Australia: Recent Climate Change & Energy Efficiency Initiatives Introduced In Victoria

Last Updated: 28 September 2006
Article by Louise Hicks, Mark Beaufoy and Kim Piskuric

On 17 July 2006, the Victorian Government released Our Environment, Our Future – Sustainability Action Statement, which outlines the government’s proposal to introduce a package of sustainability initiatives to, among other objectives, respond to the challenge of climate change, to maintain and restore Victoria’s natural assets and to use resources more efficiently.

Of the initiatives proposed, possibly the two most significant measures, both in terms of impact on industry and the Government’s ability to implement the key goals of the Sustainability Action Statement, are the mandatory Victorian Renewable Energy Target and Environment and Resource Efficiency Plans.

Victorian Renewable Energy Target

On 19 September 2006, legislation was enacted in Victoria to create the Victorian Renewable Energy Target (VRET).

The Victorian Renewable Energy Act 2006 aims to ‘promote the development of renewable energy generation through the establishment of a scheme that provides for the creation and acquisition of renewable energy certificates and requires the surrender of renewable energy certificates’. It is targeted to reach a 10% renewable energy level for Victoria by 2016.

The VRET scheme largely builds on the existing Federal Mandatory Renewable Energy Target (MRET). Using the same model as the Federal MRET, the VRET scheme will require electricity retailers to acquire and surrender Renewable Energy Certificates (RECs) to meet renewable energy targets set under the scheme.

The VRET scheme is to be administered by the Essential Services Commission (ESC).

The requirements of the new scheme will come into operation on 1 January 2007.

How is the target determined?

The amount of renewable energy which a relevant entity under the VRET scheme is required to acquire each year, and therefore the amount of RECs a relevant entity is required to surrender each year, is determined according to the ‘renewable power percentage’ for that year.

The ‘renewable power percentage’ for each year will be fixed by an Order in Council on or before 31 May each year or in accordance with the formula outlined in the legislation. The renewable power percentage will rise in accordance with the increases in the amount of electricity required from renewable energy sources each year to meet the overall target.

Who is obliged to surrender renewable energy certificates?

The obligations under the VRET scheme apply to ‘relevant entities’. A ‘relevant entity’ is a person who makes a ‘scheme acquisition’ as defined under the legislation. This generally includes retailers of electricity and wholesale purchasers of electricity acquired for use in Victoria.

Relevant entities are required to:

  • Lodge an audited energy acquisition statement for the year on or before 30 April in the following year. The energy acquisition statement must specify:
    • The amount of electricity acquired under the scheme during the year.

    • The value (in MWh) of any RECs being surrendered. RECs can only be surrendered if they are valid, created before 31 January in the year following the year in which the statement is made, and registered as owned by the entity.

    • Any surplus RECs being carried forward.

  • Carry out either of the following:
    • Surrender the required amount of RECs for the year in which the relevant acquisition is made.

    • If notified by the ESC that they have a REC shortfall, pay the shortfall penalty rate for that year. The rate for 2007 (to be indexed) is $43 per MWh of REC shortfall.

The legislation provides a range of methods by which the ESC can enforce a requirement to surrender additional certificates or a requirement for payment of the penalty.

The REC shortfall requirements under the VRET scheme are likely to be tougher than the current requirements under the MRET scheme for two reasons:

  • Unlike the MRET scheme, the VRET scheme will not allow a shortfall leeway of 10%. The MRET scheme currently permits a REC shortfall of less than 10% of the renewable energy requirement to be carried forward to the next year. However, relevant entities under the VRET scheme will be required to pay the REC shortfall penalty if they have not surrendered the required amount of RECs for that year.
  • The shortfall penalty under the VRET scheme is higher than the MRET shortfall penalty. The VRET penalty is $43 per MWh and indexed each year, whereas the shortfall penalty under the MRET scheme is $40 per MWh and is not indexed.

Who can create renewable energy certificates?

RECs under the VRET scheme can only be created by power stations accredited under the VRET scheme.

In order to be eligible for accreditation, power stations must be located in Victoria or in another state or territory in which an approved interstate renewable energy regime applies. An interstate regime will generally be approved if it meets the criteria set out in the legislation, which includes that the regime must complement and not detract from the purposes of the legislation and not impose unreasonable costs on purchasers of electricity in Victoria.

