Purpose of the Bill
The purpose of the Greenhouse and Energy Minimum Standards Amendment (Administrative Changes) Bill 2023 is to amend the Greenhouse and Energy Minimum Standards Act 2012 (the GEMS Act).[1]
The overall aim is to improve the administration of the GEMS Act by implementing some of the recommendations of the 2019 Independent Review of the GEMS Act (the Review).
The Bill proposes this by:
- allowing for customised products to be registered at the point a sale is confirmed rather than at the point of offer for sale
- allowing greater flexibility for business in demonstrating compliance with a GEMS determination, including the acceptance of equivalent testing methods adopted in other markets
- allowing greater flexibility to the GEMS Regulator to grant exemptions to requirements or aspects of requirements of GEMS determinations, while ensuring availability and promotion of energy efficient products
- broadening the ways in which product classes may be specified in a GEMS determination
- allowing GEMS determinations to specify ‘other requirements’ supporting the effectiveness of GEMS labelling requirements in more circumstances
- extending the grandfathering of compliant products manufactured in Australia or imported before a new or modified GEMS determination comes into effect
- giving the GEMS Regulator a power to extend the time allowed to pay application fees, in exceptional circumstances.
In addition to technical amendments, the Bill would amend the object of the GEMS Act to clarify that one of the objects is to facilitate an intergovernmental scheme.
Background
Purpose
The main purpose of the GEMS Act has been to create a national scheme for labelling and minimum energy performance of electrical appliances, to provide benefits for consumers and, through harmonisation, to lower compliance costs for business.
Other Commonwealth and Commonwealth-state laws and schemes covering other aspects of energy efficiency are described in the Appendix.
The GEMS Act
The GEMS Act is a national law to regulate energy efficiency and labelling standards for appliances and equipment. The object is explained in an overview clause, stating:
This Act is about promoting the development and adoption of products to reduce energy use and greenhouse gas production.
This is achieved by applying greenhouse and energy minimum standards (GEMS) in association with the supply and commercial use of products that use energy, or affect the energy used by another product. These standards are provided for by requirements in Ministerial determinations (GEMS determinations).[2]
The GEMS Act has two main mechanisms:
- product labelling to assist consumers to make more informed choices
- mandatory minimum standards for specified classes of products and equipment.
Setting minimum efficiency requirements for products enables exclusion of poorly performing products from the market.
Cooperative federalism
The GEMS Act’s energy efficiency scheme is founded upon cooperative federalism, in this instance led by the Commonwealth.
The national framework introduced by the GEMS Act replaced seven prior state and territory legislative frameworks.[3] Prior to the national legislation, there was a patchwork of state laws for energy labelling. For example, NSW and Victoria unilaterally enacted energy labelling laws for appliances such as refrigerators in 1986.[4]
The implementation of the GEMS legislation relies upon intergovernmental cooperation between the Commonwealth and the states and territories.[5] The GEMS Act is expressed to operate concurrently with state and territory laws on energy use.[6] The GEMS Act does not exclude or limit state laws that set minimum requirements relating to energy use and greenhouse gas production, as long as they impose more stringent requirements.[7]
The GEMS Act underpins the cross jurisdictional Equipment Energy Efficiency Program (E3):
The Equipment Energy Efficiency (E3) Program is a cross jurisdictional initiative for delivering a single, integrated approach to energy efficiency standards and energy labelling for household and business equipment and appliances in Australia and New Zealand. For Australia, the E3 Program operationalises the Inter-Governmental Agreement (IGA) for the Greenhouse and Energy Minimum Standards (GEMS) legislative scheme and the Greenhouse and Energy Minimum Standards Act 2012 (the GEMS Act). In New Zealand, the Energy Efficiency (Energy Using Products) Regulations 2002 perform a similar role and these are administered by the Energy Efficiency and Conservation Authority (EECA).[8]
GEMS Determinations
The GEMS Act is implemented via federal legislative instruments known as the GEMS determinations, which:
- specify one or more product classes covered and
- specify requirements for products in those product classes.[9]
For example, GEMS determinations specify product classes such as fridges, washing machines and clothes dryers as well as some commercial equipment such as large air conditioning systems and electricity distribution transformers.
