Australia: Paris Agreement commencement puts the climate change ball back into Australia's court

Climate policy in Australia will become a key area of focus over the next 12 months following the Paris Agreement commencement and domestic developments.

The Paris Agreement will enter into force on 4 November 2016 following the announcement on the 5 October 2016 that at least 55 Parties to the Convention that account for at least approximately 55% of the total global greenhouse gases had ratified, accepted or approved the instrument.

Australia is yet to ratify the Agreement and will review its domestic climate change policies in 2017.

Paris Agreement's condition for the entry into force is satisfied

The Paris Agreement, agreed at the COP21 on 12 December 2015, contained a condition that it would enter into force on the 30th day after at least 55 Parties to the Convention accounting for at least approximately 55% of the global greenhouse emissions had ratified, accepted, approved or accessioned the Agreement.

On 5 October, this threshold was reached and currently the Paris Agreement has been ratified by 84 Parties. Some Parties who have ratified, accepted or approved the Agreement include the USA, the UK and Northern Ireland, the EU, New Zealand, Canada, China, India, France and Germany. This shows a commitment to the Agreement by some of the world's largest emitters in a remarkable speed.

In contrast, the 1997 Kyoto Agreement, which had an identical condition, experienced immense opposition from the USA and ultimately took eight years to come into effect. One possible the reason behind the rapid entry into force of the Paris Agreement may be that the Agreement itself does not have binding emission reduction targets, but rather requires member countries to make voluntary commitments through Nationally Determined Contributions.

The road to Australia's ratification of the Paris Agreement

Australia has not yet ratified the Paris Agreement, although it is expected to do so before the end of this year. Now that the USA, China and India have ratified the Paris Agreement, Australia will likely feel international pressure to ensure that its domestic policies implement the Paris Agreement.

In July, the United Nations reviewed Australia's climate change policies and expressed concerns that Australia's emissions are continuing to increase. In response, Parties including the US, China and New Zealand posed a number of questions to Australia regarding its methods for calculating emissions and its progress in achieving emission targets. Australia is expected to answer these questions before COP22 in Marrakech in November.

On 31 August 2016, the Government tabled the Paris Agreement for Parliamentary scrutiny. The Joint Standing Committee on Treaties received public submissions on the Paris Agreement up until 7 October; it will produce a report which will be considered by the Federal Government before ratification can take place.

The Government has also committed to a review of its domestic climate change policies during 2017. Although the terms of reference for the review are currently being prepared, it remains to be seen if the review will consider whether the generous baselines under the Safeguard Mechanism need to be reduced to assist Australia achieve its 2030 emissions reduction targets of 26-28% below 2005 levels.

The review will likely need to examine how the Emissions Reduction Fund (ERF) can transition from a publicly funded abatement program, and the potential for international credits to be used by emitters to meet any compliance obligation. Organisations, such as the Carbon Market Institute and the International Emissions Trading Association, have recently encouraged the Government to make changes to tighten the baselines under the Safeguard Mechanism, review the ERF process and consider the implementation of international carbon markets as a means of assisting Australia to meet its international commitments.

What's next?

The entry into force of the Paris Agreement has been seen as a historic moment, if only because of the rapidity with which it has occurred. Australia may face international criticism if it does not take action to ratify the Agreement quickly. Even after the Agreement is ratified, Australia will have to ensure that it implements domestic policies consistent with achieving its committed target. The convergence of the coming into force of the Paris Agreement and the 2017 review means that climate policy in Australia will become a key area of focus over the next 12 months.

RELATED KNOWLEDGE

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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