CPRS legislation introduced into Parliament

Bills introduced

On 14 May 2009, the Federal Government introduced into the House of Representatives its Bills for the establishment of the Carbon Pollution Reduction Scheme (CPRS) and associated measures. The Bills are:

1. the Carbon Pollution Reduction Scheme Bill 2009
2. the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009
3. the Carbon Pollution Reduction Scheme (Charges–General) Bill 2009
4. the Carbon Pollution Reduction Scheme (Charges–Customs) Bill 2009
5. the Carbon Pollution Reduction Scheme (Charges–Excise) Bill 2009
6. the Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2009
7. the Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) Bill 2009
8. the Customs Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2009
9. the Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2009, and
10. the Australian Climate Change Regulatory Authority Bill 2009.

Differences from exposure draft legislation

Freehills has previously reported¹ on the exposure draft versions of the Bills which were released on 10 March 2009. We have also reported² on the proposed delay in the commencement of the CPRS and related announcements made on 4 May 2009.

The Bills as introduced into Parliament differ from the exposure draft legislation in the following significant respects:

1. The objects of the principal Bill now include a target of reducing Australia’s greenhouse gas emissions to 25 per cent below 2000 levels by 2020, but only if ‘Australia is a party to a comprehensive international agreement that is capable of stabilising atmospheric concentrations of greenhouse gases at around 450 parts per million of carbon dioxide equivalence or lower’.
2. The Minister must take all reasonable steps to ensure that regulations declaring the scheme cap for the three years from 2012–13 to 2014–15 are made before 1 July 2010.
3. Obligations to surrender eligible emissions units under the CPRS will now commence on 1 July 2011, one year later than originally planned.
4. In the first compliance year, 2011–12, there will be no cap on greenhouse gas emissions, and an unlimited number of Australian emissions units will be sold at $10 per unit.
5. In the following four compliance years, an unlimited number of Australian emissions units will be available at a price indexed from a 2010–11 value of $40.
6. Emissions from ‘legacy waste’ in landfills (that is, waste accepted before 1 July 2008) will now be entirely exempted from liability under the CPRS (it had previously been proposed to exempt emissions from such waste only until 2018). However, emissions from legacy waste will continue to count towards a waste facility’s liability threshold.
7. The anti-avoidance provisions regarding waste facilities within a prescribed distance of each other have been made less stringent, in that the facilities must accept the same prescribed class of waste and one of the facilities must be a facility which emitted at least 25,000 tonnes of carbon dioxide equivalence in the previous financial year.
8. The provisions regarding the definition and timing of a ‘supply’ have been added to. In particular:
   1. a ‘supply’ will now be taken to include the making available of an eligible upstream fuel for combustion at a facility (and the supply will be taken to have occurred when the fuel is combusted), and
   2. where a supply does not involve a physical delivery of a substance, the supply will be taken to have occurred when property in the substance passes to the recipient.
9. A new subdivision makes provision for the adjustment (by factors to be specified by regulation) of provisional emissions numbers relating to facilities located in either or both of the Joint Petroleum Development Area (as defined in the Petroleum (Timor Sea Treaty) Act 2003 (Cth)) and the Great Sunrise unit area (as defined in the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth)).
10. The provisions relating to the mechanisms by which an obligation transfer number (OTN) is ‘quoted’ have been considerably expanded. They will now deal separately with a ‘one-off quotation’ and a ‘standing quotation’ and provide for cases where a standing quotation of an OTN may be withdrawn. The provisions will now also require the quotation of a mandatory (but not an optional) OTN to be acknowledged in writing.
11. Notwithstanding the one-year delay in the commencement of obligations under the CPRS, free Australian emissions units in respect of eligible reforestation projects will be able to be issued starting from 1 July 2010.
12. Consequential adjustments have been made to a number of aspects of the CPRS due to the 1-year delay in commencement. For example, the five years of assistance to the coal-fired electricity generation sector will now extend from 2011–12 to 2015–16.

A number of other measures announced in the second reading speeches for the legislation are not contained in the Bills themselves because they will be effected by regulation or through administrative action. These include the Global Recession Buffer for the emissions-intensive trade-exposed assistance program and the fact that auctioning of Australian emissions units for use after 30 June 2012 will commence in the 2010–11 financial year.

Also, the second reading speech for the principal Bill foreshadowed that the Federal Government may move amendments to the provisions regarding liability transfer certificates in order to address some issues with that mechanism which have been raised by Freehills, among others. This will occur if there is a ‘satisfactory policy outcome’ following further consultation with industry and legal experts.

Next steps

The Bills have been referred to the Senate Standing Committee on Economics for an inquiry, which is due to report on 15 June 2009.

On 13 May 2009, the Senate granted an extension of time to the Senate Standing Committee on Climate Policy to present its report on climate-change policy more generally (including the choice of emissions trading as the principal policy vehicle and the details of the CPRS legislation). The Committee now has until 15 June 2009 to report.

This article was written by John Taberner, Consultant, Sydney.

Endnotes

1. The Carbon Pollution Reduction Scheme Bill 2009 article
2. Delay in implementation of CPRS legislation article

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