pricing to potential new coal mining developments would be 25-37 per cent of potential new jobs.[244] These estimates relate to employment lost in mines rendered unviable by emissions pricing. They do not include job losses from changes to production rates in response to emissions pricing imposts.[245]

A range of proposals were made by business groups and unions about the thresholds for assistance included in the design of the Jobs and Competitiveness Program. These included:

•          that the baseline for calculating the basis of free permit allocation creates unfairness across individual industries where there are differences in emissions intensity between individual firms[246]

•          that emissions-intensive trade-exposed industries should be eligible for 100 per cent allocation of free permits[247]

•          that the level of assistance should not decline by 1.3 per cent per year, but instead should be removed entirely,[248] or remain 100 per cent until at least 80 per cent of relevant competitors in the industry have introduced comparable effective greenhouse gas costs on the industry and all sources of emissions relating to non-trade exposed inputs be covered in the permit allocation, [249] or that the assistance should remain fixed at the 90 per cent and 60 per cent threshold levels[250]

•          that a ‘local content mandate’ be established so that 25 per cent of funds allocated under various carbon price mechanism assistance arrangements be allocated to domestic manufacturers and firms[251] and

•          that reviews by the Productivity Commission about whether the level of assistance should pause at 90 per cent for highly emission-intensive activities, or 60 per cent for moderately emissions-intensive activities do not provide clarity about the issues that the Commission should consider in undertaking the review of future assistance,[252] or that the case for more reductions should be made by the Productivity Commission, with the onus of proof to be borne by the Commission in determining further decay of assistance levels.[253]

Research commissioned by the Australian Trade and Industry Alliance (whose members include Manufacturing Australian the Australian Chamber of Commerce and Industry and the Australian Steel Institute) showed that 952,156 Australians are employed by manufacturing firms that are unlikely to be covered by the ‘Jobs and Competitiveness Program’.[254] The Alliance argue that businesses excluded from compensation arrangements will face higher electricity costs, higher prices for raw materials and manufactured inputs while trying to compete on global and domestic markets against foreign producers who will pay no such additional costs.[255]

Some doubts have been raised whether some Australian emissions‑intensive industries are really vulnerable to carbon leakage under the carbon tax arrangements. Recent analysis by the Grattan Institute suggested that it was unlikely that there would be job losses in the black coal and LNG industries and that while a carbon price would add to pressures faced by steel producers as a result of global shifts in capacity and high exchange rates, the government’s proposed assistance ‘is so generous that steel producers will receive an unjustified windfall gain’.[256]

Does the carbon price mechanism achieve emissions reductions at ‘least cost’?

The carbon pricing mechanism will increase the relative prices of carbon-intensive goods and services.  This will encourage users to substitute less carbon-intensive goods and services such as more fuel efficient cars, and producers to change to methods using less carbon-intensive inputs, for example, generating electricity from natural gas instead of coal.

The economic efficiency of the carbon price mechanism in achieving emissions reductions at least cost depends on several factors including:

•          coverage

•          the extent of changes in incentives facing producers and consumers, such as any compensation arrangements that distort behavioural changes

•          the extent and possible overlap of other regulatory arrangements such as subsidies and quotas for renewable energy and energy efficiency programs, and

•          the extent of international linkages.

Coverage

The Government estimates that the carbon pricing mechanism will apply directly to around 500 of the largest emitters in Australia, with the 50 largest emitters responsible for around 75 per cent of emissions covered by the scheme.[257] A list of entities covered by the scheme is not yet available, but a Fact Sheet released as part of the Clean Energy package noted that:

•          around 60 are primarily involved in electricity generation

•          around 100 are primarily involved in coal or other mining

•          around 40 are natural gas retailers

•          around 60 are primarily involved in industrial processes (cement, chemicals and metal processing)

•          around 50 operate in a range of other fossil fuel intensive sectors, and

•          the remaining 190 operate in the waste disposal sector.[258]

The Government estimates that over 50 per cent of Australia’s emissions will be directly covered by the carbon pricing mechanism and around two-thirds will be covered by a carbon price applied through various means.[259]

Those sectors directly excluded by the carbon pricing mechanism, including agriculture and transport, account for more than 30 per cent of Australia’s net greenhouse emissions.[260] By excluding areas of the economy from the carbon price mechanism, it is argued that the emissions reduction burden falls unevenly across the economy and that lower cost emissions reduction opportunities are foregone.[261] That said, an alternate view is that the level of substitution delivered from carbon pricing (which differs across sectors) and the role that a carbon price plays in inducing innovation and investment (which will be higher for emissions-intensive industries) are important considerations in deciding which sectors should be covered.[262]

Extent of changes in incentives

As noted above, the Clean Energy Package proposes an initial fixed carbon price of $23 per tonne of CO2-e from 1 July 2012. Various measures of support for households and industries seek to mitigate the impact of any direct and indirect price changes imposed on both the consumption and production of goods and services.

For households, Treasury modelling of the Clean Energy Package estimates that the impact on household expenditure of a $23 carbon price to be $9.90 per week, with an increase in the consumer price index of 0.7 per cent.[263] Compensation arrangements, in the form of changes to income tax arrangements and direct payments to eligible recipients, are expected to leave around two in three households with assistance that offsets their expected average price impact, while around nine out of ten households will receive some assistance.[264]

For businesses, assistance measures implemented as part of the Clean Energy package are estimated by the Government to cost more than $17 billion between 2011–12 and 2014–15.[265]

Given the relatively low level of the carbon price and assistance measures to assist households and businesses adjust to a carbon price, the incentives to change behaviour may be muted. This may mean that the lowest cost emissions reductions opportunities across all sectors are able to be realised.[266]

For households, changes in behaviour will depend on the effects of changes in income and prices on consumption patterns. For businesses, changes in behaviour will depend on a range of factors including the potential to pass costs on to customers due to competition, changes in consumption patterns by consumers and the availability of less carbon-intensive production inputs.

Recent estimates of the price elasticity of electricity in South Australia estimated that the overall price elasticity ranges from -0.363 to -0.428—a 10 per cent increase in electricity prices leads to a decrease of between 3.63 per cent and 4.28 per cent in electricity consumption.[267] Treasury’s modelling included the assumption of a total price elasticity of demand around -0.3 in the medium term.[268]

Other programs to address emissions reductions

The Clean Energy package includes a range of programs that directly seek to change emissions through a mix of approaches such as changing the emissions intensity of electricity generation through support for renewable energy, improving the efficiency of energy use by households and businesses and regulating emissions standards. Moreover, state and territory governments also have in place a wide range of programs that are aimed at similar issues — the Productivity Commission recently noted 233 separate Commonwealth and state/territory programs to reduce emissions.[269]

Several business groups have argued that various state and federal government programs should be wound up with the commencement of the carbon price mechanism so as to ‘better enable a least cost approach to emissions reduction’.[270] A discussion of these issues is outside the remit of this Digest.

International linkages

From 1 July 2015 until 2020, liable entities must meet at least 50 per cent of their annual liabilities from domestic carbon units.[271] At present, international emissions units that are eligible for purchase and use in the proposed ETS includes currently traded Kyoto units such as certified emission reductions units from the Clean Development Mechanism and emission reduction units from the Joint Implementation mechanism.[272] However, the Government may by regulation add to, or remove from, the list of eligible international emissions units.[273]

The capacity to purchase international emissions units is an important aspect of emissions reduction in the proposed ETS. Treasury modelling prepared as part of the Clean Energy package under the ‘core policy’ scenario assumes that there is unlimited international linking from 2015-16.[274] Under these conditions, it is forecast that international permits account for 95 Mt CO2-e of the 152 Mt CO2-e emissions abatement by 2020 and 434 Mt CO2-e of the 897 Mt CO2-e emissions abatement by 2050.[275]

While limits on the quantitative and qualitative restrictions are also a feature of other emissions trading schemes such as the European ETS, the Business Council of Australia argue that the inability to link to international schemes during the fixed price period and other postulated limits—‘as yet unstated’—mean that the cost of the policy will be higher than would have been the case otherwise.[276]

Key provisions

Part 1—commencement, objects and territorial application of the Bill

Short title of the Act

Clause 1 provides that the Act may be cited as the Clean Energy Act 2011. Titles of Bills are often controversial and in this case, the Conservation Council of South Australia has indicated that the title needs a re-think. More specifically, they state that the title of the Bill:

fails the accuracy and integrity test at its first word suggesting that it is about ‘clean’ energy. In particular, whilst the gas industry has been provided a prominent role in the Clean Energy Future Plan, it is inaccurate to describe this fossil fuel as clean. The word should be changed to ‘cleaner’, given that no form of energy generation properly considered over its life cycle is completely clean. It is important that even simplified messaging remains true and accurate.[277]

Objects of the Bill

•          to give effect to Australia’s obligations under the United Nations Framework on Climate Change and the Kyoto Protocol

•          to support the development of an effective global response to climate change , consistent with Australia’s national interest, in ensuring that average global temperatures do not increase by more than 2 degrees above pre-industrial levels

•          to take action in a flexible and cost-effective way, directed at meeting the target of reducing Australia’s net greenhouse gas emissions to 80% below 2000 levels by 2050

•          to put a price on greenhouse gas emissions in a way that encourages investment in clean energy, supports jobs and competitiveness in the economy and supports Australia’s economic growth while reducing pollution (clause 3).

This last point in the objects clause is focused mainly on the supply-side of the problem. This last objective may benefit by being extended to include the goal of informing and encouraging the community to make decisions about their consumption of goods and services that is consistent with the aims of sustainable development in general, and a cleaner energy future in particular.

Clause 5 provides definitions of key terms used in the Bill. These are defined in the glossary of this Digest.

A concern has been raised about the definitions of ‘person’ and ‘liable entity’.

The Institute of Chartered Accountants in Australia made the point that the definition of ‘person’ does not specifically include partnerships, unincorporated associations and rules about ‘capacity’, which indicates a lack of symmetry that may lead to difficulties in the future.[278]

Territorial application

The Act will apply to every external territory, and to any matter relating to the exercise of Australia’s rights in the exclusive economic zone and the continental shelf, and to the Joint Petroleum Development Area (clauses 9-11).

Part 2—Carbon Pollution/Emissions Cap

The first stage of the carbon pricing mechanism commences 1 July 2012 and ends on 30 June 2015. During this fixed price phase, there will be no pollution cap. Liable entities will be able to buy carbon units at a fixed charge as set out in clause 100. And, the Government will allocate a fixed number of free carbon units as part of its Jobs and Competitiveness Program and as part of its assistance to coal fired electricity generators.

It is the Clean Energy (Unit Issue Charge—Fixed Charge) Bill 2011 which imposes the charge on the issue of those carbon units. The reason for the separate  and procedural Bill, is anticipation of ‘the possibility that, under the carbon pricing mechanism, the charge payable by a person to the Commonwealth for the issue of a carbon unit for a fixed charge, is [in whole or in part] a tax within the meaning of section 55 of the Commonwealth Constitution’.[279] Section 55 requires that laws imposing a tax only deal with the imposition of that tax.

From 1 July 2015 onwards, pollution caps[280] will come into existence. In basic terms, the cap is the maximum amount of units/permits to pollute that will be made available by the Government. This will be the beginning of the flexible charge period, also known as the fully-fledged cap-and-trade period/emissions trading scheme. Pollution caps will be gradually reduced over time so as to enable Australia to meet its emissions reduction targets. The date of 1 July 2015 is meant to provide business with sufficient certainty and time to commence the transition toward cleaner energy business.

In a nutshell, Part 2 of the Bill assigns power and sets out the procedure for making regulations for the purpose of declaring the carbon pollution cap and pollution cap number.

The pollution cap is a limit on the number of carbon units issued in a financial year. Once the pollution cap is set, carbon units equal to that carbon pollution cap will be issued (clause 13). The pollution cap number, for a given financial year, is the quantity of GHGs that has a carbon dioxide equivalence of a specified number of tonnes (clause 13 and clause 5).

Because the carbon pollution cap limits the number of carbon units[281] or permits that may be issued in any given year during the so-called flexible charge period, it will operate to have an impact on the value of carbon units in the period post 1 July 2015 (the fully-fledged cap-and-trade period), when the scheme becomes more explicitly market-driven.

The carbon pollution cap limits the sum of:

•          the total number of auctioned carbon units

•          the total number of free carbon units issued in accordance with the Jobs and Competitiveness Program, and

•          the total number of free carbon units issued to coal-fired electricity generators.

Considerations in setting the carbon pollution cap and pollution cap number (subclause 14(2))

The considerations the Minister must have regard to when making a recommendation to the Governor-General about regulations in relation to the carbon pollution cap and pollution cap number are:

•          Australia’s international obligations under international climate change agreements

•          The most recent ‘report of the periodic review’ by the Climate Change Authority[282], of the legislation and the level of any carbon pollution cap under clause 292.

The Minister may also have regard to:

•          undertakings relating to greenhouse gas emissions reductions that Australia has given under international climate change agreements. This is in addition to the legal obligations in such agreements. This enables the Minister to consider, for example, Australia’s undertakings in the Copenhagen Accord in setting the carbon pollution cap, even though the Copenhagen Accord is not legally binding.

•          Australia’s medium and long-term targets for reducing GHG emissions

•          global action to reduce GHG emissions and estimates of the global GHG emissions budget

•          economic and social implications associated with various levels of carbon pollution caps

•          voluntary action to reduce GHG emissions

•          estimates of GHG emissions not covered by the Act, and the number of ACCUs that are likely to be issued

•          the extent of non-compliance with the Act

•          extent to which liable entities have failed to surrender sufficient units to avoid liability for their shortfall charge

•          acquisitions or proposed acquisitions by the Commonwealth of eligible international emissions units

•          other matters (if any) that the Minister considers relevant.

Comment

It has been suggested the drafting of subclause 14(2) needs to tightened to ensure that the pollution cap is tied more closely with our international commitments. This would protect against any future government wishing to read down our obligations and set very low caps. The Environmental Defender’s Office has suggested alternative form of words. ‘The Minister must act consistently with’ and not merely ‘have regard to’, our international obligations under climate change agreements, and the most recent report under clause 292.[283]  ‘Or at the very least, the Government must prepare reasons for departing from the advice of the CCA, and table those reasons in Parliament with the cap regulations (clause 289)’.[284]

Duration of the carbon pollution cap

The carbon pollution cap will be set by regulations five years in advance, with the 2015-2019 caps to be set by 2014, and each subsequent year to be set annually (subclause 14(1) and subclauses 16(1) and (5)).

Thus, in contrast to the schemes of other countries and the European Union (EU), the Carbon Pricing Mechanism will not be based upon phases or trading periods.

Comment

Concern has been raised that making 31 May 2014, the last date upon which regulations must be made for the first five years of the flexible charge period, is too late as it does not adequately take into account the certainty required for businesses in terms of their planning. It has been suggested that the subclause be bought forward a year to 31 May 2013[285], or even 31 May 2012.[286] Also, having five-year carbon pollution caps for the flexible charge period is thought to be too short a period of time to satisfy business need for certainty and informed investment decisions. It has been pointed out that businesses tend to plan for longer time periods and have assets with economic lives in excess of five years, therefore it is suggested that 10 years is an appropriate period.[287]

Parliamentary scrutiny and disallowance of the regulations for carbon pollution cap numbers

Regulations for carbon pollution caps will be subject to Parliamentary scrutiny. Either House of the Parliament may disallow the regulations. In the event that regulations setting pollution caps are not tabled by the 31 May deadline or are disallowed, clauses 17 and 18 contain a mechanism for a default pollution cap to take effect. The default pollution cap operates as follows:

•          If there are no regulations in place declaring the carbon pollution cap number for the flexible charge year beginning 1 July 2015:

–      The total emissions numbers for the eligible financial year beginning on 1 July 2012 minus 38,000,000 (will be the carbon pollution cap number)

•          If regulations are in place declaring the carbon pollution cap number for any subsequent flexible charge year:

–      The self-executing cap, being 12,000,000 units less than the previous year’s cap. This works out to a default reduction rate of approximately 2.5 per cent against the emissions from the covered sectors.

The purpose of the default mechanism is to enable a five per cent reduction in emissions below 2000 levels by 2020,[288] and thereafter a reduction ‘consistent with the annual reduction in emissions implied by the five per cent emissions reduction target’[289].  This will also provide certainty for investors.

Part 3—Liable Entities -who is captured by the scheme – who is required to acquire and surrender carbon units or permits and under what circumstances can liability obligations be transferred?

a) In general and basic terms, Part 3 of the Bill provides that liability will be imposed on persons (liable entities) which have operational control of a facility which directly emits covered emissions of

·          over 25,000 tonnes of CO2-e during a financial year (or exceeds the threshold amount given their number of operation control days)

·          over 10,000 tonnes of CO2-e for landfill site (provided that they are within a specified distance of landfills that emit 25,000 tonnes CO2-e or more)

What does it mean to be in operational control of a facility?

Consistent with the definition in section 11 of the NGER Act, a person will have operational control if they have authority to introduce and implement any or all of the operating, health and safety and environmental policies for that facility. Alternatively, they may be considered to have operational control of that facility by virtue of the Greenhouse and Energy Data Officer declaring the corporation or member to have operational control of the facility under section 55 of the NGER Act.

In the case of a facility being operated by an unincorporated joint venture where no one person has operational control over the facility, the emissions liability for that facility will be allocated between the joint venture parties in proportion to their respective interests in the facility (clause 21).

b) Natural Gas Supplier: [290]a separate threshold applies and the natural gas supplier will be liable for the greenhouse gas emissions embodied in the gas that they supply, irrespective of the amount supplied, unless the liability is transferred.

c) The third category of liable entity is a person that opts-in under the Opt-in Scheme for greenhouse gas emissions embodied in specified fuels (clauses 19 and 92A). From 1 July 2013, regulations will be made to provide large users of taxable fuel the choice of managing their own carbon liability directly under the Clean Energy Bill rather than paying the equivalent carbon price through the fuel tax system.  Entities who decide to opt-in to the scheme in this way will be considered liable entities under the scheme for their acquisition, manufacture or importation of taxable fuel. A person will be eligible to be a 'designated opt-in person' if that person is a member of a GST group that is entitled to fuel tax credits, is a participant in a GST joint venture that is entitled to fuel tax credits or is itself entitled to fuel tax credits, and the fuel is subject to the fuel tax credits regime. The introduction of this flexibility is informed by an understanding that the person who has operational control over the facility will not necessarily be the entity that has an entitlement to the tax fuel credits available for that fuel.

The measurement of GHG emissions will be done through the already established National Greenhouse and Energy Reporting System (NGERS). Since 1 July 2008, large emitters have been under a legal obligation to monitor and report their emissions and these obligations will be basically consistent under this scheme. The Clean Energy (Consequential Amendments) Bill 2011 makes the necessary amendments to the National Greenhouse and Energy Reporting Act 2007 to integrate NGERS with this mechanism.

Obligation of liable entities

Liable entities must acquire and surrender sufficient eligible emissions units (i.e. carbon units and eligible international and domestic offsets), or they are liable to pay unit shortfall charge. Under this scheme:

•          liability is not presumptively visited on the top Australian holding company in the group ( the ‘controlling corporation’). Instead, liability rests with a person which has the so-called operational control of the facility (or, is a participant in a designated joint venture, or holds a liability transfer certificate)

•          in most instances there will be no group aggregation, as coverage is on an individual facility basis. Thus, a corporation with two facilities emitting 20,000 tonnes of CO2-e each will not attract liability under this scheme.

