Climate Change regulation in Australia

1 Introduction

Australian climate change legislative policy is once again in an active state of play. At her initial press conference on 24 June 2010 Prime Minister Gillard announced that, if her government is returned at the next election, she would vigorously pursue an ‘argument for change’. She made it clear that she would not be acting quickly, stressing that ‘community consensus for action’ was needed, but her remarks are an apparent shift from the position announced on 27 April 2010 by former Prime Minister Rudd, namely: that the Federal Government would not implement its proposed carbon pollution reduction scheme until 1 January 2013 at the earliest and that, at that time, it would assess the action taken by other nation states before making a decision on implementation.

It is not clear what precisely Prime Minister Gillard’s remarks mean for the Federal Government’s proposed carbon pollution reduction scheme except that in her view it does not presently enjoy ‘community consensus’. But her remarks do mean that, again, in Australia the central question is not whether, but rather how fundamentally, will economic reform occur in Australia around climate change issues.

This briefing note supplies a succinct but comprehensive summary of the current state of Australian climate change legislative policy.

While a primary focus remains on the Federal Government’s plans for its carbon pollution reduction scheme, no less important is the legislation which has existed in Australia for a Mandatory Renewable Energy Target (since April 2001), for an Energy Efficiency Opportunities Program (since April 2006), and for a National Greenhouse and Energy Reporting System (since September 2007). As well there are active proposals for a legislated building energy efficiency scheme. Sections 3 and 4 below consider the CPRS and the possibility of a double dissolution election based on it. Section 2 below considers the other related schemes just mentioned. Sections 5 and 6 consider the implications of these developments for litigation and for the assessment of development projects.

2 Australia’s Current Position on Climate Change

2.1 Renewable Energy Target

Primary legislation

The Mandatory Renewable Energy Target (MRET) was established by the Renewable Energy (Electricity) Act 2000 and commenced operation on 1 April 2001. The MRET required liable parties to source an additional 9500 gigawatt-hours of electricity per year from renewable sources by 2010, and was due to extend until 2020.

On 7 September 2009, the following Acts were passed to create the expanded Renewable Energy Target (RET): the Renewable Energy (Electricity) Amendment Act 2009; and the Renewable Energy (Electricity) (Charge) Amendment Act 2009.

The Renewable Energy (Electricity) (Charge) Amendment Act 2009 came into effect on 8 September 2009.

All the substantive provisions of the Renewable Energy (Electricity) Amendment Act 2009 have come into effect.

The effect of the amendments is to:

1. extend the RET (as successor to the MRET) to 2030
2. require liable entities to source an increasing quantity of electricity from eligible sources, commencing in 2010 and peaking at 45,850 gigawatt-hours in 2020 and continuing at 45,000 gigawatt hours from 2021 to 2030
3. allow a limited amount of electricity produced from waste coal mine gas at existing power stations until 2020
4. provide for regulations to formulate a program of partial exemptions for emissions-intensive trade-exposed industries (EITEs), and
5. increase the shortfall charge (for failure to source the required quantity of electricity from renewable sources) from $40 to $65 per megawatt-hour, with effect from 1 January 2010.

On 24 June 1010, the following Acts were passed to split the RET into a Large-scale Renewable Energy Target (LRET) and a separate Small-scale Renewable Energy Scheme (SRES): the Renewable Energy (Electricity) Amendment Act 2010; and the Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Act 2010.

The split is designed to:

1. provide greater certainty for both large-scale and small-scale renewable power generation
2. support a higher Renewable Energy Certificate (REC) price for large-scale projects, and
3. guarantee uncapped support for small-scale technologies with an available fixed $40 REC price (excluding GST), but with two-yearly reviews and increased Government flexibility to manage the SRES as well as minor changes from the current treatment of small-scale renewable power generation.

The split will take effect from 1 January 2011.¹

Delegated legislation

On 7 September 2009, the following Regulations pertaining to the RET were made:

1. The Renewable Energy (Electricity) Amendment Regulations 2009 (No. 2) amend the Principal Regulations to implement the Solar Credits mechanism, under which the number of RECs able to be created in respect of eligible small generation units may be multiplied by a factor that varies over time. Solar Credits replace support for the deployment of household-scale solar photovoltaic systems under the Solar Homes and Communities Plan, and supports deployment of small generation units by households, businesses and community groups.
2. The Renewable Energy (Electricity) Amendment Regulations 2009 (No. 3) amend the Principal Regulations to deter the installation of inappropriately large commercial-scale solar and heat pump water heaters in domestic and small commercial premises.