The power station must also generate some or all of its electricity from a renewable energy source specified under the VRET scheme. Specified sources include hydro, wave, wind, solar, biomass and geothermal.

A person registered under the VRET scheme may also apply for provisional accreditation of the proposed components of an electricity generation system that the person considers, if assembled, would be a power station eligible for accreditation. Provision accreditation will enable a power station to obtain accreditation once its components are assembled, provided that the ESC is satisfied that it is not materially different from the provisional components.

A REC can be created for each MWh of electricity generated utilising the power station’s ‘scheme capacity’, which is to be determined by the ESC at the time of accreditation. A power station’s ‘scheme capacity’ is generally its capacity to generate electricity in excess of its ‘pre-scheme’ capacity. A REC can be created at any time after the generation of the final part of the electricity in relation to which the REC is created and before the end of year after the year of generation.

Accredited Power Stations must lodge audited electricity generation returns for a year to the ESC by 14 March of the following year. The returns must specify the following:

  • The amount of electricity generated by the power station during the year.
  • The amount of that electricity generated from an eligible renewable energy source.
  • The number of RECs created during the year.

RECs are registered in an electronic register and given a unique identification code. A REC will not be valid under the scheme until it is registered under the scheme. Registered RECs can be transferred and the transferee will be recorded as the owner of the REC in the register.

The legislation provides for the creation of RECs by small generation units installed on or after 1 January 2007. Special rules will apply to the generation of these certificates.

The legislation also contains penalties for improperly creating RECs.

It is envisaged that further details on the requirements of the scheme will be set out in rules made by the ESC.

Implications for Renewable Energy Generators

As the VRET scheme has been closely modelled on the MRET scheme, renewable energy generators currently operating within the MRET scheme should be able to either work within both schemes or switch to the VRET scheme with relative ease.

However, generators should note that the VRET scheme does not permit the creation of VRET RECs from electricity for which MRET RECs have been created. Generators seeking accreditation under the VRET scheme who are already accredited under the MRET scheme may be required to give an undertaking to the ESC that they will not create a MRET REC in relation to electricity generated utilising VRET scheme capacity if a VRET REC has already been created. Other undertakings relating to the sharing of information between the two scheme administrators and notification of participation in the MRET scheme may also be required.

Accordingly, in order to generate RECs under the VRET scheme, existing generators will need to demonstrate additional generating capacity.

In choosing between the two schemes, the key deciding factor for generators is likely to be the difference in value of the RECs created under each of the schemes. Due to the fact that the VRET shortfall penalty requirements are likely to be more stringent, the value of VRET REC may be higher.

The other factor that may influence REC value and therefore choice between the two schemes is the uncertain future of the MRET scheme. The Federal Government has recently decided not to extend MRET beyond its target of 2% renewable energy by 2010, which means that the annual target under MRET will remain the same between 2010 and 2020, when the scheme comes to an end. The targets under VRET will continue to rise until the scheme meets its overall target of 10% of electricity from renewable energy sources in 2016.

Environment And Resource Efficiency Plans

The Environment Protection (Amendment) Act 2006 (the Act), recently passed by Parliament, introduces a suite of amendments to the existing environment regulatory framework established under the Environment Protection Act 1970, including the introduction of a requirement on Victoria’s largest water and energy users and waste producers to consider ways in which to improve their resource efficiency through mandatory Environment and Resource Efficiency Plans (EREP).

The amendments implementing the EREP scheme came into operation on 30 August 2006. However, most of the detail relating to the requirements of the scheme is to be prescribed by regulation. These regulations are proposed to be made next year. Accordingly, while the amendments have come into operation the scheme will only have practical effect next year when the relevant regulations are made. Nevertheless, the current amendments provide a clear indication of the way in which the EREP framework is proposed to operate.

The new EREP framework requires occupiers of premises at which a scheduled activity is being undertaken to register the activity with the Environment Protection Authority (EPA) (and notify the EPA of ongoing changes to their activities) and, unless they have obtained an exemption, to prepare an EREP in accordance with the prescribed criteria under the framework.