Provisional emissions numbers (PENs) are the number of tonnes of covered emissions in CO2-e emitted from a facility. They are used to calculate the number of eligible emissions units that a liable entity must surrender in order to avoid having to pay a unit shortfall charge (subclauses 20(2), 22(1), 22(1), 23(1), 24(1), 25(1)). However, to avoid double counting, covered emissions that are from the combustion of natural gas will not count towards the facility PEN when a natural gas supplier is responsible for emissions embodied in the natural gas.

When a natural gas supplier is responsible for emissions embodied in the natural gas?

•          The liable entity for the facility will be responsible for the emissions if an OTN has been quoted for the gas supplied to the facility (clause 19).

•          The supplier of gas to the facility will be responsible for the embodied emissions if an OTN has not been quoted for the gas supplied to the facility (subclause 20(8)).

For large gas consuming facilities OTN quotation is mandatory, thus liability will always rest with the liable entity for the facility (subparagraph 21(1)(d)(ii)).

Coverage of sectors and liability

On its face, the scheme appears to cover GHG emissions from a range of sources including:

•          stationary energy (eg. power stations)

•          industrial processes with high emissions intensity (eg. manufacturing, smelting)

•          fugitive emissions (eg. from coal mining and natural gas extraction, other than from decommissioned coal mines)

•          non-legacy waste emissions (eg. landfill emissions)

However at this point in time, the scheme is rather modest in its capture. Some sectors are excluded. Agriculture, land and forestry are all excluded and dealt with exclusively by the Carbon Farming Initiative [291] (subclause 30(4)). It is expected to apply to around 500 major polluting companies in comparison with the CPRS which would have applied to around 1000.[292]

Subclause 30(2) excludes from the definition of covered emissions, emissions attributable to the combustion of certain fuels that have been subject to any duty under the Customs Tariff Act 1995, or the Excise Tariff Act 1921: liquid petroleum fuel, liquid petroleum gas, liquefied natural gas, compressed natural gas.

Subclause 30(3) excludes from the definition of covered emissions, emissions attributable to the combustion of biomass, biofuel or biogas.

Emissions from legacy waste and certain synthetic GHGs are also excluded from the definition of covered emission which is a scope 1 emission.

A mechanism (liability transfer certificate - LTC) is provided for transferring liability from one entity to another. An LTC enables liability to be transferred between entities within a corporate group (via a controlling group LTC), or from the entity with operational control to the entity outside the corporate group which possesses financial control of the facility (via a financial control LTC). However, the transfer of an entity’s carbon price mechanism obligations remains subject to their satisfying certain criteria and obtaining approval from the regulator (clauses 81 and 83). A person needs consent from the liable entity in order to apply to the regulator to take on the obligation.

Attached to a financial control LTC is an obligation on the party of the entity to assume all NGERS reporting obligations as well as the carbon price mechanism obligations. In practical terms, this means reporting energy use and production in addition to scope 1 and 2 GHG emissions and the emissions number.

Attached to a controlling group LTC, is only the obligation to report scope 1 GHG emissions and the emissions number is also transferred in this context.

A penalty of up to three times the value of the evasion can be imposed on any entity which fraudulently represents that it has transferred its obligations to another entity using liability LTCs.

Clause 83 provides criteria for issuing a liability transfer certificate

The Regulator must not issue an LTC unless:

·         the applicant passes the corporate group transfer test in relation to the facility

·         the applicant has, and is likely to continue to have:

-          the capacity

-          the access to information, and

-          the financial resources

necessary for it to comply with obligations that will be imposed on the applicant by this Act and the associated provisions if the certificate is issued, and

meets any other requirement as may be set out in the regulations (clause 83).

A decision to refuse to issue a LTC is a decision which may be reviewed by the Administrative Appeals Tribunal (clause 281).

An Obligation Transfer Number (OTN) is used to transfer liability for emissions arising from the use of natural gas from the supplier to the user of that gas. According to the Explanatory Memorandum, an OTN is used to keep track of liability so that it is not imposed twice on the same emissions. For example, it ensures that emissions from the use of natural gas that count towards a facility‘s emissions do not count towards a gas supplier‘s liability. OTNs also ensure that liability is not imposed on natural gas that is used in a way that does not result in emissions.[293]

Clauses 37, 39 and 40 set out how OTNs are issued. There are basically two ways, either by an application by the person or by a Regulator’s own initiative. Where the Regulator refuses to issue an OTN, written notice must be given to the person  and the decision to refuse to issue an OTN is reviewable (subclause 42(2) and clause 281).  Such a decision is reviewable by the Administrative Appeals Tribunal following a process of internal reconsideration by the Regulator (clause 281). Clause 43 sets out the rules for the cancellation and surrender of an OTN.

OTN Register

The Regulator must keep an OTN register with information:  the OTN, the identity of the person that was issued with that OTN, that person‘s last known address, and their ABN if they have one (clause 45). Where an OTN holder’s details change, they are obliged to notify the Regulator within 28 days (clause 47) and a civil penalty applies for a failure to do so.

The AWU has expressed some ‘concern over the lack of obligation on the part of natural gas operators to accept an OTN from a business. This in effect creates a monopoly on the operation of permits in the natural gas sector, and creates nonsense of the OTN system. This issue is of particular concern having regard to the concentration of the natural gas industry, which has very few suppliers and as a result reduced competition factors.’[294]

Penalties in relation to misuse of OTNs

Penalties are provided in relation to misuse of OTNs or the quoting of a bogus OTN. For example, where a person makes an OTN quotation that a supplier must accept the OTN holder must provide the supplier with a written declaration that sets out that the quotation is being made under a relevant section of the Bill (subclause 59(3) and subclause 60(3)). It is also an offence to make a false or misleading declaration. The maximum penalty is a period of imprisonment for up to 12 months (clause 62).

Part 4—Carbon Units — the terms under which they are issued and how they can be transferred

The key mediator of GHG emission behaviour under the carbon price mechanism is the ability of liable entities to make a payment for or surrender eligible emissions units for each tonne of emissions for which they are liable during an eligible financial year.

A carbon unit is one such eligible emissions unit, issued by the Regulator on behalf of the Commonwealth (clause 94). Entities cannot use eligible international emissions units to meet domestic liabilities during the fixed charge period (subclause 122(8)). However, liable entities are able to use eligible ACCUs (issued under the CFI) from 1 July 2012. In the fixed charge period, a liable entity may surrender eligible ACCUs up to an amount equal to five per cent of its total emissions liability; and in the flexible charge period, a liable entity may surrender as many eligible ACCUs as it wants to meet its emissions liability.

A liable entity may use eligible international units from 1 July 2015 to meet its liabilities.[295] ‘However, the use of international units is subject to qualitative[296]and quantitative[297]restrictions, to ensure the environmental integrity and ongoing credibility of the mechanism’[298] (subclause 133(7) and clause 123).

This combination of eligible emissions units is designed to provide liable entities with flexibility in meeting their obligations under the mechanism. This is important because from 1 July 2015 when the emissions trading scheme commences, the Regulator will be issuing a limited number of carbon units equal to the carbon pollution cap.  Emissions may exceed the cap, but to do so, they must be offset by eligible ACCUS or eligible international units. If not, then a unit shortfall charge is payable.[299]

Comment

To provide for greater clarity and facilitate reader accessibility, the term carbon unit could be replaced with a more accurate term ‘carbon allowance unit’, to properly describe its functional purpose. Also, in the outline in clause 93 it may be helpful to the reader to explain that the term carbon is a shorthand expression for ‘equivalent carbon dioxide emissions’.[300]

Each carbon unit will have a unique identification number (clause 95) and will have a vintage year consisting of a particular eligible financial year (clause 96). The Regulator will issue the carbon units to a person by making an entry in a Registry account kept by the person (clause 98).

The circumstances under which carbon units may be issued is either by: auction[301]conducted by the Regulator, for a fixed charge (clause 100), in accordance with the Jobs and Competitiveness Program, or in accordance with assistance to coal fired electricity generation (clause 99).

Use of units issued in fixed and flexible charge years

Carbon units whose vintage year is a fixed charge year will be available to liable entities at a fixed charge. These units cannot be ‘banked’ for use in future years (subclause 100(7) or traded. The Government’s standing offer to buy back permits at market value makes it rather unlikely that there will be any secondary market over this period.

Carbon units that are issued free of charge under Parts 7 and 8 can only be surrendered for the eligible financial year corresponding to their vintage year. If not, they will be cancelled at the end of 1 February of the next financial year (clauses 115 and subclause 122(7)). Clause 116 provides for the buyback of certain free carbon units during the period at the start of 1 September in that fixed charge year and ending at the end of 1 February next following that fixed charge year.

When issued in a flexible charge year, they do not have a use-by date and can be used any year after that (subclause 122(4)).

Property in, and transfer of, carbon units

Carbon units will be classified and regulated as a financial product and are a form of personal property (clause 103). They will be transferrable (excepting fixed price permits), and it will be permissable to take security over the permits and create equitable interests in them (clause 103A).

A person may transfer carbon units, except for those that are issued for a fixed charge (clause 104). The modes of transfer are provided by clauses 105 (transfer by assignment), clause 106 (transfer by will or operation of law), clause 107 (transfer between registry accounts of the same person) and clause 108 (transfer to an account in a prescribed foreign registry on or after 1 July 2018).

Fixed charge carbon units, including those issued under price ceiling arrangements

Clause 100 provides that the Regulator will issue fixed charge carbon units with vintage years that are a financial year between 1 July 2012 and 30 June 2018. Fixed carbon prices will start at $23 a tonne and rise to $25.40 by 2014-15.

Comment

The Australian Industry Group has expressed concern that these starting prices may be unnecessarily high.

They are out of step with the lower prices that currently prevail in international carbon markets. Furthermore, the prices represent a sharper and more disruptive shock than a gentler transition would. The key factor for investment decisions, particularly for long-lived assets like electricity generators, is expectations around future prices rather than the starting price. Linkage to global carbon markets in the floating price phase provides a reasonable basis for assessing those future prices.

Thus there should be no barrier to the adoption of a softer start with lower fixed carbon prices. Such prices should more closely reflect current prices in the European Union ETS and the Clean Development mechanism; an example trajectory would start around AUD$10 and move gradually towards international prices currently expected for 2015-16. This might also require consequential changes to some elements of the various assistance packages.[302]

Determining the price floor by regulations

From 1 July 2015 ‘a price ceiling will apply to the first three flexible charge years and be implemented by issuing carbon units at a fixed charge. This is meant to assist in managing costs and creating market certainty. The amount of the fixed charge for carbon units issued in 2015-16 will be prescribed in regulations’[303] by 31 May 2014 at AUD$20 above the expected international price for 2015-16, rising by five per cent in real terms per year, with a price floor starting at AUD$15 and rising by four per cent per annum in real terms. Clause 111 specifies the price floor arrangements for the auctioning of carbon units (supported in the Clean Energy (Charges—Excise) Bill 2011).

Concern has been raised about the strategy of making the price floor dependant on disallowable regulations. According to the New South Wales Environmental Defender’s Office

If the international unit surrender charge regulations are disallowed, the price floor will not take effect (cl 111(5)).

This makes the entire price floor vulnerable to disallowance of the regulations. A smarter way would be to impose the price floor on international units through the Clean Energy (International Unit Surrender Charge) Act 2011 itself to prevent disallowance. This could be done by setting the amount of the charge at ‘so much as is necessary to make the net permit price $15’.[304]

Auctioning carbon units

Sublause 111(1) empowers the Regulator to issue carbon units through auctions and outlines matters relevant for the design of an auctioning system for carbon credits. Clause 113 provides that details of the policies, procedures and rules for the conduct of auctions will be determined by the Minister through a disallowable legislative instrument for the purposes of the Legislative Instruments Act 2003 and will be finalised following consultation.

Surrender charge on eligible international units

A charge on the surrender of eligible international units may be imposed during the first three flexible charge years of the scheme. The surrender charge is imposed by the Clean Energy (International Unit Surrender Charge) Bill 2011 (clause 124).

Assessing and meeting liability

Parts 5, 6 and 11 of the Bill are dealt with together given their obvious relationship.

Part 5 – determining a liable entity’s ‘emissions number’, providing an incorrect emissions number, failure to provide an emissions number.

Part 6 – surrender of eligible emissions units and extension of surrender time, unit shortfalls & unit shortfall charges, restrictions on surrender of international units.

Part 11 – relinquishment of carbon units – voluntarily or by court order.

The significance of an emissions number

The emissions number is the quantity of emissions for which a liable entity is responsible and it is used to calculate the number of eligible emissions units that the entity must surrender.  A liable entity will be obliged to report to the Regulator actual or potential emissions for which they are responsible[305].

A person‘s emissions number for an eligible financial year is the sum of the person‘s provisional emissions number (PENs) for the eligible financial year (clause 118). A PEN represents the emissions which give rise to liability under the mechanism.

Failure to surrender eligible emissions units

If a liable entity fails to meet its emissions obligations through the surrender of eligible emissions units, it must pay a unit shortfall charge for those units it has not surrendered.  If the year is a fixed charge year, the charge is 130 per cent of the fixed charge for that year. However, from the beginning of the flexible charge period, the charge can be up to 200 per cent of the benchmark average auction charge for the previous year. This shortfall charge is designed to encourage liable entities to surrender units instead of paying the charge. The amount of unit shortfall charge is specified by clause 9 of the Clean Energy (Charges—Customs) Bill 2011 (so far as the charge is a duty of customs), clause 9 of the Clean Energy (Charges—Excise) Bill 2011 (so far as the charge is a duty of excise) or clause 8 of the Clean Energy (Unit Shortfall Charge—General) Bill 2011 (so far as the charge is not a duty of customs or excise). [306] 

As already mentioned, liable entities meet their liabilities by either surrendering units or paying a shortfall charge.  The process for this will differ between the fixed and flexible period. The Clean Energy Bill’s Explanatory Memorandum provides an explanation of the differences.[307]

An extension of the units surrender deadline may be possible in certain circumstances basically relating to fault or malfunction relating to a computer system under the control of the Regulator, a fault or malfunction relating to a facility (within the meaning of the Telecommunications Act 1997), or a fault or malfunction relating to a carriage service provided to the public (clause 142).

Clause 273 provides criminal penalties of imprisonment for up to 10 years, or up to 10,000 penalty unit points (currently $1.1 million), or both.

A Regulator’s assessment of a person’s emissions number - giving the person written notice of the assessment

In circumstances where:

•          the Regulator has reasonable grounds to believe the person’s emission number specified in their report to the Regulator is incorrect (clause 119)

•          a person has not provided a report under proposed section 22A of the NGERS Act and the Regulator has reasonable grounds to believe that the person is a liable entity for the financial year (clause 120)

•           

The Regulator may make an assessment of:

-          the unit shortfall, or

-          the unit shortfall charge payable on the unit shortfall, and

give the person written notice of the assessment (clause 141).

The Regulator may amend an assessment under this section at any time and if the Regulator amends an assessment, the Regulator must give written notice of the amendment to the person to whom the assessment relates (subclause 141(4)).

An assessment of a person’s emissions number may also be undertaken at the request of the person to whom the assessment relates (subclause 119(5)).

The Regulator is obliged to provide a person with notice in writing, in the case of a refusal to undertake or amend an assessment. An amended assessment may occur because of the Regulator’s own initiative or at the request of the person to whom the assessment related (subclauses 120(5) and 120(7)).

A decision to amend or refuse to amend a decision under subclause 120(4) and clause 141 is a reviewable decision (clause 281).

Late payment penalty

An assessment made before 1 February following the relevant eligible financial year, must be accompanied by a statement which explains that following that assessment, that person may need to surrender eligible emissions units to avoid being liable for a unit shortfall charge, or liable to pay a unit shortfall charge and a late penalty under clause 135. Thus, a late payment penalty will be calculated at a rate of 20 per cent per annum (or a lower rate if prescribed in the regulations). The Regulator may remit the late payment penalty in whole or part if satisfied that the person did not contribute to the delay in payment and, or has taken reasonable steps to mitigate the causes of the delay. The nature of the reasons which caused the delay in payment will also be taken into account (clause 135). A decision to refuse to remit the whole or a part of an amount under subsection 135(2) is a decision which may be reviewable by the Administrative Appeals Tribunal (clause 281).

Comment

The Environmental Defender’s Office, NSW, expressed concern that this power seems to be rather broad, making it unacceptably easy for liable entities to dispute their obligations and making it too difficult for environment groups to uphold them.  They argue the issue is compounded by two factors:

• liable entities have the right to appeal against the decision if the Regulator does not remit the charge (cl 281);

• nobody has the power to appeal the decision if the Regulator does remit the charge.

This poses an unacceptably large invitation to polluters to dispute their obligations and lobby the Regulator to have them waived. It also gives unbalanced rights of appeal, allowing nobody to speak for the environment. The power to remit should be removed, and the rights of appeal should be balanced. [308]

Relinquishment of carbon units

Voluntary relinquishment

A person who holds carbon units can relinquish them by electronic notice transmitted to the Regulator.  The notice must specify certain reasons for relinquishment (subclauses 210(1) and 210(2)).

Mandatory relinquishment

In a nutshell, a person is required to relinquish a number of ascertained carbon units where those units are issued before or at the beginning of a financial year in relation to the Jobs and Competitiveness Program, and a specified event or circumstance happens during a year (clause 146 and clause 211). It is unclear what this specified event or circumstance may be. While the Explanatory Memorandum states that this event is when production ceases during a year,[309] it is not helpful to have this explanation in the Explanatory Memorandum, rather it would be more helpful to make the provision clearer. Relinquishment is also deemed to have occurred where the issue number exceeds the relinquishment number (subclause 211(2)).

Relinquishment is also required where a court has ordered relinquishment following a conviction under relevant provisions of the Criminal Code, relating to false or misleading information given to the regulator, which has resulted in those units being wrongly issued (subclause 208(2)).

Penalties are provided for a failure to comply with the relinquishment requirements.  The liable entity must pay a penalty which is calculated at double the unit charge, though the regulations may provide otherwise in a flexible charge period (clauses 212, 213, 214, 215, 216).

Relinquished units in a fixed charge year are cancelled and removed from the owner’s Registry account by the Regulator (subclause 201(3)). Relinquished units in a flexible charge year transferred to the Commonwealth and the Regulator may auction these units (clause 112).

Part 7 – Jobs & Competitiveness Program

In a nutshell, this part deals the provision of transitional support for, highly emissions-intensive industries that compete in international markets and generate significant levels of GHGs in Australia. As mentioned in an earlier section, duration of the program is for a minimum of five years  and free carbon units will be provided to entities which satisfy certain requirements in terms of their emission-intensive, trade-exposed activities. Thus being able to properly identify those particular entities is key goal of this section, and to provide assistance that is economically and environmentally efficient (subclause 143(2)). The underlying policy framework for determining the eligibility of activities for EITE assistance is the same as that used for establishing eligibility for assistance provided under the Renewable Energy Target scheme.

Other key provisions relating to the framework of the program are:

·         conferral of powers to make regulations formulating this program (subclause 145(1)) and an obligation on the Minister to ensure that regulations for the purposes of this subclause are made before 1 March 2012

·         free carbon units must not be issued to a person in accordance with the program unless the person meets such requirements as are specified in the program and has a Registry account (subclause 145(2)).

·         a review and report on the assistance levels to be undertaken by the Productivity Commission, with the first review to occur in 2014 (subclause 155(1) and clause 157). The inquiry must take into account particular matters, among these listed in subclause 156(2) are:

-          whether countries responsible for the substantial majority of the world’s emissions of GHGs have implemented measures to reduce those emissions that have an impact that is comparable to the impact of Australian emissions reduction measures (including the impact of associated assistance)

-          progress made by persons carrying on emissions-intensive trade-exposed activities towards achieving best practice for energy and emissions efficiency

-          additional activities that should be identified as emissions-intensive trade-exposed activities for the purposes of the Jobs and Competitiveness Program

-          whether windfall gains are being conferred on persons carrying out emissions-intensive trade-exposed activities

-          he growth in the emissions-intensive trade-exposed sector, and implications of that growth for the number of free carbon units issued within the limits of the carbon pollution cap

-          the extent to which the Jobs and Competitiveness Program gives effect to the objects and purpose of the Act

-          any other matters specified in a legislative instrument by the Productivity Minister.

·         As soon as practicable after the receiving the Productivity Commission’s response, the government must prepare a statement of response which is to be tabled in Parliament (subclause 157(4)(a))

·         a requirement that industry be given at least three years notice of any changes to the program that will adversely affect it (subclause 157(3)).

·         compliance with reporting and record-keeping requirements (clause 151)

·         information gathering powers of the Minister which assist the Commonwealth to formulate or vary the policy embodied in the Jobs and Competitiveness Program (clause 152). Clause 153 provides that there is no assistance for 2 eligible financial years if a corporation refuses or fails to comply with a request for information.

·         assistance based on previous year's production with a true up to account for actual production

·         assistance is provided in respect of both direct and cost of indirect emissions, with no caps on existing activities.

Part 8 – Coal-fired electricity generation

This part of the Bill provides for transitional assistance in respect of highly emissions-intensive generation assets so as to help generators that face significant losses in the value of their assets, and also to support investment confidence in generation assets as part of meeting Australia’s future energy security needs (clause 159). In meeting these objects, free carbon units may be issued in respect of generation complexes that meet certain eligibility requirements. These free units (whose number is capped) will be issued from 1 July 2013 (for a 3 year period) if a certificate of eligibility for coal‑fired generation assistance is in force in respect of the generation complex (subclause 161(1)).

·         Free units will not be issued if a generation complex does not pass the power system reliability test for a financial year, and

·         Free units will not be issued in respect of a generation complex unless a Clean Energy Investment Plan is given to the Resources and Energy Minister.

However, these two requirements are dispensed with (and there is a limit placed on the free units that may be issued), where there is a closure contract is in force in relation to a generation complex (clause 181).

Clause 161 sets out the formulae used to calculate the issue of free carbon units in respect of generation complexes.

Making an application for a certificate of eligibility for coal‑fired generation assistance

A person who owns, controls or operates the generation complex is entitled to apply (within 270 days after the commencement of this section[310] ) to the Regulator to issue a certificate of eligibility for coal‑fired generation assistance in respect of a generation complex (subclauses 162 (1) and (2)).

Clause 163 and subclauses 162(3) and (4) specify the requirements for a person to make an application for a certificate of eligibility for coal‑fired generation assistance. The form and manner requirements are that the application must be in writing, must be accompanied by a prescribed form, and must include additional information and documents as specified in the regulations.

The Regulator may, by written notice, request that the applicant provide further information within a specified time period and may refuse to consider the application or take any further action in relation to the application, if that information is not supplied (clause 164).

Criteria for  certificate of eligibility for coal‑fired generation assistance

Subclause 64(3) provides that the Administrator must not recognise a person as an offsets entity unless satisfied that they are a fit and proper person, having regard to such matters as:

o        whether the applicant has been convicted of an offence against a law of the Commonwealth, a state or a territory, where the offence relates to dishonest conduct

o        whether the applicant has been convicted of an offence against a law of the Commonwealth, a state or a territory, where the offence relates to the conduct of a business.

Timing --Decision by the Regulator on the application for a certificate of eligibility for coal‑fired generation assistance

After considering the application, the Regulator may issue a certificate of eligibility for coal‑fired generation assistance in respect of the generation complex. Subclause 165(4) requires the Regulator to take all reasonable steps to make a decision on the application within 90 days of the application, or 300 days from the commencement of this section, whichever is the later. A decision to refuse to issue a certificate is reviewable (clause 281).

Criteria for issuing a certificate of eligibility for coal‑fired generation assistance (clause 166)

The Regulator must not issue a certificate of eligibility for coal‑fired generation assistance unless the Regulator is satisfied that the generation complex passes the generation complex assistance eligibility test.

A generation complex passes the generation complex assistance eligibility test if:

At any time during the period beginning on 1 July 2008, and ending on 30 June 2010, at least 95 per cent of the electricity generated by the generation complex was attributable to the combustion of coal, and the generation complex:

-          was in operation

-          was connected to a grid with a grid capacity[311] of at least 100 megawatts, and

-          the emissions intensity[312] of the generation complex is greater than 1.0.

No assistance if the generation complex does not pass the power system reliability test (subclause 169(2))

No free carbon units are to be issued to the generation complex if the generation complex does not pass the power system reliability test in relation to the eligible financial year. Subclause 170(2) and clause 171 detail the requirements for passing the power system reliability test in relation to an eligible financial year.

No assistance unless Clean Energy Investment Plan is provided (clause 177)

No free carbon units are to be given to a generation complex unless, a person who owns, controls or operates the generation complex gives the Resources and Energy Minister a Clean Energy Investment Plan in relation to the generation complex for the eligible financial year, by 15 August in the eligible financial year. If the Resources and Energy Minister receives a Clean Energy Investment Plan, he or she must give a copy of the plan to the Regulator (clause 179) and must publish the Clean Energy Investment Plan on the website of his or her Department (clause 180).

What is a Clean Energy Investment Plan? (clause 178)

A Clean Energy Investment Plan is a plan that:

·         deals with such matters as are specified in a legislative instrument made by the Resources and Energy Minister for the purposes of this section, and

·         does so in a manner specified in the legislative instrument.

Comment

The requirements and adequacy of clean energy plan seem to be lacking in detail. It may be helpful to provide or indicate the nature of the detail that would be usefully required by such a plan, and impose a deadline for the Minister to deliver such detail, so as to provide timely guidance to industry.

Part 9 – Publication of information

The Regulator is required to maintain an electronic Liable Entities Public Information Database with mandatory content (clause 183).  Where an entry is made for a person who the Regulator has reasonable grounds to believe will be a liable entity for that year, then that person must receive written notice of that entry (clause 184).

Mandatory content to be entered into the Liable Entities Public Information Database

·         As soon as practicable after making an assessment of the person’s emissions number for the eligible financial year (or an amendment to the emissions number), the Regulator must enter details of the assessment in the information database (clause 185). 

·         Estimates of total emissions numbers (clause 186).

·         If the Regulator is of the opinion that the person has a unit shortfall for the eligible financial year but an assessment of the person’s unit shortfall for the eligible financial year has not been undertaken, the Regulator must enter in the Information Database:

-          the Regulator’s reasonable estimate of the number of units in the person’s unit shortfall for the eligible financial year, and

-          the Regulator’s reasonable estimate of the amount of unit shortfall charge payable by the person in relation to the unit shortfall (clause 187).[313]

·         If an assessment has been made under section 141 of the person’s unit shortfall for the eligible financial year, then in certain circumstances, details need to be published (subclause 187(5)).

·         Information relating to unpaid unit shortfall charge and unpaid administrative penalties must be entered onto the database (clause 188 and clause 191).

·         The number of surrendered eligible emissions units (clause 189)

·         The number of carbon units required to be relinquished under the Jobs and Competitiveness Program or another part of the Act (clause 190 and clause 192)

Mandatory information to be published on the Regulator’s website

·         Information about holders of Registry accounts (clause 194)

·         For each auction of carbon units conducted by the Regulator, the Regulator must publish details of the auction including its results (clause 195 and clause 196)

·         Information about the total number of carbon units issued in accordance with section 100  for a fixed charge in each of the relevant years (clause 197)

·         Information about the free carbon units issued to a person in accordance with the Jobs and Competitiveness Program including, the name of the person to whom they are issued, the total number of free carbon units issued, each activity under the Jobs and Competitiveness Program, which is taken to be an emissions‑intensive trade‑exposed activity in respect of which the free carbon units were issued (clause 198).

·         Quarterly reports about issue of free carbon units under the Jobs and Competitiveness Program and in accordance with Part 8 (coal‑fired electricity generation) (clause 199)

·         Information about surrender of borrowed and banked eligible emissions units (clause 200)

·         Information about total emissions numbers and unit shortfalls (clause 201)

·         a concise description of the characteristics of carbon units (clause 202)

·         Information about relinquishment requirements for persons other than liable entities, including the name of the person and details of the relinquishment requirement (clause 203)

·         a list of the landfill facilities (including location) that, in the Regulator’s opinion, were designated large landfill facilities in relation to the previous eligible financial year (clause 206).

Part 10 – Fraudulent conduct

Subclause 208(2) allows a court to order the relinquishment of carbon units issued as a result of a conviction for fraudulent conduct under specified sections of the Criminal Code Act 1995. The conviction may for an offence occurring before the coming into force of the Clean Energy legislation (subclause 208(6)).

Comment

While this provision seems rather problematic in that it applies to past convictions, they Minister has explained that:

The object of clause 208 is to ensure that carbon units obtained as the result of fraudulent conduct (for instance a false or misleading statement made to the Commonwealth) are subject to the possibility of relinquishment. The issue of carbon units in such circumstances could mean that carbon units have been issued that should not have been issued. This could distort the operation of aspects of the carbon pricing mechanism by denying others the capacity to obtain those units to satisfy their liabilities.

Whether the fraud in question occurred before or after the commencement of the Clean Energy Bill 2011, or the conviction in question occurred before or after the commencement of the Clean Energy Bill 2011, would not affect whether, as a matter of policy, the carbon units should be relinquished so that the distortions that misallocation creates can be remedied.

In any case, there are unlikely to be many instances of carbon units being issued directly or indirectly arising out of a fraud for which a conviction has been obtained before commencement of the Clean Energy Bill 2011. If a conviction is obtained before commencement, it is likely that the Regulator will become aware of the conviction and that carbon units will not be issued in ignorance of the fraud.[314]

Part 12 – Notification of significant holdings

The controlling corporation of a group must notify the Regulator if the group either begins to have or ceases to have a significant holding of carbon units with a particular vintage year (clause 218 (1)).  It must do this within 5 business days of becoming aware of the event, and provide certain information in relation to its notification. A formula is provided for calculating a significant holding (subclause 218(7)).

The notification requirement must be complied with. It is an offence to aid, abet, counsel or procure a contravention of this requirement. Civil penalties are provided for these offences.

A non‑group entity must also notify the Regulator if the non‑group entity has a significant holding of carbon units.

Part 13 – Information gathering powers

Power is conferred on the Regulator to require a person, by written notice, to provide any such information or documents from a person if the Regulator believes on reasonable grounds that the person has information or a document that is relevant to the operation of this Act, or the associated provisions.  A person must comply with such a notice to the extent that they are able to do so (clause 221).

Civil penalties apply for a failure to comply or for inducing, aiding, abetting, counselling or procuring a contravention of this requirement either directly or indirectly (clause 221(5)).

A person is not excused from giving information or producing a document under section 221 on the ground that the information or the production of the document might tend to incriminate the person or expose the person to a penalty. However, in the case of an individual providing such information or documentation, it is not admissible in evidence against the individual:

-          in civil proceedings for the recovery of a penalty (other than proceedings for the recovery of a penalty under section 135, 212 or 213), or

-          in criminal proceedings (other than proceedings for an offence against section 137.1 or 137.2 of the Criminal Code that relates to this Part).

Part 14 – Record-keeping requirements

The regulations may require a person to make a record of information and to retain a record of that information for a period of five years (clause 227).

Record-keeping requirements must be complied with. It is an offence to aid, abet, counsel or procure a contravention of this requirement. Civil penalties are provided for these offences.

Records must be kept of the quotation of OTNs by both the supplier and recipient of the OTN for a period of 5 years (clause 228). A failure to comply triggers the civil penalty provisions.

Part 15 – Monitoring powers

Clause 232 provides for an inspector to enter premises with either the consent of the occupier, or under a monitoring warrant, for compliance purposes or to substantiate information provided for the purpose of the Act. Clause 233 gives the inspector a wide variety of powers to carry out these tasks. Clause 235 gives the inspectors powers to ask questions and require the production of relevant documents. Under clause 236, self-incrimination is not an excuse for failing to answer a question or produce a document. However, that evidence is not admissible in certain criminal and civil proceedings (subclause 236(2)). A failure to comply with subclause 235(2) carries a maximum penalty of 6 months imprisonment, or 30 penalty units ($3300), or both.

If a premises are inspected under a monitoring warrant the occupier has the right to observe this inspection under clause 243, but, under the provisions of clause 244, they must provide the inspector with all reasonable facilities and assistance. These warrants must be issued by a magistrate under subclause 245(2).

Part 16—Liability of executive officers of bodies corporate 

The Bill provides that executive officers of bodies corporate are liable for a contravention of a civil penalty provision by that body corporate in certain circumstances.  Subclauses 248(1)-248(2) define the degree of ‘negligence’ and ‘recklessness’ that an executive officer must manifest in relation to a contravention of the Clean Energy legislation by a body corporate so as to attract personal liability for a Part 17 civil penalty. Two things are noteworthy firstly, the term ‘executive officer’ is defined rather broadly and secondly, the imposition of this liability is becoming rather commonplace[315], though it remains a contentious means of dealing with the governance and conduct of bodies corporate.

The Explanatory Memorandum states:

By imposing liability on the basis of knowledge, negligence or recklessness, liability only applies if there is a degree of blame that can be attributed to the office holder. This approach ensures fairness and offers some protection to the individuals involved. It is also consistent with the recommendations of the Australian Law Reform Commission in Report 95: Principled Regulation: Federal Civil and Administrative Penalties in Australia.[316] [317]

Also included are the standard ‘due diligence’ and ‘no capacity to influence’ defences (clause 248 ).

Part 17—Civil penalty orders 

Civil penalties are imposed by courts, but are not criminal offences, and hence only require the court to be satisfied on the balance of probabilities‘ (rather than the criminal standard of beyond reasonable doubt‘) that the relevant contravention occurred. From this perspective, it may make an alleged contravention easier to prosecute. Subclause 252(3) sets out how the relevant court determines the amount of a pecuniary penalty under the civil penalty provisions of the Bill. These relate to the particular circumstances of the case. Subclause252(4) sets an upper limit for corporations of 10,000 penalty units ($1.1 million), except in certain situations where the court can estimate the corporation has benefited from the contravention. In that case a penalty of three times the value of the benefit can be imposed. Subclause 252(6) provides that for an individual, the upper limit is 2,000 penalty units. Clause 263 deals with penalties for continuing contraventions and caps the daily penalties that apply for most continuing contraventions of the Clean Energy Bill at five per cent of the maximum penalty for the contravention.

Part 18—Infringement notices 

Clause 278 empowers the Regulator to issue infringement notices for contraventions, as an alternative to court proceedings.

Part 20—Enforceable undertakings

Clause 278 empowers the Regulator to accept enforceable undertakings concerning compliance and clause 279 provides for the enforcement of those undertakings by a Court.

Part 21—Review of decisions 

Clause 281 lists which of the decisions under the Act are ‘reviewable decisions’. Where a decision is listed, and the decision was made by a delegate of the Authority, a person affected by the relevant decision can ask the Authority to reconsider the decision. If after that, the person is still not satisfied, they may apply to the Administrative Appeals Tribunal for a review (subclause 285(1)). If the original decision was made by Authority (rather than a delegate), the application for review is to be made direct to the Administrative Appeals Tribunal (subclause 285(2)).

Part 22—Reviews by the Climate Change Authority 

The Climate Change Authority must conduct periodic reviews of:

·         the  Act and the associated provisions

·         the level of carbon pollution caps

·         any indicative national emissions trajectory and national carbon budget, and

·         progress in achieving Australia’s emission reduction targets and any national carbon budget.

Also, the Climate Change Authority is to conduct a review of matters relating to this Act and the associated provisions if requested to do so by the Minister or both Houses of the Parliament.

Part 23—Miscellaneous 

Clause 295 lists other functions of the Regulator. Among these are:

·         to monitor and promote compliance with this Act and the associated provisions

·         to conduct and/or co‑ordinate education programs about the operation of the Act

·         to advise the Minister on matters relating to the Act, its provisions and emissions trading schemes

·         to advise and assist persons in relation to their obligations under this Act and the associated provisions

·         to advise and assist the representatives of persons in relation to compliance by persons with the Act

·         to liaise with regulatory and other relevant bodies, whether in Australia or elsewhere, about co‑operative arrangements for matters relating to the Act and emissions trading schemes

·         to collect, analyse, interpret and disseminate statistical information relating to the operation of this Act and the associated provisions

Clause 297 confers power on the Regulator, which is to be used in a reasonable way, to request additional relevant information in circumstances where a person makes a request to the Regulator pursuant to a provision in the Act.

Clause 304 excludes the Minister and certain government officers from action or other proceeding for damages for, or in relation to, an act matter in good faith done or omitted to be done, in the performance of any function, or in the exercise of any power conferred by this Act or the associated provisions.

Clause 308 provides for compensation on just terms for the acquisition of property from a person by the Commonwealth. If the Commonwealth and the person do not agree on the amount of the compensation, the person may institute proceedings in a court of competent jurisdiction for the recovery from the Commonwealth of such reasonable amount of compensation as the court determines.

Comment

Mr Abbott has reportedly pledged to repeal the carbon tax if the Coalition wins the next election. There is an argument that the potential cost to businesses of doing so, may dissuade Mr Abbott, as it would most likely invite a High Court challenge if a Coalition government was not intending to pay compensation on just terms to businesses who suffered losses as a result of the repeal of this legislation[318].  Even though the Clean Energy Bill states very clearly that carbon units are a form of personal property, Professor George Williams points out that ‘the case might be won by arguing that carbon units are in reality mere creations of legislation that can be freely altered by future laws’.[319]
It is actually uncertain as to how the High Court would decide as the jurisprudence in this area is rather complex.

Appendix 1: International policy and pre-2010 domestic policy developments

Growing awareness of climate change issues

Scientific concern about the possible build–up of carbon dioxide in the atmosphere commenced as far back as 1861. However, it was not until the latter half of the twentieth century that improvements in technology allowed for more precise measurements of the level of greenhouse gases (GHGs) in the atmosphere. From the 1980‘s onward scientific concern about the possible long term consequences of the increase in GHGs in the atmosphere accelerated.[320] At the beginning of the twenty first century the effects of such a build–up, as predicted by scientific modelling, were being increasingly observed. These effects include increasing average global temperatures, sea level rise, accelerated glacial melting, intense and prolonged droughts and increased storm severity.[321] The projected environmental and consequent economic impacts of continued adverse changes in these areas are severe to catastrophic, and form a compelling case for significant global policy action to mitigate or reverse these trends.[322]

What is considered to be a minority scientific opinion disputes various elements of the majority view of anthropogenic climate change.  A detailed consideration of that debate is not within the purview of this Digest.

