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Under the current regime, the NSW Greenhouse Gas Abatement Scheme will end after 31 December 2012. The Electricity Supply Amendment (Greenhouse Gas Abatement Scheme) Bill (2006) proposes to extend the operation of the scheme from 2012 to 2021 and beyond.
What does it mean for you?
Many greenhouse gas abatement projects and technologies take several years to plan, require significant capital investment, and involve long asset lives. Investors may not be able to realise any significant return for a lengthy period of time. Wind farms, biomass plants and research and development into other kinds of renewable energy and clean coal technology fall into this category. GGAS’s current expiry date is a disincentive for investors who are considering whether to invest in those projects and technologies encouraged by the scheme.
The Bill extends the operation of the scheme beyond 2012. The extended duration of the scheme will provide investors with certainty over future climate change policy in New South Wales. The price signal provided through the market for abatement certificates will guide investment decisions on major energy investments.
The Bill also increases the penalty payable by a benchmark participant who fails to meet the participant’s annual greenhouse gas benchmark. As a result of the amendments, from 1 January 2010, the current penalty amount of $11.50 per tonne of carbon dioxide equivalent of shortfall will rise by incremental steps to $15.50 by 1 January 2013. For investors in abatement projects, the higher penalty acts as a subsidy allowing abatement certificates to trade at a higher price.
What is the issue?
The Explanatory note states that the Bill aims:
- to provide for the extended operation of the scheme from 2012 to 2021 and beyond or until a scheme with similar objects is established on a national basis or in this jurisdiction and at least one or more other States or Territories, and
- to increase in incremental steps commencing 1 January 2010 the penalty payable under Part 8A by a benchmark participant who fails to comply with the participant’s greenhouse gas benchmark for reducing greenhouse gas emissions in any year, and
- to make minor amendments to facilitate the administration of the scheme -these include the GGAS Scheme Administrator compiling and making available consolidated information from the register of accredited abatement certificate providers and the register of abatement certificates.
The introduction of the Bill clarifies the New South Wales Government’s approach to the relationship between the Greenhouse Gas Abatement Scheme and the proposed National Emissions Trading Scheme (NETS). The NETS, which could start as early as 2010, was unveiled in a discussion paper authorised by each State and Territory in August 2006. The effect of the Bill is that if the NETS (a scheme with “similar objects” to the GGAS) is implemented, the GGAS will cease. The overall impact of the Bill is to confirm the commitment of the New South Wales Government to a carbon/environmental market, preferably on a national level, as the favoured government policy measure aimed at addressing the threat of climate change.
Additionally the recent Crown Lands Legislation Amendment (Carbon Sequestration) Bill 2006 allows the granting of carbon sequestration rights and related forestry rights in respect of Crown Land, Crown-timber land and certain other land. This too shows the New South Wales Government laying the groundwork for the implementation of a national emissions trading scheme in the near future.