Clean energy law in Australia
 9780409332247, 0409332240

Table of contents :
Cover Page
Full Title
Copyright
Foreword
Publisher's Note
Preface
Table of Cases
Table of Statutes
Directory
Table of Contents
Chapter 1 - Legal Framework
Introduction
Sources of law
Snapshot
National legal framework - Carbon pricing mechanism
Clean Energy Act 2011 (Cth)
National Greenhouse and Energy Reporting Act 2007 (Cth)
Fuel Tax Act 2006 (Cth)
Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth)
National legal framework - Energy efficiency
Energy Efficiencies Opportunities Act 2006 (Cth)
Building Energy Efficiency Disclosure Act 2010 (Cth)
National legal framework - Renewable energy
Renewable Energy (Electricity) Act 2000 (Cth)
National legal framework - Land sector
Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth)
Regulatory oversight
Clean Energy Regulator
Australian Climate Change Authority
Land Sector and Biodiversity Board
Productivity Commission
Australian Competition and Consumer Commission
International framework
United Nations Framework Convention on Climate Change
Kyoto Protocol to the UNFCCC
Ongoing modifications and additions to the UNFCCC
Linking
Australian targets and caps
Chapter 2 - Registration, Measurement and Reporting
Introduction
Sources of law
Who must register?
Controlling corporation
Controlling corporation's group
Liable entity
Person who may reasonably be expected to be liable
Tests for registration
Emissions threshold for registration by controlling corporation
Group threshold for emissions and energy
Threshold for facility
Prorated threshold
Exceptions from threshold
Emissions threshold for registration by liable entity
Emissions threshold for registration by person who is a potential liable entity
Emissions
Emissions of GHG
Covered emissions
Greenhouse gases
Release into the atmosphere
Direct result
Territorial nexus
Facility
NGER reporting regulations requirements for facility
Industry sector
Operational control
Tie-breaker tests for operational control
Rules for joint ventures
Rules for trusts with multiple trustees
Consumption of energy
Production of energy
Energy
Eligible financial year
Voluntary registration
Time for registration
Form for registration
Registration application by controlling corporation
Registration application by liable entity
Online registration
Penalty for failing to register
Register of registrations
How are greenhouse gases measured?
Overview of NGER (Measurement) Determination
Emissions sources
Categories of scope 1 emissions
Units of measurement
Carbon dioxide equivalence and global warming potential
Measurement methods
Uses of methods
Due diligence for methods
Rules for methods
Carbon capture and storage
Continuous emissions monitoring
Example - coal mining: fugitive emissions - underground mining activities
Available methods
Fugitive emissions from extraction of coal
Example - coal mining: fugitive emissions - open cut mines
Available methods
Fugitive emissions from extraction of coal
Uncertainty
Guidance
Reporting obligations: who must report?
Report by registered corporation
Report by responsible member of a controlling corporation's group
Report by liable entities
Report by holders of liability transfer certificate
Time for reporting
Scope of information to be reported
Reporting information about persons and facilities
Reporting scope 1 and scope 2 emissions
Scope 1 emissions from fuel combustion
Scope 1 emissions from particular sources
Example - reporting GHG emissions from coal mining
Reporting energy production
Reporting energy consumption
Reporting primary or secondary fuels and energy commodities
Other general reporting requirements
Reporting aggregated amounts from facilities
Reporting percentages of emissions and energy
Reporting about incidental emissions and energy
Reporting for facilities that are networks and pipelines
Reporting for facilities that are vertically integrated production processes
Reporting about contractors
Reporting a change in principal activity for a facility
Reporting if no group thresholds met
Reporting of information by another person
Reporting liability and related matters under the Clean Energy Act 2011 (Cth)
Special reports
Greenhouse gas projects
Offsets of greenhouse emissions
Form for reporting
On-line report
Penalty for failing to report
Deregistration
Declaration by the regulator of facilities and/or operational control
Declaration of a facility - corporate group
Declaration that a corporation has operational control of a facility - corporate group
Declaration of a facility - non-group entity
Declaration that a corporation has operational control of a facility - non-group entity
Chapter 3 - Liability under the Clean Energy Act 2011 (Cth)
Introduction
Sources of law
Direct emitters
Introduction to Division 2
Person
General rules for liability for non-landfill facilities
General rules for liability for landfill facilities
General rules for liability of participants in designated joint ventures
General rules for liability of holders of a liability transfer certificate
Facilities in the joint petroleum development area and greater sunrise unit area
Natural gas suppliers
Introduction to Division 3
Liable entity for the supply of natural gas
Liable entity if a person quotes their obligation transfer number
Liable entity if a person misuses their obligation transfer number
Gaseous fuel suppliers
Introduction to Division 3A
General rules for liability for import of LPG or LNG for non-transport use
General rules for liability for production of LPG or LNG for non-transport use
Liable entity if a person quotes their obligation transfer number
Liable entity if a person misuses their obligation transfer number
Obligation transfer numbers
Introduction to Division 4