Each of the above instruments commenced on 9 September 2009.

On 9 December 2009, the Federal Government released an exposure draft of the Renewable Energy (Electricity) Amendment Regulations 2009 (No 3) (Draft RET-EITE Regulations), for the purpose of implementing the EITE assistance mentioned at (d) above. The Draft RET-EITE Regulations contain provisions which are relevantly parallel to those for EITE assistance under the Federal Government’s proposed Carbon Pollution Reduction Scheme, discussed at 3 below, together with specific provisions relating to the mechanics of applying for and issuing partial exemption certificates. The Draft RET-EITE Regulations came into effect on 11 March 2010.

On 14 December 2009, the Federal Government made the Renewable Energy (Electricity) Amendment (Transitional Provisions) Regulations 2009, to prescribe matters dealing with the transitioning of liable entities and certificates from State-based schemes to the RET. The formal provisions came into effect on 17 December 2009, certain other provisions will came into effect on 1 February 2010, and the remainder came into effect subsequently.

On 16 December 2009, the Renewable Energy (Electricity) Amendment Regulations 2009 (No 4) came into effect, prescribing matters which the regulator must take into account when considering whether a ‘gaming’ arrangement has taken place.

2.2 Energy Efficiency Opportunities Program

Primary legislation

The Energy Efficiency Opportunities Act 2006 came into effect on 6 April 2006. The Act was amended by the Energy Efficiency Opportunities Amendment Act 2007, most provisions of which were backdated to come into effect on the same date as the principal Act.

Delegated legislation

The Energy Efficiency Opportunities Regulations 2006 came into effect on 27 June 2006. They have been amended a number of times, most recently by the Energy Efficiency Opportunities Amendment Regulations 2009 (No 2), which came into effect on 17 November 2009 and introduced provisions allowing liable entities to shift obligations under the Program to an entity holding a Reporting Transfer Certificate under Australia’s National Greenhouse and Energy Reporting System. (See 2.3(c) below).

2.3 National Greenhouse and Energy Reporting System

Australia’s National Greenhouse and Energy Reporting System (NGERS) has been in effect since late 2007.

Principal Legislation

The National Greenhouse and Energy Reporting Act 2007 (NGER Act) came fully into effect on 29 September 2007. It has since been amended by the National Greenhouse and Energy Reporting Amendment Act 2008, which came fully into effect on 15 March 2009, and by the National Greenhouse and Energy Reporting Amendment Act 2009. This latter Act :

1. introduces detailed provisions for auditing of reports and reporting entities
2. removes the requirement for the regulator to publish totals of a corporate group’s energy production, and
3. introduces the concept of a Reporting Transfer Certificate to allow the obligation to report on a facility to be transferred from the controlling corporation of the entity having operational control of the facility to a member of a different group having financial control of the facility.

The amendments in (a) and (b) commenced on 16 October 2009.

The amendments in (c) commenced on 19 September 2009.

The Federal Government’s proposed Carbon Pollution Reduction Scheme, discussed at 3 below, if enacted will amend the NGER Act further. The NGER Act is proposed to be extensively amended by the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009, and these proposed amendments are contingent on the Scheme, as is the commencement of certain amendments to be made by the National Greenhouse and Energy Amendment Act 2009 which introduce references to the Australian Climate Change Regulatory Authority.

Delegated legislation

The National Greenhouse and Energy Reporting Regulations 2008 came into effect on 1 July 2008. They were amended with effect from 15 March 2009 by the National Greenhouse and Energy Reporting Amendment Regulations 2009 (No 1).

The National Greenhouse and Energy Reporting (Measurement) Determination 2008 came into effect on 1 July 2008. It was amended with formal effect from 27 June 2009 by the National Greenhouse and Energy Reporting (Measurement) Amendment Determination 2009 (No 1). However, the amendments made by that instrument apply only in relation to the 2009–2010 reporting year and later years.

