Review

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Dominic Bortoluzzi  
Partner
T +61 2 9296 2178

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Sydney
Scott Farrell  
Scott Gardiner  
Martin James  

Melbourne
Louis Chiam  
Michael Clough  
Stephen Davis  

Canberra
Adam Bartlett  

Hong Kong
Christopher Tung  (董彥華)

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Governments continue to implement initiatives to reduce greenhouse gas emissions that do not necessarily involve renewable energy. In this review, we consider new Australian legislation requiring large users of energy to assess and report on their energy use, the European Union’s move to embrace “clean coal” and new China/Australia joint projects aimed at reducing greenhouse gas emissions.

Energy Efficiency Opportunities Bill 2005 (Cth)

What is the issue?

The Energy Efficiency Opportunities Bill 2005 was introduced into the Australian House of Representatives by the Government on 14 September 2005. If enacted, the new legislation will require large users of energy to assess their potential to improve energy efficiency and report publicly on the outcomes.

What does it mean for you?

The Bill is targeted at businesses using more than half a petajoule of energy per year. Those large users will be required to undertake comprehensive assessments of energy efficiency opportunities every five years from 2006. However, the implementation of those opportunities identified in the assessment will at this stage be voluntary.

In this sense, the measure is directed at increasing the uptake of energy efficiency projects which are commercially attractive but which may not have been considered before.

The legislation is aimed at forcing companies to question the efficiency of their energy use. The expectation is that companies will identify areas in which they can reduce their spending on energy then implement cost-effective opportunities that might not otherwise have been considered. Also the public reporting requirements will make businesses more accountable for their energy practices.

As it will be voluntary to implement the opportunities identified in the assessment, the legislation will not at this stage prevent businesses from profiting from increased energy efficiency by creating greenhouse abatement certificates under the NSW and ACT Greenhouse Gas Abatement Schemes. However, if in future energy efficiency projects are carried out to comply with the mandatory requirements of a Federal or State scheme, companies might lose the opportunity to create and sell these credits by making earlier voluntary reductions.

Warren Entsch, Parliamentary Secretary to the Minister for Industry, Tourism and Resources, said the opportunities represented in the Bill could deliver as much as $975 million in savings, even if only half of those opportunities were taken up.

Compulsory assessments to increase energy efficiency were first proposed in the Government’s Energy White Paper Securing Australia’s Energy Future, released in June 2004.

This proposed legislation follows the New South Wales Energy Administration Amendment (Water and Energy Savings) Act 2005, which requires certain entities to prepare plans setting out measures to save water and energy consumed in that State.

European Union follows Australia, China and US on the move to “clean coal” technology

What is the issue?

Following Australia, the United States, China and other countries joining together in the Asia Pacific Partnership on Clean Development and Climate, the European Union and China have now agreed to a new partnership on climate change.

Like the Asia Pacific Partnership, a major objective of the EU/China partnership is the development and implementation of “zero emissions” coal technology based on carbon dioxide capture and geosequestration. Likewise, the partnership will promote other more traditional clean energy measures such as energy efficiency, energy conservation and renewable energy.

What does this mean for you?

As there is at this stage no clear way forward after the first commitment period of the Kyoto Protocol ends in 2012, this partnership might be the first strong indication that the EU will move to embrace low-emissions fossil fuel electricity generation and energy efficiency as important means to address global warming. Traditionally the EU has supported renewable energy sources as the primary means to reduce greenhouse gas emissions.

This raises a question as to whether market-based mechanisms that involve the trading of allowances of greenhouse gas emissions will be the way in which climate change is addressed in future (as has been the case with the Kyoto Protocol). The development of technological solutions which do not necessarily use renewable fuels might discourage governments from making greenhouse gas emissions a tradeable commodity.

The partnership, entered on 2 September 2005, has two specific goals:

• to develop and demonstrate in the respective countries clean coal technology that involves the capture and storage of carbon dioxide emissions from coal-fired power
• to reduce the cost of greenhouse-friendly energy technologies and promote the dissemination of this technology.

New projects to reduce greenhouse gas emissions for Australia and China partnership

What is the issue?

The Australian Commonwealth Minister for Environment & Heritage, Senator Ian Campbell, announced on 5 September 2005 four new joint projects between Australia and China.

What does it mean for you?

The projects further demonstrate China’s commitment to engage Australian business in providing it with energy solutions and to cooperate to share knowledge on greenhouse gas emissions.

Australia’s relationship with China will continue to provide opportunities for Australian businesses to gain exposure to the Chinese renewable energy market.

The projects are to:

• reduce nitrous oxide emissions (a greenhouse gas) from agriculture in Australia and China by reducing unnecessary fertiliser use
• develop a guide to assist Australian businesses to enter the Chinese renewable energy market
• improve the modelling of China’s energy use and emissions
• provide renewable energy training to the Chinese renewable energy industry.