On 11 December 2012, the Clean Energy Regulations 2011 (Cth) were amended by the Clean Energy Amendment Regulation 2012 (No. 7) (Cth) (the Amendment Regulation) to:
- establish the liquid fuels "Opt-In Scheme";
- prohibit the surrender of certain eligible international emissions units; and
- amend the Jobs and Competitiveness Program.
Most of the changes brought about by the Amendment Regulation have already commenced1 and will affect you or your organisation if you:
- rely on liquid or transport fuels;
- intend to surrender eligible international emissions units in relation to emissions from activities during FY16 or later years; or
- are involved in certain manufacturing activities.
The Opt-In Scheme
In 2011, the Clean Energy Legislative Package amended fuel tax legislation in order to place an effective carbon price on activities that were otherwise exempt from the carbon pricing mechanism by reducing the business fuel tax entitlement of non-exempted industries for the use of liquid and gaseous transport fuels.
The Clean Energy Act 2011 (Cth) (Act) provides for the introduction of a scheme whereby users of liquid and transport fuels can opt-in to the carbon pricing mechanism. The Amendment Regulation has now established how the Opt-In Scheme will operate.
If a successful application is made to the Clean Energy Regulator, a person will be appointed the designated opt-in person for specified eligible fuel. Whenever that person acquires, manufactures or imports fuel, for either:
- its own use;
- use by persons who are members of the person's GST group; or
- use by persons who are members or participants in the person's GST joint venture
then that designated opt-in person will become liable under the Act for that amount of liquid fuel.
Two or more entities may agree to form a GST joint venture if the joint venture is not a partnership and, amongst other things, is for a specified purpose, including mining exploration, agriculture or the generation, transmission and distribution of electricity.
A group of companies is, or can form, a GST group if it is 90% owned by the group, or the group of companies are all non-profit. The members of the GST group must not be members of any other GST group and they must account on the same basis and use the same accounting periods. One of the companies will then deal with all GST liabilities and entitlements and will be accountable under the carbon pricing mechanism.
Opting-in to the carbon pricing mechanism would be particularly attractive for a group of related companies which is prevented from efficiently managing its carbon liability under the carbon pricing mechanism because a company within that group pays an effective rather than actual carbon price. Consolidating a group's carbon liability through a single scheme could potentially decrease administrative costs.
Prohibition on the surrender of certain eligible international emissions units
The Amendment Regulation imposes restrictions on the ability of liable entities to surrender eligible international emissions units by prohibiting the surrender of CERs and ERUs where the units are attributable to activities involving:
- nuclear energy;
- the destruction of certain gases, commonly occurring in manufacturing activity, including:
- trifluoromethane (a gas used in refrigeration and fire suppression systems); or
- nitrous oxide created as a result of producing adipic acid (released during the manufacture of nylon); and
- hydropower plants with a generating capacity greater than 20MW (unless the plant satisfies European Union requirements).
Please be aware of these important restrictions when acquiring CERs and ERUs.
Amendments to the Jobs and Competitiveness Program
The Act refers to industries and businesses engaging in emissions-intensive, trade-exposed (EITE) activities, which produce substantial carbon pollution but are incapable of passing through the costs. To ease the effect of international competition, free carbon units are being issued under the Jobs and Competitiveness Program in accordance with the Act.
The Amendment Regulation specifies the eligibility for assistance and prescribes the rate of assistance for the following new activities:
- the production of pulp from recovered paper as a sub-activity of manufacturing printing and writing paper; and
- the production of nickel (but does not include mining of mineralised nickel ores or producing low grade nickel waste input products).
Persons who engage in the production of nickel have until 31 March 2013 to apply for assistance under the Act.
Further, the Amendment Regulation specifies the ethane-specific factor which will be used to determine the level of assistance for entities engaged in the production of and transmission of ethane, which is recognised as a highly emissions-intensive activity.
1The commencement of Schedule 2 of the Regulation (the "joint venture operator of a GST joint venture" amendments to the eligibility test for the Opt-In Scheme) is linked to the commencement of the Clean Energy Amendment (International Emissions Trading and Other Measured) Bill 2012, which is expected to receive the Royal Assent in early 2013.
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.