On 17 December 2009, the National Greenhouse and Energy Reporting Amendment Regulations 2009 (No 2) came into effect. The amendments principally prescribe matters related to greenhouse and energy audits.

An exposure draft of the National Greenhouse and Energy Reporting (Audit) Determination 2009 was made available for comment during August 2009. The Determination was finalised and published on 21 December 2009.

The Department of Climate Change also invited submissions during August 2009 on a proposed NGER Auditor Registration Instrument.

2.4 Building Energy Efficiency Disclosure

Primary legislation

The Building Energy Efficiency Disclosure Bill 2010 (BEED Bill) was passed by the Senate without amendment on 24 June 2010.

The BEED Bill is intended to come into operation on 1 July 2010. If and when it does, it will impose significant obligations on sellers and lessors of commercial office buildings to obtain, register and advertise energy efficiency information.²

Delegated legislation

Regulations in support of the BEED Bill are yet to be made.

3 Carbon Pollution Reduction Scheme

The primary focus remains on the Federal Government’s plans for its Carbon Pollution Reduction Scheme (CPRS). On 27 April 2010, the Federal Government reiterated its commitment to the establishment of a cap-and-trade emissions trading scheme in Australia in the form of the CPRS. But it also stated that it would not implement the CPRS until 1 January 2013 at the earliest and that, at that time, it would assess the action taken by other nation states before making a decision on implementation. In an apparent shift from this position, on 24 June 2010 Prime Minister Gillard announced that, if her government is returned at the next election, she would vigorously pursue an ‘argument for change’. Further details of this shift are awaited.

Below is background on the history of the CPRS up to 27 April 2010.

3.1 Three Rounds

First round

On 10 March 2009, the Federal Government published its exposure draft legislation for the CPRS. On 14 May 2009, the Federal Government introduced into the House of Representatives ten Bills connected with the proposed CPRS. On 28 May 2009, the Federal Government introduced into the House of Representatives one further associated Bill. These eleven Bills (together, the First 2009 CPRS Bills) were passed by the House of Representatives (with certain government-moved amendments to some of the Bills) on 4 June 2009, and were introduced into the Senate on 15 June 2009. The Senate considered the First 2009 CPRS Bills (without voting on them) on 22 and 23 June 2009 before the Senate was adjourned for the winter recess on 25 June 2009. The Senate voted down each of the First 2009 CPRS Bills on 13 August 2009.

Second round

On 22 October 2009, each of the First 2009 CPRS Bills (including where relevant the government-moved amendments referred to above) was reintroduced into the House of Representatives. The ‘new’ Bills were known as the Carbon Pollution Reduction Scheme Bill 2009 [No 2], etc. The CPRS Bills [No 2] (Second 2009 CPRS Bills) were passed by the House on 16 November 2009.

On 17 November 2009, the Second 2009 CPRS Bills were reintroduced into the Senate.

On 24 November 2009, the Federal Government publicly released a series of proposed amendments to the legislation which had been negotiated over the preceding weeks between the Federal Government (Senator Penny Wong) and the Opposition (Senator Ian Macfarlane). The proposed amendments included the legislated exclusion of agriculture, the inclusion of a general mechanism for recognising offsets, increased assistance for EITE industries, and a greatly expanded compensation regime for coal-fired power generators, among other matters.

Then-Opposition Leader Malcolm Turnbull supported the passage of the legislation with the agreed amendments. However, on 1 December 2009 he lost the leadership of the Liberal Party to Tony Abbott, who immediately announced that the Opposition in the Senate would seek to have consideration of the Second 2009 CPRS Bills deferred, but if that proved impossible, would oppose the Bills outright.

On 1 December 2009, Greg Combet for the Federal Government announced that the CPRS including the amendments negotiated by Senators Wong and Macfarlane (Amended CPRS) would be the Federal Government’s future policy.

On 2 December 2009, the Senate rejected the Second 2009 CPRS Bills outright.³

This action provided the Federal Government with a double-dissolution trigger, but only in relation to the Second 2009 CPRS Bills as introduced into the Senate on 17 November 2009, and not in relation to the Amended CPRS which had since become Federal Government policy.

