Mandatory emissions reporting not far off

Background

On 15 August 2007 the National Greenhouse and Energy Reporting Bill 2007 (Cth) (Bill) was introduced into Parliament and was read a second time. In summary, the Bill provides a framework for the reporting and dissemination of information related to greenhouse gas emissions, greenhouse gas projects, energy consumption and energy production of corporations. The reporting obligations under the Bill are intended to lay the foundation for the Federal Government’s proposed national emissions trading scheme, due to be introduced by 2011.

Key aspects of the Bill

• Mandatory registration—Under the Bill, a controlling corporation must register with the National Greenhouse and Energy Register and report if the total greenhouse gas emissions, energy production or energy consumption from facilities under the operational control of members of the corporate group exceeds prescribed thresholds for financial years ending on or after 30 June 2009 (see below). The thresholds will be decreased over the first three years of the Bill’s operation, thus increasing the coverage of the reporting regime.

• Voluntary registration—Corporations may also voluntarily register if they are undertaking a greenhouse gas emissions reduction project.
• Corporate groups—The party obliged to report is the controlling corporation of a corporate group. The concept of a controlling corporation’s group includes its subsidiaries as well as joint ventures and partnerships of which a member of the group is a joint venturer or partner, and has been nominated as a responsible entity for the joint venture or partnership for the purposes of the reporting regime. This avoids double reporting and is analogous to the concept of consolidated financial reporting.
• Report timing and form—Registered corporations must provide a report each financial year on the greenhouse gas emissions, energy production and energy consumption from the operation of facilities under the operational control of members of their corporate group. The report must be given within four months of the end of the relevant financial year. The report must be in a prescribed form and contain the information prescribed in the regulations (which have not yet been released).
• Publication of reported data—By 28 February each year, the Government will publish on the internet totals of the greenhouse gas emissions, energy production and energy consumption reported for a corporate group for the previous financial year. The relevant Government official also has a discretion to report these matters disaggregated to a group member level.
• Penalties, including personal liability for CEOs—Various civil penalties apply for failure to register and report. For example, a breach of the obligation to report would carry a maximum civil penalty of $220,000. CEOs may be personally liable for breaches by their corporations where they had knowledge of the breach, or were reckless or negligent as to the breach, and failed to take reasonable steps to prevent it.
• Relationship with other reporting regimes—Reporting under the national scheme will supersede reporting under state or territory laws that provide for reporting of the same information and under national environmental protection measures such as the National Pollutant Inventory.

Implications for business

• Businesses will need to be in a position to assess whether they are required to register and report for financial years ending on or after 30 June 2009. Where registration is required it must occur by 31 August 2009 and the first report will need to be given by 31 October 2009. Corporations will therefore need to understand their greenhouse gas emissions, energy production and energy consumption prior to this date and consider putting in place systems and personnel to ensure they comply with their reporting and record keep obligations.
• Corporations conducting or planning greenhouse gas reduction projects should consider registering to assist them to gain recognition for the emissions reductions achieved as a result of these projects.
• Reporting on emissions and energy production and consumption will be on the same timeframes as corporations’ annual reports and will form part of their annual reporting cycle.
• The reporting obligations under the Bill will improve public information on companies’ emissions profiles and energy production and use and should therefore assist analysts and the market to better assess the impact of an emissions trading scheme on companies’ valuations.
• The reporting obligations extend to greenhouse gas emissions from facilities under a corporation’s operational control, meaning, broadly, that it has the authority to introduce and implement the facility’s operating and health, safety and environment policies. Accordingly, it would seem that the obligation is only to report direct emissions and not indirect emissions from, for example, an electricity production facility from which the corporation buys its electricity. The reporting regime would therefore seem to be on the same basis as the proposed emissions trading scheme, which ultimately dictates the economic effect of emissions caps on corporations.
• Businesses should maintain a watching brief to assess the details of the reporting scheme—of particular importance will be the regulations that are yet to be promulgated and any practical guidance issued by the Government.
   

This article was written by John Taberner, Partner, Sydney and Paul Branston, Senior Associate, Perth.

More information

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