A ‘scheduled activity’ is defined under the Act to mean:

  1. the use at a premises of environmental resources in excess of the threshold prescribed for resources of a kind prescribed for the purposes of this definition;
  2. the disposal of waste off-site from a premises in excess of the threshold prescribed for wastes of a kind prescribed for the purposes of this definition. The legislation envisages that the kinds of resources, wastes and thresholds for the purposes of the definition of ‘scheduled activity’ will be prescribed by the Regulations.

The EREP must include the following:

  • A description of the relevant environmental resource and use and disposal of waste off-site of the scheduled activity.
  • A plan of actions to achieve environmental resource efficiency gains and waste disposal reductions.
  • Timeframes within which the actions are to be implemented.
  • A description of how the implementation of the EREP is to be monitored.
  • The period of time in which the EREP is to operate.

EREPs must be submitted to the EPA with the required supporting material for approval. The EPA must approve the EREP if it is satisfied that the EREP has been prepared in accordance with section 26H and submitted in accordance with section 26J of the Act. The EPA may also request further information to enable it to determine whether to approve the EREP. The Act also provides scope for EREPs to be substituted or revoked with the consent of the EPA.

A party required to prepare an EREP may apply to the EPA for a whole or partial exemption from the requirement. The relevant criteria and considerations according to which the EPA will grant an exemption are to be prescribed by the Regulations. An exemption may be revoked if the criteria and considerations applying to the initial exemption cease to apply.

A failure to comply with the requirements relating to the preparation of an EREP or implement the EREP within the required timeframes is an offence under the Act. The penalty for such offences is 300 penalty units (one penalty unit is currently $107.43 in Victoria). A Pollution Abatement Notice (PAN) may also be served on a party who fails to comply with any of the obligations of the EREP scheme. A PAN allows the EPA to require the occupier of a premises to cease or not commence carrying on an activity, or to carry on or modify an activity in a particular manner or take other measures specified in the PAN.

The Act empowers the EPA to make regulations in relation to the following:

  • Prescribing the kinds of thresholds of resources and wastes to be applicable to the scheme.
  • Prescribing registration and reporting requirements for scheduled activities.
  • Regulating the development and implementation of EREP.
  • Prescribing any matter necessary to give effect to the scheme.

The State Government has indicated that energy, water and waste reduction actions under the EREPs are to have a three year or better pay back period.

The Government has also suggested that in addition to the mandatory EREP scheme, there will be a voluntary program for other large users through industry associations and targeted programs for key areas such as smaller commercial and industry resource users.

There are a number of other significant amendments made to the Environment Protection Act 1970 by the Act. We propose to review these amendments in our next Environment update.

Existing Regulatory Framework

The EREP scheme builds on the EPA’s existing functions under the Environment Protection Act 1970 and existing action plan models implemented as part of the EPA’s Greenhouse Program which aims to reduce greenhouse gas emissions and improve energy efficiency in industry.

The Program requires EPA licence holders that are medium to large scale energy users and businesses applying for EPA works approval or a new EPA licence to incorporate energy efficiency best practice improvements with a three-year payback period. New applicants are required to document this information as part of information on environmental management procedures and programs submitted to the EPA with their application. Existing licence holders are required to take additional steps and prepare action plans documenting measures for reducing energy use and/or non-energy related greenhouse gas emissions.

The Program’s requirements are enacted through the State Environment Protection Policy (Air Quality Management) (SEPP). The details of the program are set out in the Protocol for Environmental Management (Greenhouse Gas Emissions and Energy Efficiency in Industry), an incorporated document in the SEPP. The Protocol is intended to provide guidance on the implementation of the requirements in the SEPP.

What You Should Do

Large water and energy users and waste producers should consider undertaking the following actions:

  • Track the development of regulatory tools.
  • Gain an understanding of your organisation’s water and energy use and waste production and consider undertaking an audit of your facility.
  • Consider any energy, water and waste saving strategies that have already been put in place within the facility.
  • Explore other energy, water and waste reduction opportunities.
  • Gain an understanding of the additional reporting requirements under the EREP scheme.
  • Review current reporting procedures.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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

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

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”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.