Third round

On 2 December 2009, shortly after the Senate’s rejection of the Second 2009 CPRS Bills, Acting Prime Minister Julia Gillard announced that legislation for the Amended CPRS would be introduced on the first sitting day of the Parliament after the summer recess, namely: 2 February 2010.

On 2 February 2010, the Federal Government introduced a third set of eleven CPRS bills, in a form reflecting the Amended CPRS (2010 CPRS Bills). The 2010 CPRS Bills were passed by the House of Representatives on 11 February 2010. No vote in the Senate has yet been taken on the 2010 CPRS Bills other than one in which the Senate determined to delay any vote on them until its sittings in May 2010.

3.2 Overview of Second 2009 CPRS Bills

The CPRS, as set out in the Second 2009 CPRS Bills, will cover virtually all corporations which are involved in the emission of greenhouse gases within Australia, with the exception of agriculture and deforestation. Greenhouse gases covered by the scheme are carbon dioxide, methane, sulphur hexafluoride, nitrous oxide, hydroflurocarbons and perfluorocarbons.

A corporation covered by the CPRS will be required to purchase enough emissions permits for its group’s greenhouse gas emissions from Australian territory where controlled facilities emit more than 25,000t (= 25 Kt) carbon dioxide equivalent (CO₂e) per year, or where the corporation is designated by the CPRS as a ‘proxy’ for downstream emitters.

The number of permits in circulation will be equivalent to the government-determined ‘cap’ on emissions, plus any permits issued to Kyoto-compliant forestry. The short and medium term caps have been set at between 5% and 25% of 2000 levels by the end of 2020. The long term cap is at least a 60% reduction against 2000 greenhouse gas emissions levels by 2050.

Permits, which are personal property, will be able to be purchased at auction directly from the government or on the secondary trading market (including from Kyoto-compliant forestry) or may be allocated freely under compensation arrangements proposed as part of the scheme. At the end of each year, a corporation covered by the CPRS will be liable to surrender to the government a permit for every tonne of its covered CO₂e emitted that year.

The purchase and surrender of emissions permits will result in the imposition of direct costs at certain points in the economy. Most commonly, this imposition will occur at the point of greenhouse gas emission: for example, in electricity generation and in industrial processes. In other cases, this imposition will occur at a different point in the supply chain: for example, upstream fuel suppliers will have direct costs imposed on them as ‘proxies’ for the emissions of the users of their products, and no direct liability will be imposed on those down-stream users.

The legislation contemplates an administrative mechanism (known as the Obligation Transfer Number (OTN)) to enable, and in some cases require, permiting obligations to be transferred as regards certain fuels, and another administrative mechanism which, in other cases, enables permiting obligations to be transferred to subsidiaries or to financial controllers of relevant facilities.

While the direct liability will rest at these set points, corporations will look to ‘pass through’ their greenhouse gas emissions costs wherever they can. A corporation’s ability to do so will be a matter of contractual negotiation as, unlike GST, there is no proposal for legal assistance or a legal framework to pass through emissions costs. Consequently, a component of the price of all goods and services with a greenhouse gas emissions footprint will comprise an emissions cost, to a varying degree, as a result of the CPRS.

A party covered by the scheme that does not surrender sufficient emissions permits to cover its emissions will be liable to a penalty and a ‘make good’ obligation.

There will be compensation for emissions intensive trade exposed industries (for example, aluminium smelting) and coal-fired generators, as well as a range of other compensatory measures to be delivered through the taxation system.

The CPRS will not rely on carbon offsets. However, special treatment will be given to Kyoto-compliant forestry (which, on an ‘opt-in’ basis, will be issued with free permits equal to the CO₂e it sequesters) and ‘Carbon Capture and Storage’. Emitters will also be able to purchase emissions credits generated by offset projects accredited under the Kyoto Protocol in other countries, but domestic Australian offsets will not be effective.