Surrendering or cancelling an OTN
Quoting an obligation transfer number
Accepting or refusing to accept the quotation of an obligation transfer number
Mandatory quotation of OTN
Voluntary quotation of OTN
Withdrawing the quotation of an OTN
Misuse of an OTN
Quotation of a bogus OTN
OTN Register
Joint ventures
Introduction to Division 5
Mandatory designated joint venture
Declared designated joint venture
Allocation of liability in a joint venture - participating percentage determination
Should an unincorporated joint venture become a designated joint venture or allocate liability using a liability transfer certificate?
Liability transfer certificates
Introduction to Division 6
Transfer of liability to another member of a corporate group
Transfer of liability to a person who has financial control of a facility
Duration of a liability transfer certificate
Surrender of a liability transfer certificate
Cancellation of a liability transfer certificate
Opt-in Scheme
Chapter 4 - Emissions Units
Introduction
Sources of law
The Australian National Registry of Emissions Units
Registry accounts
Opening a registry account
Entries in registry accounts
Eligible emissions units
Carbon units
Australian carbon credit units
Eligible international emissions units
Original issues of carbon units
Fixed charge carbon units
Auction of carbon units
Free carbon units
Surrendering eligible emissions units
Timing rules for surrender
Surrendering carbon units
Surrendering eligible Australian carbon credit units
Surrendering eligible international emissions units
International unit surrender charge
Borrowing carbon units
Cancelling emissions units
Transfer of emissions units
Transfer mechanics
Deferral of transfers
Relinquishment of carbon units
Relinquishment mechanics
Relinquishment for fraudulent conduct
Relinquishment under the Jobs and Competitiveness Program
What happens to carbon units after relinquishment?
Non-compliance with a relinquishment notice
Title in emissions units
Emissions units as personal property
Indefeasibility of title
Dealing with emissions units
Australian financial services licence
Special dealings in emissions units
Suspending a Registry account
Appendix - Activity definitions for Jobs and Competitiveness Program
Chapter 5 - Special Topics
Introduction
Anti-avoidance
Tests
Section 29 factors
Publication of avoidance determination
Audit
Sources of law
Pre-submission audit
Compliance audit - suspected non-compliance
Compliance audit - general
Conduct of audits
Greenhouse and energy auditors
Constitutional foundation
Is the charge for carbon units a tax?
Liability of executive officers
Pecuniary penalty
Defence
Information disclosure
Publication of emissions and energy data
Liable entities public information database
Disclosure requirements of the Corporations Act 2001 (Cth)
ASX listing rules
International linking
Background
Importing
Exporting
Limitations to linking
International unit surrender charge
Record-keeping
Sources of law
Compliance with record-keeping requirements
Record-keeping requirements - general
Record-keeping requirements - applications to the regulator
Record-keeping requirements - reports submitted to the regulator
Record-keeping requirements - OTNs
Taxation
Goods and services tax
Income taxation
Stamp duty
Unit surrender shortfalls and unit shortfall charge
Unit shortfalls
Unit shortfall charge
Late payment penalty
Default assessment
Remission
Unit surrender surplus
Provisional surplus surrender number - fixed charge year
Surplus and estimation error adjustment number - fixed charge year
Final surplus surrender number - fixed charge year
Surplus surrender number - flexible charge year
Appendix
Chapter 6 - Enforcement Powers of the Regulator
Introduction
Sources of law
Information and document gathering powers
Section 71 notice to give compellable information
Section 221 notice to give information or produce documents
Retention of documents by the regulator
Claims for legal professional privilege and self-incrimination
Monitoring compliance
Appointment of authorised officers and inspectors
Issue and use of identity cards
Exercise of power under the directions of the regulator
Entering premises
Monitoring powers
Asking questions and seeking production of documents
Procedures for obtaining monitoring warrant
Form of monitoring warrant
Civil penalty provisions
Excuse for mistake of fact
Continuing contraventions
Court powers to order civil penalty
Civil enforcement of penalty
Infringement notices
Basis for issuing an infringement notice
Form of infringement notice
Infringement penalty
Withdrawal of an infringement notice
Effect of paying the infringement notice
Savings for civil penalty proceedings
Enforceable undertakings
Acceptable undertakings
Enforcement of undertakings
Monitoring compliance with the undertaking
Criminal sanctions
Offences under the Criminal Code Act 1995 (Cth)
Offences relating to unit shortfall charge
Offence to obstruct the exercise of a warrant
Offences in the Australian National Registry of Emissions Units Act 2011 (Cth)
Appendix - Civil penalty provisions, penalties and infringement notice penalties
Chapter 7 - Review and Appeals
Introduction
Source of law
Processes and rules
Process for internal reconsideration by the regulator
Time limit for requesting internal review
Grounds for reconsideration by the regulator
Time limit for reconsideration of original decision
Process for review by the Administrative Appeals Tribunal
Time limit for application for review
Merits review
Judicial review
Appeal to Federal Court of Australia
Further appeals
Appeal under the Administrative Decisions (Judicial Review) Act 1977 (Cth)
Effect of review or appeal on monies owing to the regulator
Liability for compensation and damages
Index

Citation preview

Clean Energy Law in Australia Dr Damien Lockie BEcon, LLB, LLM (Monash), PhD (Bond) Barrister and Mediator, Victorian Bar Adjunct Professor of Law Director of Clean Energy Research, Centre for Law Governance and Public Policy, Bond University

Australia 2012

AUSTRALIA

ARGENTINA AUSTRIA BRAZIL CANADA CHILE CHINA CZECH REPUBLIC FRANCE GERMANY HONG KONG HUNGARY INDIA ITALY JAPAN KOREA MALAYSIA NEW ZEALAND POLAND SINGAPORE SOUTH AFRICA SWITZERLAND TAIWAN UNITED KINGDOM USA

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National Library of Australia Cataloguing-in-Publication entry Lockie, Damien

Clean energy law in Australia/Damien Lockie. ISBN 9780409332230 (pbk.) ISBN 9780409332247 (ebook) Includes index. Carbon taxes — Law and Legislation — Australia Clean energy investment — Australia. Emissions trading — Law and legislation — Australia. Environmental policy — Australia. 346.940467916 ©2012 Reed International Books Australia Pty Limited trading as LexisNexis This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Printed in Australia. Visit LexisNexis Butterworths at www.lexisnexis.com.au

Foreword The passage of the Clean Energy Act 2011 on 8 November 2011 ushered in a new phase of Australia’s commitment to a clean energy future. The Act is the centrepiece of a suite of new and existing laws specifically designed to give effect to Australia’s international obligations and implement appropriate and effective domestic arrangements. Clean energy laws affect industry participants and the economy at large in direct, substantial and ongoing ways. Programs such as the carbon pricing mechanism, the National Greenhouse and Energy Reporting Scheme, the Renewable Energy Target, and the Carbon Farming Initiative are the practical application of the laws. For its part, the Clean Energy Regulator has the day to day responsibility for administering these programs and enforcing the laws. In fulfilling these functions, the Clean Energy Regulator recognises that engagement, education and support assist industry participants to meet obligations and avoid inadvertent non-compliance. In cases of deliberate non-compliance, the Clean Energy Regulator enforces the law and seeks appropriate penalties. By bringing together the various laws and programs in one volume, Clean Energy Law in Australia makes an important contribution. When used in conjunction with the guidance and materials released by the Clean Energy Regulator through its website and education program, Clean Energy Law in Australia will promote wider understanding of the way the law operates, how businesses can comply with the law in their current and future activities, and how the law will be applied and enforced by the Clean Energy Regulator. I commend Clean Energy Law in Australia to all those interested in the clean energy laws of Australia and the role of the Clean Energy Regulator. The text will be particularly useful to practitioners, scholars and students, and provide them with a comprehensive summary of the laws as they stood at 1 July 2012. Chloe Munro Chair and CEO, Clean Energy Regulator August 2012

Publisher’s note Legislation The publisher, authors, contributors and endorsers of this publication each excludes liability for loss suffered by any person resulting in any way from the use of, or reliance on, this publication. © LexisNexis. The legislation reproduced in this work does not purport to be an official or authorised version.

Preface Since the turn of this century, the Australian government has introduced a range of legislation and more than 80 initiatives to encourage a reduction of emissions of greenhouse gases (GHG) by businesses and citizens. The policy dimensions that set the change in desired behaviour (for example, in the mix and pricing of fossil fuel energy production and consumption) and thus lay the foundation for the Australian government’s clean energy future comprise: a mandatory renewable energy target (in place from 2001), energy efficiency measures (in place from 2006), action on the land to incentivise land use change (in place from 2011), and a carbon pricing mechanism (starting from 1 July 2012). The carbon pricing mechanism is designed to arrest anthropogenic influence over adverse climate change by encouraging the use of clean energy.1 A new statutory right, a “carbon unit” is created by the Clean Energy Act 2011 (Cth). When a carbon unit is “surrendered” to the new regulator, the Clean Energy Regulator, each carbon unit will allow the emission of one metric tonne carbon dioxide equivalent greenhouse gases in Australia.2 Emissions of greenhouse gases will bear a cost based on the price for carbon units. The new statutory right becomes the unit of currency in the carbon pricing mechanism. In the period to 30 June 2015 the price of carbon units is fixed, starting at $23 per carbon unit. From 1 July 2015 to 30 June 2018, the price of carbon units is not fixed, however the price will be subject to a floor price and a ceiling price. From 1 July 2018, the price of carbon units will be determined by the carbon markets. This book presents a detailed study of the Clean Energy Act 2011 (Cth) and the related Acts and Regulations that form the centre-piece for Australia’s carbon pricing mechanism. The ambition of the Clean Energy Act 2011 (Cth) is noble: chief among its objects is the support of “Australia’s economic growth while reducing

pollution”.3

What is the pollution problem? Scientific and academic researchers and regulators have correlated polluted air with adverse effects on the health of humans,4 the climate,5 and economic costs.6 Earth’s atmosphere (together with the ecosystem) has established the necessary conditions for the creation and sustaining of human kind. Each individual is uniquely connected to and through the biosphere.7 The biosphere comprises air, land, surface rocks, and water in a global ecological system that integrates all living beings and their relationships, including their interaction with the elements of the lithosphere (solid outermost shell of the planet), hydrosphere (the collective mass of water found on and under the surface of the planet), and the atmosphere.8 As HRH Prince Charles recently observed: When it comes to the air we breathe and the water we drink, there are no national boundaries. We all depend on each other — and, crucially, on each other’s actions — for our weather, our food, our water and our energy. These are the “tectonic plates” on which the peace and stability of the international community rest.9

Blacks’ Law Dictionary (Thomson Reuters, 8th ed, 2004) defines “to pollute” as “to corrupt or defile; to contaminate the soil, air or water with noxious substances.” In economic theory, pollution10 is an externality — a cost or a benefit that is not reflected in the price of a good or service11 — which compendiously describes the waste (residual) products of human existence, production and consumption.12 Using the “spaceship earth” analogy of Georgescu-Roegen (1994): what goes into the economic process represents valuable natural resources and what is thrown out of it is valueless waste…. From the viewpoint of thermodynamics, matter-energy enters the economic process in a state of low entropy and comes out of it in a state of high entropy.13

Greenhouse gases are uniformly mixed, accumulative air pollutants.14 Emissions of greenhouse gases are treated as a negative externality because the negative costs to the environment (for example, damage incurred by emissions from electricity generation) are not reflected in the cost of the final product (for example, electricity used in an industrial factory). The Clean Energy Act 2011 (Cth) enjoins emissions of GHG as air pollution.15

The problem of air pollution however is not new, and indeed, it may not be soluble. With each in-breath,16 humans have always,17 and humans are likely for always,18 to inhale whatever pollution may be in the air. Pollutants are natural constituents of the air. Even without man and his technology, plants, animals, and natural activity would cause some pollution. For example, animals vent carbon dioxide, volcanic action produces sulfur oxides, and wind movement insures that there will be suspended particulates.19

Nonetheless, the Clean Energy Act 2011 (Cth) makes a start to a solution for reducing man-made GHG emissions.

The Australian carbon pricing mechanism The carbon pricing mechanism is modelled20 on a cap-and-trade emissions trading scheme, favoured by a series of Australian governments as the policy21 of choice for achieving reduction action on greenhouse gas emissions. From 1 July 2012, desired GHG emission reductions are to be achieved by liable entities. A cap-and-trade emissions trading scheme is a market-based approach through which greenhouse gas emissions can be reduced if: the cap (maximum limit) established for emissions is fixed or reducing “emission entitlements” are defined as a commodity with assigned property rights, and the commodity is allowed to be traded. An emissions target establishes the “cap” in a cap-and-trade scheme. The cap represents a numerical emission reduction objective for entities covered by the scheme, and is most often measured as the reduction of a percentage of a base year’s emission level within a period of time (ie five per cent reduction below 2000 levels by 2020). The cap normally would be beyond the projected business as usual (BAU) emissions trajectory. Each created “emission unit” covers 1t CO2-e GHG emissions. Property rights are embodied in the ownership of the emissions unit, with the ability to freely transfer this unit from one legal entity to another, at a price agreed by the parties.