GEMS determinations also ‘specify requirements for energy consumption, greenhouse gas production, labelling and some other matters, including the environment and human health’.[10] They are made by legislative instrument and also outline how requirements must be met, such as how product performance testing must be undertaken.
The GEMS Act sets preconditions to the making of GEMS determinations, including obtaining consent of the participating jurisdictions. Section 33 of the GEMS Act states: ‘Before making a GEMS determination, the Minister must obtain consent to the terms of the determination’. The processes for development of new and revised GEMS requirements, including obtaining consent from the parties, are set out in the Inter-Governmental Agreement for the Greenhouse and Energy Minimum Standards (GEMS) Legislative Scheme (IGA).[11] These processes also include a requirement for Regulation Impact Analysis.[12] The Minister must receive approval from at least two-thirds of participating jurisdictions.[13]
Product coverage
The legislation divides GEMS products into two categories, with greater regulatory consequences attaching to the category of products that have a high impact on energy use.[14] The GEMS Act sets out GEMS categories, A or B, as follows:
- Category A product types are small energy consuming items (lights, household heaters, et cetera)
- Category B product types are large energy consuming items (industrial chillers, distribution transformers, et cetera).[15]
Different penalties apply for offences depending on whether a product is a category A product or a category B product for a product class.[16]
Offences
The GEMS Act makes it an offence to sell regulated products that do not meet specified standards and that do not display energy performance labels on equipment and appliances.
A product covered by a GEMS determination can only be supplied or offered for supply, or used for a commercial purpose, if the model of the product is registered.
In more detail, the GEMS Act prohibits supply of, or offering to supply, GEMS products that do not comply with a GEMS determination.[17] Similarly, the GEMS Act makes it an offence to supply a GEMS products if the model of product is not registered against the relevant GEMS determination for that product class.[18] These offences are linked to GEMS labelling requirements.[19]
The GEMS Act also sets out legally binding obligations on commercial users of electrical equipment and appliances. These apply when GEMS products are used for commercial purposes, requiring that the products comply with GEMS determinations and that the models used are registered.[20]
Contravention of these rules may result in prosecution for strict liability offences or exposure to liability for civil penalties.[21]
Independent review of the GEMS Act
An Independent review of the Greenhouse and Energy Minimum Standards (GEMS) Act 2012 (the 2019 Review) was conducted in 2019 by Anna Collyer, formerly partner at Allens, and now Chair of the Australian Energy Market Commission. The review was a statutory timetabled review, required by section 176 of the GEMS Act. It made 40 recommendations with some requiring legislative change, as outlined below.[22] At the time of writing, no government response to the 2019 review has been published.
Recommendations of the Review
A number of the recommendations made by the 2019 Review suggested legislative change, including:
Medium term improvements requiring legislative change, completed within three years
Determinations
5. The Commonwealth Government amend the GEMS Act to require the Minister to release an exposure draft of each proposed GEMS determination.
Registration
13. The Commonwealth Government amend the GEMS Act to allow registration ‘at the point a sale is confirmed’ for clearly defined customised products.
18. The Commonwealth Government amend the GEMS Act to extend the grandfathering provisions that currently apply for non-compliant products to the registration obligation for compliant products.
Compliance
22. The GEMS Regulator engage with industry stakeholders on alternative check testing methods that ensure fairness, transparency, and integrity.
23. Based on the outcomes of Recommendation 21 [which called on the GEMS Regulator to continue to explore new ways to target compliance activities], the Commonwealth Government amend the GEMS Act to allow a flexible approach to compliance and enforcement that maintains adequate protection for registrants.
Managing the GEMS Program.
25. The Commonwealth Government reviews its information and data requirements and examines the most appropriate means to realise those data needs.
26. Based on the outcomes of Recommendation 25, the Commonwealth Government amend the GEMS Act to allow the GEMS Regulator to collect further data to improve its evidence base.