3.3 Overview of 2010 CPRS Bills

As mentioned, the 2010 CPRS Bills reflect amendments to the Second 2009 CPRS Bills negotiated between the Federal Government and the Opposition in late November 2009.⁴

In summary:

• The Federal Government has offered increased compensation to EITE industries, but not to the level requested by the Opposition or some industry groups such as the Minerals Council of Australia. LNG will receive special treatment ensuring it will be given compensation cover for 50 per cent of its emissions. Food processing will also have access to $150 million of dedicated assistance. 
• The Federal Government has indefinitely exempted agriculture from the CPRS. This means that a large part of Australian emissions are not covered by the CPRS. But it also removes a large part of the opposition to the CPRS. Agriculture interests have been vocal opponents of the proposed CPRS. 
• The Federal Government has opened the way for significant agricultural and other offsets to be recognised. Further, on 20 January 2010, it released its National Carbon Offset Standard.⁵
• There will be substantially increased financial support for the coal mining sector. 
• There will also be increased support for the coal-fired power sector, significantly increasing the amount of free emissions units which will be given to coal-fired power stations and doubling the time over which they will receive them. The Federal Government has proposed other mechanisms targeted to address loan default and energy supply risks. 
• There will be substantially increased support for mining and manufacturing sectors affected by electricity price rises. 
• There will be measures to recognise voluntary action and energy efficiency.

4 Double Dissolution?

4.1 Introduction

There has been speculation that a double-dissolution election could be called in relation to the CPRS.

To date, there have been six double dissolution elections in Australia but there has only been one joint sitting of the two houses of Federal Parliament (in 1974). At that joint sitting, the relevant double dissolution bills were all passed.

4.2 Double dissolution processes

If the present Federal Government is to call a double dissolution election, it must do so no later than 10 August 2010. This is the date which is six calendar months before the third anniversary of the date on which the current House of Representatives first met, namely: 12 February 2008. Section 57 of the Constitution (Section 57) stipulates this requirement.

Section 57 also stipulates that, before any proposed legislation can qualify as a double dissolution ‘trigger’, the legislation must have been twice rejected (or once rejected and twice ‘not passed’) by the Senate. In the case of the CPRS, two sets of bills are relevant: the Second 2009 CPRS Bills; and the 2010 CPRS Bills.

The 2010 CPRS Bills do not qualify as a trigger: they have not been rejected (even once) by the Senate.

On the other hand, the Second 2009 CPRS Bills do qualify as a trigger. So, a House of Representatives controlled by the current Federal Government after a double dissolution election could pass the Second 2009 CPRS Bills, and a subsequent joint sitting of the House and Senate could vote on those bills.

If following a double dissolution election the current Federal Government is returned with numbers sufficient to control the House of Representatives but not the Senate, there will need to be one further round of passage of, and failure to pass, the Second 2009 CPRS Bills before a joint sitting can be convened. The Second 2009 CPRS Bills must first be introduced and passed by the House of Representatives. The Second 2009 CPRS Bills as passed must then be introduced into the Senate. The Senate must then reject or fail to pass them. Then, and only then, can the Prime Minister advise the Governor-General to convene a joint sitting of both house to consider the Second 2009 CPRS Bills as passed by the House of Representatives.

The procedures just described could only result in passage into law of the CPRS which is reflected in the Second 2009 CPRS Bills. The Federal Government has on several occasions since the passage of the Second 2009 CPRS Bills stated that the 2010 CPRS Bills have become its policy. Does Section 57 offer the House any scope, by passing the Second 2009 CPRS Bills, to pass into law the CPRS as reflected in the 2010 CPRS Bills?

This is a matter of argument rather than clear ‘ability’ or ‘opportunity’. There are two elements to the argument.

1. The first element is this. When Section 57 states that the members at a joint sitting are to vote together on bills ‘as last proposed by the [House], and [on] amendments [to the bills], if any, which have been made therein by [the] House and not agreed to by the [Senate]’, this language includes amendments which had not been introduced to the Senate at the time of their passage in the House.
2. The second element is this. When Section 57 states that, after a double dissolution election, the House may ‘[pass previously rejected bills] with or without any amendments which have been made, suggested, or agreed to by the Senate’, this does not mean that the House is limited to making only those amendments which have been made, suggested, or agreed to by the Senate or introduced to the Senate since the election.

If (but only if) these two arguments prevail could the House, after a double dissolution election, pass the Second 2009 CPRS Bills with amendments tantamount to passing the 2010 CPRS Bills and, could the joint sitting vote on those bills as passed.

