Australia: The Carbon Pollution Reduction Scheme Draft Bill

Last Updated: 13 March 2009
Article by Elisa de Wit

On 10 March 2009, the Federal Government released the eagerly anticipated draft Bill designed to introduce the Carbon Pollution Reduction Scheme. The legislation seeks to implement the design of the scheme originally proposed in the Government's Green Paper and more recently set out in the Government's White Paper issued on 15 December 2008 (see our previous legal updates). Minister Wong has described the Bill as containing 'no significant policy changes' from that outlined in the White Paper.

As anticipated, some aspects of the scheme remain to be dealt with through regulations, such as the program which will provide assistance to the emissions-intensive trade-exposed industries. However the draft Bill does provide the working framework for the operation of the scheme, detailing who is liable and how that liability is to be satisfied. This legal update summarises some of the key components of the proposed legislation. Submissions on the draft Bill must be submitted to the Government by 14 April 2009.

Liable entities

As forshadowed by the White Paper, there will be two primary types of liable entities – entities that have operational control over a facility with direct emissions of more than 25,000 tonnes of CO2-e per annum, and fuel importers, producers or suppliers. (One exception to the 25,000 tonnes CO2-e threshold is landfills, where they are located within a certain prescribed distance from another landfill receiving the same type of waste. In this case, the threshold is 10,000 tonnes CO2-e)

Ordinarily, the liability will fall on the controlling corporation (see our legal update on the NGERS for an explanation of this term). However, in some circumstances it may be possible for the controlling corporation to transfer its liability to another corporation within its group or to a corporation that has financial control of the particular facility. In these instances, a Liability Transfer Certificate may be issued by the Authority (see below). Liability Transfer Certificates remain in place indefinitely, but are not transferable. The transfer tests are set out in the draft Bill, as is the definition of 'financial control'.

In relation to the obligations falling on fuel importers, producers and suppliers, there is also a mechanism for shifting liability to other parties in certain circumstances. The draft Bill sets up a system of Obligation Transfer Numbers, which may be issued to large users of fossil fuels and synthetic greenhouse gases. In some circumstances, the holder of an Obligation Transfer Number will be required to take responsibility for surrendering Australian emissions units (see below) to cover the emissions released from the combustion of the purchased fuel.

Australian emissions units

Each year, the Authority will issue Australian emissions units up to the national scheme cap. (The national scheme cap will be set out in regulations and it is intended that regulations specifying the first five years of scheme caps will be made before 1 July 2010.) One Australian emissions unit will represent one tonne of CO2-e.

The Australian emissions units will belong to a financial year and will have a unique identification number. They will be personal property, and will be transferable.

The majority of Australian emissions units will be sold through auction. Details of the auctioning procedures will be released in a further discussion paper. A proportion of the total yearly issued units will be provided, without fee, to the emissions-intensive trade-exposed industries and coal-fired electricity generators.

Liable entities will be required to surrender sufficient eligible emissions units to cover their emissions for a financial year. Eligible emissions units include Australian emissions units or certain approved Kyoto Protocol emissions units. Once an emissions unit is surrendered it is cancelled. It is also possible to buy units for voluntary cancellation.

It will be possible to use Australian emissions units issued in earlier years to satisfy a liability in a later year (known as 'banking'). It will also be possible to use Australian emissions units issued for the following year for up to 5% of an entity's emissions liability (known as 'borrowing').

If insufficient emissions units are surrendered to cover an entity's emissions liability, it will be required to pay a penalty. The penalty will apply to the shortfall amount. It will either be a fixed amount prescribed by regulations, or if no regulations are in place, it will comprise 110% x the benchmark average auction price for the previous financial year. In addition to the penalty, the entity will also be required to 'make good' its shortfall (i.e by purchasing emissions units to cover the shortfall).

Australian Climate Change Regulatory Authority

The Carbon Pollution Reduction Scheme will be administered by a new authority which will be established under the Australian Climate Change Regulatory Authority Bill 2009. This Authority will also administer the reporting regime established under the National Greenhouse and Energy Reporting Act 2007, and the expanded renewable energy regime (see our legal update).

Compliance issues

The draft Bill specifically seeks to regulate actions that may be taken by entities to escape or avoid liability under the scheme. For example, if the Authority considers that an arrangement has been entered into with the purpose of seeking to avoid triggering a threshold, it can determine that the relevant entity is not entitled to obtain the benefit of the relevant threshold. These provisions apply to any arrangement put in place after 15 December 2008 (i.e the date of release of the White Paper).

If a person is convicted of an offence relating to fraudulent conduct, and that conduct has involved the issuing of Australian emissions units, the court may order that the person must relinquish a specified number of units. In practice, this provision of the draft Bill will only apply where emissions units have been issued without charge, such as those proposed to be issued to the emissions-intensive trade-exposed sectors and coal-fired electricity generators.

The draft Bill expands upon the corporate liability arrangements contained within the National Greenhouse and Energy Reporting Act 2007, by expanding possible liability to all executive officers of a company, rather than just the Chief Executive Officer. The draft Bill provides that if a company contravenes a civil penalty provision, and an executive officer was involved in the contravention, that person will also contravene a civil liability provision.

Penalties for contravention of civil penalty provisions are up to $1,000,000 for a body corporate and up to $200,000 for an individual. Proceedings can be commenced up to 6 years after the contravention.

There are also significant penalties (up to $1,000,000 or 10 years imprisonment) if a person enters an arrangement to avoid an existing or future liability to pay a penalty for an emissions unit shortfall.

Further information

There are specific parts of the draft Bill dealing with the assistance to be provided to coal-fired electricity generators, the free emissions units to be created through reforestation and destruction of synthetic greenhouse gases. If you require information on these aspects, or further information on the matters covered above, please do not hesitate to contact us.

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.

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