Chapter 1

Introduction

Conduct of the inquiry

1.1        On 30 May 2012, the Greenhouse and Energy Minimum Standards Bill 2012 and the Greenhouse and Energy Minimum Standards (Registration Fees) Bill 2012 (the bills) were introduced to the House of Representatives by the Parliamentary Secretary for Climate Change and Energy Efficiency, the Hon Mark Dreyfus MP.[1]

1.2        On 21 June 2012, the Senate referred the provisions of the bills to the Environment and Communications Legislation Committee (the Committee) for inquiry and report by 15 August 2012.[2]

1.3        The bills have also been referred to the House of Representatives Standing Committee on Climate Change, Environment and the Arts for inquiry.[3] On 4 July 2012, the House Committee informed the Committee it would wait until the conclusion of the Senate's inquiry before determining whether to proceed with its own inquiry.[4]

1.4        In accordance with usual practice, the Committee advertised the inquiry on its website and wrote to relevant organisations inviting submissions. The inquiry was also advertised in The Australian newspaper on 4 July 2012. The Committee received two submissions which are listed at Appendix 1.

Background

Household energy consumption in Australia[5]

1.5        The Australian Bureau of Resources and Energy Economics estimates that residential households accounted for around 11% (440 petajoules) of Australia's total final energy consumption in 2009–10.[6]

1.6        Household energy is used for various purposes, such as:

• operating household appliances (approximately 39% of household energy);
• space heating and cooling (31% of household energy);
• water heating (24% of household energy); and
• cooking (5% of household energy).

1.7        Household appliances include lighting, refrigerators, freezers, televisions, information technology (IT) equipment, washing machines, clothes driers, microwaves and dishwashers.

1.8        Since 1989–90, household energy consumption in Australia has grown by 41%, or at an annual rate of 1.6%. The increase in energy can be attributed to a range of factors such as increases in the size of Australia's population, the number of households and the average size of houses by floor area. An overall rise in the number of appliances per person is also considered to have increased household energy consumption relative to 1989–90. This trend was mostly driven by the increased ownership of refrigerators, televisions, lighting and IT equipment.

1.9        It is anticipated that by 2020, household energy consumption will increase to 467 petajoules as the population and number of households increase.[7]

Improving energy efficiency

1.10      Energy consumed by appliances and equipment is a major source of greenhouse gas emissions in Australia. The stationary energy industry in Australia (comprising electricity, heat production and manufacturing industries) produced 201.4 million tonnes of carbon dioxide (CO²) equivalent emissions in 2010, representing 54.1% of Australia's net emissions (excluding Land Use, Land Use Change and Forestry).[8] It is predicted that by 2020, Australia's total stationary energy emissions will increase to 332 million tonnes of CO² equivalent emissions, 33% above 2000 levels.[9]

1.11      The Commonwealth Government has committed to reducing Australia's greenhouse gas emissions by at least 5% on 2000 levels by 2020 and reducing emissions by 80% compared with 2000 levels by 2050.[10]

1.12      Improving energy efficiency is considered to be the "low hanging fruit" of emission reduction efforts as it is arguably the easiest, simplest and most cost efficient way of lowering greenhouse gas emissions.[11] In 2007, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimated that 55% of Australia's emission reduction target to 2050 could be met through energy efficiency improvements.[12]

Equipment Energy Efficiency Program

1.13      In 1992, the national Equipment Energy Efficiency (E3) Program was established to coordinate several state-based schemes that required a range of appliances to meet Minimum Energy Performance Standards (MEPS)[13] and to display energy rating labels.[14] The E3 Program is currently administered by the Commonwealth government, state and territory governments and the New Zealand government.[15]

1.14      The E3 Program is a mandatory scheme that requires a range of appliances sold in Australia to display energy rating labels to show the amount of energy consumed by the appliance. Appliances currently required to display energy rating labels are:

• refrigerators;
• freezers;
• clothes washers;
• clothes dryers;
• dishwashers
• air conditioners; and
• televisions.[16]

1.1        The E3 Program applies to the supply of appliances and most appliances are supplied by retailers.[17] When offered for sale by a retailer, appliances must display an energy rating label. The energy rating label has two main features: a star rating and a comparative energy consumption rating (shown in Figure 1 opposite).

1.15      A star rating of between one and ten stars is used to give a comparative assessment of a model's energy efficiency. The greater the number of stars, the higher the efficiency. The star rating is determined by the energy consumption and size of the product. These values are measured under Australian Standards which define test procedures for measuring energy consumption and minimum energy performance criteria.[18]

1.16      The comparative energy consumption (usually kilowatt hours per year) provides an estimate of the annual energy consumption of the appliance based on the tested energy consumption and information about the typical use of the appliance in the home.

1.17      Energy rating labels are designed to enable consumers to compare the energy efficiency of domestic appliances on a fair and equitable basis and provide an incentive for manufacturers to improve the energy performance of appliances.[19]

Figure 1: Energy Rating Labels[20]

         

1.18      Analysis from 2009 estimated that E3 standards already implemented will:

...reduce household electricity use in 2020 by about 13% compared with business as usual (BAU), and measures currently planned could bring about a further reduction of nearly 15%.[21]

COAG agreement

1.19      In July 2009, the Council of Australian Governments (COAG) adopted the National Strategy on Energy Efficiency to accelerate energy efficiency efforts, streamline responsibilities across levels of governments, and to help households and businesses prepare for the introduction of the Carbon Pollution Reduction Scheme (CPRS).[22] As part of the strategy, COAG agreed to establish national legislation to provide:

...a nationally consistent policy framework covering appliance and equipment minimum energy performance standards and labelling, streamlining governance arrangements and regulatory processes, simplifying compliance and enforcement responsibilities for all stakeholders, and reducing transaction costs for business.[23]

Government consultation

1.20      In August 2009, the Commonwealth Government released a discussion paper on a proposed national energy efficiency program and labelling scheme.[24] Six public hearings were held around Australia to gather feedback from stakeholders.[25]

1.21      In January 2010, the government published a Regulation Impact Statement (RIS) on a proposed national scheme and held an additional six public hearings.[26] A Supplementary Discussion Paper followed, focussing on compliance obligations and enforcement measures.[27]

1.22      In August 2011, the government released a draft of the Greenhouse and Energy Minimum Standards (GEMS) bill, inviting submissions.[28] The government published a consolidated response addressing key concerns raised by stakeholders during this process.[29]

Overview of the bills

Purpose of the bills

1.23      The bills seek to deliver a national framework to regulate energy efficiency and labelling standards for appliances and other products supplied or used within Australia.[30]

1.24      The bills would give effect to the COAG agreement of August 2009 (see earlier section) and 'certain commitments under the United Nations Framework Convention on Climate Change to adopt policies and measures to mitigate climate change and limit Australia's anthropogenic emissions of greenhouse gases'.[31]

1.25      Upon introducing the bills, the Parliamentary Secretary stated:

The E3 Program is an important part of ensuring affordable energy for all Australians, and assisting Australia's transition to a low-carbon future.

The benefits are real and significant. By 2020, existing E3 measures are forecast to save Australian households and businesses $5.2 billion per year and reduce household electricity use by 13 per cent per year, compared with business as usual. The planned regulatory program is forecast to bring about a further reduction of almost 15 per cent, saving Australian households more than 25 per cent of their yearly power bills.[32]

Greenhouse and Energy Minimum Standards Bill 2012[33]

1.26      The Greenhouse and Energy Minimum Standards Bill 2012 (the GEMS bill) is intended to address inconsistencies arising from the E3 Program whilst delivering 'a national and expanded E3 Program'.[34] The GEMS bill would allow the Commonwealth Government to set mandatory minimum efficiency requirements for products and set nationally-consistent labelling requirements.

GEMS products

1.27      The GEMS bill would require 'GEMS products' to be registered in the 'GEMS Register' in the relevant 'product classes'.[35]

1.28      A GEMS product is defined as 'a product that uses energy [for example a refrigerator or television] or affects the amount of energy used by another [for example insulation or window glass]' and 'is in a product glass covered by a GEMS determination'.[36]

1.29      GEMS products would be either category A products or category B products. Category B products would be required to 'have a high impact on energy use or greenhouse gas production'.[37]

1.30      A single product could be included in more than one product class (for example a combined clothes washer and dryer may fall within 'clothes washing machine' and 'clothes dryer' product classes).

Supplying GEMS products

1.31      Subject to certain exceptions, GEMS products would only be able to be supplied if they comply with the relevant GEMS determination and its requirements. GEMS products would not be able to be supplied where the model is not registered. Non-compliant GEMS products would not be able to be used for commercial purposes.

1.32      Contravention of these requirements would amount to a criminal offence of strict liability attracting a financial penalty.

1.33      These provisions would not commence until 1 October 2013 to allow existing registrations under the state-based E3 Program one calendar year to be transferred to the proposed new national program.

GEMS determinations

1.34      A GEMS determination, made by the minister, would specify one or more 'product classes' and would specify requirements for products in those product classes.

1.35      The GEMS bill specifies the circumstances in which the minister could make a GEMS determination including the requirement for the minister to obtain consent from participating jurisdictions (the Commonwealth Government and state and territory governments).[38]

Registering GEMS products

1.36      Once a GEMS determination is made by the minister, an interested party (such as a manufacturer, importer or supplier) would be required to register models of each GEMS product on the GEMS Register. The GEMS Register would be operated by the GEMS Regulator who must approve an application unless certain requirements are not met.

1.37      The GEMS bill would require registrants to provide certain information, such as changes to a product or contact details, and information pertaining to the import and manufacture of products.[39]

1.38      Registrations could be suspended or cancelled for non-compliance, the provision of incorrect information, or non-compliance with a notice.

GEMS Regulator

1.39      The GEMS Regulator would be a Senior Executive Service (SES) Officer and would be responsible for administering the Act; maintaining the GEMS Register; assisting the minister in the making of GEMS determinations; monitoring and enforcing compliance with the Act; and reviewing and evaluating its operation. The GEMS Regulator would be afforded wide-ranging powers.

1.40      The GEMS Regulator would be empowered to appoint GEMS inspectors from Commonwealth, state or territory agencies. GEMS inspectors would be given certain powers to enter public areas of business premises without a warrant to perform certain limited functions (such as inspecting GEMS products, inspecting information or purchasing GEMS products available to the public). In circumstances where a GEMS inspector reasonably suspects there may be evidential material on a premise, the inspector would be afforded certain higher level powers.

Enforcement

1.41      The GEMS Regulator would be allowed to apply for civil penalty orders within six years of an alleged contravention of the GEMS requirements. The GEMS Regulator would also be able to publicise certain offences, contraventions and adverse decisions.

Greenhouse and Energy Minimum Standards (Registration Fees) Bill 2012

1.42      The Greenhouse and Energy Minimum Standards (Registration Fees) Bill 2012 accompanies the GEMS bill and would establish legislative power for the GEMS Regulator to levy fees from businesses registering product models under the GEMS bill.

1.43      Registration fees would recover some of the costs incurred under the E3Program, including the costs of processing registration applications and a portion of the costs of monitoring compliance with the GEMS bill.[40]

Senate Scrutiny of Bills Committee

1.44      The Senate Scrutiny of Bills Committee highlighted several issues with the bills in respect of an individual’s personal rights and liberties.[41]

1.45      In examining the GEMS Bill, the Scrutiny Committee highlighted issues concerning:

• the strict liability offences to ensure enforcement of the GEMS legislation (clauses 16–19, and 144);
• the reversal of onus on defendants to provide evidential proof of a particular factual matter (clauses 16–19); and
• insufficiently defined administrative powers in relation to the delegation of authority to a state or territory official (clause 80).[42]

1.46      In respect of these matters, the Scrutiny Committee left the question of whether the proposed approach is appropriate to the consideration of the Senate as a whole.[43]

1.47      However, the Scrutiny Committee has sought the minister's advice in relation to the following issues:

• the broad discretionary power of the GEMS Regulator to impose written conditions on a product model’s registration (clause 45);
• the lack of procedural fairness concerning the suspension or cancellation of a product model’s registration (clauses 49 and 54); and
• the ability of the GEMS Regulator to publicise matters of fact connected with the enforcement of the legislation (clause 162).[44]

1.48      In relation to the GEMS (Registration Fees) Bill, the Scrutiny Committee has sought the minister's advice 'as to whether consideration might be given to an amendment to the bill which clarifies the intention that registration fees are limited to cost recovery purposes' (clauses 8–9).[45]

1.49      The minister is yet to respond to these issues.

Key issues

1.50      The Committee received two submissions to the inquiry. Both of these were broadly supportive of the bills and identified some key issues including:

• the need for a nationally-consistent approach to regulate energy minimum standards and labelling requirements;
• criminal sanctions; and
• the requirement to provide sales data to the regulator.[46]

1.51      These matters are discussed in Chapter 2.

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