What is happening?

The government released its carbon pricing details on 10 July 2011—more information is available at the Clean Energy Future website.1

Draft legislation will be released on 31 July 2011, with the opportunity to comment. The government will introduce the legislation into parliament later in 2011, probably sometime late August to October. The carbon price will commence on 1 July 2012.

With some exceptions (including the treatment of heavy on-road transport), the announced details are agreed to by the government, Greens and key independents Rob Oakeshott and Tony Windsor. Independent Andrew Wilkie has also given his support, giving the government the numbers to pass the necessary legislation.

Key details for the waste industry

The carbon price

The price will be fixed for the first three years, starting at $23/t on 1 July 2012. After 1 July 2015, the price will be set by the market under an emissions trading scheme (ETS). A ‘price floor’ ($15) and ‘price ceiling’ ($20 above the expected international price at 1 July 2015) will apply in the first three years of the ETS.

Reduction target

At least 5% by 2020 and 80% by 2050.

Coverage

Power stations, industrial processes, fugitive emissions, natural gas retailers, non-legacy waste and some transport fuels (under changes to the fuel tax regime).

Waste emissions coverage

The carbon price will apply to landfills, biological treatment, waste water, waste gas combustion and incineration facilities with emissions exceeding:

  • 25,000t CO2e pa, or 
  • 10,000t CO2e pa for landfill facilities within a prescribed distance (expected to be approximately 80km) of large landfill facilities (expected to be set at 25,000t CO2e pa), to avoid waste displacement from covered to non-covered landfill facilities.

The total emissions will be determined under the National Greenhouse and Energy Reporting System (NGERS). Only non-biogenic emissions (eg methane) are covered, not biogenic emissions (eg CO2). Emissions from ‘legacy’ waste deposited prior to 1 July 2012 will not be subject to the carbon price, but will count towards the facility thresholds.

The carbon price would not apply to other waste treatment approaches, unless included in NGERS.

If a facility exceeds the thresholds then the carbon price will apply to its total emissions, not just the amount above the threshold.

Transport fuel treatment

Both:

  • off-road business transport fuel use (including for non-transport purposes such as generators), and
  • heavy on-road vehicles (>4.5t),

will be subject to an ‘effective’ carbon price by changes to the fuel tax/rebate program, rather than a need to acquire and surrender permits. However, this proposed treatment of heavy on-road vehicles has not yet been agreed to by the Greens and key independents and the government will need to secure support for its passage.

Liable entities

The ‘liable entity’, who must acquire and surrender permits, will be the person with operational control of a facility.

The legislation is likely to make it clear that government agencies including regional and local governments are covered (as was done in the proposed CPRS legislation). In our view regional and local governments would most likely be covered without such changes and we consider they are similarly likely covered by the current NGERS.

The liable entity will be able to transfer its liability in certain circumstances.

Offsets

During the fixed price period, a limited amount of Carbon Farming Initiative (CFI) credits can be surrendered by liable entities (5% of total liability), but no international units. During the ETS period, an unlimited number of CFI credits, and a limited number of accepted international units (50% of total liability), can be surrendered.

If the carbon price proceeds then there will be limited opportunity for the waste industry to generate CFI credits, other than from non-legacy emission reductions, related soil carbon and biochar.

Renewable energy

Significant new funding programs and arrangements, including a $10 billion Clean Energy Finance Corporation (with a venture capitalist style role), as well as the continuation of the Renewable Energy Target program. Waste to energy technologies may be able to access this funding.

Land based measures

$1.7 billion to support agricultural carbon and biodiversity programs.

Other business assistance

Various other programs available to support businesses with the carbon price transition.

Further information on these matters is available in our article ‘Carbon price: what do we do now?’.2

What should the waste industry do now?

The carbon price details raise a number of legal issues we recommend the waste industry carefully consider, including:

  1. Review how you will be impacted and plan how to deal with it. The carbon price may significantly increase waste industry costs, especially for landfill operations. The waste industry needs to consider how to best manage these costs, including can they be efficiently reduced or effectively passed through. Landfill will likely consider gas capture where it hasn’t been implemented and then cost pass through (by increased gate fees or rates). The carbon price (as well as landfill levies) will likely drive further take up of alternative waste technologies.
  2. Ensure NGERS information gathering and reporting is optimal. Because carbon price liability will be determined under NGERS, it is essential that the necessary information is gathered and completed appropriately and thoroughly. Additional investment in more efficient processes and training may be valuable. 
  3. Ensure that disclosure obligations are met. Consider what you need to tell the market and your stakeholders about how you will be impacted. 
  4. Consider the use of offsets to reduce financial exposure to the carbon price. 
  5. Consider whether government funding is available. 
  6. Make sure marketing is not misleading or deceptive. Any claims you make in respect of green or carbon marketing should be reassessed in light of the announced carbon price details.
  7. Review operational approvals in respect of carbon issues. If you are undergoing project approval processes then any carbon offset proposals or negotiations should be reviewed. Previously granted operational approvals should also be reviewed and amendments could be requested. In our view once a carbon price is legislated then this should be the primary driver of emissions reduction and efficiency improvement decisions, not approval requirements.
  8. Review the draft legislation and consider engaging with the government.