In brief

This article provides an update on the progress towards the Australian Government’s new Direct Action climate change system, in place of the Carbon Tax, since our previously published article Direct Action legislation passed.

Developments

Emissions Reduction Fund first auction announced

The Clean Energy Regulator has announced that the first Emissions Reduction Fund (ERF) auction will open on Wednesday 15 April 2015, with a two day bidding window. The auction will be a ‘single-round, pay-as-bid, sealed-bid auction format’.

In anticipation of the auction, the Clean Energy Regulator has issued new guides.1

Successful bidders will enter a standard form contract with the Government.2

The Government has been progressing ERF methodologies that provide for the calculation of emissions reductions from particular projects and hence permit participation in the ERF. The Government has recently finalised methods for aviation, land and sea transport (including from mobile equipment), coal mine gas and avoided clearing of native regrowth.

Legal challenge to Queensland coal mine

A legal challenge was commenced on 14 January 2015 in the Federal Court by the NSW Environmental Defenders Office against (among others) Federal Environment Minister Hunt. The challenge is to the Minister’s approval to a proposed Queensland coal mine. It alleges a failure by the Minister to consider ‘scope 3 emissions’ from the coal in granting the approval.

Things to do now

Businesses interested to sell or deal in carbon abatement

Carbon abatement businesses should:

  • Consider opportunities to sell carbon abatement to the ERF, including under existing and draft methodologies,
  • Consider how transitional arrangements for existing projects will apply, and
  • Work with the government to ensure approval and compliance under the new system.

Businesses with material greenhouse gas emissions exposure

  • Businesses with material greenhouse gas emissions exposure should:
    • Consider if they are likely to be caught by the safeguard mechanism. The Government has indicated a 100,000t carbon dioxide equivalent per annum threshold. If so, then consult with the government and prepare for the mechanism,
    • Consider the commercial implications of the safeguard mechanism, including potential costs and pass through under electricity, gas and coal supply and related agreements,
    • Consider if any existing emissions related conditions on project approvals are appropriate and seek their amendment or removal if not, and
    • Prepare for increased opposition to emissions intensive projects, potentially including legal challenges