Upcoming Mallesons seminarsThe CPRS Scheme will affect all areas of the Australian economy.
What do you need to do?Monitor progress as the Bill is considered by the Parliament.
Louis Chiam
Partner
Louis Chiam
Partner
T +61 3 9643 4086
Sydney
Vishal Ahuja
Dominic Bortoluzzi
Scott Farrell
Melbourne
Louis Chiam
Perth
Alan Murray
Tim Warman
Brisbane
Matthew Austin
Canberra
Adam Bartlett
Australia today moved a step closer to an emissions trading scheme, with the Government introducing into Parliament its controversial Carbon Pollution Reduction Scheme legislation. However, the Bill faces an uncertain path in the Senate, where the Government does not enjoy a majority. Both the Greens party and the Opposition have flagged significant concerns with the proposed legislation.
The Bill, which has already been the subject of extensive public consultation, largely follows the path laid by the exposure draft, but includes a number of new items.
As flagged in recent Government announcements, the Bill defers the start date of the scheme by 12 months, to 1 July 2011, with the price of tradeable Australian emissions units capped at A$10 for the first year. Importantly, the Government has sought to deal with a number of market distortions that could flow from the price cap. Free permits issued to trade exposed businesses or power stations in the first year must be surrendered in the first year. To further discourage hoarding of permits, the Government will conduct a mandatory buy-back scheme for five months after the first year ends.
The Bill expands the circumstances in which the carbon liability may be transferred from the operator of a facility to another entity that has financial control of the facility. In contrast to the exposure draft, which contained a relatively narrow list of situations, the Bill now includes a tailored regime to transfer liability from joint venture operators to the lead to joint venturer, as well as allowing liability to be transferred to entities that have the “economic benefit” of the facility.
The Bill also seeks to address a potential gap in the Obligation Transfer Number structure, which is designed to pass carbon liability through fuel supply chains. For the natural gas market, the exposure draft only required natural gas “retailers” to take on liability for the carbon emissions embodied in the natural gas (via the mandatory OTN quotation). This left a possible gap where the gas was sold via a wholesale reseller. In the Bill, the OTN obligation has been extended to all gas “resuppliers” of natural gas.
At the same time, the Bill contains changes that appear to target power stations operating on a fuel “tolling” basis, where fuel such as natural gas is delivered (but not sold) by the customer and transformed into electricity by the power station. The Bill now provides that “making available” gas for power station combustion will be treated as a supply and therefore transfer carbon liability to the power station.
The Government has indicated its intention to secure passage of the legislation by the end of June 2009.
The Bill is available here.