Pushing the boundaries of the GEMS Act
38. The Commonwealth Government update the GEMS Act to allow for mandatory demand response capability.[23]
Recommendations and the Bill
Recommendations 13 and 18 are addressed by this Bill. (See Key issues and provisions, below).
Future reforms
The Bill’s second reading speech indicates that the present Bill is only the Government’s first step in modernising the GEMS Act and expanding its coverage:
As we consider our energy transition, it's time to update the GEMS Act, and modernise it to make sure it fits with today's technologies, appliances, and energy demands.
To move forward, we need to expand the GEMS Act to gather more information, set more minimum performance standards on a broader range of appliances and products to meet our climate and energy needs into the future. We need to build in flexibility into the GEMS Act to be ready for the future, and to support better choices.
This Bill introduces a first phase of GEMS Act amendments, targeted to streamline the implementation of the GEMS scheme, and to reduce unnecessary burden on our regulated community.[24]
The Government also signalled its intention to expand the GEMS scheme in the lead-up to the 2023–24 Budget, announcing further funding for GEMS. It stated:
This funding will also expand and modernise the Greenhouse Energy Minimum Standards (GEMS). Existing minimum energy efficiency and labelling requirements save the average household between $140 and $220 per year on electricity bills. But Australian requirements only cover around half the products of comparable other countries. This funding will help expand GEMS to help Australian households and businesses save on bills and emissions.[25]
The 2023–24 Budget measure Household Energy Upgrades Fund – establishment provided:
$36.7 million over 4 years from 2023–24 (and $2.1 million per year ongoing) to develop further initiatives to improve energy performance, including expanding and modernising the Greenhouse and Energy Minimum Standards program and the Nationwide House Energy Rating scheme.[26]
Significant scope exists to expand the coverage of the scheme by making GEMS determinations for more product classes. The E3 Prioritisation Plan shortlists 38 products with ‘good alignment with the E3 Program criteria’, including 26 which are currently unregulated and 10 where the GEMS determinations are ‘under sunsetting review’.[27]
Committee consideration
Senate Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills has expressed reservations about the role of delegated legislation in Item 5 of Schedule 1 to the Bill, proposed subsection 27A(1), which allows the GEMS Regulator to declare, by legislative instrument, that specified classes of products or specified models of GEMS products are taken to comply with requirements of a GEMS determination in certain circumstances or if particular conditions are complied with. This allows the GEMS Regulator to accept alternative requirements (for example different test methods) that demonstrate compliance. The Committee reiterated its ‘consistent scrutiny view’:
that significant matters should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. The committee notes that a determination made by the GEMS Regulator would mean that a specified class or model of products are deemed to comply with requirements specified in a determination made by the Minister under section 23 of the Act.
While welcoming the constraints upon the instrument making power set out in proposed subsection 27A(3), which provides that a declaration must not be made unless the GEMS Regulator is satisfied that it is likely to promote the objects of the GEMS Act and complies with any requirements prescribed in the regulations, the Committee requested the Minister to consider amending the Bill:
to provide for a review of the operation of declarations made under proposed subsection 27A(1) within a specified time, for example within three years of commencement of the declaration.[28]
At the time of writing this Digest, the Minister’s response had been received by the Committee, but not yet published.[29]
Environment and Communications Legislation Committee
On 22 June 2023, the Senate referred the Bill to the Environment and Communications Legislation Committee for inquiry and report by 27 July 2023.
At the time of writing this Digest, the Committee had received three submissions.
Position of major interest groups
In a submission to the Environment and Communications Legislation Committee, the Energy Efficiency Council, the peak body for the energy efficiency industry, expressed a desire for the coverage of the GEMS scheme to be expanded ‘at the earliest available opportunity’.[30] It also called for amendments that would enable more ‘rapid adoption of suitable international minimum energy performance standards’, arguing that this would reduce barriers to entry to the Australian market for efficient products made overseas.[31] Earlier, when the 2023-24 Budget was delivered, the Energy Efficiency Council stated:
The Government has also committed to helping householders understand the energy performance of their home through funding an expansion of the Nationwide House Energy Rating System, as well as expanding the Greenhouse and Energy Minimum Standards program.