International policy

Between 1979 and 1988 a series of international conferences convened by the World Meteorological Organisation (WMO) and the United Nations Environment Program (UNEP) raised concerns about the ramifications of the mounting evidence that human activity was causing potentially dangerous increases in GHGs in the atmosphere. In 1988, the WMO and UNEP jointly established the Intergovernmental Panel on Climate Change (IPCC). The IPCC‘s role is to provide independent scientific advice on the complex and important issue of climate change. The Panel was asked to prepare, based on available scientific information, a report on all aspects relevant to climate change and its impacts and to formulate realistic response strategies. It has issued four major assessment reports to date as well as a number of special reports on various topics.[323]

The findings of the first IPCC Assessment Report of 1990 played a decisive role in leading to the United Nations Framework Convention on Climate Change (UNFCCC), which was opened for signature in the Rio de Janeiro Summit in 1992 and entered into force in 1994 (Australia is a signatory to this Convention). The IPCC Second Assessment Report of 1995 provided key input for the negotiations of the Kyoto Protocol in 1997 and the Third Assessment Report of 2001. Special and Methodology Reports provided further information relevant for the development of the UNFCCC and the Kyoto Protocol.[324]

The Fourth Assessment Report of the IPCC in 2007 has provided the essential scientific background for negotiations, held at annual United Nations Climate Change Conferences, which included, under the UNFCCC, the Conference of Parties (COPs) and the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP). The last meeting was held in Cancun Mexico and was the sixteenth meeting of the COPs and the sixth meeting of the CMPs.[325] The increasing wealth of scientific evidence presented in each new IPCC report has aided in creating new global agreements on mitigation and adaptation, and has heightened concerns about the rate of climate change and increasing urgency of a coherent policy response at a global level.

The following summarises the main global agreements that emerged in Cancun Mexico and are known as the Cancun Agreements.

•          Green Climate Fund – is a fund by which developed countries pool funds to help developing countries facilitate mitigation and adaptation of climate change.

•          Technology Mechanism ¬– is expected to facilitate the implementation of enhanced action on technology development and transfer, which will support mitigation and adaptation of climate change.

•          Cancun Adaptation Framework – is a framework that facilitates international cooperation in reacting to and enhancing action on adaptation. More specifically, it will deal with issues like agriculture, food security and water and take into account the urgent and immediate needs of those developing countries that are most vulnerable.

•          Fast Start Finance – this is additional funds/resources that developed countries have pledged to mobilize through international institutions to help mitigation and adaptation for those most vulnerable countries, particularly with adaptation mechanisms.

•          Forest Management Reference Levels – is a requirement by the CMP for each Annex I  party to submit to the secretariat information on forest management reference levels. The CMP also decided to submit each submission to a technical assessment and the outcomes to be discussed at the seventh session of the CMP.[326]

Pre-2010 domestic policy developments

ALP policy development

The broad outline of current government policy appears to have been formulated in the period leading up to the 2004 election. During the 2004 election campaign Australian Labor Party (ALP) policy documents carried the following words:

Labor will establish a National Emissions Trading Scheme, to allow market based mechanisms to deliver lowest cost greenhouse gas emissions reductions, and seek linkages with international trading arrangements.[327]

Another policy document from the 2004 campaign stated that a Federal Labor Government would ratify the Kyoto Protocol and introduced an ETS that was operational no later than 2010.[328]

An important contributor to ALP policy development was commissioned by state governments. In 2004, Australian state and territory governments established the National Emissions Trading Taskforce (NETT) to develop ideas for a multi‑jurisdictional ETS as part of a policy response to the challenge of reducing GHG emissions, and potentially to link Australia to international carbon markets. The NETT played a formative role in building Australian commitment to an ETS.[329] NETT‘s final report strongly endorsed the establishment of a national emissions cap-and-trade scheme as soon as possible.[330]

These themes were carried over into the 2007 election where ALP policy was to introduce an ETS commencing in 2010.[331] During the 2007 election campaign the then Labor opposition stated that a Rudd Labor Government would:

Ensure that Australia's international competitiveness is not compromised by the introduction of emissions trading. Consult with industry about the potential impact of emissions trading on their operations to ensure they are not disadvantaged.

Establish specific mechanisms to ensure that Australian operations of emissions intensive trade exposed firms are not disadvantaged by emissions trading.[332]

The Garnaut Climate Change Review was commissioned in April 2007 by the then Leader of the Opposition, Kevin Rudd, and by the premiers of the six states and the chief ministers of the two territories of Australia. The Commonwealth Government joined the Review in January 2008 after the change of government in the 2007 election. The Review was required to examine the impacts of climate change on the Australian economy, and to recommend medium– to long–term policies and policy frameworks to improve the prospects of sustainable prosperity. Its draft and final reports, released in July and September 2008 respectively, strongly recommended the establishment of an Australian cap and trade scheme.[333]

Rudd Government

After its election in 2007, the Rudd Government released a Green Paper on an Australian ETS, which would be called the Climate Pollution Reduction Scheme (CPRS). This paper put forward a possible design for the proposed scheme and invited comments.[334] This was followed by the release in October 2008 of detailed Treasury economic modelling of the Australian economy under a reference scenario and two scenarios incorporating assumptions consistent with the CPRS.[335] The final government decisions on the broad outline of the proposed CPRS were released in a White Paper in December 2008.[336] An exposure draft of the CPRS legislation and associated commentary were released on 10 March 2009, with comments invited by 14 April 2009.[337]

In response to submissions and feedback on the draft legislation, the Government announced substantial changes to the CPRS on 4 May 2009,[338] before introducing the revised legislation into Parliament on 14 May 2009. The Carbon Pollution Reduction Scheme Bill 2009, and associated Bills, passed the House of Representatives on 4 June 2009, but were defeated in the Senate on 13 August 2009.[339]

The Government re-introduced the legislation in the House of Representatives on 22 October 2009 and it was passed by the House on 16 November 2009.[340] After introduction in the Senate on 17 November 2009, and agreement over a number of amendments, the Bills were defeated on 2 December 2009.[341]

On 2 February 2010, the Carbon Pollution Reduction Scheme Bills were introduced for a 3rd time in the House of Representatives and were passed by the House on 11 February 2010.[342] The Bills were introduced in the Senate on 22 February 2010.[343]

On 27 April 2010, Prime Minister Rudd announced that the Government had decided to delay the implementation of the Carbon Pollution Reduction Scheme until after the end of the current commitment period of the Kyoto Protocol (which ends in 2012), and to make it conditional on there being greater clarity on the actions of other major economies including the US, China and India.[344]

Coalition policy development

The development of Coalition policy on emissions trading occurred alongside increased public concern about climate change matters. In response to increased public concern, the then Coalition Government commissioned an inquiry in 2006 into the development of an Australian ETS. The report of this inquiry concluded that it would be in Australia‘s interests to develop a ‘cap and trade’-style ETS, even if a global climate change agreement had not been reached. This scheme was recommended to commence trading by 2011, or at the latest by 2012.[345]

In the subsequent 2007 election, official Coalition party policy stated:

To reduce domestic emissions at least economic cost, we will establish a world-class domestic emissions trading scheme in Australia (planned to commence in 2011). We are also committed to capturing the opportunities from being among the first movers on carbon trading in the Asia–Pacific region.[346]

Appendix 2: Modelling of the Clean Energy legislative package

Treasury Modelling

The Department of Treasury has undertaken modelling of the Clean Energy package, including the projected impact of the carbon price measures on emissions, the economy, households and business sectors. The modelling is based on a range of assumptions including the extent of complementary international action, population growth and technology change.[347]

The Treasury modelling was released in two parts:

•          initial modelling of the economy-wide and household impacts of the carbon price mechanism was released on 10 July 2011, and

•          update modelling of the economy-wide impacts was released on 21 September 2011.[348] This was accompanied by more detailed analysis of the household impacts

Assumptions about the level of the carbon price, scenarios and policies included differ in

Emissions reductions

The Government estimates that meeting Australia’s commitment to reduce emissions by 5 per cent from 2000 levels by 2020 will require abatement of at least 159 Mt CO2-e (or 23 per cent) in 2020.[349]

The updated Treasury modelling comparing a business as usual approach (ie: without a carbon price mechanism and the measures included in the Clean Energy package) under a range of different scenarios projects that domestic emissions will be reduced to varying extents:

•          under the core policy scenario domestic emissions in 2020 will be 621 Mt CO2-e — 12 per cent above 2000 levels and a cut of 58 Mt CO2-e compared to business as usual

•          under the medium global action scenario domestic emissions in 2020 will be 679 Mt CO2-e — 22 per cent above 2000 levels and no reduction in domestic emissions compared to business as usual

•          under the Clean Energy Future scenario domestic emissions in 2020 will be 624 Mt CO2-e — 13 per cent above 2000 levels and a cut of 54 Mt CO2-e compared to business as usual

•          under the Government Policy scenario domestic emissions in 2020 will be 621 Mt CO2-e — 12 per cent above 2000 levels and a cut of 58 Mt CO2-e compared to business as usual.[350]

The impact on domestic emissions under these scenarios to 2050 is illustrated in figure 5.

Figure 5: Australia’s domestic emissions under the policy scenarios, 2010 to 2050

Source: Treasury, Strong Growth, Low Pollution, Modelling a carbon price, update, op. cit, p. 6.

In the updated Treasury modelling, under the ‘core’ policy scenario, the carbon price mechanism will contribute domestic abatement of 58 Mt CO2-e and that a further 94 Mt CO2-e of abatement activity will be purchased from overseas.[351] Despite this abatement, Treasury estimates that domestic emissions levels will rise by 10 per cent until late-2020 (figure 6).

Figure 6: Australian emissions in the core policy scenario

Source: Treasury, Chart and Table Data, Chart 5.2: Australian emissions in the core policy scenario, op. cit.

Interpreting Treasury’s modelling of the impact of the carbon price mechanism

The modelling is based on a range of assumptions including the extent of complementary international action, population growth and technology change.[352] The updated modelling incorporated some wider industry assistance measures not included in the initial modelling and the announced carbon price of $23.[353] Selected ‘headline’ results of the updated modelling are presented in table 3.

Table 3: Selected headline indicators from the updated Treasury carbon price modelling

At 2010

At 2020 (government policy scenario)

At 2050 (Government policy scenario)

Emission target, change from 200  level (per cent)

-

-5

-80

Carbon price, real ($/t CO2-e)

-

29

131

Domestic emissions (Mt CO2-e)

-

-58

-463

Domestic emissions, change from 2000 level (per cent)

-

22

-2

Gross national income per person ($’000)

55.8

64.8

86.9

Gross Domestic Product ($ billion)

1.28

1.72

3.56

Employment (millions)

11.4

13.0

17.4

Gross state product, average annual growth (per cent)

  New South Wales

-

2.5

2.5

  Victoria

-

2.6

2.4

  Queensland

-

3.5

2.9

  South Australia

-

2.1

1.8

  Western Australia

-

4.2

3.0

  Tasmania

-

2.0

1.9

Source: Treasury, Strong Growth, Low Pollution, Modelling a carbon price, update, 21 September 2011, p. 5, viewed 21 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/update/downloads/Modelling_update.pdf

There are several issues to consider in interpreting the modelling, including the general limitations of modelling an integrated and dynamic economy over a long-term period to 2050 and the impact of key assumptions on the modelling results.

Differences between the Clean Energy package and the assumptions in the initial modelling

The assumptions included in the initial modelling differ in several regards to the final Clean Energy Package. These include:

•          the household impact modelling incorporates the $23 carbon price from 1 July 2012. However, the initial economy-wide modelling used a $20 carbon price.

•          the core policy scenario assumes unlimited international permits over the entire period. However, there will be no international linking until 1 July 2015 and until 2020 liable parties must meet at least 50 per cent of their annual liability with domestic permits or credits.

•          several industry adjustment programs were not included in the initial modelling, such as support for jobs in the coal and steel industries and expanding coverage of the scheme to heavy on-road transport from 1 July 2015.

Updated modelling assumptions

The updated Treasury modelling uses a starting carbon price of $23t CO2-e for the economy-wide modelling rather than $20t CO2-e and includes an additional additional scenarios:

•          ‘Clean Energy Future’ scenario — largely reflects the features of the Clean Energy package including a requirement that businesses meet at least 50 per cent of their annual liability from domestic permits and credits until 2020, no maximum cap on transitional assistance to emission-intensive trade-exposed industries under the Jobs and Competitiveness Program, and permanent exclusion of heavy on-road transport combustion emissions from carbon pricing.

•          ‘Government policy’ scenario – includes additional Government-only measures for heavy on-road transport and some of the additional assistance for the steel industry.[354]

The Treasury also noted in the updated modelling that it was not feasible to model all the detailed elements of the Clean Energy package.[355] In particular, the modelling of the renewable energy sector does not include the impact of the Clean Energy Finance Corporation, policies that provide investment and innovation grants (Australian Renewable Energy Agency, the Clean Technology Program or the Steel Transformation Plan), the Carbon Farming Futures Fund and the Biodiversity Fund.[356] Treasury note that:

The impact of these programs on investment and behaviour is difficult to predict. Generally, they reduce the cost of investment in energy efficiency, renewable energy, and abatement in the land sector. These policies would likely lead to more investment and lower domestic emissions.[357]

The updated modelling also does not include the planned closure of 2 000 MW of electricity generation capacity of the most emission-intensive power plants and policies that assist targeted facilities in industries with an unusually diverse level of emissions (such as the few mines with high volumes of fugitive emissions that will be eligible for assistance under the Coal Sector Jobs Package).[358]

Modelling limitations and scenarios

Economic models approximate the complex real world and consequently have limitations that affect the interpretation of results.[359] Treasury note that:

The inherent difficulty in developing assumptions and undertaking simulations is compounded by the long timeframes required for this analysis. Generally, more caution is needed in interpreting results that are well into the future. As the timeframe expands, assumptions are more speculative. Just as modellers in 1972 could not have easily foreseen today’s widespread internet use and China’s economic transformation, modellers today are unlikely to accurately foresee all potentially relevant developments in the world of 2050.[360]

Global scenarios

In the initial modelling, Treasury modelled two scenarios of global action, a ‘medium’ global action scenario and an ‘ambitious’ global action scenario.

•          In the medium action scenario, developed regions, China, OPEC and South Africa enter from 2021, with India, Indonesia and other South and East Asia entering in 2026. The rest of the world enters in 2031.[361]

•          In the ambitious action scenario, the lag between different regions is compressed, with all regions except Rest of World entering in 2021 and Rest of World entering in 2026.[362]

The key aspects of each of Treasury’s scenarios are summarised in table 4.

Table 4: Summary of international global action scenarios

Medium global action scenario

Ambitious global action scenario

Stabilises concentrations of greenhouse gases at 550 ppm CO2-e by around 2100.

Incorporates the low end pledges under the Cancun Agreements until 2020(a).

Multistage action: developed countries and China lead the mitigation effort initially; all countries act by 2031.

Stabilises concentrations of greenhouse gases at 450 ppm CO2-e just beyond 2100.

Incorporates the high end pledges under the Cancun Agreement to 2015-16. After 2016, major advanced economies increase their effort above the pledge levels.

Multistage action: developed countries and China lead the mitigation effort initially; all countries act by 2026.

Mechanism: from 2013 to 2015 uncoordinated global action, no trade in permits, differentiated carbon prices. From 2016

onwards, countries trade, either bilaterally or through a central market

Coverage: all sectors are covered from the start, except agriculture, which is covered from 2031.

Technology: nuclear is only considered a technology option in countries that have current nuclear generation(b).

Note: (a) Where a whole region does not have a pledge (such as OPEC), the 2020 allocation is set equal to baseline emissions. Where a region includes a number of countries with 2020 pledges, regional allocations have been estimated, weighted by individual countries’ share of total regional emissions in 2005 (CAIT, 2005), with those countries in the region without pledges getting allocations equal to baseline emissions; (b) Sensitivity analysis explores the effect of a worldwide freeze on nuclear generation capacity. Source: Treasury, Strong growth, low pollution: modelling a carbon price, p. 15, viewed 13 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/report.asp

In the short-term the modelling assumes countries will meet their Accord targets through existing measures where this is possible. For example, the modelling assumes countries and regions with emissions trading schemes already in place continue with their schemes. However, several regions are assumed to take additional individual action from 2013 to meet their 2020 pledges.[363] Over the medium term the modelling assumes an eventual shift to a lower cost coordinated international policy framework, recognising that this is ultimately in all countries’ best interests. By 2016, a more coordinated international policy regime allows countries to trade either bilaterally or through a common central market. As a result, a harmonised world carbon price emerges in 2016.[364]

Treasury’s assumptions about the extent of global action are based on commitments that countries made at the UNFCCC’s Cancun meeting and do not require that companies have an emissions trading scheme—only that they are taking action and that there is an implicit or explicit carbon price.[365]

Domestic scenarios

Treasury also modelled two Australian policy scenarios – a ‘core’ scenario and a ‘high price’ scenario. The latter is based on a more ambitious stabilisation target (540 ppm compared to 550 ppm under the core scenario) and emissions target (25 per cent on 2000 levels by 2020 compared to 5 per cent on 2000 levels for the core scenario).

The key domestic scenario assumptions included in the modelling are set out in table 5.

Table 5: Key domestic scenario modelling assumptions

Core policy

High price

Carbon price nominal A$/t CO2-e

2012-13

$20

$23 for household modelling

$30

Escalator

5 per cent per year plus inflation for two years

Flexible price

Projected to be $29 in 2015-16

Projected to be $61 in 2015-16

World stabilisation target

550 ppm

450 ppm

Australian emissions reduction target

5 per cent below 2000 levels by 2020;

80 per cent below 2000 levels by 2050

25 per cent below 2000 levels by 2020; 80 per cent below 2000 levels by 2050

Emission-intensive trade-exposed industries (EITE)

Assistance starts at 94.5 per cent or 66 per cent, depending on intensity, and declining at an annual rate of 1.3 per cent per year.

Fuel

An effective carbon price is applied to: businesses’ combustion of liquid fuels from 2012-13 (except light vehicles, agriculture, forestry and fishing) and heavy on-road vehicles from 2014-15, through the fuel tax credit system; and aviation fuel from 2012-13 through the domestic aviation excise system. Private passenger cars are excluded.

Based on the Carbon Pollution Reduction Scheme as at 24 November 2009.

Household assistance

Remaining scheme revenue is allocated to households as lump sum payments.

International linking

Unrestricted from 2015-16.

Exclusions

Agriculture, forestry (in terms of mandatory liability for emissions), decommissioned mines, legacy waste and emissions of synthetic gases.

Allocation

Set as straight line reductions: from the end of the Kyoto commitment period to achieve the 2020 targets; and from 2020 to achieve an 80 per cent reduction on 2000 levels in 2050.

Source: Treasury, Strong growth, low pollution: modelling a carbon price, p. 75, viewed 13 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/report.asp

Criticisms of the Treasury modelling

Various criticisms have been levelled at assumptions made in the Treasury modelling. These have included:

•          That the assumptions about global action in the near term, particularly in the United States, are ambitious given that action may not be supported in some countries.[366]

•          That more detail should be released, particularly relating to different global scenarios such as Australia reducing its emissions in the absence of a legally binding international commitment to reduce emissions.[367]

•          That coal and energy exports continue to expand despite assumptions that global carbon constraining measures are in place and increases in labour productivity will occur despite ‘the forced abandonment of our most productive industries and other cost impositions’.[368]

Modelling commissioned by state governments

While the Treasury modelling provides a high-level analysis of key macroeconomic outcomes at a state and territory level, it does not examine sub-jurisdictional impacts. At a state level, Treasury notes that all states are projected to continue to grow under the ‘core’ policy scenario, but that the impact of carbon pricing on gross state product (GSP) depends on each state’s emissions intensity, which in turn depends on its industry structure.[369]

Treasury project that under the core policy scenario between 2010 and 2050:

•          GSP in Western Australia and Queensland will grow by more than 3 times and Victoria and New South Wales will grow by at least 2.5 times. The Tasmanian and South Australian economies double in size.