Eligible emissions units have a commercial value. This means that an entity can either choose to abate emissions, or purchase emissions units from other entities that face lower abatement costs. This allows abatement to occur at the lowest cost, as Tietenberg (2006) explains: When emissions permits are transferable, those plants that can control most cheaply find it in their interest to control a high percentage of their emissions because they can sell the excess permits. Buyers can be found whenever it is cheaper to buy permits for use at a particular plant than to install more control equipment. Whenever an allocation of control responsibility is not cost-effective, further opportunities for trade exist. When all such opportunities have been fully exploited, the allocation would be cost-effective.22

Generally, the total number of emissions units reduces over the life of the scheme, decreasing the emissions cap and driving further emissions reductions by constrained supply of emissions units and increasing prices. Under market-based approaches, the government cannot control both the price and the quantity of emissions.23 A cap-and-trade emissions trading scheme allows the government to control the quantity of emissions, but not the price of emissions units. This contrasts with a carbon tax, which would enable a government to control the price, but not the quantity, of emissions. An emissions trading scheme specifically tailored to the Australian economy was outlined in 2008 by Professor Ross Garnaut in the Garnaut Climate Change Review.24 In advocating for an Australian emissions trading scheme Professor Garnaut, said: An emissions trading scheme will not be the best instrument of greenhouse gas emissions reduction in every country. It is, if designed and implemented well, the best approach for Australia.25

The Garnaut Climate Change Review was contemporaneous with a July, 2008 Green Paper26 and a 15 December, 2008 White Paper27 released by the then Department of Climate Change. Former Prime Minister the Hon Kevin Rudd MP tried unsuccessfully (three times) to introduce an emissions trading scheme for Australia in 2009 and early 2010.28 On 24 February 2011, a Multi-Party Climate Change Committee29 chaired by Australia’s Prime Minister the Hon Julia Gillard MP proposed a carbon price framework for Australia starting 1 July 2012 with “a fixed price (through the issuance of fixed price units within an emissions trading scheme) before converting to a cap-and-trade emissions trading scheme.”30 The formal announcement of the carbon pricing mechanism, together with extensions to renewable energy, energy efficiency and action in the land sector, and new funds, grants and assistance programs to support new investment and technology was made by the Australian Government in Securing Australia’s Clean Energy Future: The Australian Government’s

Climate Change Plan released on Sunday, 10 July 2011. Less than two months elapsed between the release of draft legislation for public comment and the introduction of the Clean Energy Bill 2011 (Cth) into the House of Representatives on 13 September 2011 and in an historic vote on 8 November 2011, the clean energy future laws package had passed both Houses of Parliament.

Structure of the book In order for the reader to grasp the Australian and international context for the carbon pricing mechanism Chapter 1 sets the legal framework. The chapter collates and summarises the more than 25 laws for clean energy in Australia: the carbon pricing mechanism, the imposition of a price on carbon in fuel and synthetic greenhouse gas, energy efficiency, renewable energy and land sector action. Chapter 1 places the Clean Energy Act 2011 (Cth) into the international context and an emerging global market for carbon trading. Australia has not acted alone. An objective of the Clean Energy Act 2011 (Cth) is to give effect to Australia’s international obligations under the United Nations Framework Convention on Climate Change31 and the Kyoto Protocol.32 Other countries also already have emissions trading schemes in place. The most prominent cap-and-trade emissions trading scheme is the European Union Emissions Trading System (EU ETS)33 operational from 1 January 2005.34 Since 1 January 2008, New Zealand has had in place the New Zealand Emissions Trading Scheme (NZ ETS)35 and from 1 January 2013, California will commence the California Emissions Trading Scheme.36 Between 2013 and 2016, China will also introduce six greenhouse gas emissions trading schemes.37 Chapter 2 discusses registration, measurement and reporting of greenhouse gases under the National Greenhouse and Energy Reporting Act 2007 (Cth) and its subordinate instruments, the National Greenhouse and Energy Reporting Regulations 2008 (Cth) and the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth). These are necessary first steps to determination of liability under the Clean Energy Act 2011 (Cth), but many entities will still be required to report under the NGER Act independently of any liability for greenhouse gas emissions. The rules in Pt 3 of the Clean Energy Act 2011 (Cth) for determining liability for greenhouse gas emissions are the subject of Chapter 3.

Chapter 4 considers all aspects of emissions units: acquisition, cancellation, relinquishment, trading and surrender. The chapter also reviews the requirements for opening and using Registry accounts under the Australian National Registry of Emissions Units Act 2011 (Cth) and dealings in emissions units as financial products under the Corporations Act 2001 (Cth). Chapter 5 deals with anti-avoidance, audits, constitutional foundation, information disclosure, international linking, liability of executive officers, record keeping, taxation (goods and services tax and income tax) and unit surrender shortfalls and shortfall penalties. The powers of enforcement vested in the regulator are analysed in Chapter 6, and Chapter 7 deals with reviews and appeals. The book consolidates all relevant Acts comprising the clean energy future laws package and other relevant Acts intersecting with the carbon pricing mechanism, to reflect amendments made to them by the Clean Energy (Consequential Amendments) Act 2011, as effective from 1 July 2012. The analysis in the book also incorporates all relevant regulations and determinations promulgated through 30 June 2012, up to and including: Clean Energy Amendment Regulation 2012 (No 1) (Cth); Clean Energy Amendment Regulation 2012 (No 2) (Cth); Clean Energy Amendment Regulation 2012 (No 3) (Cth); Clean Energy Amendment Regulation 2012 (No 4) (Cth); National Greenhouse and Energy Reporting Amendment Regulation 2012 (No 1) (Cth); Australian National Registry of Emissions Units Amendment Regulation 2012 (No 1) (Cth); and Australian National Registry of Emissions Units Amendment Regulation 2012 (No 2) (Cth). Where appropriate, commentary and references have incorporated bills, regulations and consultative draft regulations released prior to publication but not enacted or promulgated by 30 June 2012. Every effort has also been made to anticipate other updates that will be necessary to regulations and determinations, especially if they will be due for a major update and consolidation from 1 July 2012. The Clean Energy Regulator commenced operating on 2 April 2012 and since then has released a stream of information on its website,

www.cleanenergyregulator.gov.au. Publicly available guidance from the regulator through 30 June 2012 has been included. Many people have helped this book emerge from an idea. Initial inspiration came from Professor Michael Weir, Associate Dean of Research at Bond University and Professor Peter Zablud, program director of the Zelman Cowen Centre at Victoria University. Professor Patrick Keyzer, director of the Centre for Law, Governance and Public Policy in the Law Faculty of Bond University, Associate Professor Tina Hunter and my other colleagues in the Centre also motivated me. I owe special thanks to my dedicated team of research assistants, Astrid Edwards, Richard Hundt and Tom Harrison. Each of them has encouraged and supported me. Each of them has made an extensive and invaluable contribution to the work. I owe thanks to Mr Jeff Lynn, a leading environmental law partner with Ashurst for review of early draft chapters, and also to senior officers of the Clean Energy Regulator for extremely helpful feedback on the text. Any errors or omissions are mine. The publishing team at LexisNexis have been outstanding. Linda Boer, Carlo Santa-Barbara, Angus Tainsh, Hayley Moore and my editor, Susan Seccombe, have all worked tirelessly in the timeframe to ensure the timely release of this work. Concurrently, we have all been working on the launch by LexisNexis of an on-line subscription for Clean Energy Law in Australia, a service which will become the one-stop reference portal for commentary and up-to-date clean energy law in Australia. To my family; Maureen and Darren, thanks for your support. I also owe a special debt of gratitude and special thanks to my partner Rob, for all her encouragement, support and understanding. Damien Lockie Melbourne, August 2012 1 Clean Energy Act 2011 (Cth) s 4. 2 Abbreviated to 1 t CO -e GHG. 2 3 Clean Energy Act 2011 (Cth) s 3(d)(iii). 4 Majid Ezzati et al (eds), “Comparative Quantification of Health Risks: Global and Regional Burden of Disease Attributable to Selected Major Risk Factors” (Report, World Health Organization, 2004); United States Environment Protection Authority, Endangerment and Cause or Contribute Findings for

Greenhouse Gases, (Report, EPA-HQ-OAR-2009-0171; FRL–9091–8, RIN 2060–ZA14, 15 December 2009). 5 The Intergovernmental Panel on Climate Change in its “Summary for Policymakers of the Synthesis Report of the IPCC Fourth Assessment Report” note that “most of the observed increase in globallyaveraged temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic GHG concentrations.” (Report, Intergovernmental Panel on Climate Change, 2007) 5 (emphasis in original). 6 Ross Garnaut, “Final Report to the Commonwealth, State and Territory Governments of Australia” (Report, Garnaut Climate Change Review, 30 September 2008); Ronald G Ridker, Economic Costs of Air Pollution (Praeger, 1967); Sir Nicholas Stern, The Economics of Climate Change: The Stern Review (Cambridge University Press, 2007). Cf Nigel Lawson, An Appeal to Reason: A Cool Look at Global Warming (Duckworth Overlook, 2008). 7 The biosphere is “the place on earth’s surface where life dwells.” Eduard Suess, Die Entstehung Der Alpen [The Origin of the Alps] (W Braunmuller, 1875). 8 James Lovelock, Gaia: A New Look at Life on Earth (Oxford University Press, 2000). The biosphere is defined by Lovelock as “the three-dimensional geographic region where living organisms exist.” 9 HRH Prince Charles, “The Eyes of the World are Upon You” (speech at the Copenhagen Climate Summit, Copenhagen, 15 December 2009). 10 “Pollution” is the noun of “pollute” and the product of a “pollutant.” 11 James E Meade, The Theory of Economic Externalities (AW Sijtoff, 1973). 12 Ayres and Kneese (1969) claimed that “residuals disposal involves a greater tonnage of materials than basic materials processing.” Robert U Ayres and Allen V Kneese, “Production, Consumption, and Externalities” (1969) 59 The American Economic Review 282. 13 Nicholas Georgescu-Roegen in “The Entropy Law and the Economic Problem” in Herman E Daly and Kenneth N Townsend (eds), Valuing the Earth: Economics, Ecology, Ethics (The MIT Press, 1994). 14 Tom H Tietenberg, Environmental and Natural Resource Economics (Pearson Addison Wesley, 7th ed, 2006). 15 “Carbon pollution” is a short-hand expression for atmospheric emissions of greenhouse gases. Other environmental, health and planning laws in Australia, the United States of America and in other countries all relevantly and separately define “air pollutant.” For example, Clean Air Act (US) (42 USC 85) §7602(g) defines “air pollutant” to include “any air pollution agent or combination of such agents, including any physical, chemical . substance or matter which is emitted into or otherwise enters the atmosphere.” In Massachusetts et al v Environmental Protection Agency 549 US 497 (2007), the Supreme Court of the United States (Scalia J, dissenting) held that the above definition “embraces all airborne compounds of whatever stripe” (at 529). Nagle (2009) argues that “everything is pollution.” John Copeland Nagle, “Climate Exceptionalism” (09-37, University of Notre Dame, 2009). 16 See Gabrielle Walker, An Ocean of Air (Houghton Mifflin Harcourt, 2007); Susan E Alexander, Stephen H Schneider and Kalen Lagerquist, “The Interaction of Climate and Life” in Gretchen C Daily (ed), Nature’s Services: Societal Dependence on Natural Ecosystems (Island Press, 1997); A Barrie Pittock, Climate Change: The Science, Impacts and Solutions (CSIRO Publishing, 2nd ed, 2009). 17 At least, starting from 400 BC with Hippocrates, On Airs, Waters and Places (Francis Adams trans, Internet Classics Archive, first published circa 400BC, Internet Classics Archive ed) Certainly, this also appears to have been the case for London for most of its history: see s Hipkins and s F Watts, “Estimates of Air Pollution in York 1381 to 1891” (1996) 2(3) Environment and History 337; Peter Brimblecombe, The Big Smoke: A History of Air Pollution in London since Medieval Times (Methuen, 1987). 18 Michael Brauer, “Sources, Emissions, Concentrations, Exposures and Doses” in David V Bates and