“We know minimum standards and energy ratings work. Yes, we need more energy performance labels on more appliances. But more than anything, we need an energy label on the biggest purchase of all: the family home.” Mr Menzel [EEC CEO] said.[32]
Also in response to the Budget, Energy Consumers Australia stated:
There is also funding to expand and modernise the Greenhouse Energy Minimum Standards (GEMS). Existing minimum energy efficiency and labelling requirements save the average household between $140 and $220 per year on electricity bills. But Australian requirements only cover around half the products of comparable other countries. This funding will help expand GEMS to help Australian households and businesses save on bills and emissions.[33]
The Air-Conditioning & Refrigeration Equipment Manufacturers Association of Australia (AREMA), which represents the interests of air-conditioning, heat pump and refrigeration equipment manufacturers and importers active in the Australian market, submitted that it was broadly supportive of the amendments proposed by the Bill, but that there should be ‘common sense limits to the Government in terms of what issues can be covered by the GEMS scheme’.[34] AREMA also commented on specific aspects of the Bill, with some of these comments set out under Key issues and provisions, below.
Financial implications
The Explanatory Memorandum (EM) observes:
The Bill would have no financial impact on the Australian Government Budget.[35]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[36]
Parliamentary Joint Committee on Human Rights
At the time of writing this Digest, the Parliamentary Joint Committee on Human Rights had not yet considered the Bill.
Key issues and provisions
Objects clause
Item 40 in Part 9 of the Bill seeks to add new paragraph 4(ab) to the objects of the GEMS Act. Currently section 4 provides that the objects of the Act are to:
- give effect to certain obligations that Australia has under the United Nations Framework Convention on Climate Change and the Paris Agreement and
- promote the development and adoption of products that:
- use less energy
- produce fewer greenhouse gases or
- contribute to reducing the amount of energy used, or greenhouse gases produced, by other products.
Proposed paragraph 4(ab) will provide that a further object of the GEMS Act is:
to facilitate the operation of an intergovernmental scheme involving the Commonwealth and one or more other participating jurisdictions in relation to equipment energy efficiency.[37]
This is relevant as paragraph 44(1)(a) of the Legislation Act 2003 provides that a legislative instrument (or a provision of a legislative instrument) authorised by an Act that facilitates the establishment or operation of an intergovernmental body or scheme involving the Commonwealth and one or more states or territories is not disallowable by the Parliament, unless the instrument is a regulation, or the enabling legislation or another Act provides that the instrument is disallowable. Such legislative instruments are also not subject to sunsetting.[38] The EM states:
New paragraph 4(aa) [sic] would clarify that one of the objects of the Act is to facilitate the operation of an intergovernmental scheme involving the Commonwealth and one or more other participating jurisdictions in relation to equipment energy efficiency. While this has always been the case during the existence of the Act, this amendment is intended to provide further clarity and transparency on the objects of the Act. Further, this amendment would not change the purpose, scope, nor operation of the Act.
This amendment would also provide further clarity on the existing status of legislative instruments made under the Act, which are exempt from disallowance and sunsetting requirements under the Legislation Act 2003. This amendment would not change this exemption but would simply provide further clarity.[39]
Clarification of the status of instruments under the GEMS Act would appear to be welcome, given that such instruments have previously been listed on the parliamentary disallowable instruments lists.[40]
Customised products
Part 1 of the Bill contains several proposed amendments to the GEMS Act which relate to the sale of customised products (such as commercial refrigeration or heating/cooling systems for large buildings), as opposed to large volume standardised products (for example, dishwashers).
