On 31 October 2014, the Senate passed the Government’s proposed bill to amend the Carbon Credits (Carbon Faming Initiative) Act 2011 (Act) (with amendments).
As discussed in our April edition of Resources Update, the Carbon Farming Initiative Amendment Bill 2014 (Bill), forms part of the Government’s “Direct Action” policy, the centrepiece of which is the $2.55bn emissions reduction fund (ERF). As part of the ERF, a ‘Clean Energy Regulator’ (Regulator) will be established who will, among other things, be responsible for conducting reverse auctions and/or tenders for ‘eligible offset projects’ and will enter into contracts to purchase the Australian carbon credit units (ACCU’s) generated from the ‘eligible offset projects’ that provide the greatest reduction in emissions at the lowest cost (known as carbon abatement contracts).
Amendments to the Bill made during the Senate process and negotiations between the Government and independent senator Nick Xenopohon and the Palmer United Party, among other things:
- provide that, in general, a carbon abatement contract will not have a term of longer than 7 years
- provide the proposed Emissions Reductions Assurance Committee (ERAC) with greater power, by ensuring that the Minister cannot make certain determinations, including varying the methodology for calculating the net amount of carbon dioxide equivalent for a reporting period, if ERAC has advised that the determination does not comply with one or more offset integrity standards
- delay the introduction of the arrangements for ‘designated large facilities’ until 1 July 2016, from which date they will be required to monitor their greenhouse gas emissions and ensure that their net emissions do not exceed a specified ‘baseline’ number .
The amended Bill has received some criticism that it does not sufficiently address concerns raised with the original form of the Bill, including by not providing a sufficient incentive for Australia’s largest emitters to reduce their emissions and that the arrangements will not enable the Government to achieve its targeted reduction levels, being the reduction of carbon emissions by 5 percent by 2020 (of 2000 levels).
However, as the method for calculating ‘baseline numbers’ for large facilities and the associated penalties for non-compliance have not yet been published, the practical effect of the amended Act remains uncertain. Accordingly, it’s possible that, in light of the recently announced agreement between China and the U.S.A regarding their own targeted emission reductions, the Government may seek to implement more aggressive reduction targets than have previously been mooted. Further updates will be provided once these details become available.