On July 17, 2014, the Australian federal parliament passed the
Clean Energy Legislation (Carbon Tax Repeal) Act 2014, repealing
the carbon tax legislation with effect, aside from
a few transitional provisions, taking place retrospectively from
July 1, 2014.
In order to pass the carbon repeal legislation, a number of
concessions had to be agreed to by the government. Importantly,
this included retaining the Renewable Energy Target of achieving 20
percent of energy in Australia to come from renewable sources by 2020 and ensuring that
the Australian Renewable Energy Agency remained. The Australian
Renewable Energy Agency was previously created to fund a variety of
projects and programs for research and development of renewable
energy in Australia.
In addition to the repeal of the various carbon tax
legislations, a number of temporary consumer protection measures
were implemented with the objective of ensuring the cost savings
associated with the repeal are passed to consumers. Powers were
given to the Australian Competition and Consumer Commission to
ensure no price exploitation takes place in relation to the carbon
The government released its Emissions Reduction Fund White Paper
in April 2014 ("White Paper"), which contained designs of
the Emission Reduction Fund (the "Fund") proposed to deal
with reductions in emissions. The Fund is the centerpiece of the
government's Direct Action Plan. The government is committing
AUD 2.55 billion to the Fund.
After public consultation on the White Paper, the government
released a Carbon Farming Initiative Amendment Bill 2014 exposure
draft on June 18, 2014 to establish the Fund and give effect to the
Direct Action Plan.
The Fund's overriding objective is to reduce emissions at
lowest cost over the period to 2020 and make a contribution toward
Australia's 2020 emissions reduction target of five percent
below 2000 levels by 2020.
The features of the Fund are as follows:
The Clean Energy
Regulator will issue Australian Carbon Credit Units
("Units") for genuine emission reductions estimated and
verified in accordance with approved streamlined methods to the
registered project proponent. Genuine emission reductions are
reductions that would likely not have occurred without the Fund,
are verifiable and calculated on a conservative basis, and can be
counted toward Australia's emission reduction target. Projects
will receive the Units over a crediting period of seven years in
general, although sequestration projects will have a 15-year
The Units can be
used in the voluntary National Carbon Offset Standard, and the
government will cancel credits issued to it under the Kyoto Protocol where Units are used under that
Standard. Units cannot be exported out of Australia's registry
for the first three years of the Fund.
reductions will be purchased by the Regulator through auctions. Project proponents who are
registered can participate in the auctions. Bids that provide
emission reductions at the lowest cost will be selected. There will
be a benchmark price set by the Regulator above which emission
reductions will not be purchased. There will be guidelines
published for the auctions including a minimum project size.
There will be
standard contracts for the purchase of the emission
There will be a
safeguard mechanism effective July 1, 2015, whose objective is to
ensure that the emission reductions achieved under the Fund are not
displaced by a significant rise in emissions elsewhere in the
economy. The mechanism will apply at the facility level and will be
restricted to facilities with direct emissions of 100,000 metric
tons or more of CO2-e a year
The Carbon Farming
Initiative will become part of the Fund.
The government has committed to reviewing its international
targets in 2015, and the Fund will be reviewed toward the end of
Despite the repeal of the carbon tax legislation going through, it
is not known at this time whether the Direct Action Plan
legislation will be supported by the new members of the Australian
Senate, who have the balance of power. These new members have
expressed a general support of carbon reduction initiatives,
although they may require further revisions to the legislation
before the legislation is passed.
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.
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