Australian Carbon Pricing Mechanism

Transcription

1 FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE, MINING AND COMMODITIES TRANSPORT TECHNOLOGY AND INNOVATION PHARMACEUTICALS AND LIFE SCIENCES Australian Carbon Pricing Mechanism Anthony Hobley Global Head of Climate Change Norton Rose Group 27 September 2012

2 Clean Energy Legislative Package passed 8 November 2011 Clean Energy Act 2011 Clean Energy (Consequential Amendments) Act 2011 Clean Energy (Income Tax Rates Amendments) Act 2011 Clean Energy (Household Assistance Amendments) Act 2011 Clean Energy (Tax Laws Amendments) Act 2011 Clean Energy (Fuel Tax Legislation Amendment) Act 2011 Clean Energy (Customs Tariff Amendment Act 2011 Clean Energy (Excise Tariff Legislation Amendment Act 2011 Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Act 2011 Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Act 2011 Clean Energy (Unit Shortfall charge General) Act 2011 Clean Energy (Unit Issue Charge Auctions) Act 2011 Clean Energy (Unit Issue Charge Fixed Charge) Act 2011 Clean Energy (International Unit Surrender Charge) Act 2011 Clean Energy (Charges Customs) Act 2011 Clean Energy (Charges Excise) Act 2011 Clean Energy Regulator Act 2011 Climate Change Authority Act 2011 Steel Transformation Plan Act 2011 Australian Renewable Energy Agency Act 2011 Australian Renewable Energy Agency Act (Consequential Amendments and Transitional Provisions) Act 2011

3 CPM in a Nutshell 3 year fixed price period, starting from 1 July 2012 $23 in year 1; then $24.15; then $25.40 Flexible price period, starting from 1 July 2015 Applies to 4 greenhouse gas emissions: carbon dioxide, methane, nitrous oxide and perfluorocarbons (from aluminium smelting) Applies to stationary energy, industrial processes, fugitive emissions and emissions from non-legacy waste Agriculture and land sector emissions are excluded Transport fuel for household and light commercial vehicles and fuel used by agriculture, forestry and fisheries not covered

4 Mechanics of pricing under CPM Fixed price period from 1 July 2012 No cap on supply of permits by Government Permits purchased for fixed price automatically surrendered Freely allocated permits (EITE sector and coal-fired generators) Cannot be banked Can be sold back to Government Can be surrendered or traded until 1 February in following compliance year Flexible price period from 1 July 2015 Rolling 5 years worth of caps (first 5 years announced in May 2014 Budget and legislated in Regulations) Default cap setting mechanism Price collar for first 3 years price floor: $15 (4% pa rise)* price ceiling: $20 above international price (5% pa rise) surrender charge for international units* Fully flexible price from 1 July 2018 Banking allowed Borrowing from future compliance year (up to 5%) Permits to be auctioned by Government

5 Mechanics of liability Liable entity is person with operational control over facility that emits over 25,000 tonnes CO 2 -e of covered emissions Supplier or large user of natural gas Ability to transfer liability (LTC or OTN) Compliance year = financial year Fixed price period: 75% surrender by 15 June; remainder by 1 February (except if under 35,000 tonnes or no interim emissions number) Flexible period: 100% surrender by 1 February Compliance units Carbon units (purchased from Regulator) Australian Carbon Credit Units (up to 5% except landfill sector (100%) in fixed period; no limit in flexible period) International units (none in fixed period; up to 50% in flexible price period); qualitative restrictions Penalties for non-compliance (shortfall charge) Fixed price period: 1.3 x fixed price Flexible price period: double average price of permits for that year Late payment penalty

6 Who is liable? About 440 businesses will be subject to the CPM: 130 waste disposal businesses Private sector and local government 100 coal or other mining businesses 60 electricity generation businesses 60 industrial process businesses (cement, chemicals and metal processing), 50 businesses from fossil fuel intensive sectors 40 natural gas retailers In addition, some large fuel users (e.g. airlines) can opt in from July % of Australia s emissions covered

7 Carbon Units Nature of carbon units Carbon units will be personal property Issued with a vintage year Held in Registry account Transmissible by assignment, by will and by devolution by operation of law Registered holder of carbon unit is legal owner Dealings with carbon units only protected when: In good faith for value Without notice of any defect in title of registered holder Carbon units will be financial products Purchased through auctions or issued freely to EITE sector or electricity sector

8 Australian carbon credit units Created under the Carbon Farming Initiative (project based domestic carbon offset mechanism) Implemented through: Carbon Credits (Carbon Farming Initiative) Act 2011 Carbon Credits (Carbon Farming Initiative) (Consequential Amendments) Act 2011 Australian National Registry of Emission Units Act 2011 Receive carbon credits for abatement activities in the land sector, by: Reducing or avoiding emissions Carbon sequestration (removing carbon from the atmosphere to soil or trees) Create either Kyoto (compliance) or non-kyoto (voluntary) ACCUs Methodologies needed for projects Projects must pass additionality test Scheme commenced 8 December 2011

9 International units Types of international units certified emission reductions which are not temporary certified emission reductions or long-term certified emission reductions emission reductions units removal units a prescribed unit issued in accordance with the Kyoto rules, and prescribed international units European emission allowances Excluded units nuclear energy projects destruction of trifluoromethane (HFC-23) destruction of nitrous oxide from an adipic acid plant, and large-scale hydro-electric projects not consistent with criteria adopted by the European Union (based on the World Commission on Dams guidelines)

10 Repeal (AKA How Abbott Proof is the CPM? ) Legislation well designed and self contained; Cap setting by auto pilot Almost certainly require amendments to legislation; Double dissolution and general election; Property rights and compensation? Financial package removal or refinancing no small things Raises tax free threshold for every working Australian; Financial support for low income households A$15 bn for renewables and clean tech; Industry support packages; Link with EU international obligations & global leadership; Lack of alternatives; Business uncertainty.

11 Disclaimer The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Norton Rose Australia on the points of law discussed. No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such individual is described as a partner ) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose OR LLP or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.

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