•          The Queensland and New South Wales economies are most affected by the carbon price mechanism, with GSP between 3 and 4 per cent lower in 2050. South Australia and Tasmania are the states that are least affected, with GSP projected to be less than 1 per cent lower in 2050 due to the imposition of a carbon tax.[370]

Several state and territory governments have conducted additional analyses about how the Clean Energy package will impact on the national economy and their jurisdiction. This has included detailed modelling exercises that build upon the Treasury’s modelling — it is important to note that while these modelling exercises are based on a similar model to that used by Treasury, they do not necessarily all make the same assumptions about how each economy evolves as a result of a carbon tax. For this reason, the Treasury modelling results cannot be directly compared to those undertaken by state governments.

In addition to these modelling exercises, a range of groups have highlighted a number of specific regional impacts of the Clean Energy package. These are discussed below.

Queensland

The Queensland Government commissioned modelling by the Queensland Treasury to assess the implications of the Clean Energy package on the Queensland economy, budget and government-owned electricity generators.[371] Queensland Treasury also engaged Deloitte Access Economics to assess carbon pricing impacts for Queensland using an alternate economic model that incorporates different underlying assumptions about the way the economy will adjust to carbon pricing.[372]

The key results of the Queensland Treasury modelling included:

•          over the period to 2049–50, average annual GSP growth is expected to be 2.8 per cent with carbon pricing, and 2.9 per cent without carbon pricing. This is marginally higher than estimated average annual GDP growth for Australia of 2.6 per cent with carbon pricing, and 2.7 per cent without carbon pricing

•          the carbon price is expected to increase the overall cost of providing government services by between 0.31 and 0.4 per cent, and reduce net revenues by between 0.22 and 0.34 per cent. This combined impact results in an estimated negative impact on the Queensland general government operating balance of around $251 million in 2012–13, rising to $360 million in
2015–16, and

•          the value of state government-owned coal-fired generation assets decreases by $1.1 billion, which represents around a 30 per cent decrease in economic value. In contrast, the value of the gas-fired assets increases by $333 million and the other assets, which includes the hydro-electric generators, increases by $158 million. The overall net impact is a loss in economic value of $640 million.[373]

The Deloitte Access Economics commissioned modelling examined a range of scenarios including a ‘core policy’ (which is broadly similar to that used by the Commonwealth Treasury) and scenarios that make different assumptions about the extent and timing of international action and commodity prices.[374] The key results of the Deloitte Access Economics modelling included:

•          the adverse impacts of the Clean Energy policies are projected to be higher in Queensland compared with the Australia-wide results. For example, Queensland GSP declines by 2.76% relative to the ‘medium global action’ levels at 2020 under the ‘core policy’ scenario, while Australian GDP is projected to decline by 2.20%. This is because the Queensland economy is more concentrated in industries that are relatively more adversely affected by a carbon price because of their higher emissions intensity, particularly in mining and minerals processing, and

•          under the ‘delayed action’ scenario, there is reduced international action on greenhouse emissions, including limited availability of international emissions permits. The projected reduction in GSP is lower in the longer term driven by the relative competitiveness impacts between major economies and Australia. By delaying action in the United States and China, these countries face a more difficult structural transition once a carbon price is established. Conversely, in Australia there is a more gradual transition to carbon pricing which lowers adjustment costs.[375]

New South Wales

New South Wales Treasury commissioned modelling — undertaken by economic consulting firm Frontier Economics — focussed on the period 2010 to 2030 and included projected regional and industry output and employment outcomes across the state. NSW Treasury also modelled the impact on the state budget.[376]

Some of the key projected results of this modelling on New South Wales are:

•          at 2030, the reduction in GSP is the greatest of any mainland state (-1.53 per cent). In real terms (after adjusting for inflation), the loss of output in the state is $3.7 billion a year in 2020 rising to $9.1 billion in 2030

•          at 2030, employment is expected to be 31,000 less than in the reference case. The most adversely affected region in Australia is the Hunter, while the Illawarra and Central West NSW are among the worst-affected regions in the country:

–      Hunter – absolute reduction of 18,500 jobs at 2020

–      Illawarra – 7,000 fewer jobs at 2020

–      Central West – about 1,000 fewer jobs at 2020, and

•          a reduction in the state’s net budget position of between $867 million and $948 million over the period 2011–12 to 2014–15 due to a range of factors including additional energy costs to state government agencies (between $282 million and $363 million) and a reduction in dividends from state-owned electricity generators ($700 million).[377]

Western Australia

The Western Australian Treasury’s ‘preliminary assessment’ of the Clean Energy package examined the impact on the Western Australian economy, budget position and households.[378] Some of the key projected outcomes on Western Australia are:

•          the 0.7 per cent projected increase in the consumer price index in the Commonwealth Treasury modelling translates to an additional $50 million in additional costs in 2012–13 for state government agencies, growing to around $60 million by 2014–15

•          a combined impact estimated to be between $230 million and $280 million per year for state-owned electricity generation assets, and

•          around 419,000 households in Western Australia (out of a total of 810,500 households) where the average cost of living impact of the carbon tax is greater than the Australian Government assistance for the carbon tax.[379]

Victoria

The Victorian Government commissioned Deloitte Access Economics to model the regional impact of the carbon tax on the state. In broad terms, the results projected that the carbon tax would reduce Victorian job growth by 24,311 jobs and reduce Victorian output by $2.8 billion in 2015.[380] Country regions most affected in terms of the loss of employment by 2015 were the Mornington Peninsula (less 515 jobs), Yarra Ranges (less 412 jobs), Wodonga and Cardinia (less 175 jobs), and Mildura (less 154 jobs).[381]

The Victorian Government released the full modelling report on 20 September 2011.[382] The Deloitte Access analysis indicated that the adverse economic impacts of the Clean Energy policies are projected to be slightly less in Victoria compared with the Australia-wide results, suggesting that the major reasons for this were:

•          the adverse impacts of carbon pricing are projected to fall more heavily on states such as Western Australia and Queensland. This is because these states are faster growing over the reference case and a large component of this growth is based on investment in mining and minerals processing which become less competitive under a carbon price scenario, and

•          while Victoria has a high reliance on brown coal, the economy is more diversified than Western Australia and Queensland with less energy intensive production. Subsequently, this means that the flow on impacts of the carbon price are less acute in comparison to Western Australia and Queensland.[383]

The Deloitte Access modelling also projected that there would be a deterioration of the state budget position, mainly through increases in expenditure driven by rising energy prices. By 2020, the Victorian budget is expected to be close to $850 million worse off compared to the business as usual scenario, and $1.3 billion worse off by 2030. The deterioration of the budget position remains as a steady share of GSP over the period 2020 to 2030, at around 0.17 per cent of nominal GSP.[384]

Appendix 3: Carbon leakage and industry assistance

Should a company or sector find itself vulnerable to carbon leakage, and the associated falling profits, then it may decide to relocate its activities to a jurisdiction that is not subject to a price on carbon. In no particular order some of the considerations when relocating may be:

•          whether a facility is the highest cost facility in a globally integrated industry. For example, the global aluminium industry is dominated by a few major multinational companies with aluminium smelters in many locations. Such companies would relocate production from the highest cost smelters first

•          the availability of an alternative location with the necessary physical attributes, particularly for achieving the necessary scale of production if establishing a new facility

•          whether the alternative location can physically expand production if the activity in question is already present. For example, this may require the establishment of additional power stations

•          the availability of less expensive energy in the alternative location

•          the availability of a trained workforce in the alternative location

•          if there are strong nearby markets with low import barriers. This is particularly important for products where transport costs to markets are a major cost. Transport costs are not so important for low volume high value commodities such as aluminium

•          whether there is a stable government willing to host the activity in question without extracting a disproportionate ‘rent‘ in the form of fees and charges, and

•          whether there are less stringent tax and environmental regimes in the alternative location, both now and over the economic life of the new investment

As the income of developing countries increases, they may well demand enhanced environmental controls. Further, participation in any new international agreement to limit GHG emissions may radically affect the decision to relocate.  Further considerations may include:

•          whether it is less expensive to upgrade an existing facility compared to the investment required to relocate, and

•          whether by relocating, a company risks a major negative impact on its reputation.[385]

The answers to these questions will be different for each particular firm and activity. But the important point is that a decision to relocate an activity due to the impact of emissions trading is not a simple decision. Some firms may choose to absorb the additional costs and continue operating within a region subject to an ETS.

Treasury modelling prepared for the CPRS suggested that there may be a minor amount of carbon leakage at most of the expected permits prices ($23 per tonne of C02-e) but that where carbon prices are double the highest expected price range, ‘noticeable’ leakage may occur.[386]

The above analysis does not appear to apply to the aluminium smelting industry. The Garnaut Climate Change Review noted that Australia‘s aluminium smelting industry may well eventually decline due to the introduction of an ETS in Australia. The review suggested that this industry would relocate to take advantages of cheaper energy in Africa, Asia and the island of New Guinea.[387]

European Union ETS industry assistance

In the third phase of the European Union ETS, the emissions-intensive trade-exposed sectors may be eligible for the allocation of free permits if the sector, as a whole, satisfies certain thresholds based on increased productions costs and trade intensity.[388]

Installations in sectors deemed to be exposed to a risk of carbon leakage will receive up to 100 per cent of the allowances free of charge at the level of a benchmark. Sectors not deemed at risk of carbon leakage will instead receive 80 per cent of their allowances free of charge at the level of a benchmark and this proportion will decrease to 30 per cent in 2020 and 0 per cent in 2027.[389] The benchmarks are based on the average of the 10 per cent most efficient installations.[390]

A list of industry sectors considered at risk of relocation was determined at the end of 2009, and includes a large number of manufacturing industries such as aluminium manufacturing, casting of iron and the manufacture of pulp.[391] The sectors and sub-sectors deemed to be at significant risk of carbon leakage are estimated to account for around a quarter of total emissions covered by the EU ETS and around 77 per cent of the total emissions from manufacturing industry in the EU ETS. A large part of the emissions covered by the ETS come from the power sector which, from 2013, will not receive any free allowances, subject to a limited exemption to aid modernisation of the electricity sector in some Member States.[392]

A recent survey of 215 EU market participants found that 80 per cent did not consider moving production outside the EU ETS area. Sectors most likely to have moved outside the EU ETS area, or those where participants were planning or considering whether to move production, were in the cement, lime and glass and the pulp and paper sectors.[393]

The Minerals Council of Australia claims that industry assistance for emissions-intensive trade-exposed industries under the proposed carbon price mechanism are inferior to those arrangements provided for under the European Union’s ETS.[394]

New Zealand ETS industry assistance

Under the New Zealand ETS, emissions-intensive industries are eligible for a free allocation of permits. The New Zealand Ministry for the Environment estimates that nearly 300 businesses are able to receive allocations.[395] The allocation is based on emissions intensity:

•          moderately emissions intensive – those businesses that emit 800 tonnes of carbon dioxide equivalent gases per NZ$1 million worth of production (or roughly 1 per cent of their turnover). These are eligible for an allocation level of 60 per cent, and

•          highly emissions intensive – those businesses that emit 1600 tonnes of carbon dioxide equivalent gases per NZ$1 million worth of production (or roughly 2 per cent of their turnover). These are eligible for an allocation level of 90 per cent.[396]

Activities eligible for the 90 per cent level of assistance include aluminium smelting, iron and steel from iron sand and newsprint manufacturing. Activities eligible for the 60 per cent level of assistance include glass containers, clay bricks and field tiles, and ethanol production.[397] After 2012, the level of assistance will reduce by 1.3 per cent each year.[398]

Permits are allocated based on a formula that considers the amount of production of the prescribed activity and an ‘allocative baseline’, a benchmark based on emissions per tonne of product produced.[399]

A recent survey of 31 New Zealand companies covered by the emissions trading scheme noted that 94 per cent of companies had not considered moving production outside New Zealand because of carbon costs—although this may simply reflect the early stages of the scheme and that some of the respondents represent sectors such as forestry that cannot move its production elsewhere.[400]

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ISSN 1328-8091

[1].               Treasury, Strong growth, low pollution: modelling a carbon price, viewed 13 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/report.asp

[2].               Department of Climate Change and Energy Efficiency, Australia’s Plan for a Clean Energy Future, Regulation Impact Statement, viewed 18 September 2011, http://ris.finance.gov.au/files/2011/07/03-Clean-Energy-Future-RIS.pdf

[3].               R Garnaut, The Garnaut climate change review: final report, Cambridge University Press, Cambridge, 2008, p. 65.  The UK’s Stern Report also indicates Australia may in fact suffer disproportionately from climate change due to our particular environmental issues and the configurations of our predominantly coastal population, The Stern Review, Final Report, Cambridge University Press, 2008, viewed 10 October 2011, http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/stern_review_report.htm

[4].               Australia, Parliamentary Library, Annex II parties, Climate change - Background Note, Canberra, viewed 3 October 2011, http://www.aph.gov.au/library/pubs/climatechange/governance/international/unfccc/annexII.htm

[5].               World Bank, ,State and trends of the carbon market 2011’, pp. 28–34, viewed 13 September 2011, http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_Updated_June_2011.pdf. For further information about action by countries to reduce emissions page 50 of this Bills Digest.

[6].               Australian Labor Party (ALP), A cleaner future for power stations, ALP policy document, viewed 7 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FZ2GX6%22; Reward for early action, ALP policy document, viewed 7 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FA3GX6%22; Connecting renewable energy to Australian homes, ALP policy document, viewed 7 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FBPGX6%22

[7].               J Gillard, Prime Minister, Interview with Prime Minister Gillard, Ten News, 16 August 2010, viewed 7 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22emms%2Femms%2F179580%22

[8].               Liberal Party of Australia, The Coalition’s direct action plan: environment and climate change, Coalition policy document, p. 2, viewed 6 September 2011 http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FLIOX6%22

[9].               Ibid., pp. 17-29.

[10].               Australian Greens, Australian Greens Policy: Economics, March 2010, Australian Greens policy document, p. 2, viewed 7 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FTQFX6%22

[11].               The Australian Greens, The Australian Greens & The Australian Labor Party (ʹThe Partiesʹ) – Agreement, viewed 6 September 2011, http://greens.org.au/sites/greens.org.au/files/Final%20Agreement%20_ALP_GRNS.pdf

[12].               J Gillard (Prime Minister of Australia), W Swan (Treasurer), G Combet (Minister for Climate Change and Energy Efficiency), Prime Minister establishes Climate Change Committee, joint media release, viewed 6 September 2011, http://www.climatechange.gov.au/en/minister/greg-combet/2010/media-releases/September/mr20100927.aspx

[13].               The four expert advisers were Professor Ross Garnaut, Ms Patricia Faulkner, Professor Will Steffen and Mr Rod Sims; J Gillard (Prime Minister of Australia), W Swan (Treasurer), G Combet (Minister for Climate Change and Energy Efficiency), Prime Minister establishes Climate Change Committee, joint media release, 27 September 2010, viewed 6 September 2011, http://www.climatechange.gov.au/en/minister/greg-combet/2010/media-releases/September/mr20100927.aspx

[14].               G Hunt (Shadow Minister for for Climate Action, Environment and Heritage), Gillard’s secret committee starts planning for Labor’s electricity tax, media release, 27 September 2010, viewed 6 September 2011, http://www.greghunt.com.au/Pages/Article.aspx?ID=1882

[15].               See for example, Department of Climate Change and Energy Efficiency, ‘Status of global mitigation action : current targets and policies in key countries’ (updated 1 March 2011), http://www.climatechange.gov.au/government/initiatives/multi-party-committee/meetings/~/media/publications/mpccc/status-global-mitigation-action.pdf; F Jotzo, A price floor for Australia’s emissions trading scheme?, paper commissioned for Australia’s Multi-Party Climate Change Committee, viewed 6 September 2011, http://www.climatechange.gov.au/government/initiatives/multi-party-committee/meetings/~/media/publications/mpccc/jotzo-floor-price-mpccc-may.pdf

[16].               Multi-Party Climate Change Committee, Communique, 21 December 2010, Department of Climate Change and Energy Efficiency, viewed 6 September 2011 http://www.climatechange.gov.au/government/initiatives/mpccc/meetings/third-meeting/communique.aspx

[17].               R Garnaut, Garnaut climate change review – update 2011: Australia in the global response to climate change: summary, p. 2, viewed 6 September 2001, http://www.garnautreview.org.au/update-2011/garnaut-review-2011/summary-20June.pdf

[18].               R Garnaut, Garnaut climate change review – update 2011: Australia in the global response to climate change: summary, p. 6, viewed 6 September 2001, http://www.garnautreview.org.au/update-2011/garnaut-review-2011/summary-20June.pdf

[19].               Multi-Party Climate Change Committee, Multi-Party Climate Change Committee Clean Energy Agreement, Department of Climate Change and Energy Efficiency, viewed 6 September 2011, http://www.climatechange.gov.au/government/initiatives/mpccc/resources/clean-energy-agreement.aspx 

[20].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, pp. 133‑134, viewed 11 July 2011, http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Consolidated-Final.pdf

[21].               L Nielson, J Styles, A Talberg, J Tomaras, Carbon Pollution Reduction Scheme Bill 2009, Bills Digest, no. 165, 2008-09, 15 June 2009, http://www.aph.gov.au/library/pubs/bd/2008-09/09bd165.pdf

[22].               Clean Energy Bill 2011, section 3. The targets under the Climate Change Convention and Kyoto Protocol targets are not explicitly referred to in the objectives of the Clean Energy Bill 2011, however the Explanatory Memorandum for the Bill notes these targets on p. 11 and p. 19.

[23].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 14.

[24].               Clean Energy Bill 2011, Explanatory Memorandum, p. 123; Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 21.

[25].               Explanatory Memorandum, Clean Energy Bill 2011, p. 123.

[26].               Ibid.

[27].               Clean Energy Bill 2011, section 14.

[28].               Explanatory Memorandum, Clean Energy Bill 2011, pp. 107–108.

[29].               Ibid., p. 108.

[30].               Ibid., p. 31.

[31].               Ibid., pp. 123 and 128.

[32].               Ibid., p. 32.

[33].               Australian Government, Department of Climate Change and Energy Efficiency, ‘The Australian Government Submission to the UN Framework Convention on Climate Change’,  April 2011, p. xi, viewed 10 October 2011, http://www.climatechange.gov.au/~/media/publications/greenhouse-acctg/national-inventory-report-2009-vol1.pdf

[34].               Ibid., p. 33. Fugitive emissions sector includes generally deliberate but not fully controlled emissions that typically result from leaks, including those from pump seals, pipe flanges and valve stems.

[35].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 27.

[36].               Explanatory Memorandum, Clean Energy Bill 2011, p. 33.

[37].               Ibid., p. 33.

[38].               Ibid.

[39].               Ibid., p. 282.

[40].               Ibid. 

[41].               Ibid., p. 32.

[42].               Clean Energy Bill, Explanatory Memorandum, p. 55.

[43].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 105.

[44].               Ibid.

[45].               Clean Energy Bill, Explanatory Memorandum, p. 55; G Combet, ‘Consideration in detail Clean Energy Bills’, House of Representatives, Debates, 11 October 2011, p. 81, viewed 12 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fe9136cb0-045a-45cd-8f9b-0b16ac82cac5%2F0098%22

[46].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 29; Clean Energy Bill, Explanatory Memorandum, p. 35.

[47].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 29.

[48].               Clean Energy Bill, Explanatory Memorandum, p. 100.

[49].               Ibid., p. 33.

[50].               Ibid., p. 53.

[51].               Ibid., p. 54.

[52].               Ibid., p. 32.

[53].               Ibid., p. 35.

[54].               Ibid., p. 120.

[55].               Ibid., p. 124.

[56].               Ibid., p. 143.

[57].               Ibid., p. 124.

[58].               Ibid., p. 148. The amount of unit shortfall is specified in the Clean Energy (Charges-Customs) Bill 2011, Clean Energy (Charges-Excise) Bill and Clean Energy (Unit Shortfall Charge) Bill 2011.

[59].               Ibid., p. 148. The amount of unit shortfall is specified in the Clean Energy (Charges-Customs) Bill 2011, Clean Energy (Charges-Excise) Bill and Clean Energy (Unit Shortfall Charge) Bill 2011.

[60].               Ibid., p. 226.

[61].               Clean Energy Bill 2011, Explanatory Memorandum, pp. 225–227.

[62].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit, p. 110.

[63].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 111.

[64].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit, pp. 111–112.

[65].               Clean Energy Bill 2011, Explanatory memorandum, pp. 133–136.

[66].               Parliamentary Library estimates based on Treasury, Chart and Table Data, Chart 5.1: Australian emissions in the core policy scenario, viewed 22 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter5/Chart_5.01_update.xlsx and Chart and Table Data, Chart 5.2: Australian emissions in the core policy scenario, viewed 22 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter5/Chart_5.02_update.xlsx

[67].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 45.

[68].               See Bill’s Digests for the Clean Energy (Income Tax Rates Amendments) Bill 2011 and Clean Energy (Tax Laws Amendments) Bill 2011 and Clean Energy (Household Assistance Amendments) Bill 2011.

[69].               Australian Government, Working together for a clean energy future, Factsheets: Household assistance – tax reform, p. 2, viewed 6 September 2011, http://www.cleanenergyfuture.gov.au/household-assistance%e2%80%94tax-reform/. The LITO has the effect of lifting the nominal tax-free threshold for low-income earners, thereby creating an effective tax-free threshold of $16 000. This will increase to $20 542 under the proposed changes.

[70].               Ibid.

[71].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 131.

[72].               Ibid.

[73].               Ibid.

[74].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., pp. 74 and 116.

[75].               Parliamentary Library estimates based on The Climate Group, Greenhouse Indicator Series Australian Generation Report 2008: Victoria, New South Wales, Queensland and South Australia, July 2009, viewed 7 September 2011, http://www.theclimategroup.org/_assets/files/Greenhouse-Indicator-Generation-Report-2009.pdf

[76].               Ibid.

[77].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., pp. 116–117.

[78].               Clean Energy Bill 2011, Explanatory Memorandum, pp. 159–173

[79].               Ibid., pp. 174–175.

[80].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., pp. 52 and 131.

[81].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 53.

[82].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 54.

[83].               NSW Business Chamber, Carbon tax report, 11 July 2011, viewed 11 September 2011, http://www.nswbusinesschamber.com.au/NSWBC/media/Misc/Lobbying/Analysis/Carbon-Tax-Report-Jul-2011.pdf

[84].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 115.

[85].               NSW Business Chamber, op. cit.

[86].               Explanatory Memorandum, p. 163.

[87].               Ibid.

[88].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit, pp. 55–56.

[89].               Ibid., p. 56.

[90].               Clean Energy Bill 2011, sub section 145(3).

[91].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 133.

[92].               Ibid. A separate Bills Digest is available for the Steel Transformation Plan Bill 2011.

[93].               Ibid.

[94].               Ibid.

[95].               Ibid.

[96].               Ibid., p. 123.

[97].               Ibid., p. 58.

[98].               Ibid., p. 122.

[99].               Ibid.

[100].               Ibid., p. 123.

[101].               Ibid., p. 127.

[102].               Ibid., p. 124.

[103].               Ibid., pp. 59 and 124.

[104].               Ibid., p. 121.

[105].               Ibid.

[106].               Ibid.

[107].               Ibid.

[108].               P Wong (Minister for Finance and Deregulation), ‘Questions without notice: Clean Energy Finance Corporation’, Senate, Debates, 13 October 2011, p. 49, viewed 27 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansards%2F44a5a46d-a92f-4e32-9264-5bdc1e61282a%2F0134%22

[109].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., pp. 65–66.

[110].               Ibid., p. 122.

[111].               Australia, House of Representatives, Votes and proceedings, no. 73, 2010–11, p. 977.

[112].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 93.

[113].               Ibid., p. 126.

[114].               Ibid., p. 128.

[115].               Ibid.

[116].               Ibid., pp. 128–129.

[117].               Joint Select Committee on Australia’s Clean Energy Future Legislation, Advisory Report on the Clean Energy Bills and the Steel Transformation Bill 2011, Canberra, October 2011, p. 62, viewed 10 October 2011, http://www.aph.gov.au/house/committee/jscacefl/report/CommitteeFinal.pdf

[118].               Ibid., pp. 99, 117 and 123.

[119].               Dissenting Report, Report of Coalition Members and Senators, Joint Select Committee on Australia’s Clean Energy Future Legislation, Advisory Report on the Clean Energy Bills and the Steel Transformation Bill 2011, Canberra, October 2011, p. 131, viewed 10 October 2011, http://www.aph.gov.au/house/committee/jscacefl/report/CommitteeFinal.pdf

[120].               C Milne and A Bandt, Supplementary comments from the Australian Greens, Advisory Report on the Clean Energy Bills and the Steel Transformation Bill 2011, Joint Select Committee on Australia’s Clean Energy Future Legislation p. 125, viewed 10 October 2011, http://www.aph.gov.au/house/committee/jscacefl/report/CommitteeFinal.pdf

[121].               C Milne, Greens supporting jobs in the transition to a cleaner future, media release, 12 October 2011, viewed 26 October 2011, http://greens.org.au/content/greens-supporting-jobs-transition-cleaner-future

[122].               Select Committee on the Scrutiny of New Taxes, Interim Report - The Carbon Tax: economic pain for no environmental gain, The Senate, Canberra, October 2011, p. 72, viewed 10 October 2011, http://www.aph.gov.au/senate/committee/scrutinynewtaxes_ctte/carbontax/interim_report/report.pdf

[123].               Government Senators' Dissenting Report, Select Committee on the Scrutiny of New Taxes, p. 249, viewed 10 October 2011, http://www.aph.gov.au/senate/committee/scrutinynewtaxes_ctte/carbontax/interim_report/report.pdf

[124].               Additional Comments by Senator Nick Xenophon, Select Committee on the Scrutiny of New Taxes, Interim Report - The Carbon Tax: economic pain for no environmental gain, The Senate, Canberra, October 2011, p. 319, viewed 10 October 2011, http://www.aph.gov.au/senate/committee/scrutinynewtaxes_ctte/carbontax/interim_report/report.pdf

[125].               Business Council of Australia (BCA), ‘BCA Greenhouse Gas Emission Reduction Policy Principles (December 2010)’, viewed 31 August 2011, http://www.bca.com.au/DisplayFile.aspx?FileID=729

[126].               Deloitte Access Economics, Fiscal Risks of the Clean Energy Package, Report commissioned by the Business Council of Australia, p. i, viewed 5 October 2011, http://www.bca.com.au/DisplayFile.aspx?FileID=764

[127].               Australian Industry Group (AiG), Ai Group comment on carbon price proposals, media release, March 2011, viewed 31 August 2011, http://www.aigroup.com.au/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/LIVE_CONTENT/Media%2520Releases/2011/March/Ai%2520Group%2520comment%2520on%2520carbon%2520price%2520proposals

[128].               Australian Chamber of Commerce and Industry, Submission on the Clean Energy Package, 16 August 2011, p. 1, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianChamberOfCommerceAndIndustry-20110823-PDF.pdf

[129].               Australian Chamber of Commerce and Industry (ACCI), Small business to suffer, media release, 12 October 2011, viewed 12 October 2011, http://www.acci.asn.au/Research-and-Publications/Media-Centre/Media-Releases-and-Transcripts/Economics-Industry/Small-business-to-suffer

[130].               Minerals Council of Australia, Carbon tax package, media release, 10 July 2011, ‘http://www.mineralscouncil.com.au/file_upload/files/media_releases/Carbon_Tax_MR_10_July_2011.pdf

[131].               Ibid.

[132].               Australian Coal Association (ACA), ACA Policy Brief, Climate Change Policy Position, viewed 9 September 2011, http://www.australiancoal.com.au/resources.ashx/Publications/40/Publication/11C69876C7B8747619D6A07647714FA4/Climate_Change_Policy_Brief.pdf

[133].              ACIL Tasman Economics and Policy, ‘Impact of Proposed Carbon Price on Black Coal Mining Analysis of existing coal mines and potential coal developments based on survey data’, prepared for the Australian Coal Association, 10 June 2011, viewed 9 September 2011, http://www.australiancoal.com.au/resources.ashx/Announcements/56/DocumentFile/ABC9A4EF07C0D09A302F121340D5D2A1/ACA_Report_10_06_11.pdf

[134].               Australian Petroleum Production and Exploration Association (APPEA), ‘APPEA Climate change policy principles’, viewed 8 September 2011, http://www.appea.com.au/images/stories/mb_files/APPEA_Climate_Change_Policy_Principles_November_2010.pdf

[135].               Australian Institute of Petroleum, Submission to the Department of Climate Change and Energy Efficiency On Clean Energy Bill 2011 and related Bills, 22 August, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianInstituteOfPetroleum-20110822-PDF.pdf

[136].               Association of Australian Mining and Exploration Companies, Submission to Joint Select Committee on Australia's Clean Energy Future Legislation September 2011, p. 5, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub008AMEC.pdf

[137].               Association of Australian Mining and Exploration Companies, Submission to Joint Select Committee on Australia's Clean Energy Future Legislation September 2011, p. 5, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub008AMEC.pdf

[138].               Cement Industry Federation, Submission to the Senate Select Committee on Scrutiny of New Taxes, Inquiry into the Carbon Tax Pricing Mechanisms, December 2010, p. 4, viewed 13 September 2011, https://senate.aph.gov.au/submissions/comittees/viewdocument.aspx?id=f143afd2-b5a6-45a5-9c38-b2c0bed78b61

[139].               Ibid.

[140].               Electricity Supply Association of Australia, Mixed news for the energy sector in carbon price package, media release, 10 July 2011, viewed 8 September 2011, http://www.esaa.com.au/content/detail/2011_media_releases_mixed_news_for_the_energy_sector_in_the_carbon_price_package

[141].               Ibid.

[142].               Australian Pipeline Industry Association, Climate change: APIA Submission, 10 May 2011 - Department of Climate Change and Energy Efficiency – The proposed Carbon Price Architecture, viewed 9 September 2011, http://www.apia.net.au/wp-content/uploads/2011/01/110510-DCC-and-Energy-Efficiency-The-proposed-Carbon-Price-Architecture.pdf?rs_file_key=19493605764ddc68e4e8966115332233

[143].               Australian Pipeline Industry Association, ‘Devil in detail’ on carbon tax: Gas Transmission Industry, media release, 11 July 2011, viewed 9 September 2011, http://www.apia.net.au/wp-content/uploads/2011/06/110711-Devil-in-Detail-on-carbon-tax-Gas-Transmission-Industry.pdf

[144].               Australian Aluminium Council (ACA), AAC Position on Climate Change Policy, viewed 8 September 2011, http://aluminium.org.au/climate-change/aac-position-on-climate-change-policy

[145].               Ibid.

[146].               National Farmers Federation, Submission on the Clean Energy Legislative Package 22 August 2011, p. 5, viewed 23 August 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-NationalFarmersFederation-20110824-PDF.pdf

[147].               Ibid.

[148].               Australian Landfill Owners Association (ALOA), ALOA Position - Responding to Climate Change, 9 February 2011, viewed 9 September 2011, http://www.aloa.com.au/Links/ClimateChangePolicy.pdf

[149].               Australian Tourism Export Council, Carbon price delivers tourism triple whammy, media release, 25 July 2011, viewed 19 September 2011, http://www.atec.net.au/tourism_carbon_impact_210711_fina.pdf

[150].               Ibid.

[151].               Housing Industry Association, Carbon tax pain for new housing, jobs and consumers, media release, 10 July 2011, viewed 17 September 2011, http://economics.hia.asn.au/media/Media%20Release%20-%20Carbon%20Tax%20Pain%20for%20New%20Housing%20Jobs%20and%20State%20Revenues.pdf

[152].               Housing Industry Association, Carbon taxes new housing and Aussie jobs, media release, 7 June 2011, viewed 17 September 2011, http://hia.com.au/hia/news/article/MR/National/EC/Carbon%20Taxes%20New%20Housing%20and%20Aussie%20Jobs.aspx; The chief executive officer of housing developer Stockland, was reported to have estimated that the carbon price mechanism would add $2 500 to the cost of one of its house-and-land package (L Schlesinger, Carbon tax won't increase housing costs much: Stockland, Property Observer, 11 August 2011, viewed 17 September 2011, http://www.propertyobserver.com.au/news/carbon-tax-won-t-increase-housing-costs-much-stockland/2011081151119)

[153].               Australian Food and Grocery Council, Submission to the Department of Climate Change and Energy Efficiency in response to the proposed architecture and implementation arrangements for a carbon pricing mechanism, p. 5, viewed 20 September 2011, http://www.afgc.org.au/media-releases/883-carbon-tax-still-impacts-australian-food-and-grocery-costs.html

[154].               Australian Food and Grocery Council, Carbon tax still impacts Australian food and grocery costs, media release, 10 July 2011, viewed 20 September 2011, http://www.afgc.org.au/media-releases/883-carbon-tax-still-impacts-australian-food-and-grocery-costs.html

[155].               Australian Retailers Association, Carbon tax spells disaster for retailers as consumers left out of pocket, media release, viewed 17 September 2011, http://www.retail.org.au/index.php/articles/Carbon_tax_spells_disaster_for_retailers_as_consumers_left_out_of_pocket

[156].               Australian Retailers Association, Carbon tax to add insult to retail injury - Retail industry survey released today, media release, 7 August 2011, viewed 17 September 2011, http://www.retail.org.au/index.php/articles/Carbon_tax_to_add_insult_to_retail_injury_-_Retail_industry_survey_released_TODAY

[157].               Australian Trucking Association, Submission to Joint Select Committee on Australia’s Clean Energy Future Legislation,  Clean Energy legislative package, 22 September 2011, p. 3, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub0027ATA.pdf

[158].               Ibid.

[159].               Total Environment Centre, Climate Change Package a 'game changer', media release, 10 July 2011, viewed 12 September 2011, http://www.tec.org.au/climate-change/937-climate-chaneg-package-a-game-changer

[160].               Australian Conservation Foundation, Australian action on climate change starts here, media release, 10 July 2011, viewed 12 September 2011, http://www.acfonline.org.au/articles/news.asp?news_id=3464

[161].               The Climate Institute, Submission to the Department of Climate Change and Energy Efficiency on the Clean Energy legislative package, viewed 12 September 2011, http://www.climateinstitute.org.au/images/reports/tci_cleanenergylegislativepackagesubmission_august2011.pdf

[162].               World Wildlife Fund (WWF), Inquiry on the Clean Energy Bills, WWFs submission to the Joint Select Committee on Australia’s Clean Energy Future Legislation, p. 1, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub016WFF.pdf

[163].               Ibid.

[164].               Australian Council of Social Services, Community sector welcomes Clean Energy Future package, media release, 13 September 2011, viewed 14 September 2011, http://www.acoss.org.au/media/release/community_sector_welcomes_clean_energy_future_package_acoss

[165].               Australian Council of Social Services (ACOSS), The Clean Energy Future package, households on low incomes and the community services sector: A briefing on the Australian Government’s climate change plan, ACOSS Paper 177, August 2011, p. 24, viewed 14 September 2011, http://acoss.org.au/images/uploads/ACOSS_Analysis_Clean_Energy_Future_Package_August_2011.pdf

[166].               Australian Bankers’ Association, Australian Bankers’ Association comments on Carbon Pricing Mechanism, media release, 10 July 2011, viewed 8 September 2011, http://www.bankers.asn.au/Australian-Bankers--Association-comments-on-Carbon-Pricing-Mechanism/default.aspx

[167].               Australian Local Government Association, Submission on the draft legislation, p. 1, viewed 26 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianLocalGovernmentAssociation-20110922-PDF.pdf

[168].               Ibid.

[169].               Australian Council of Trade Unions, Campaign; Climate Change and Jobs, viewed 28 September 2011, http://www.actu.org.au/Campaigns/ClimateChangeJobs/default.aspx

[170].               Australian Council of Trade Unions (ACTU), ACTU tells carbon inquiry costs of inaction far outweigh costs of action, media release, 27 September 2011, viewed 28 September 2011, http://www.actu.org.au/Media/Mediareleases/ACTUtellscarboninquirycostsofinactionfaroutweighcostsofaction.aspx

[171].               Construction, Forestry, Mining and Energy Union (CFMEU), Action on Climate Change, viewed 28 September 2011, http://cfmeu.asn.au/sites/default/files/downloads/nat/campaign/climatechangeflyermay2011finalbweb.pdf

[172].               T Maher, Construction, Forestry, Mining and Energy Union, transcript, 27 September 2011, p. 3, viewed 29 September 2011, http://www.aph.gov.au/hansard/joint/commttee/j326.pdf

[173].               ABC News, ‘Union’s threaten carbon tax revolt’, 15 April 2011, viewed 14 September 2011, http://www.abc.net.au/news/2011-04-15/union-threatens-carbon-tax-revolt/2614238

[174].               Australian Workers Union, AWU leadership responds to carbon-pricing, media release, 18 July 2011, viewed 14 September 2011, http://www.awu.net.au/62092_5.html

[175].               T Sheldon, Public hearing transcript, Senate Select Committee on Scrutiny of New Taxes, 22 July 2011, p. 25, viewed 13 September 2011, http://www.aph.gov.au/hansard/senate/commttee/s182.pdf

[176].               Ibid.

[177].               Southern Cross Climate Coalition, Review of the Clean Energy Future Package, viewed 12 September 2011, http://www.acfonline.org.au/uploads/res/SCCC_AnalysisCEFP_August2011.pdf

[178].               T Abbot, ‘Second reading speech: Clean Energy Bills’, House of Representatives, Debates, 14 September 2011, p. 9997, viewed 10 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fdb12227e-c808-4b45-8e11-e59ca86f689e%2F0004%22; J Hockey, ‘Second reading speech: Clean Energy Bills’, House of Representatives, Debates, 11 October 2011, p. 36, viewed 11 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fe9136cb0-045a-45cd-8f9b-0b16ac82cac5%2F0024%22

[179].               T Abbot, J Hockey and G Hunt, Julia Gillard's unnecessary and costly $9 billion tax will hit families, joint media release, 10 July 2011, viewed 29 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F915265%22

[180].               T Abbot, J Hockey and G Hunt, Julia Gillard's unnecessary and costly $9 billion tax will hit families, joint media release, 10 July 2011, viewed 29 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F915265%22

[181].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 133.