There is as yet no judicial authority on these two arguments and, in the absence of such authority, it is likely that there would be High Court challenges to any action taken in reliance on those arguments. That being the case, claims that the Federal Government ‘had…and has the ability…to take the matter of the [CPRS] to a double dissolution election’, or that it ‘had (and, indeed, still has) the opportunity to do so’, are only loosely true. They are true only to the extent that the Federal Government has opportunity to turn the unamended Second 2009 CPRS Bills into law.

4.3 Regulations

The Second 2009 CPRS Bills and the 2010 CPRS Bills both rely heavily on proposed regulations to bring the CPRS fully into effect. In particular, they provide for regulations to determine (among many other things): the periodic ‘caps’ and ‘gateways’ that will underlie the scheme; the range of direct emitters that will be covered; and all details of the emissions-intensive trade-exposed assistance program.

Such regulations will be subject to disallowance by either House of Parliament, in which case they will not be able to be re-made for six months (and will then be liable to further disallowance).

The result is that even if a returned Federal Government secures passage of the Second 2009 CPRS Bills through a joint sitting against the wishes of a hostile Senate, the government may nonetheless experience serious difficulties in actually implementing the CPRS.

5 Climate change litigation?

5.1 Introduction

While the focus has been on the Federal Government’s plans for its CPRS, another development has been quietly but steadily increasing in significance: private litigation based on climate change issues.

Climate change litigation is at a fledgling stage in Australia, but developments both in this country and in the United States suggest that such litigation will increase in frequency and significance.

At present, three principal types of action can be envisaged:

1. regulatory actions, where a plaintiff seeks to enforce an interpretation of regulatory provisions which would require action to reduce greenhouse gas emissions
2. tort actions, most obviously in public nuisance, where a plaintiff seeks direct relief against an emitting entity, and
3. shareholder actions, where shareholder plaintiffs seek to compel their own corporation to adopt a better approach to climate change issues, or to be recompensed for loss of share value because of the corporation’s alleged inadequate approach to such issues.

5.2 Regulatory actions

So far in Australia, climate change litigation has been confined to regulatory actions. The context is usually state and territory land-use planning legislation, or the federal Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), each of which has provisions for substantially open standing. The results have been mixed:

1. In a challenge to approval under the EPBC Act for the development of two coal mines, the Federal Court held that the expression ‘likely impacts’ does not extend to merely theoretical impacts, including the possibility of increased greenhouse gas concentrations due to the downstream emissions from the burning of coal produced at the proposed mines.⁶
2. Contrariwise, in a challenge to the planning approval for another coal mine, the New South Wales Land and Environment Court held that, in the circumstances of the case, the impact of such emissions did need to be assessed.⁷
3. Decisions of the New South Wales Court of Appeal and the New South Wales Land and Environment Court have held, apparently inconsistently:
   1. that the principles of ecological sustainable development (ESD) are a mandatory consideration under the New South Wales planning laws but that those principles do not require a particular form of quantitative assessment of greenhouse emissions⁸ 
   2. that the principles of ESD are not yet a mandatory consideration in all such cases, but that it might be expected that they soon will be⁹ 
   3. that the principles of ESD, as a component of the public interest, are a mandatory consideration and extend to the consideration of climate-change induced coastal erosion (but that the respondent council had considered those impacts).¹⁰
4. A number of recent decisions of courts and administrative tribunals have upheld the principle that consent for development or subdivision may be refused in circumstances where there is a reasonable expectation that climate-induced rising sea levels and increased severity of storm events will adversely impact the relevant land within the next century or so.¹¹

It remains to be seen whether these diverse holdings will lead to a settled jurisprudence concerning the necessity of considering, the scope, and the weight to be given to, climate change impacts in the context of planning and environmental approvals.

In the United States, the focus has also been on regulatory actions, but the principal hurdles for would-be plaintiffs have been standing (because the relevant legislation generally does not contain ‘open standing’ provisions) and the constitutional issue of the justiciability of ‘political’ questions. Important recent decisions appear to indicate that at least the States and certain environment organisations may satisfy the ‘standing’ requirements, and that in the absence of concerted Federal measures to address climate change through the ‘political’ branches of government (the legislature and executive), recourse may be had to the judicial system.¹²

5.3 Tort actions

There have been no Australian tort actions related to climate change to date, and such actions face significant hurdles which have less bearing on regulatory actions, namely: standing, causation and the utility of granting the relief sought.

