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Climate change

Australia is a party to the United Nations Framework Convention on Climate Change and its Kyoto Protocol, and in November 2016 ratified the Paris Agreement. Australia has submitted a Nationally Determined Contribution (NDC) that commits Australia to reducing its GHG emissions to between 26 to 28 per cent below 2005 levels.

The policy measures intended to achieve this commitment include:

  1. the Australian Emissions Reduction Fund (ERF);
  2. the Safeguard Mechanism;
  3. the Renewable Energy Target;
  4. energy productivity measures; and
  5. fuel standards.

Under the ERF, eligible carbon abatement projects developed under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) are able to generate Australian carbon credit units (ACCUs), for purchase by the Clean Energy Regulator through periodic reverse auctions or other competitive tendering processes. In 2014, the federal government pledged A$2.55 billion to fund the purchase of ACCUs through the ERF. As of December 2020, there have been 11 auctions of ACCUs and the majority of the funding has now been committed.

In 2019, the federal government established the Climate Solutions Fund, which will receive A$2 billion in funding between 2020 and 2030. The Climate Solutions Fund operates as a re-branded ERF and incorporates the majority of existing project methodologies under the ERF. The Clean Energy Regulator holds reverse auctions in March and September every year, with the aim of delivering approximately 100 million tonnes of emissions reductions by 2030.

The National Greenhouse and Energy Reporting Act 2007 (Cth) requires reporting on GHG emissions, energy production and energy consumption. In 2016, the federal government amended this Act to introduce the Safeguard Mechanism, which is designed to ensure that emissions reductions paid for through the ERF are not displaced by a significant increase in emissions elsewhere in the economy. The Safeguard Mechanism requires facilities whose net scope 1 emissions exceed the safeguard threshold of 100,000 tonnes of CO2e to keep their GHG emissions at or below a set baseline based upon historical calculations.

Australia adopted a renewable energy target of over 23 per cent renewable energy by 2020, which is administered through the Renewable Energy (Electricity) Act 2000 (Cth). That target has been achieved, but the federal government has not, at the time of writing, announced a revised target. Finally, in December 2016, the federal government announced that it would look to introduce more stringent fuel standards in an attempt to bring Australian standards into line with those in Europe and to achieve Australia's NDC goals. These draft standards were the subject of public consultation in 2017 and a draft regulation impact statement was released in March 2018. Discussions are still ongoing following the consultation.

During the course of 2020, the federal government announced its response to the King Review into the ERF. As part of that response, the federal government has foreshadowed its intention to introduce reforms to incentivise greater participation by a wider variety of sectors in the ERF, including compressed time frames for procuring ACCUs, allowing greater third-party involvement in the development of ERF methodologies, lowering administrative costs for projects currently applying multiple methodologies and providing greater market access for small projects through a clearing house. Details of these reforms will become apparent in due course.

Besides these laws, climate change is also addressed in a corporations law context, with the Australian Securities and Investment Commission having released revised regulatory guidelines that incorporate commentary on climate change disclosures with respect to the preparation of prospectuses and the preparation of a corporation's operating and financial review.

Australian states and territories have adopted strong positions on renewable energy and climate change. All Australian states and the two mainland territories have adopted targets of achieving net-zero emissions by 2050. The NSW Renewable Energy Action Plan sets out the framework for NSW to achieve its goal of net-zero emissions by 2050, and the NSW Climate Change Policy Framework sets out other key policy initiatives for NSW, including the establishment of a climate change fund. In Queensland, the state government announced a $145 million plan to establish three renewable energy zones across Northern, Central and Southern Queensland with the potential to deliver 16,000 MW of renewable capacity and significantly contribute towards achieving Queensland's RET by 2030 and net-zero emissions by 2050. South Australia has a RET to achieve net 100 per cent renewable energy generation in the 2030s. Victoria has a RET to meet 50 per cent of its electricity consumption needs by renewable energy sources by 2030, which is enshrined in the Renewable Energy (Jobs and Investment) Act 2017 (Vic).