Hawker Britton Occasional Papers and Media

The climate change agenda: current developments

July 2009

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2009 is a significant year for the climate change agenda both within Australia and internationally. The coming months will establish whether the Government’s proposed emissions trading scheme, the Carbon Pollution Reduction Scheme (CPRS), will be passed by the Parliament and in what form.

The Federal Government has emphasised that a major part of Australia’s efforts to control global greenhouse gas emissions would be Australia’s participation in international negotiations leading to a global agreement on emissions targets. Australia participates in a number of bilateral and multilateral climate change partnerships, including the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol.

This year, global negotiations on emissions targets will culminate at the United Nations Climate Change Conference (COP15) in Copenhagen in December. COP15 will be a landmark international meeting that will attempt to reach agreement on a long-term post-Kyoto set of arrangements for the international community on climate change including carbon targets.

Background

On 15 December 2008 the Prime Minister Kevin Rudd released the Government’s Climate Change White Paper, Carbon Pollution Reduction Scheme: Australia's Low Pollution Future. The White Paper sets out Australia’s medium-term national targets to reduce greenhouse gas emissions by between 5 per cent and 15 per cent below 2000 levels by the end of 2020.

The top of this range (5 per cent below 2000 levels) represents a minimum unconditional commitment to reduce emissions by 2020, irrespective of the actions by other nations. The bottom of this range (15 per cent below 2000 levels) represents a commitment to reduce emissions in the context of global agreement where all major economies commit to substantially restrain emissions and all developed countries take on comparable reductions to that of Australia.

The Government believes that it is in Australia’s national interest to achieve a comprehensive global agreement to stabilise atmospheric concentrations of greenhouse gases at around 450 parts per million of carbon dioxide equivalent.

In the event that a comprehensive global agreement were to emerge involving emissions commitments by both developed and developing countries that are consistent with long term stabilisation of atmospheric concentrations of greenhouse gases at 450 parts per million (ppm) CO2 e or lower, the Government is prepared to establish Australia’s post-2020 targets in line with achieving the agreed goal.

Legislation

On 10th March 2009 the Government released the exposure draft of the Carbon Pollution Reduction Scheme Bill 2009. In response to feedback by stakeholders, the Government announced new measures for the CPRS on 4 May 2009 including a July 2011 start date for the CPRS, a fixed price for carbon permits for the first year and a target of 25 per cent reduction of 2000 levels by 2020 if the world agrees to an ambitious global deal to stabilise levels of CO2 equivalent in the atmosphere at 450 parts per million or lower.

On Thursday 14 May 2009 the Government introduced the following CPRS legislative package into the Parliament:

The following bills were also introduced. These are the responsibility of the Department of the Treasury

The following bill was introduced on 28 May 2009 by the Minister for Families, Housing, Community Services and Indigenous Affairs:

EITE Draft Regulations

In June 2009, the Government released important details of how the emissions-intensive trade-exposed (EITE) assistance program, established by Part 8 of the Carbon Pollution Reduction Scheme Bill 2009, will work in practice.

Public Submissions Sought

The Government has indicated that it is interested in hearing from stakeholders on the practical implications of the draft regulations, and whether there is need for any additional clarity or certainty in relation to the program. It is particularly interested in receiving feedback on the compliance burden imposed by the program, and whether there are any unintended outcomes by the application of the rules based approach of the program. Industry stakeholders are invited to provide details of situations that have arisen in their industry over the past ten years, if necessary, in confidence, to demonstrate any unintended outcomes or implementation difficulties.

Public submissions on the draft regulations are invited before 5pm (AEST) on 14 August 2009. This template should be used to ensure all the required details are included and to assist the Department in the timely consideration of your submission:

Renewable Energy Target scheme

The Mandatory Renewable Energy Target (MRET) scheme was established on 1 April 2001 to encourage additional generation of electricity from renewable energy sources and achieve reductions in greenhouse gas emissions. The MRET scheme placed a legal liability on wholesale purchasers of electricity to proportionally contribute to an additional 9,500 giga-watt hours (GWh) of renewable energy per year by 2010 by acquiring renewable energy certificates (REC) via an REC market.

The MRET scheme was implemented through the following legislation:

The Rudd Government has committed to expanding the MRET scheme to a national Renewable Energy Target (RET) scheme, which includes a target of 45,000 GWh in 2020. The expanded scheme will deliver the Government’s commitment that the equivalent of at least 20 per cent of Australia’s electricity comes from renewable sources by 2020.

In June 2009 the Government introduced the following bills to expand the MRET into the national RET scheme, which will incorporate state and territory targets into one national target.

The Office of the Renewable Energy Regulator (ORER, www.orer.gov.au) currently oversees the implementation of the existing MRET scheme and will also administer the expanded national RET scheme once it is put in place. The Department of Climate Change handles policy issues on the legislation.

The proposed legislation also allows for small-scale solar PV, wind and hydro electricity systems to qualify for ‘Solar Credits’ once the expanded national RET scheme legislation passes through Parliament and the required regulations come into force. The establishment of Solar Credits under the expanded RET scheme will multiply the number of RECs able to be created for eligible installations of small-scale renewable energy systems. It will also assist with the upfront costs of installing small-scale renewable energy systems, including household solar photovoltaic (PV) systems.

Those wishing to create RECS for systems installed on or after 9 June 2009 may choose to apply for RECs under the current deeming arrangements and apply later for the additional Solar Credits when invited by the ORER. Alternatively, they may choose to delay their application until the Solar Credits regulations are in place.

On 18 June 2009, the Senate referred the provisions of the Renewable Energy (Electricity) Amendment Bill 2009 and the Renewable Energy (Electricity) (Charge) Amendment Bill 2009 to the Economics Legislation Committee. To view submissions received click here

The committees final report was delivered to the Senate on 12 August 2009. The report is available here.

Status of the CPRS Bills

The CPRS Bills were introduced to Parliament on 14 May 2009. They passed the House of Representatives, and the Senate adjourned consideration until August 2009. In the interim, the Coalition and Senator Xenophon commissioned a report from Frontier Economics to consider the CPRS, its costs, and alternative schemes.

On 24 July 2009 the Leader of the Opposition, the Hon. Malcolm Turnbull, released a statement clarifying the Coalition’s position on the proposed CPRS. The statement outlined nine issues that the Opposition want addressed before they would agree to vote for the bill. The statement is available here.

On 10 August 2009 Mr Turnbull and Senator Xenophon released a report by Frontier Economics ‘The economic impact of the CPRS and modifications to the CPRS’. The report is available here.

On 13 August 2009 the Coalition, the Greens and Senators Xenophon and Fielding voted down the eleven CPRS Bills. The bills are expected to be reintroduced in November 2009.

Timeline of the Introduction of the Carbon Pollution Reduction Scheme:

The following table shows significant events leading up to the proposed start of an Australian Emissions Trading Scheme. It also shows scheduled international meetings.

Date Australia
June 2009
  • CPRS Bill and associated legislation passes through the House of Representatives on 4 June 2009.
  • CPRS and associated legislation introduced to the Senate on 15 June.
  • Bonn climate change talks, Germany 1-12 June 2009, negotiating text of eventual agreement now in the public domain.
8-10 July 2009
  • G8 summit in Italy agrees on overall goal of limiting the increase in average temperature to 2 degrees above average pre-industrial levels. The summit also agrees on a global long-term goal of reducing global emissions by at least 50% by 2050 and, as part of this, on an 80% or more reduction goal for developed countries by 2050.
10-14 August 2009
  • Informal UNFCCC inter-session climate change talks in Bonn, Germany. Two more formal meetings of the AWG-LCA and AWG-KP are expected to be held before COP15.
12 August 2009
  • Senate Economics Legislation Committee to report on the Inquiry into the proposed national Renewable Energy Target scheme.
12-16 October 2009
  • UN World Meteorological Organisation – 3rd World Climate Conference, Geneva.
October 2009
  • Receipt of National Greenhouse & Energy Reporting System Data for 2008-09 (this will inform the scheme cap and national emissions targets).
November/December 2009
  • Stage I regulations and legislative instruments made and tabled in Parliament following passage of Bills.
  • APEC meetings, Singapore, 8-15 November COP15/CMP6 – Climate change treaty negotiations, Copenhagen, 7-8 December
January to March 2010
  • Release of Tracking towards the Kyoto Target 2009.
  • Government to announce:
    • the extension of indicative national emissions trajectory up to 2014-15;
    • scheme caps for first five years of scheme (2010-11 to 2014-15); and
    • approach for expanding cap to accommodate increase in coverage.
  • National registry operation with Carbon Pollution Reduction Scheme functions.
  • Stage II regulations and legislative instruments made and tabled in Parliament.
1 July 2010
  • Reforestation credits can be generated.
January to June 2011
  • First auction of permits.
1 July 2011
  • Start of first compliance year under the Carbon Pollution Reduction Scheme. $10 fixed price period commences.
2011
  • Extension announcements –scheme caps extended to 2015-16.
  • Indicative National Emissions trajectory extended to 2015-16.
1 July 2012
  • Full flexible price trading commences.

 

Links

The Parliamentary Library has released a research report entitled Climate change discussions and negotiations: a calendar. It is available at http://www.aph.gov.au/library/pubs/BN/2009-10/climatechangecalendar.pdf.

Hawker Britton’s Occasional Papers on Climate Change are available at http://www.hawkerbritton.com/publications.php?c=1&s=1.

The Government’s Climate Change website is available at www.climatechange.gov.au.

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