However, recent developments in the United States indicate that some of these hurdles at least may be able to be overcome.

The issue of standing appears able to be addressed by framing an action in public nuisance. An action in public nuisance may be framed where the defendant’s conduct unreasonably endangers the health, property or comfort of the public generally or obstructs the public in the exercise of its rights. Importantly, such an action does not require a plaintiff to establish that the plaintiff’s private right to the use and enjoyment of land has been specially affected by the defendant’s conduct.

Recent decisions of United States courts indicate that the courts will at least entertain such an action, as in a private suit brought against oil and gas companies alleging that their operations causes emissions of greenhouse gases that exacerbated the damage caused to the plaintiffs’ property by Hurricane Katrina,¹³ or a suit brought by eight states and New York City against electricity producers for climate-related damage caused by their carbon dioxide emissions.¹⁴

Each of the decisions mentioned established no more than that the relevant plaintiffs have standing to sue and that the courts have jurisdiction to hear the actions notwithstanding the ‘political’ questions that will be raised.¹⁵ The more difficult issue of causation—in particular, the fact that many factors other than the defendant’s actions are contributory to global warming—have yet to be squarely faced.

It seems reasonable to expect that Australian litigants will follow the American example. Their path to the courts is likely to be smoother because of the lack in Australia of some of the constitutional doctrines that impede such actions in the United States.

5.4 Shareholder actions

Neither in Australia nor the United States has there yet been a shareholder action based on climate impacts. However, these can surely be expected and will probably not face the issues of standing and justiciability that loom so large in the tort cases.

In Australia, there is already a possible statutory basis for such actions in the requirement for the annual directors’ report for a listed public company to contain information that shareholders would reasonably require to make an informed assessment of the company’s ‘business strategies and its prospects for future financial years’.¹⁶

It is not difficult to imagine that, in the near future, increasing concern by investors about a company’s response to climate change will give a specific, climate-related, content to that requirement, and that the failure to fulfil the requirement adequately or at all may found individual or class-based actions.

In the United States, the Securities and Exchange Commission (the Federal corporate regulator) is currently processing a ‘rule-making petition’ filed in September 2007 by a number of state treasurers, Comptrollers and Attorneys-General (among others), which would expressly require the disclosure of climate-related information in company reports. Again, the wide availability of such information may prove a stimulus to action by shareholders who are dissatisfied with their own company’s performance in this area.

5.5 Planning and development actions

One potentially significant area of climate change related litigation is in respect of planning and development approvals, especially regarding sea level rise.

Developers are now on notice that a failure to consider climate change risks on (or arising from) their proposed coastal developments could result in rejected proposals or could leave approvals open to future challenge.

Owners of businesses and properties with operations and facilities in coastal areas will increasingly need to consider adaptation strategies to ensure the preservation of their infrastructure and assets and balance restoration costs against new design or relocation costs.

Local councils are likely to adopt a more conservative approach in approving development as they consider the risks of future negligence claims if landowners suffer loss or property damage.

An examination of recent case law developments and policy in response to climate change and potential sea level rise, and discussion of the implications for developers, owners and local councils in coastal areas, is available in our article ‘Climate change litigation to flood planning and development in coastal areas’.¹⁷

5.6 Conclusion

Climate change litigation is in its infancy, both in Australia and elsewhere. However, all indications are that the scope for such litigation is steadily increasing and that at least some of the impediments to it are being steadily worn away. It remains to be seen whether the probable greatest impediment—proof of causation—will give way to a determined and well-resourced litigator. It may be that a continued failure to make progress with the CPRS, or in Copenhagen or both, will encourage the emergence of such a litigator.

6 Environmental Impact Assessment

6.1 Potential for climate change consideration

With the delay to the CPRS, it is possible that state and Commonwealth environment regulators may look to assess greenhouse gas emission issues as part of the environmental assessment process and accordingly impose conditions or even refuse approval.

Examples have been recently seen in Western Australia. The Western Australia Environmental Protection Authority has recommended the imposition of carbon capture and storage requirements as conditions of approval for the proposed Bluewaters coal fired power station expansion¹⁸ and the proposed Perdaman Urea Plant.

