Australia: Final report for Climate Change Authority's Special Review

Last Updated: 2 October 2016
Article by Elisa de Wit and Dylan Orsborn


The Climate Change Authority has released the third and final report for its Special Review into Australia's climate targets and policies.

The report, entitled Towards a Climate Policy Toolkit (Policy Report), recommends policies for Australia to deliver on commitments arising from the climate change negotiations in Paris last year. It recommends building on the Government's existing policies and incorporating new policies in a 'phased transition'.

The Policy Report draws on modelling commissioned by the Authority which assesses the impacts of various emissions reduction policies on the electricity sector and broader Australian economy. The Authority published the results and its analysis of the modelling in a separate report (Electricity Report).

Market Mechanisms

In both reports, the Authority is generally supportive of market mechanisms, noting that if well-designed, these mechanisms can achieve emissions reductions in a manner which is cost-effective, scalable, and equitable.

The Authority compares two mechanisms which it considers to be best suited for adoption in Australia: a cap and trade scheme and an emissions-intensity scheme, with a focus on principles of economic efficiency, environmental effectiveness and equity.

It concludes that the schemes would be similar in terms of emissions reductions and cost effectiveness, but that the emissions-intensity scheme would have a lower impact on electricity prices, meaning less impact on lower-income households, greater community acceptance, and would therefore, more likely be a durable and stable policy in the long-term.


The Paris Agreement provides that members will come together every five years, commencing 2023, to participate in a 'global stocktake', revising commitments based on the latest science.

The Policy Report recommends adopting a five-yearly review cycle for domestic policies, commencing in 2022, so that domestic reviews immediately precede reviews under the Paris Agreement.

Electricity Sector

The Authority considers that the electricity sector is best suited for a market mechanism in the near term, being characterised by quantifiable emissions, a small number of larger emission sources, and generally competitive markets.

The Policy Report recommends the adoption of an emissions-intensity scheme for the electricity sector, to be introduced in 2018.

Under such a scheme, the Government would set a target emissions-intensity baseline (e.g. tonnes of carbon dioxide per megawatt hour of electricity produced) for the sector and electricity producers would receive a free allocation of permits per unit of production.

The Policy Report does not set out a detailed plan, but recommends that emissions-intensity baselines decline linearly to reach zero 'well before 2050' and that the scheme allow facilities to purchase offsets, but only domestically-sourced, energy efficiency offsets (see 'Energy Efficiency' below).

The Authority notes that its modelling shows that although residential spending on electricity under such a scheme would increase by 8% on average to 2050, disposable income is projected to grow by 40% during the same period.

In both reports, the Authority considers the prospect of additional policies for the electricity sector which would encourage the entry of low-emissions generation and exit of high-emissions generation. It concludes that the risks would outweigh the benefits as additional policies may increase the costs and complexity of the regulatory environment and create uncertainty for investors. It recommends that existing schemes under the Renewable Energy Target should proceed as planned.

Enhanced Safeguard Mechanism

The Authority notes that, in its current form, the Safeguard Mechanism may prevent emissions from rising in facilities to which it applies, but is unlikely to reduce emissions. It therefore recommends an 'enhanced' Safeguard Mechanism for the direct combustion, industrial processes, and fugitive emissions sectors, changes including:

  1. reducing the threshold for facilities from 100,000 to 25,000 tonnes carbon dioxide per annum (the latter being the threshold for the National Greenhouse and Energy Reporting system);
  2. introducing declining baselines for all facilities at a uniform linear rate, consistent with Australia's Intended Nationally Determined Contributions (to reduce emissions by 26-28% below 2005 levels by 2030); and
  3. removing flexibility mechanisms which allow facilities to reset their baselines.

The Safeguard Mechanism presently allows a facility to surrender credits generated under the Emissions Reduction Fund to comply with its obligations when its baseline is exceeded. The Policy Report recommends allowing facilities to also surrender international credits and permits, with a quantitative limit being imposed on facilities (though it notes that facilities in emission-intensive, trade-exposed industries should be exempt from the quantitative limit).

Emissions Reduction Fund

The Authority supports the continuation of the Emissions Reduction Fund and recommends that the Government continue to hold auctions until the 'enhanced' Safeguard Mechanism provides a source of demand for credits generated under the Emissions Reduction Fund.

> It highlights the significant role that the land sector has played thus far in the Emissions Reduction Fund (and former Carbon Farming Initiative) and recommends that the land sector continue to be covered.

Energy Efficiency

The Policy Reports notes that energy efficiency is one of the fastest and most cost-effective ways to achieve emissions reductions. It recommends that existing state and territory white certificate schemes be harmonised and that the resulting credits be used by liable facilities to meet their obligations under the recommended emissions-intensity scheme for the electricity sector.

Innovation Support

The Policy Report recommends prioritising investment in low-emissions innovation through targeted public funding for research, development and demonstration.

In the Authority's view, most emissions reduction technology is likely to be developed overseas and it recommends that Australian public funding be directed to areas in which Australia has particular challenges, strengths or opportunities and which are less likely to be prioritised by the private sector or other countries. It identifies carbon, capture and storage and agricultural innovation as two such possible areas.

Transport Sector

The Policy Report recommends that in the short-term, Australia should introduce a mandatory carbon dioxide emission standard for light vehicles, the Emissions Reduction Fund continuing to apply to the transport sector until the standard is in place.

The Authority recommends further research in other areas, including a cost-benefit analysis to determine if a carbon dioxide emission standard for heavy vehicles should be adopted, and research into the roles that public and private providers should take in delivering electric vehicle recharging infrastructure.

Waste sector

The Authority considers that the most effective means for reducing emissions from landfill is direct regulation. It states that the Government should commence work to harmonise state-based regulation of emissions from landfills and link such regulation to Australia's emissions reduction targets.

Taking the same approach as it does with the Transport sector, the Authority recommends that the Emissions Reduction Fund apply to the landfill sector until these regulations are in place.

Impacts on Australia's Economy

The Policy Report notes that the costs of emissions reduction policies may disproportionately impact certain industries, regions, and households. It recommends, in general terms, that these impacts should be assessed and that additional support should be provided where adverse economic impacts can be demonstrated.

Minority Report

Two dissenting board members of the Authority who participated in the Special Review process have published a 'Minority Report' which criticises certain aspects of the majority reports.

The key point of disagreement is the failure of the majority to develop policy recommendations linked to a national 'carbon budget' which is consistent with the long term commitments set out in the Paris Agreement.

The minority recommends adopting a cap and trade scheme in the electricity sector and states that the emissions-intensity scheme proposed by the majority would result in lower demand compared with a cap and trade scheme.

It is critical of the majority's emphasis on policy stability, stating that this approach does not provide a balanced assessment of the strengths and weaknesses of existing policies with other market mechanisms, and that considering the political feasibility of policies in developing recommendations reflects a lack of political independence.

The minority criticises the recommended continuation of Direct Action policies. The Minority Report states that the Emissions Reduction Fund in its present form is a 'fiscal drain' and that the 'enhanced' Safeguard Mechanism is unlikely to drive a transition to a low carbon economy because firms will purchase offsets instead of reducing emissions.

The Minority Report also supports a regulated closure of coal-fired power stations.

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.

Elisa de Wit
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”

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions