The Abbott Government's Direct Action plan has at its centre the repeal of the carbon price mechanism (CPM) and the introduction of the emissions reduction fund (ERF), which aims to deliver on a commitment to reduce carbon emissions by five per cent on 2000 levels by 2020.

The Climate Institute has estimated that the repeal of the CPM and its replacement with the ERF will have a negative fiscal impact of more than $15 billion over the forward estimates.

Norton Rose Fulbright partners Elisa de Wit and Noni Shannon note that the ERF may provide opportunities for private and public sector organisations to receive a form of government funding to implement registered emissions reductions projects. This could involve those in the land, waste, industrial, mining, commercial building, housing, transport and government sectors.

Those organisations involved in the CPM should monitor the repeal of legislation, especially those that have entered into contracts with carbon price pass-through provisions.

"Any business which has passed through the carbon price down the supply chain will also need to be aware of the role that the Australian Competition and Consumer Commission will play in monitoring prices, costs and profits associated with the supply of regulated goods (such as natural gas, electricity, synthetic greenhouse gases) by corporations and the supply of goods by liable entities under the CPM," Ms de Wit said. The legislative process for, and potential benefits from, the ERF should also be monitored closely by business over coming weeks.

The government has also confirmed that it intends to abolish the Australian Renewable Energy Agency (ARENA) to achieve expected savings of $1.3 billion over five years from 2017-18. Ms Shannon says that this may lead to an interesting few months, as any such abolition will require the repeal of the Australian Renewable Energy Agency Act 2011. The legislation to abolish ARENA is unlikely to be presented until the new Senate is installed on 1 July 2014 and, even then, it is not clear at this stage whether a majority of the Senate would support such legislation.

Aside from the unresolved question of its immediate future, Ms Shannon highlighted the tensions between budget announcements and the spending obligations of agencies under their legislation and the impact this can have on industry. As ARENA chief executive, Ivor Frischknecht, has noted in the press prior to the budget, his organisation may find itself caught between its legislative obligations to fund (and continue to fund) renewable energy projects and the government's announcement tonight of the changed policy. In terms of future funding, $1 billion over eight years will remain available to support existing priority projects although it is not clear at this stage which projects will qualify as a "priority project".

In further changes to the administration of climate change policy in Australia, funding will be reduced for the National Greenhouse and Energy Reporting Scheme (savings of $2.0 million over four years) and the Carbon Capture and Storage Flagships Programme (savings of $459.3 million over three years from 2017 18).

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