Similarly, the Commonwealth Minister for the Environment is considering the imposition of requirements addressed to greenhouse gas emissions and carbon capture and storage as conditions of approval for the proposed Shell floating Liquefied Natural Gas platform off the Western Australia coast.

6.2 EPBC Act climate change trigger

An independent review of the EPBC Act was completed on 30 October 2009. In the report it was recommended that the Act should be amended to apply (pending the introduction of the CPRS) to projects which, if approved, would emit greenhouse gases (above specified thresholds) in their construction or operations (or both). To date, when the CPRS remained a current proposal, the Federal Government has resisted calls for such a ‘greenhouse trigger’ for the Act. However, now that the CPRS is delayed, the calls for such a trigger may gain support.

7 Fundamental Economic Reform

Clearly a substantial process of economic reform is under way in Australia around climate change issues despite the present policy hiatus.

This process has two important and ongoing categories of consequences for corporations in Australia.

The first arises in the new climate change-related policy and legislative responses that Australian governments may implement. Those responses already include stringent carbon accounting and reporting requirements, and may include caps on greenhouse gas emissions. They are likely to affect corporations in all sectors of the economy, not just those sectors with direct obligations under the carbon regulatory schemes. This is because the changes may result in higher costs for all corporations for fuel and for energy and commodity inputs. The responses will also open new opportunities in domestic and international markets, particularly for non-carbon-based energy projects and secondary trading in permits and derivative products under proposed regulatory responses.

The second category of consequences arises in the impact that climate change issues will have on a wide variety of existing corporate obligations under statute and in contract. Particularly relevant are the reporting and disclosure obligations under the Corporations Act 2001 (Cth) and under the Securities Exchange listing rules under that Act. Also relevant are obligations under existing contractual arrangements such as long-term supply agreements (which may omit provisions sufficient to allow carbon-cost pass-through) and joint venture and other agreements (which may omit provisions appropriately allocating responsibility for carbon-related matters such as information gathering and reporting).

This article was written by Peter Briggs, Partner, John Taberner, Consultant, Sydney and Michael Voros, Senior Associate, Perth.

Endnotes

1. Further information on the split is available in our article ‘Renewable Energy Target split’
2. Further information is available in our article ‘Building Energy Efficiency recent developments: BEECs and BEER’
3. With the defeat of the CPRS Bills [No 2], it is likely that regulations to the effect of the Draft RET-EITE Regulations (see 2.2 above) will need to be made, at least for a transitional period. 
4. A table which summarises in details the Opposition’s requested amendments and the final proposals agreed to by the Coalition can be found in our article ‘CPRS progresses’.
5. See the National Carbon Offset Standard 
6. Wildlife Preservation Society of Queensland Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage [2006] FCA 736. 
7. Gray v Minister for Planning [2006] NSWLEC 720. 
8. Drake-Brockman v Minister for Planning [2007] NSWLEC 490. 
9. Walker v Minister for Planning [2008] NSWCA 224. 
10. Aldous v Greater Taree City Council [2009] NSWLEC 17. 
11. For example: Gippsland Coastal Board v South Gippsland Shire Council [2008] VCAT 1545 (Victorian Civil and Administrative Tribunal); Northcape Properties v District Council of Yorke Peninsula [2008] SAS 57 (South Australian Supreme Court); Myers v South Gippsland Shire Council (No 2) [2009] VCAT 2414.  
12. Massachusetts v Environmental Protection Agency 549 US 497 (2007) (United States Supreme Court); Friends of the Earth v Watson 2005 WL 2035596 (US District Court for Northern District of California).
13. Comer et al v Murphy Oil USA et al 2009 WL 3321493 (5th Circuit, 16 October 2009).
14. Connecticut et al v American Electric Power Company Inc et al 2009 WL 2996729 (2nd Circuit, 21 September 2009).
15. There have been decisions to the contrary effect. See: Native Village of Kivalina v ExxonMobil Corp No CV-08-1138 (US District Court for the Northern District of California, 30 September 2009). 
16. Corporations Act 2001 (Cth), section 299A(1)(c).
17. Freehills article, ‘Climate change litigation to flood planning and development in coastal areas’ 
18. See our article, ‘Western Australia coal power must be CCS ready and emissions best practice’

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