[182].               C Milne and A Bandt, Greens supporting jobs in the transition to a cleaner future, joint media release, 11 October 2011, viewed 11 October 2011, http://christine-milne.greensmps.org.au/content/media-release/greens-supporting-jobs-transition-cleaner-future

[183].               L Taylor, ‘Labor cuts deal with Greens to push through 40 crucial bills’, Sydney Morning Herald, 7 September 2011, p. 2, viewed 10 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1064980%22

[184].               A Bandt, ‘Second reading speech: Clean Energy Bills’, House of Representatives, Debates, 19 September 2011, p. 10468, viewed 28 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F9273d8f9-c390-4d28-81ec-80e436f0f4d4%2F0073%22

[185].               R Oakeshott, ‘Second reading speech: Clean Energy Bills’, House of Representatives, Debates, 14 September 2011, p. 32, viewed 27 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fdb12227e-c808-4b45-8e11-e59ca86f689e%2F0017%22 ; T Windsor, ‘Second reading speech: Clean Energy Bills’, House of Representatives, Debates, 20 September 2011, p.45, viewed 27 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fb1b854fb-f42c-4871-8565-791e6639404f%2F0032%22 

[186].               R Katter, ‘Second reading speech: Clean Energy Bills’, House of Representatives, Debates, 19 September 2011, p. 98, viewed 27 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F9273d8f9-c390-4d28-81ec-80e436f0f4d4%2F0169%22

[187].               N Xenophon, Submission to the Department of Climate Change and Energy Efficiency, p. 2, viewed 27 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-XenophonSenatorNickSenatorForSouthAustralia-20110907-PDF.pdf

[188].               Ibid.

[189].               Clean Energy Bill 2011, Revised Explanatory Memorandum, pp. 40–41.

[190].               Clean Energy Bill 2011, Explanatory Memorandum, p. 40.

[191].               M Maries, Australian Conservation Foundation, Committee Hansard, Joint Select Committee on Australia’s Clean Energy Future Legislation, Clean Energy Bill 2011 and related bills, 26 September 2011, p. 46, viewed 10 October 2011, http://www.aph.gov.au/hansard/joint/commttee/j322.pdf

[192].               Minerals Council of Australia, Submission to the Department of Climate Change and Energy Efficiency on Clean Energy Future Legislation, August 2011, p. 7 viewed 27 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-MineralsCouncilofAustralia-20110823-PDF.pdf

[193].               Institute of Public Affairs, Submission to the Inquiry into the Clean Energy Bills: Joint Select Committee on Australia's Clean Energy Future Legislation, September 2011, p. 1, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub014IPA.pdf

[194].               R Garnaut, Committee Hansard, Joint Select Committee on Australia’s Clean Energy Future Legislation, Clean Energy Bill 2011 and related bills, 27 September 2011, p. 1, viewed 10 October 2011, http://www.aph.gov.au/hansard/joint/commttee/j329.pdf

[195].               The Department of Climate change and Energy Efficiency publishes a list of countries which are currently have a price on carbon, http://www.climatechange.gov.au/government/international/global-action-facts-and-fiction/ets-by-country.aspx

[196].               B Lin and X Li, ‘The effect of carbon tax on per capita emissions’, Energy Policy, vol. 39, issue 9, September 2011, viewed 10 October 2011, http://www.sciencedirect.com/science/article/pii/S0301421511004502

[197].               Productivity Commission, Carbon Emission Policies in Key Economies, , Research Report, Canberra, 2011, p. xli.

[198].               World Bank, State and trends of the carbon market 2011, op. cit., pp. 32–33.

[199].               Point Carbon, RGGI auction clears at $1.89 amid low turnout, 9 September 2011, viewed 17 September 2011, http://www.pointcarbon.com/news/1.1581766

[200].               Productivity Commission, Carbon Emission Policies in Key Economies, op. cit., p. 20.

[201].               Emissions trading scheme review panel, Doing New Zealand’s fair share: Emissions Trading Scheme Review 2011, Final Report, p. 8, viewed 17 September 2011, http://www.climatechange.govt.nz/emissions-trading-scheme/ets-review-2011/review-report.pdf

[202].               Ibid., p. 7.

[203].               World Bank, op. cit., pp. 24–25.

[204].               Department of Climate Change and Energy Efficiency, Status of global mitigation action : Current targets and policies in key countries (updated 1 March 2011)’, p. 8, viewed 17 September 2011, http://www.climatechange.gov.au/government/initiatives/multi-party-committee/meetings/~/media/publications/mpccc/status-global-mitigation-action.pdf

[205].               World Bank, op. cit., p. 29.

[206].               Department of Climate Change and Energy Efficiency, Status of global mitigation action : Current targets and policies in key countries (updated 1 March 2011)’, op. cit., p. 15.

[207].               Point Carbon, South Korea approves 30% CO2 target for 2020, ETS plans, 13 July 2011, viewed 17 September 2011, http://www.pointcarbon.com/news/1.1558564?date=20110713&sdtc=1

[208].               World Bank, op. cit., p. 29; Productivity Commission, Carbon Emission Policies in Key Economies, op. cit., p. 22.

[209].               COP 17/CMP7, United Nations Climate Change Conference 2011, viewed 10 October 2011, http://www.cop17-cmp7durban.com/

[210].               United Nations Framework Convention on Climate Change, Introduction by UNFCCC Executive  Secretary  Christiana  Figueres  at  noon  press briefing in New York, 19 September 2011, viewed 10 October 2011, http://unfccc.int/files/press/news_room/press_releases_and_advisories/application/pdf/110919_ny_pc_intro.pdf

[211].               C Spence, What can a deal in Durban deliver?, viewed 20 September 2011, http://www.forestcarbonportal.com/content/what-can-deal-durban-deliver; H Hove, Outcomes of Bonn UNFCCC Climate Change Conference: Prospect for agreement in Durban, June 2011, An IISD Commentary, viewed 20 September 2011, http://www.iisd.org/pdf/2011/outcomes_bonn_unfccc_durban.pdf

[212].               Point Carbon, ANALYSIS: EU’s Kyoto vow piles pressure on China, viewed 12 October 2011, http://www.pointcarbon.com/news/1.1602791

[213].               Australia/Norway Submission under the Cancun Agreements, September 2011, p. 3, viewed 20 September 2011, http://unfccc.int/files/meetings/ad_hoc_working_groups/lca/application/pdf/australia_norway_mitigation_submission_.pdf

[214].               R Leal-Arcas, Alternative Architecture for Climate Change - Major Economies, European Journal of Legal Studies, Volume 4, Issue 1 (Summer 2011), p. 38, http://www.ejls.eu/8/99UK.pdf; T Houser, A Role for the G-20 in Addressing Climate Change?, Petersen Institute for International Economics Working Paper, 2010, viewed 20 September 2011, http://www.iie.com/publications/wp/wp10-15.pdf

[215].               R Garnaut, Garnaut Climate Change Review: Final Report, op. cit., pp.237–238.

[216].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., pp 26–27.

[217].               For example, in Europe the first trading period for the European Emissions Trading Scheme saw unexpected reductions in carbon dioxide emissions in Eastern Europe by the simple expedient of using hard black coal in power stations that were previously fired by brown coal.

[218].               Concrete evidence for this particular claim is scant. See DM Driesen, ‘Does Emissions Trading Encourage Innovation?’, Environmental Law Reporter, Vol. 32, January 2003. However, it is early days yet for most cap and trade schemes and early emissions reductions are likely to be due to changes in operations and fuel switching as much as from more costly technical innovation. The alternative argument is that over time, the economic incentives could be hoped to lead to the development of such measures.

[219].               M Weitzman, ‘Prices vs Quantities‘, The Review of Economic Studies, Vol. 41, Issue 4, October 1974, pp. 477–491.

[220].               The Canadian emissions trading scheme proposed in 2008 is an example of an emissions intensity based trading scheme on a national scale. See Canadian Government, Environment Canada, Turning the Corner – Regulatory Framework for Industrial Greenhouse Gas Emissions, March 2008.

[221].               W McKibbin and P Wilcoxen, ‘Building on Kyoto: Towards a realistic climate change agreement‘, Working Paper 13/2008, Australian National University Centre for Applied Macro Economic Analysis, June 2008.

[222].               An example of the baseline and credit approach is the NSW Greenhouse Gas Abatement Scheme.

[223].               Liberal Party of Australia, The Coalition’s direct action plan, p. 2, viewed 6 September 2011 http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FLIOX6%22

[224].               Ibid.

[225].               The Treasury, Treasury Executive Minute: Economic and fiscal impacts of the Coalition’s direct action plan, 14 July 2011, viewed 13 September 2011, http://www.treasury.gov.au/documents/2149/PDF/TEM_coalitions_direct_action_plan.pdf

[226].               The Productivity Commission note that the implicit abatement subsidy (the subsidy per unit of abatement) is not directly equivalent to a carbon price, with a number of different carbon prices existing that could capture a particular aspect of the impacts of a subsidy scheme (Productivity Commission, Carbon Emission Policies in Key Economies, op. cit., p. xxii).

[227].               Productivity Commission, Carbon Emission Policies in Key Economies, op. cit.

[228].               Productivity Commission, Carbon Emission Policies in Key Economies, op. cit., p. xxvii.

[229].               Clean Energy Bill 2011, Explanatory Memorandum, p. 133.

[230].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 31.

[231].               Clean Energy Bill 2011, Explanatory Memorandum, pp. 132–136.

[232].               A Kollmuss, M Lazarus, C Lee, M Lefranc and C Polycarp, Handbook of Carbon Offset Programs: Trading Systems, Funds, Protocols and Standards, Earthscan, 2010, p. 7.

[233].               World Bank, op. cit., p. 9.

[234].               Treasury, Strong Gorwth, Low Pollution, Modelling a Carbon price, Chart Data, Chapter 3: Chart 3.5, viewed 23 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter3.asp

[235].               World Bank, op. cit., p. 40.

[236].               A Brohe, N Eyre and N Howarth, Carbon Markets: An international business guide, 2011, Earthscan, p. xxvii.

[237].               Ibid.

[238].               K Neuhoff, Climate Policy after Copenhagen: The role of carbon pricing, Oxford University Press, 2011, p. 154.

[239].               J Ramseur, The Role of Offsets in a Greenhouse Gas Emissions Cap-and-Trade Program: Potential Benefits and Concerns, Congressional Research Service Report to Congress, 2008, pp. 18–21, viewed 13 September 2011, http://www.nationalaglawcenter.org/assets/crs/RL34436.pdf

[240].               World Bank, op. cit., pp. 17–18.

[241].               Point Carbon, Carbon 2011, p. 32–33, 35.

[242].               Clean Energy Bill 2011, sub section 143(2)(a).

[243].               Australian Coal Association (ACA), ACA Policy Brief, Climate Change Policy Position, viewed 9 September 2011, http://www.australiancoal.com.au/resources.ashx/Publications/40/Publication/11C69876C7B8747619D6A07647714FA4/Climate_Change_Policy_Brief.pdf

[244].               ACIL Tasman Economics and Policy, Impact of Proposed Carbon Price on Black Coal Mining Analysis of existing coal mines and potential coal developments based on survey data Prepared for the Australian Coal Association, 10 June 2011, viewed 9 September 2011, http://www.australiancoal.com.au/resources.ashx/Announcements/56/DocumentFile/ABC9A4EF07C0D09A302F121340D5D2A1/ACA_Report_10_06_11.pdf

[245].               Ibid.

[246].               Australian Institute of Petroluem, submission to the Department of Climate Change and Energy Efficiency on Clean Energy Bill 2011 and related Bills, 22 August 2011, p. 3, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianInstituteOfPetroleum-20110822-PDF.pdf

[247].               Business Council of Australia (BCA), ‘Submission to the Government on Carbon Pricing Policy May 2011’, p. 15, viewed 31 August 2011, http://www.bca.com.au/DisplayFile.aspx?FileID=744; Australian Industry Greenhouse Network, AIGN Response to the Exposure Draft of the Clean Energy Future Legislation, 22 August 2011, p. 11, viewed 24 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianIndustryGreenhouseNetwork-20110822-PDF.pdf

[248].               Australian Institute of Petroleum, submission to the Department of Climate Change and Energy Efficiency on Clean Energy Bill 2011 and related Bills, 22 August 2011, p. 4, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianInstituteOfPetroleum-20110822-PDF.pdf

[249].               Business Council of Australia (BCA), ‘Submission to the Government on Carbon Pricing Policy May 2011’, p. 15, viewed 31 August 2011, http://www.bca.com.au/DisplayFile.aspx?FileID=744

[250].               Australian Workers’ Union, Consultations on Carbon Price Mechanism Legislation, The Australian Workers’ Union Submission August 2011, p. 9, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianWorkersUnion-20110922-PDF.pdf

[251].               Australian Workers’ Union, Consultations on Carbon Price Mechanism Legislation, The Australian Workers’ Union Submission August 2011, p. 7, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianWorkersUnion-20110922-PDF.pdf

[252].               Australian Aluminium Council, Australian Aluminium Council submission on the exposure draft of the Clean Energy Bill 2011, p. 3, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianAluminiumCouncil-20110822-PDF.pdf

[253].               Australian Workers’ Union, Consultations on Carbon Price Mechanism Legislation, The Australian Workers’ Union Submission August 2011, p. 7, viewed 22 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianWorkersUnion-20110922-PDF.pdf

[254].               Minerals Council of Australia, Government’s hollow words leave 950,000 manufacturing workers exposed to world’s biggest carbon tax, media release, 19 September 2011, viewed 19 September 2011, http://www.minerals.org.au/news/governments_hollow_words_leave_950000_manufacturing_workers_exposed_to_worl/

[255].               Ibid.

[256].               T Wood and T Edis, New protectionism under carbon pricing, Grattan Institute, September 2011, viewed 12 September 2011, http://www.grattan.edu.au/publications/101_report_new_protectionism.pdf

[257].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 21.

[258].               Australian Government, Securing a clean energy future: Fact Sheet 500 biggest polluting companies, viewed 6 September 2011,http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Fact-sheet-19-500-Biggest-polluting-companies.pdf

[259].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 27.

[260].               Department of Climate Change and Energy Efficiency, National Inventory Report 2009 Volume 1 The Australian Government Submission to the UN Framework Convention on Climate Change April 2011, p. 28, viewed 13 September 2011, http://www.climatechange.gov.au/~/media/publications/greenhouse-acctg/national-inventory-report-2009-vol1.pdf

[261].               Australian Conservation Foundation (ACF), ACF Submission on the Clean Energy Legislative Package, p. 7, viewed 23 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianConservationFoundation-20110822-PDF.pdf; Australian Food and Grocery Council, Australian Food and Grocery Council, submission, 22 August 2011, p. 10, viewed 23 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianFoodAndGroceryCouncil-20110822-PDF.pdf; Australian Industry Greenhouse Network (AIGN), AIGN Response to the Exposure Draft of the Clean Energy Future Legislation, 22 August 2011, viewed 23 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianIndustryGreenhouseNetwork-20110822-PDF.pdf; Energy Supply Association of Australia, Submission to the Joint Select Committee on Australia’s Clean Energy Future Legislation, 23 September 2011, p. 16, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub001essa.pdf

[262].               K Neuhoff, op. cit., pp. 87–89.

[263].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 45.

[264].               Ibid., p. xiv.

[265].               Ibid., p. 131.

[266].               Climate Spectator, Carbon price: Academics' view, viewed 13 September 2011, http://www.climatespectator.com.au/commentary/carbon-price-academics-view

[267].               S Fan and R Hyndman, The price elasticity of electricity demand in South Australia, Monash University Department of Econometrics and Business Statistics Working Paper 16/10, August 2010, p. 26, viewed 18 October 2011, http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2010/wp16-10.pdf

[268].               Treasury, Strong growth, low pollution: modelling a carbon price, op. cit., p. 161.

[269].               Productivity Commission 2011, Carbon Emission Policies in Key Economies, op. cit., Appendix P – Country stocktakes, viewed 13 September 2011, http://www.pc.gov.au/__data/assets/pdf_file/0010/109954/25-carbon-prices-appendixp.pdf

[270].               Business Council of Australia (BCA), ‘Submission to the Government on Carbon Pricing Policy May 2011’, p. 6, viewed 31 August 2011, http://www.bca.com.au/DisplayFile.aspx?FileID=744; See also Australian Industry Group (AiG), ‘Submission on the Federal Government's draft Clean Energy Bill and related legislation, p. 2, viewed 31 August 2011, http://www.aigroup.com.au/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/LIVE_CONTENT/Policy%2520and%2520Representation/Submissions/Environment%2520and%2520Energy/2011/Submission_Clean_Energy_Bill_and_related_legislation_22_August_2011.pdf; Australian Forest Products Association, Submission on the Clean Energy Legislative Package, p. 9, viewed 23 September 2011, http://climatechange.gov.au/en/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianForestProductsAssociation-20110822-PDF.pdf

[271].               Clean Energy Bill, 2011, Explanatory Memorandum, p. 133.

[272].               Ibid.

[273].               Ibid., p. 134.

[274].               Treasury, Strong growth, low pollution: modelling a carbon price, op. cit., p. 75.

[275].               Ibid., p. 77.

[276].               Business Council of Australia, ‘Submission to the Department of Climate Change and Energy Efficiency on the Clean Energy Legislative Package 22 August 2011’, viewed 31 August 2011, http://www.bca.com.au/DisplayFile.aspx?FileID=756

[277].               Conservation Council of SA Inc., Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 22 August 2011, viewed 20 September 2011, http://www.conservationsa.org.au/files/submisssions/2011/CCSA_comments_on_Clean_Energy_Legislative_Package.pdf

[278].               The Institute of Chartered Accountants in Australia, Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 25 August 2011, p. 4, viewed 28 September 2011, http://www.charteredaccountants.com.au/Industry-Topics/Sustainability/Carbon/Tax-issues/25-08-11-Submission-on-the-Clean-Energy-Legislative-Package.aspx

[279].               G Combet (Minister for Climate Change and Energy Efficiency), ‘Second reading speech: Clean Energy (Unit Issue Charge-Fixed Charge) Bill 2011’, House of Representatives, Debates, 13 September 2011, p. 9865, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F9d23419d-b801-43c9-b4d4-20152cc8bff9%2F0055%22 .

[280].               It should be noted that the cap itself will differ from the Government’s emissions reduction target because the cap does not cover all of the economy. However, the cap remains a significant tool in reaching the Government’s emissions target.

[281].               A carbon unit is a generic term for a right to emit (see subclause14(1)). One carbon unit is equal to one tonne of CO2‑e. It is classified and regulated as a financial product and is a form of personal property (clause 103A). It will be transferrable (excepting fixed price permits), and it will be permitted to take security over the permits and create equitable interests in them.

[282].               The Climate Change Authority will be a newly created statutory body.

[283].               Environmental Defenders Office NSW & Environmental Defenders Office Victoria, ‘Draft Clean Energy Bills: our top priorities for amendment’, Policy and Law Reform: briefing paper, 10 August 2011, viewed 20 September 2011, p. 2, http://www.edovic.org.au/downloads/law%20reform/edo_vic_clean_energy_briefing.pdf

[284].               Ibid.

