Australia: Doing Business in Australia - Environment and Climate Change

Last Updated: 1 May 2012
Article by Tony Holland

Australian government policies, business priorities and consumer choices are all being influenced by environmental concerns, such as management of pollution, contaminated land and the impacts of climate change. Organisations with the right approach and advice can view these issues as opportunities, whereas those who don't could face added costs and business disruption.

ENVIRONMENTAL LAWS

Protection of the environment is a major priority in Australia, and environmental issues receive a great deal of media and public attention. Australia has had a strict system of federal and state environmental regulations prohibiting the discharge of pollution and waste to air, water or land. Recently, an improved range of regulatory mechanisms involving more flexibility has allowed for a spirit of cooperation between business and government to promote corporate sustainability. There are increased opportunities for industry to interact directly with government authorities to plan targets for energy and resources use, waste control and disposal. The Federal Government has also recently introduced product stewardship legislation, which provides the framework to effectively manage the environmental, health and safety impacts of products, and in particular those impacts associated with the disposal of products. The framework includes a new industry-led national scheme for recycling televisions and computers.

Each state and territory has its own environmental legislation and administration, and its own regime for town planning, control of pollution, clearing vegetation and the use and extraction of resources including water. The principles in each jurisdiction's legislation are similar, but there are important differences that need to be carefully considered in the particular state and territory. In most states, the body with responsibility for environmental administration (including compliance and enforcement) is known as the Environment Protection Authority. There are some environmental issues, for example water, where a coordinated national approach to ecologically sustainable development has been undertaken by all tiers of government.

Approval requirements vary between the different state, territory and local governments responsible. Commonly, approvals are required before particular land uses are commenced, buildings constructed, or before certain types of plants may be installed and environmental impact assessments may be required as part of the approval process. Approvals often need to go through a public notification and comment stage. The Environment Protection and Biodiversity Conservation Act 1999 (Cth) may also apply if there are impacts on matters of national environmental significance, for example world heritage, protected wetlands, or threatened species of flora or fauna.

Licences will generally be required for activities such as waste discharge, and the disposal, treatment, storage and use of certain quantities of chemicals. Any process that involves the production of pollution will be subject to stringent works approvals and licensing requirements administered by the environment protection authorities in each state. Each state and territory also has different approaches to statutory requirements to report pollution incidents and contaminated land and who is responsible for reporting.

Failure to comply with environmental and planning legislation may lead to civil and/or criminal liability. Penalties may include both fines and jail, along with loss of licences and liability for clean-up costs. A company convicted of environmental offences may find itself the subject of adverse publicity. There has been a growing trend to impose substantial financial penalties and, in certain circumstances, directors and managers may be held personally liable for offences committed by a company.

CLIMATE CHANGE POLICY AND BUSINESS

Australia is a party to the United Nations Framework Convention on Climate Change and ratified the Kyoto Protocol in 2007. Since signing the Kyoto Protocol, Australia's climate change policy has seen great change, buffeted by the sudden economic decline and heated political debate.

In 2011, the Federal Government announced its Clean Energy Future Plan, which will introduce a price on carbon in Australia from 1 July 2012 through the Clean Energy Act 2011 (Cth) and associated legislative package. The Clean Energy package will put an initial fixed price on carbon of AU$23 per tonne in 2012-2013. This will rise by 2.5% per year for a fixed period of three years (to AU$24.15 in 2013-2014 and AU$25.40 in 2014-2015). The carbon price will then transition to a full trading scheme on 1 July 2015 and will regulate greenhouse gases by setting a cap on Australia's carbon emissions. Businesses will then have to meet this cap by acquiring and trading in carbon units, which will be issued by the Federal Government.

The introduction of a price on carbon will have an impact on around 500 companies that will directly bear its cost. The impact will filter throughout the economy as the costs borne by businesses are passed on and flow through, such as increases in electricity prices and other inputs. Each year, liable entities are required to purchase Eligible Emissions Units (EEUs) for each tonne of CO2-e they emit. Liable entities are entities that have operational control of a facility that emits more than 25,000 tonnes of carbon dioxide equivalent (CO2-e) greenhouse gas emissions or more than 10,000 tonnes of CO2-e for some landfill sites. A separate threshold applies to natural gas, as natural gas retailers will be liable for greenhouse gas emissions embodied in the natural gas that they supply, regardless of the amount supplied, unless liability is transferred. Other key features of the legislative package include:

  • The creation of the framework underpinning the introduction of a carbon price, including registries, audit and compliance requirements and changes to the taxation system
  • The creation of a number of new authorities and other statutory bodies to administer the measures under the legislative package
  • Transitional measures to assist businesses and industry sectors adjust to a carbon price.

The sectors covered by the carbon price mechanism include stationary energy, industrial processes, fugitive emissions (generally from coal mining and natural gas extraction) and emissions from landfills. The forestry and agricultural sectors will not be subject to a carbon price. Instead, these sectors will be incentivised to achieve emissions reductions through the Carbon Farming Initiative (CFI). The CFI mechanism will allow certain accredited carbon abatement and sequestration projects tradeable credits known as Australian Carbon Credit Units from land sector abatement initiatives.

EEUs under Australia's carbon price mechanism are regarded as financial products, which means that trading in carbon credits and providing advice in relation to credits may require an Australian Financial Services Licence. This is an area that is evolving and specific legal advice should be sought.

Legislation already impacting business in this area includes the National Greenhouse and Energy Reporting Act 2007 (Cth), which demands businesses report on environmental matters. This Act creates a National Greenhouse and Energy Register, placing mandatory reporting requirements on businesses producing or consuming energy or greenhouse gases above specified thresholds. Such businesses have to register and report as well as comply with prescribed monitoring and auditing processes. Reporting began in October 2009. Heavy penalties are imposed for compliance failure, while increased directors' liability places responsibility on them to oversee compliance. Importantly, while only high-level users were initially caught by this Act, the relevant thresholds have decreased rapidly, capturing a much wider range of businesses.

There are also a number of state and Commonwealth schemes setting renewable energy targets and energy efficiency standards.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.


DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com

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