The GEMS Act only permits a GEMS product (those covered by a relevant GEMS determination) to be supplied if the product has been registered. As the GEMS Act states, ‘Generally speaking, all models of GEMS products must be registered under Part 5 (in the GEMS Register) against GEMS determinations.’[41]
Broadly, under the GEMS Act, the obligation to obtain registration of regulated products applies when a product is first offered for supply. In some situations, it is understood the timing of the registration requirement can be problematic for businesses selling bespoke or customised refrigeration or heating/cooling systems for large buildings or larger commercial applications, because suppliers are presently required to obtain registration for such systems prior to making a sale offer, despite the risk that the customised offer may not be accepted by a customer and converted into supply and installation of the product.
The amendments would allow for customised products to be registered at a later point in time, when a sale is confirmed, rather than at the earlier point in time of being offered for sale. The intention is to remove unnecessary regulatory burden at the point of an offer for supply for suppliers of low volume products designed to be customised for a particular customer.
Subsection 17(1) of the GEMS Act prohibits a person supplying, or offering to supply, a product covered by a GEMS determination if it is not registered. Item 2 of the Bill would insert new subsection 17(2A), which would provide that the prohibition in subsection 17(1) does not apply to an offer to supply a GEMS product that:
- is or will be manufactured or modified on request by an identified customer to customised requirements
- is covered by a GEMS determination that is prescribed under subsection 17(2B) and
- meets any other requirements that are prescribed under subsection 17(2B).
Proposed subsection 17(2B) then empowers the GEMS Regulator to make a legislative instrument that prescribes relevant GEMS determinations and other requirements for the purposes of proposed section 17(2A).
These changes are designed to avoid regulatory burden for custom designed products if a sale does not proceed. The proposed amendments would not apply to large volume products regulated by the GEMS Act. These amendments would implement Recommendation 13 of the 2019 Review.[42]
Item 4 makes necessary adjustments to section 17, relating to civil penalty proceedings for the contravention of the prohibition on supplying GEMS products where the model has not been registered with the GEMS Regulator. The amendments would clarify what is required of persons who seek to rely on new subsection 17(2A), relating to an exemption for customised products, in civil penalty proceedings for the contravention of subsections 17(5) or (6).
Proposed subsection 17(9) provides that those seeking to rely upon the exemption for customised products will bear an evidential burden in relation to whether the product meets the requirements in proposed subsection 17(2A). Section 4 of the Regulatory Powers (Standard Provisions) Act 2014[43] provides that an evidential burden means ‘the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist’.
This evidential burden is consistent with the treatment of existing categories of exemptions in the GEMS Act, for example, the exemption of second-hand goods from the requirement to comply with GEMS determinations. These goods are exempt from the compliance requirement under paragraph 16(2)(a) and subsection 16(8) places an evidential burden on a person seeking to rely on that exemption.[44]
AREMA’s submission to the Senate Environment and Communications Legislation Committee inquiry into the Bill expressed support for the amendments in Part 1 of the Bill.[45]
Deemed compliance
Part 2 of the Bill seeks to insert new section 27A, which would provide a mechanism for the GEMS Regulator to specify alternative requirements that can demonstrate compliance with a GEMS determination (such as alternative testing methods). This would be relevant, for example, in cases where a suitable alternative standard has already been complied with and would avoid the need for suppliers to conduct testing specifically for the Australian market.
Proposed subsection 27A(1) allows the GEMS Regulator to declare, by legislative instrument, that specified classes of products or specified models of GEMS products are taken to comply with requirements of a GEMS determination in certain circumstances or if particular conditions are complied with.
Proposed subsection 27A(3) would constrain the GEMS Regulator from making a declaration under subsection 27A(1) unless they were satisfied that making the declaration is likely to promote the objects of the Act (set out above) and any requirements prescribed by the regulations are complied with.
The E3 Prioritisation Plan provides some context for this proposed change:
Now that several major economies regulate a wider selection of products than Australia and New Zealand, in many cases it is possible to increase energy savings by aligning product scopes with these economies. Product suppliers have indicated a clear preference for aligning with standards published by international standards organisations and international regulatory levels, especially those operation in the European Union (EU). Not only does this reduce the time and cost of developing new policies, but it substantially reduces the risk that poorer performing products will be ‘dumped’ into the Australian and New Zealand markets.[46]
While broadly supporting the amendments proposed in Part 2 of the Bill, AREMA:
remains concerned that this could, potentially, open a loophole for more substantive change than is described in the explanatory memorandum. We would support decisions being made reviewable/appealable if they resulted in a shift in regulatory intent.[47]
As discussed above, the Senate Standing Committee for the Scrutiny of Bills has asked the Minister to consider whether the Bill could be amended ‘to provide for a review of the operation of declarations made under proposed subsection 27A(1) within a specified time, for example within three years of commencement of the declaration’.[48]
Extension of grandfathering provisions
‘Grandfathering’ under the GEMS Act provides a transitional exemption, where legacy products are permitted to be sold under specified circumstances, even though new rules have been introduced to apply to new products and new technologies going forward.
Part 7 of the Bill proposes amendments to extend the scope of existing ‘grandfathering’ provisions in Part 3 of the GEMS Act. The amendments do not aim to provide an extension of exemptions in a temporal sense (that is, the duration of exemptions), but in the sense of making grandfathering provisions more accessible in a broader range of circumstances.
The Review of the GEMS Act recommended that the Commonwealth ‘amend the GEMS Act to extend the grandfathering provisions that currently apply for non-compliant products to the registration obligation for compliant products.’[49]
As explained by the Review of the GEMS Act ‘The grandfathering provisions, will allow products that cannot meet the [Minimum Energy Performance Standards] requirements to continue to be sold if they were imported into, or manufactured in, Australia before the regulation took effect.’[50]
An industry view expressed by the Consumer Electronics Suppliers Association describes the purpose of grandfathering as ‘A grandfathering period is to give suppliers time to sell out noncompliant stock, or stock which may be compliant but the model is not continuing so will not be registered.’[51]
The amendments would enable grandfathering of otherwise compliant products, to reduce testing requirements. The amendments extend grandfathering arrangements that currently apply for non‑compliant products, to the registration obligation for compliant products.
Item 23 of Part 7 of the Bill would add a new paragraph 17(2)(c) for this purpose. As discussed above, subsection 17(1) of the GEMS Act prohibits a person supplying, or offering to supply, a product covered by a GEMS determination if it is not registered. Proposed paragraph 17(2)(c) provides that the prohibition in subsection 17(1) does not apply if the following conditions are satisfied:
- the product is imported into or manufactured in Australia at a time (the earlier time) before the GEMS determination comes into force
- if there is a limited grandfathering period under the GEMS determination for the product class (see section 31)—the supply or offer occurs before the end of that period
- all transitional GEMS labelling requirements of the GEMS determination are complied with in supplying or offering to supply the product
- the product currently complies with any pre-existing GEMS determination that was in force at the earlier time
- if there was no such pre-existing GEMS determination—the supply of the product (or an offer to supply the product) in a state or territory at the earlier time would not have contravened a law of the state or territory relating to energy use by products, or greenhouse gases resulting from operating products.
In its submission to the Senate Legislation Committee, the Department explained that the grandfathering amendments have the following intention:
Currently, only stock that cannot meet the GEMS requirements and was manufactured in or imported into Australia prior to the new or updated determination taking effect, can continue to be sold without registration. This change would mean all existing stock of products that have already been imported or manufactured in Australia that would be compliant under new or updated determinations, can be supplied without the need to test or register.’[emphasis added][52]
In reference to concerns raised by importers of lighting products, the DCCEEW has submitted:
If this Bill is passed, grandfathering provisions will address some concerns raised by the lighting sector during consultation of potential regulations to cover Light Emitting Diode (LED) lamps and the phase out of incandescent and halogen lamps. Any products that are onshore and meet the GEMS requirements at the time the related Determinations come into effect, will be able to be sold until out of stock, without the need to register.[53]
Other Commonwealth laws and nationwide schemes for energy efficiency
Several other Commonwealth laws address different aspects of energy efficiency, aside from the matters addressed by the GEMS legislation.
Briefly, these are the:
Building energy efficiency systems and schemes