[285].               CPA Australia, Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 31 August 2011, viewed 30 September 2011, p. 6, http://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/clean-energy-legislative-package-submission.pdf

[286].               Electricity Supply Association of Australia, Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 23 September 2011, p. 31, viewed 11 October 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub001essa.pdf

[287].               CPA Australia, op. cit.; Electricity Supply Association of Australia, op. cit.

[288].               Explanatory Memorandum, Clean Energy Bill 2011, p. 106; Securing a Clean Energy Future, p. 104, viewed 22 September 2011, http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Consolidated-Final.pdf

[289].               Securing a Clean Energy Future, p. 104, viewed 22 September 2011, http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Consolidated-Final.pdf

[290].               This has been defined rather broadly to refer to a person who supplies gas to another person.

[291].               For details of the Carbon Farming Initiative, see A Talberg and J Tomaras, Carbon Credits (Carbon Farming Initiative) Bill 2011, Bills Digest, no. 5, 2011-12, 1 July 2011, viewed 5 September 2011, http://www.aph.gov.au/library/pubs/bd/2011-12/12bd005.pdf

[292].               Securing a Clean Energy Future, op. cit., p. 21.

[293].               Explanatory Memorandum, p. 46.

[294].               Australian Worker’s Union, Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 25 August 2011, viewed 20 September 2011, http://www.climatechange.gov.au/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianWorkersUnion-20110922-PDF.pdf

[295].               Explanatory Memorandum, p. 115.

[296].               Only credible international emissions units will be used for compliance, supporting the environmental integrity of Australia‘s pollution reduction efforts (clause 123 and subclause 122(9)). Criteria the Minister may use in prohibiting the surrender of eligible international units include:  Australia‘s international objectives and obligations, the environmental integrity of the mechanism, expert recommendations of the Climate Change Authority, whether the units are accepted by either the European Union or New Zealand emissions trading schemes; such other matters (if any) as the Minister considers relevant (subclause 123(2)).

[297].               In the flexible charge period, until 2020, liable entities must meet a minimum of 50 per cent of their annual liability with domestic carbon units. If the surrender of eligible international emissions units exceeds 50 per cent minimum, then the excess will not be counted as part of the calculation of the emissions number for that financial year. Rather, the excess is counted as part of the calculation of the emissions number for the subsequent financial year (subclause 133(7)).

[298].               Explanatory Memorandum, p. 116.

[299].               Ibid.

[300].               Conservation Council of SA Inc., Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 22 August 2011, viewed 20 September 2011, http://www.climatechange.gov.au/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-ConservationCouncilofSA-20110922-PDF.pdf

[301].               Clause 113 deals with the conduct of auctions for the purpose of issuing carbon units.

[302].               Australian Industry Group, Submission to the Department of Climate Change and Energy Efficiency, Inquiry into Australia’s clean energy future, 22 August 2011, viewed 15 September 2011, http://www.climatechange.gov.au/government/submissions/clean-energy-legislative-package/~/media/government/submissions/cel/public/CEL-Submission-AustralianIndustryGroup-20110922-PDF.pdf

[303].               Explanatory Memorandum, p. 123.

[304].               Environmental Defenders Office NSW & Environmental Defenders Office Victoria, ‘Draft Clean Energy Bills: our top priorities for amendment’, Policy and Law Reform: briefing paper, 10 August 2011, viewed 20 September 2011, p. 2, http://www.edovic.org.au/downloads/law%20reform/edo_vic_clean_energy_briefing.pdf

[305].               Proposed section 22A NGER Act, item 367 of the Clean Energy Consequential Amendments Bill 2011.

[306].               Unit shortfall charges are imposed through these Bill so as to ensure compliance with the requirement of section 55 of the Commonwealth Constitution.

[307].               Explanatory Memorandum, Clean Energy Bill 2011, pp. 148-155.

[308].               Environmental Defenders Office NSW & Environmental Defenders Office Victoria, ‘Draft Clean Energy Bills: our top priorities for amendment’, Policy and Law Reform: briefing paper, 10 August 2011, viewed 20 September 2011, p. 2, http://www.edovic.org.au/downloads/law%20reform/edo_vic_clean_energy_briefing.pdf

[309].               Explanatory Memorandum, p. 161.

[310].               However, this timeframe may be extended, but to no later than 300 days after the commencement of this section.

[311].               The capacity of a grid is to be determined in accordance with regulations made for the purposes of subsection 31(3) of the Renewable Energy (Electricity) Act 2000.

[312].               This is defined in clause 168.

[313].               In making an estimate under this section, the Regulator may rely on a report given under the National Greenhouse and Energy Reporting Act 2007 by the person.

[314].               Senate Standing Committee for the Scrutiny of Bills, Twelfth Report of 2011, 12 October 2011, p. 491,  viewed 22 October 2011, http://www.aph.gov.au/senate/committee/scrutiny/bills/2011/b12.pdf

[315].               According to the Explanatory Memorandum, at page 54, ‘The bill takes the same approach as the liability imposed on executive officers in other Commonwealth laws, including under section 154N of the Renewable Energy (Electricity Act) 2000, section 40B of the Hazardous Waste (Regulation of Exports and Imports) Act 1989 and section 494 of the Environmental Protection and Biodiversity Conservation Act 1999. It also reflects the approach taken in clause 217 of the Carbon Credits (Carbon Farming Initiative) Bill 2011’.

[316].              Australian Law Reform Commission, Report 95, Principled regulation: federal civil and administrative penalties in Australia, 13 March 2003, viewed 5 October 2011, http://www.alrc.gov.au/report-95

[317].               Explanatory Memorandum, p. 254.

[318].               G Williams, ‘Abbott courts trouble with carbon tax plans’, Sydney Morning Herald, 26 October 2011, p. 13, viewed 26 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1180167%22 

[319].               Ibid.

[320].               S Weart, ‘The discovery of global warming: the carbon dioxide greenhouse effect‘, American Institute of Physics website, June 2008, viewed 11 September 2011, http://www.aip.org/history/climate/co2.htm#survey

[321].               Intergovernmental Panel on Climate Change (IPCC), Climate change 2007: the physical science basis, Cambridge University Press, Cambridge and New York, 2007, pp. 5–9.

[322].               J Styles, Climate change: the case for action, Research paper, no. 28, 2008–09, Parliamentary Library, Canberra, 2009, viewed 11 September 2011, http://www.aph.gov.au/library/pubs/rp/2008-09/09rp28.pdf

[323].               For a short history of the IPCC see: WMO/UNEP, ‘Intergovernmental Panel on Climate Change—16 years of scientific assessment in support of the climate convention’, IPCC website, December 2004, viewed 11 September 2011, http://www.ipcc.ch/pdf/10th-anniversary/anniversary-brochure.pdf

[324].               Intergovernmental Panel on Climate Change (IPCC), ‘History‘, IPCC website, viewed 11 September 2011, http://www.ipcc.ch/organization/organization_history.shtml

[325].               United Nations Climate Change Conference (IPCCC), ‘The United Nations Climate Change Conference in Cancun, COP 16 / CMP 6, 29 November - 10 December 2010’, IPCC website, viewed 1 October 2011, http://unfccc.int/meetings/cop_16/items/5571.php

[326].               United Nations Climate Change Conference (IPCCC), ‘Decision 1/CP.16 The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention’, IPCC website, viewed 1 October 2011, http://unfccc.int/resource/docs/2010/cop16/eng/07a01.pdf#page=2

[327].               K Thompson (Shadow Minister for Sustainability, the Environment and Heritage), Labor’s plan for environment and heritage, ALP policy document, 6 October 2004, p. 10.

[328].               J Fitzgibbon (Shadow Minister for Mining, Energy and Forestry), Labor’s plan for a secure, affordable and sustainable energy future, ALP policy document, 7 October 2004, p. 5.

[329].               Garnaut Climate Change Review, Emissions Trading Scheme Discussion Paper, Canberra, March 2008, p. 10.

[330].               National Emissions Trading Taskforce, Possible design for a national greenhouse gas emissions trading scheme: Final framework report on scheme design, December 2007, Department of Prime Minister and Cabinet, viewed 3 October 2011, http://pandora.nla.gov.au/pan/72614/20070601-0000/www.pmc.gov.au/publications/emissions/index.html

[331].               K Rudd, P Garrett and C Bowen, Labor’s 2020 target for a renewable energy future, Election 2007 policy document, ALP, October 2007, viewed 11 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2F5VRO6%22

[332].               C Evans, Labor’s plan for a stronger resources sector, Election 2007 policy document, ALP, October 2007, viewed 11 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FKM0P6%22

[333].               R Garnaut, op. cit., p. xiii.

[334].               Australian Government, Carbon Pollution Reduction Scheme – green paper, Canberra, July 2008, viewed 3 October 2011, http://www.climatechange.gov.au/~/media/publications/green-paper/greenpaper.ashx .

[335].               Australian Government, Australia‘s low pollution future – the economics of climate change mitigation, Canberra, 30 October 2008, viewed 3 October 2011, http://www.treasury.gov.au/lowpollutionfuture/

[336].               Australian Government, Carbon Pollution Reduction Scheme – Australia‘s low pollution future – white paper, Canberra, 15 December 2008, viewed 3 October 2011, http://pandora.nla.gov.au/pan/102841/20090728-0000/www.climatechange.gov.au/whitepaper/report/index.html

[337].               Australian Government, Exposure Draft – Carbon Pollution Reduction Scheme Bill 2009, Canberra, 10 March 2009.

[338].               K Rudd (Prime Minister), W Swan (Treasurer) and P Wong (Minister for Climate Change and Water), New measures for the carbon pollution reduction scheme, joint media release, Canberra, 4 May 2009.

[339].               Australia, House of Representatives, Votes and proceedings, no. 98, 2008-09, 4 June 2009, pp. 1108–1108; Australia, Senate, Journals, no. 80, 2008–09, 13 August 2009, pp. 2290–2292.

[340].               Australia, House of Representatives, Votes and proceedings, no. 130, 2009-10, 16 November 2009, pp. 1441–1448.

[341].               Australia, Senate, Journals, no. 105, 2009–10, 30 November 2009, pp. 2958–2982, 2987–3045.

[342].               Australia, House of Representatives, Votes and proceedings, no. 144, 2009-10, 11 February 2010, pp.1614–1618.

[343].               Australia, Senate, Journals, no. 109, 2009–10, 22 February 2010, pp. 3171–3173.

[344].               Department of Climate Change and Energy Efficiency, Carbon Pollution Reduction Scheme, 5 May 2011, viewed 19 September 2011, http://www.climatechange.gov.au/media/whats-new/cprs-delayed.aspx

[345].               Prime Ministerial Task Group on Emissions Trading, op. cit., pp. 7 – 13.

[346].               Liberal Party of Australia, Australia: strong prosperous and secure, National Progress, October 2007, Coalition policy document, p. 27, viewed 11 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FUQRO6%22

[347].               Treasury, Strong growth, low pollution: modelling a carbon price, viewed 21 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/report.asp

[348].               Ibid.

[349].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit, p. 14.

[350].               Treasury, Strong Growth, Low Pollution, Modelling a carbon price, update, 21 September 2011, p. 5, viewed 21 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/update/downloads/Modelling_update.pdf

[351].               Treasury, Chart and Table Data, Chart 5.2: Australian emissions in the core policy scenario, viewed 22 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter5/Chart_5.02_update.xlsx .

[352].               Treasury, Strong growth, low pollution: modelling a carbon price, viewed 13 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/report.asp

[353].               Treasury, Strong Growth, Low Pollution, Modelling a carbon price, update, 21 September 2011, viewed 21 September 2011, http://www.treasury.gov.au/carbonpricemodelling/content/update/downloads/Modelling_update.pdf

[354].               Treasury, Strong Growth, Low Pollution, Modelling a carbon price, update, op. cit., p. 2.

[355].               Ibid., p 3.

[356].               Treasury, Strong Growth, Low Pollution, Modelling a carbon price, update, op. cit., p. 3.

[357].               Ibid.

[358].               Ibid.

[359].               Treasury, Strong growth, low pollution: modelling a carbon price, op. cit., p. 15.

[360].               Ibid., p. 12.

[361].               Ibid., p. 15.

[362].               Treasury, Strong growth, low pollution: modelling a carbon price, op. cit., p. 15.

[363].               Treasury, Strong growth, low pollution: modelling a carbon price, op. cit., p. 17.

[364].               Treasury, Strong growth, low pollution: modelling a carbon price, op. cit., p. 17.

[365].               D Gruen & M Quinn (The Treasury), Committee Hansard, Joint Select Committee on Australia’s Clean Energy Future Legislation, Clean Energy Bill 2011 and related bills, 26 September 2011, p. 5, viewed 29 September 2011, http://www.aph.gov.au/hansard/joint/commttee/j322.pdf

[366].               H Ergas, ‘Fatal flaw in case for a carbon tax’, The Australian, 15 July 2011, p. 12, viewed 10 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F923259%22; Institute of Public Affairs (IPA), IPA Submission on Australian Climate Change Measures, p. 1, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub014IPA.pdf

[367].               R Weisser, McKibbin urges ALP to release all Treasury modelling on carbon tax, The Australian, 12 August 2011, p. 4, viewed 10 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F993248%22

[368].               Institute of Public Affairs (IPA), IPA Submission on Australian Climate Change Measures, p. 1, viewed 27 September 2011, http://www.aph.gov.au/house/committee/jscacefl/subs/Sub014IPA.pdf

[369].               Australian Government, The Treasury, ‘Strong Growth, Low Pollution: Modelling a carbon price’, op. cit., p. 121.

[370].               Ibid., p. 122.

[371].               Queensland Treasury, ‘Carbon Price Impacts for Queensland’, August 2011, viewed 30 August 2011, http://www.treasury.qld.gov.au/knowledge/docs/carbon-price-impact-assessment/carbon-price-impacts-queensland.pdf

[372].               Ibid.

[373].               Ibid, pp. 5–6.

[374].               Deloitte Access Economics, The economic impacts of the Clean Energy Future on Queensland, Report for the Queensland Treasury, August 2011, p. 7, viewed 31 August 2011, http://www.treasury.qld.gov.au/knowledge/docs/carbon-price-impact-assessment/dae-economic-impacts-cef.pdf

[375].               Deloitte Access Economics, The economic impacts of the Clean Energy Future on Queensland, op. cit., pp. iii–v.

[376].               New South Wales Treasury, Evaluation of the impacts of the Commonwealth’s carbon price package announced 10 July 2011, viewed 30 August 2011, http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0018/20466/Evaluatiion_of_Impacts_of_Comm_Carbon_price_Package_Aug11.pdf; Frontier Economics, Carbon price modelling: A Report prepared for the NSW Government, viewed 30 August 2011, http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0017/20465/Carbon_Price_Impacts_Frontier_report_NSW_Gov_FINAL_Aug_11.pdf

[377].               New South Wales Treasury, op. cit., pp. 1–3.

[378].               Western Australian Treasury, Preliminary Assessment of the Impact of the Proposed Carbon Tax on Western Australia, viewed 30 August 2011, http://www.treasury.wa.gov.au/cms/content.aspx?id=12691

[379].               Western Australian Treasury, op. cit., pp. 11–16.

[380].               T Bailleu, Premier of Victoria, ‘Gillard Government carbon tax to choke Victorian economy, new modelling shows’, media release, 18 August 2011, viewed 31 August 2011, http://www.premier.vic.gov.au/media-centre/media-releases/1732-gillard-government-carbon-tax-to-choke-victorian-economy-new-modelling-shows-.html

[381].               Ibid.

[382].               K Wells, Victorian Treasurer, ‘Gillard Government carbon tax to devastate Victorian families and businesses’, media release, 20 September 2011, viewed 21 September 2011, http://www.premier.vic.gov.au/media-centre/media-releases/2024-gillard-government-carbon-tax-to-devastate-victorian-families-and-businesses-.html

[383].               Deloitte Access Economics, Modelling the Clean Energy Future policy, report for the Victorian Department of Premier and Cabinet, 7 September 2011, p. iii, viewed 21 September 2011, http://www.premier.vic.gov.au/images/stories/documents/mediareleases/2011/0_DAE_report.pdf

[384].               Deloitte Access Economics, Modelling the Clean Energy Future policy, report for the Victorian Department of Premier and Cabinet, op. cit., p. 81.

[385].               Points sourced from J Reinaud, International Energy Agency, ‘Issues behind competitiveness and carbon leakage – Focus on heavy industry‘, IEA Information Paper, October 2008, p. 43 and following; J P M Sijm, O J Kuik, M Patel, V Oikonomou, E Worrell, P Lako, E Annevelink, G J Nabuurs and H W Elbersen, ‘Spillovers of Climate Policy – An assessment of the incidence of carbon leakage and induced technological change due to CO2 abatement measures‘, Netherlands Research Program on Climate Change, Report 500036 002, December 2004, Appendix C, p. 160.

[386].               Australian Government, White Paper, pp. 169–170, viewed 12 September 2011, http://www.treasury.gov.au/lowpollutionfuture/report/downloads/ALPF_report_consolidated.pdf

[387].               R Garnaut, Garnaut Climate Change Review: final report, op. cit., p. 497; Additional discussion of this topic can be found in L Nielson, What makes a carbon leak?, Background Note, Parliamentary Library, Canberra, 23 December 2008, viewed 7 April 2009, http://www.aph.gov.au/library/pubs/BN/2008-09/carbonleaking.htm

[388].               European Commission, Carbon leakage: Policy, viewed 12 September 2011, http://ec.europa.eu/clima/policies/ets/leakage_en.htm

[389].               European Commission, Guidance on carbon leakage Final version issued on 14 April 2011 and updated on 29 June 2011, viewed 12 September 2011, http://ec.europa.eu/clima/documentation/ets/docs/benchmarking/gd5_carbon_leakage_en.pdf

[390].               European Commission, Carbon leakage: Policy, viewed 12 September 2011, http://ec.europa.eu/clima/policies/ets/leakage_en.htm

[391].               European Commission, Commission Decision of 24 December 2009 determining, pursuant to Directive 2003/87/EC of the European Parliament and of the Council, a list of sectors and subsectors which are deemed to be exposed to a significant risk of carbon leakage (notified under document C(2009) 10251), viewed 12 September 2011, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32010D0002:EN:NOT

[392].               European Commission, Carbon leakage FAQ, viewed 12 September 2011, http://ec.europa.eu/clima/faq/ets/leakage_en.htm

[393].               Point Carbon, Carbon 2011, p. 6.

[394].               Minerals Council of Australia, Government wrong on European carbon scheme, media release, 7 April 2011, http://www.minerals.org.au/news/government_wrong_on_european_carbon_scheme/

[395].               New Zealand Government, Report on The New Zealand Emissions Trading Scheme, 30 June 2011, p. 16, viewed 12 September 2011, http://www.climatechange.govt.nz/emissions-trading-scheme/building/reports/ets-report/ets-report-final.pdf

[396].               Ibid., p. 15.

[397].               New Zealand Government, Report on The New Zealand Emissions Trading Scheme, op. cit., p. 17.

[398].               New Zealand Government, Climate Change information New Zealand, How does industrial allocation work?, viewed 12 September 2011, http://www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/how-it-works/

[399].               Ibid.

[400].               Point Carbon, Carbon 2011, p. 30.