The cornerstone of Australia's federal climate policy (as
discussed in previous editions of The Climate Report) is known as
the "Direct Action Plan," under which the federal
government pays for emission reductions or abatements. This is done
through a series of reverse-auctions, conducted by the Clean Energy
Regulator via an emissions reduction fund ("ERF"), for
lowest cost reductions.
Under this system, the Regulator issues one Australian Carbon
Credit Unit ("ACCU") for each ton of emission reductions
to be delivered by a particular project and enters into contracts
with bidders guaranteeing payment to them by the government. Funded
projects have included the regeneration of native forest, strategic
burn-offs, and landfill gas collection. The third of the ERF
auctions took place on April 27, 2016.
The ERF is complemented by a "Safeguard Mechanism" due to
come into effect on July 1, 2016. This is designed to ensure that
the emission reductions and abatements purchased by the government
are not offset by increases in emissions over historic
levels elsewhere in the economy.
Large facilities exceeding certain emission thresholds (direct
"scope 1" emissions of more than 100,000 ton of carbon dioxide equivalence per year) must keep
their emissions at or below a business-as-usual baseline enforced
by the Regulator. These facilities—often operated by
electricity generation, mining, manufacturing, transport, and
construction businesses—collectively account for roughly half
of Australia's greenhouse gas emissions.
The Regulator may seek financial penalties against companies and
individuals who fail to comply with the baseline. However,
facilities will be permitted to exceed the baseline in any given
year provided that emissions over a two- to three-year monitoring
period remain below the baseline. This is a significant
concession—particularly given that the baselines for existing
facilities are to be determined by reference to the facility's
highest level of reported emissions in any year between
2009–2010 and 2013–2014. Businesses can also offset any
excess emissions by surrendering ACCUs and can apply for exemptions
in exceptional circumstances.
The data used for determining baselines for existing facilities
will largely be obtained from the National Greenhouse and Energy
Reporting Scheme, with most large emitters already a part of the
Facilities that are new, or that significantly expand after 2020,
will be able to apply for a new or revised baseline in accordance
with "emissions intensity benchmarks" applying to various
sectors of the Australian economy. These benchmarks are intended to
reflect "leading practice" in particular industries and
will be updated over time, including in light of changes to
"global warming potential" values.
According to draft guidelines released by the federal government in
The benchmarks will generally be
based on outputs and be neutral to factors such as inputs,
geography, location, technology, and production practices;
Technical working groups will be
established for each sector to define production variables (with
the emissions intensity benchmark worked out as emissions per unit
of the relevant production variable); and
Alternate approaches may be used
where there is insufficient data or no identified production
These matters will be subject to public consultation and reviewed
by an independent committee, which will make a final recommendation
to the Minister for the Environment.
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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