The White Paper provides significantly more flexibility in
relation to the allocation of acquittal liability within corporate
groups, partnerships and joint ventures than was originally
provided under the Green Paper.
Following various submissions by the mining and petroleum
industry sectors, the White Paper proposes that in addition to the
operational control approach to acquittal liability as set out in
the Green Paper, entities may apply to use a financial control
The Green Paper proposed that the allocation of acquittal
liability under the CPRS should follow the approach in the National
Greenhouse Emissions Reporting Act (NGER Act) by placing acquittal
liability with entities which have operational control over covered
facilities. Operational control is defined under the NGER Act as
the entity which has the power to initiate and implement
environment, health, and safety and operating policies. Although
this approach provides consistency with the NGER Act, it can cause
significant administrative and financial issues in some
This is especially apparent in the mining and petroleum industry
where operators of covered facilities owned by joint venture
participants or partnerships commonly are not a related body
corporate of any of those owners. While this may not pose a
significant issue in terms of a reporting liability, the intended
financial implications of an acquittal liability, without an
ability to readily pass those financial consequences back to the
owners, posed significant concern.
In recognising this concern, the White Paper provides an option
where the scheme regulator may allow entities with financial
control over a covered facility to take on scheme liabilities. This
will only be allowed, however, where the entity with financial
control can demonstrate:
both the transferee and the transferor agree to the transfer of
liability under the scheme
a single entity takes on scheme obligations for a given
facility (that is, multiple parties could not take on obligations
for a single covered facility)
the entity taking on obligations under the scheme agrees to
accept responsibility for emissions reporting for that
the entity that is taking on obligations can demonstrate its
capacity to obtain information to satisfy its reporting
requirements under the NGER Act
the scheme regulator is satisfied that the entity taking on
scheme obligations has the capacity to meet the liability
the entity taking on the liability is incorporated in
the entity taking on scheme obligations agrees to do so for a
minimum of four years.
It is interesting to note that the White Paper also proposes
that if the CPRS regulator approves the transfer of acquittal
liability, the entity taking on the acquittal liability under the
CPRS will also be required to take on the reporting liability for
that reporting facility under the NGER Act.
The White Paper also proposes additional flexibility for
corporate groups where it may be commercially more appropriate for
a subsidiary, rather than a controlling corporation of a corporate
group, to take on the acquittal liability under the scheme. In
order to do this, the same criteria as noted above must be met,
including the requirement that the entity taking on acquittal
liability must also take on reporting liability.
The White Paper also details a variety of other flexibility
mechanisms in regard to unincorporated joint venture agreements,
trusts, partnerships and unincorporated associations in liability
for part years.
Combined, these amendments to the CPRS design provide a
significantly greater degree of flexibility than was originally
proposed in the Green Paper.
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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