Australia: Carbon Farming Initiative bills passed; now to get ready for them

Australia will soon have a framework for carbon farming in place, with the passage of the Carbon Credits (Carbon Farming Initiative) Bill 2011, Carbon Credits (Consequential Amendments) Bill 2011 and the Australian National Registry of Emissions Units Bill 2011.

So far we do not know the date the new laws come into force, but it's expected to be soon.

What is carbon farming?

As we noted at the time the Bills were introduced into Parliament,  the CFI aims to give farmers, forest growers and landholders access to domestic and international carbon markets, providing an investment incentive for environmental conservation and greenhouse gas emission reduction. The CFI will work alongside the  announced carbon pricing mechanism (CPM) by facilitating the crediting of greenhouse gas abatement projects in the land sector and from legacy waste emissions.

By undertaking approved emission abatement activities that reduce or store carbon pollution, carbon credits, known as Australian Carbon Credit Units (ACCUs), can be created. Subject to the rules under which they are created, these ACCUs can then be sold domestically or internationally, and can be used to meet regulatory obligations such as under the CPM, or voluntary abatement activity.

The processes involved in establishing and operating offsets projects are set out in the Bill, and include the following requirements:

  • the project proponent must satisfy the "fit and proper person" test and become recognised as an offsets entity;
  • the project must be covered by an approved methodology;
  • the project must satisfy other scheme eligibility requirements, including being on the "positive list" of activities that are not common practice and not being on the "negative list" of activities that are excluded from the scheme (see below);
  • the project must be undertaken in accordance with the approved methodology; and
  • project reports must be submitted to the Carbon Credits Administrator.

The Government has committed $45.6 million over four years to implementing the scheme.

What's changed in the CFI Bill?

The Carbon Credits package was amended slightly in the Senate. The most significant changes are:

  • projects can now be excluded from the CFI scheme if they would have a significant impact on access to land for agricultural production, or have a material impact on water, biodiversity, employment, or the local community (there was no reference to a material impact leading to exclusion);
  • non-exclusive Native Title holders can now have carbon rights; and
  • the Domestic Offsets Integrity Committee must publish reasons for its decisions to endorse (or refuse to endorse) a proposal for a methodology determination that applies to a specified kind of offsets project within 28 days.

How does the CFI relate to the carbon price mechanism?

Although the CFI can work independently of the proposed CPM, clearly that mechanism will provide a demand for ACCUs generated by the CFI and so make many more abatement projects financially viable. Under the Clean Energy Future Package released on 10 July and the Clean Energy Bill 2011 released for public consultation on 28 July, Kyoto compliant ACCUs can be:

  • used to meet up to 5% of a liable entity's obligation during the first three years of the CPM (2012/13-2014/15), with no quantitative restrictions thereafter; and
  • exported to be used overseas.

ACCUs which are not Kyoto compliant (which cannot be counted towards Australia's emissions target under current international carbon accounting rules) and which cannot be used by liable entities under the CPM, will be purchased by the Commonwealth Government. It has committed $250m over six years from 2012/13 for this purpose with the intention of increasing incentives for additional abatement through projects involving soil carbon, revegetation and cessation of logging in native forests.

What's still to be determined about the CFI?

A crucial element to the CFI scheme will be the regulations, many of which are yet to be released. We currently have a draft version of the regulations on the positive and negative lists for the Carbon Farming Initiative, which is open for public consultation until 16 September.

The idea underlying the draft regulations is that activities, not individual projects, will be assessed for additionality, ie. the likelihood that a particular activity would occur without the Carbon Farming initiative, and is not common practice. This is intended to provide greater assurance that particular projects will be approved and hence reduce overall transaction costs.

The Positive List identifies 15 activities that would be considered additional and hence eligible to participate in the scheme, including:

  • establishment of permanent environmental plantings;
  • establishment of permanent mallee plantings after 1 July 2007;
  • re-establishment of native vegetation on private land; and
  • capture and combustion of methane from waste deposited in a landfill facility before 1 July 2012.

The Negative List identifies six activities that would otherwise be additional, but cannot be part of the scheme because they pose a significant risk to communities or the environment. Included on the list is the establishment of a forest as part of a forestry managed investment scheme.

Where to now?

The passage of the CFI bills is an important first step, but a first step only. Much of the detail relating to methodologies and other aspects of the mechanics of the CFI scheme are yet to be finalised. Until much of this detail is released, it may be difficult for the CFI to commence to garner critical mass.

Another factor that will affect take-up is the carbon price mechanism. Once the future policy and regulatory framework around a carbon price becomes clearer, interest in CFI will undoubtedly increase.

Nonetheless, the Carbon Farming Initiative is an important part of the general carbon market and the new carbon pricing mechanism. While the lead time needed to generate credits through CFI projects may mean that the initial supply which could be used in the carbon price mechanism is modest, the long-term effect will no doubt be greater. Those active in the offset space, including financial institutions, are working hard to make the CFI scheme an effective one which will deliver credits that could potentially reduce carbon price mechanism compliance costs for liable entities, and deliver better environmental and sustainable outcomes in the land sector.

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions