Carbon price start date getting closer - further regulations released

March 2012 Author: Elisa de Wit

Contacts

Introduction

On 16 March 2012 the Department of Climate Change and Energy Efficiency (Department) released an exposure draft of the proposed Clean Energy Amendment Regulation 2012 (draft Clean Energy Amendment Regulation) and the proposed National Greenhouse and Energy Reporting Amendment Regulation 2012 (draft NGER Amendment Regulation). These regulations are necessary to support various provisions of the Clean Energy Act 2011 (CE Act).

The draft Amendment Regulations will, when made, amend the Clean Energy Regulations 2011 and the National Greenhouse and Energy Reporting Regulations 2008. The Clean Energy Regulations 2011, made in November last year, established the assistance arrangements for coal-fired electricity generators and dealt with the prescribed distance rule for landfills. More recently, the Clean Energy Amendment Regulation 2012 (No 1) established the Jobs and Competitiveness Program.

The draft Clean Energy Amendment Regulation addresses administrative and compliance issues associated with the carbon pricing mechanism.

The draft NGER Amendment Regulation covers changes which reflect the way in which the NGERS will interact with the carbon pricing mechanism. Most of the amendments in the draft NGER Amendment Regulation are consequential in nature.

The Department is seeking submissions on the draft Amendment Regulations and has specifically asked that stakeholder submissions address the practical operation of the procedural requirements set out in the draft Amendment Regulations.

The submission period for the Exposure Drafts is very short and will end on 2 April 2012. The Department is intending to make the amendments later in April 2012, in preparation for the commencement of the carbon pricing mechanism on 1 July 2012.

Draft Clean Energy Amendment Regulation 2012

The draft Clean Energy Amendment Regulation addresses administrative and compliance issues associated with the carbon pricing mechanism introduced under the CE Act.

The new procedural requirements and definitions contained in the draft Clean Energy Amendment Regulation are particularly relevant to stakeholders in the liquid gas industry and also corporate entities wishing to be declared as ‘designated joint ventures’ or obtain a liability transfer certificate.

The draft Clean Energy Amendment Regulation contains:

  • a number of definitions dealing with the supply of natural gas (such as what comprises a natural gas supply pipeline, and the point at which supply of natural gas occurs), which are relevant to the natural gas liability provisions in Part 3, Division 3 of CE Act
  • requirements for the provision of documents to the Clean Energy Regulator
  • procedural and information requirements relevant to the making of an application for an Obligation Transfer Number (OTN) for the transfer of liquefied natural gas, liquefied petroleum gas or compressed natural gas
  • conditions for ceasing to be a ‘large gas consuming facility’ (LGCF), such as when a facility has a “one-off” year which triggers the threshold (25,000 tonnes CO2e) or when a facility falls below the threshold and it is likely that its emissions will remain below the threshold in future years
  • information requirements in respect of applications for ‘declared designated joint ventures’, participating percentage determinations, corporate group liability transfer certificates and financial control liability transfer certificates
  • the interaction of the liability transfer certificate and designated joint venture provisions, in particular, specifying that a declared designated joint venture and a liability transfer certificate (LTC) cannot co-exist for the same facility and that precedence will be based on which application is granted first
  • procedures for notifying the Regulator of transfers of carbon units by operation of law, such as through probate or under a Family Court order, and
  • requirements to keep copies of relevant documents (such as application documents for LTCs) for a 5 year period

The Department is seeking specific stakeholder feedback on whether the proposed application and information requirements in the draft Clean Energy Amendment Regulation strike an appropriate balance between flexibility in the provision of supporting information and certainty for applicants.

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Draft National Greenhouse and Energy Reporting Amendment Regulation 2012

The draft NGER Amendment Regulation will amend the NGER Regulations 2008 to support amendments that have already been made to the NGER Act by the Clean Energy (Consequential Amendments) Act 2011.   

The draft NGER Amendment Act also proposes to extend the existing NGER reporting, monitoring and compliance framework so that it incorporates entities liable under the carbon pricing mechanism.

Other notable provisions in the draft Amendment Regulation include:

  • inclusion of new definitions to clarify the meaning of ‘scope 1 emissions’, ‘scope 2 emissions’ and ‘production’ of energy for the purposes of the NGER Act reporting requirements
  • new requirements in relation to the information that needs to be set out in the National Greenhouse and Energy Register, including a requirement that information pertaining to greenhouse and energy audits be included in the Register
  • the application requirements when a nomination of operational control is made to the Regulator
  • new requirements in relation to the information that needs to be provided in support of an application for a declaration of who has operational control (including a requirement to provide evidence showing that the applicant has substantial authority to introduce and implement either or both of the operating policies and environmental policies for the facility), and
  • specification of 125,000 tonnes CO2e as the trigger for the requirement to undertake a mandatory ‘reasonable assurance’ audit.
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What next?

Further regulations still to be released will cover:

  • the liquid fuels Opt-in Scheme, which commences on 1 July 2013 (this option was included within the CE Act to provide airlines, or other large fuel users with the ability to opt into the carbon pricing mechanism)
  • the international unit surrender charge. This is the charge that will apply for the first three years of the flexible price period (ie 2015-2018). The charge will require purchasers of international units used for compliance purposes to pay a “top up” amount, if the amount they have paid for the international unit is less than the current floor price of the carbon units. A number of options for dealing with this surrender charge were identified in the Department’s discussion paper released last December.

It is intended that these regulations will be finalised in May. 

After the carbon pricing mechanism has commenced, it is intended that a Ministerial Determination will be made on auction policies, procedures and rules and additional regulations will be made to cover restrictions on the surrender of eligible international emissions units. 

If you require further information on any aspect of the Draft Regulations or the Carbon Pricing Mechanism, please contact a member of our Climate Change team.

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