Last Tuesday the Senate historically voted to pass the Clean Energy Act 2011 and related legislation. As outlined in our July publication, the carbon price mechanism (the Mechanism) will comprise:

  1. a 3 year fixed price phase from 1 July 2012, at $23 per tonne (indexed 2.5% pa); and
  2. a market-based price phase and emissions trading scheme commencing 1 July 2015.

As passed, the Act contains changes made in the Lower House since the draft Bills were first released in July. This update is provided to assist you in understanding the key changes to the package which could affect you as a participant in the construction industry.

Joint venturers and facility operators

As in the draft Bills, where a facility is operated exclusively on behalf of an unincorporated JV, the JV partners may voluntarily assume direct liability for emissions as a "declared designated joint venture".

More JVs may now benefit from this mechanism, including where:

  1. one joint venture partner or more is a foreign person; or
  2. the operator of the facility is one of the joint venture partners.

The facility operator is no longer required to guarantee payments by the JV partners. This requirement negated the benefit of this mechanism for operators in the draft Bills. However, liability can now revert to the operator if a JV partner fails to make payment for more than three months.

Large users of taxable fuel

Under the draft legislation the Mechanism did not apply to emissions from the combustion of transport fuels.   From 1 July 2013, large users of liquid fuel will now have the option of managing their own carbon liability directly under the Mechanism instead of paying the equivalent carbon price through the fuel tax system. The government has indicated that it will consult publicly on this scheme.

Natural gas suppliers

The Mechanism now applies to "natural gas suppliers" rather than "natural gas retailers". Suppliers are now liable for emissions from natural gas when:

  1. the natural gas has been withdrawn from a natural gas supply pipeline to supply to a customer (other than large users with their own direct liability);
  2. it may reasonably be expected that the customer will consume all or part of the gas; and
  3. the customer does not quote an Obligation Transfer Number (OTN).

There is now no reference to "transmission" and "distribution" pipelines. Rather all "natural gas supply pipelines" are covered unless specified by regulation.

Other changes

Of interest to all industries generally, the Legislation contains changes concerning:

  1. disclosure of significant holdings of carbon units;
  2. legal title to carbon units;
  3. clean energy investment plans in the Energy Security Fund;
  4. clarification of anti-avoidance provisions;
  5. operation of an equivalent carbon price on synthetic greenhouse gases;
  6. the Clean Energy Regulator's registration and suspension powers under the Renewable Energy Target;  and
  7. the functions and qualifications of the Land Sector Biodiversity and Carbon Board.

Reminder

With the Legislation to take effect on 1 July next year, investment decisions should take into account more than just capital costs. Projections of 'whole-of-life' costs need to consider the annual changes during the fixed phase of the carbon price and those associated with a fluctuating carbon price when the system moves to a market based price in 2015.

Please contact us if you would like further details on any aspect of the Clean Energy Legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.