Robert B Caton (eds), A Citizen’s Guide to Air Pollution (David Suzuki Foundation, 2nd ed, 2002) 11. 19 Lester B Lave and Eugene P Seskin, “Air Pollution and Human Health” (1970) 169 Science 723. 20 The theoretical foundation for emissions trading schemes follows: Ronald H Coase, “The Problem of Social Cost” (1960) 3 Journal of Law and Economics 1; Thomas D Crocker, “The Structuring of Atmospheric Pollution Control Systems” in Harold Wolozin (ed), The Economics of Air Pollution (Norton, 1966); William J Baumol and Wallace E Oates, “The Use of Standards and Prices for Protection of the Environment” (1971) 73 Swedish Journal of Economics 42; John H Dales, Pollution property & prices (University of Toronto Press, 1968);W David Montgomery, “Markets in licenses and efficient pollution control programs” (1972) 5 Journal of Economic Theory 395; Tom H Tietenberg, “Emissions trading: an exercise in reforming pollution policy” (Policy Brief, Resources for the Future, 1985). 21 Early work in Australia included six reports between 1999 and 2002 by the Australian Greenhouse Office (Australian Government, Australian Greenhouse Office, “National Emissions Trading Discussion Papers 1–6” (1999–2002)) and in 2007 a “Report of the Task Group on Emissions Trading” by the Department of Prime Minister and Cabinet (Report, Australian Government, Prime Ministerial Task Group on Emissions Trading, 2007). 22 Tom H Tietenberg, Emissions Trading: Principles and Practice (Resources for the Future, 2nd ed, 2006) 27. 23 Martin L Weitzman, “Prices vs. Quantities” (1974) 41 Review of Economic Studies 477. 24 Ross Garnaut, “Final Report to the Commonwealth, State and Territory Governments of Australia” (Report, Garnaut Climate Change Review, 30 September 2008). 25 Ibid xxxii. 26 Department of Climate Change Australian Government, “Carbon Pollution Reduction Scheme Green Paper” (Discussion Paper, Australian Government, Department of Climate Change, 16 July 2008). 27 Department of Climate Change Australian Government, “Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future White Paper” (Policy Paper, Australian Government, Department of Climate Change, 15 December 2008). For a fuller history, see Martijn Wilder and Louisa Fitz-Gerald, “Overview of Policy and Regulatory Emissions Trading Frameworks in Australia” (2008) 27 Australian Resources and Energy Law Journal 1 and Nicola Durrant, Legal Responses to Climate Change (Federation Press, 2010). 28 The Carbon Pollution Reduction Scheme, designed on the principles set out in the 2008 White Paper. 29 Prime Minister the Hon Julia Gillard MP, Deputy Prime Minister and Treasurer the Hon Wayne Swan MP and Minister for Climate Change and Energy Efficiency the Hon Greg Combet AM MP, “Prime Minister establishes Climate Change Committee” (Media Release, 27 September 2010). 30 Multi-Party Climate Change Committee, “Carbon Price Mechanism” (Communiqué of the MultiParty Climate Change Committee, 24 February 2011) (MPCCC). See also Frank Jotzo, “Carbon pricing that builds consensus and reduces Australia’s emissions: Managing uncertainties using a rising fixed price evolving to emissions trading” (CCEP Working Paper 1104, Centre for Climate Economics and Policy, Crawford School of Economics and Government, The Australian National University, 15 March 2011). 31 United Nations Framework Convention on Climate Change, opened for signature 4 June 1992, 1771 UNTS 107 (entered into force 21 March 1994). 32 Kyoto Protocol, opened for signature 16 March 1998, UN Doc. FCCC/CP/1997/7/Add.1, 10 December 1997 [being the Report of the Conference of the Parties on its third session, held at Kyoto from 1 to 11 December 1997] (entered into force 16 February 2005).

33 Commission Directive 2003/87/EC of the European Parliament and of the Council of 25 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC [2003] OJ L 275,32 (as amended). 34 One of the earliest and longest running ETS is the Acid Rain Program (ARP) (Clean Air Act (US) (42 USC 85, Title IV), which introduced emissions trading in sulphur dioxide (SO2) in the United States of America in 1990. 35 Climate Change Response Act 2002 (NZ); Climate Change (Emissions Trading Amendment) Act 2008 (NZ); Climate Change Response (Moderated Emissions Trading) Amendment Act 2009 (NZ); Climate Change (Unit Register) Regulations 2008 (NZ). 36 Global Warming Solutions Act of 2006 (Cal Health and Safety Code); California Code of Regulations, California Cap on Greenhouse Gas Emissions (Title 17). 37 Clean Energy Future, Factsheet 24, “China’s action on climate change” (Australian Government, Department of Climate Change and Energy Efficiency, July 2011).

Table of Cases References are to paragraph numbers. Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; 260 ALR 628 …. [50,550] Air Caledonie International v Commonwealth (1988) 165 CLR 462; 82 ALR 385; 63 ALJR 30 …. [110,525] Australian Securities and Investments Commission v Ludgates Corporate and Investment Advisory Services Pty Ltd (2003) 21 ACLC 1366 …. [131,200] Commissioner of Taxation v Citylink Melbourne Ltd (2006) 228 CLR 1; 228 ALR 301 …. [111,450] — v Hart (2004) 217 CLR 216; 206 ALR 207 …. [110,075], [110,100] — v Pratt Holdings Pty Ltd (2003) 195 ALR 717; 51 ATR 593 …. [130,275] Commonwealth v Tasmania (1983) 158 CLR 1; 46 ALR 625; 57 ALJR 450 …. [110,500] Crouch v Commissioner for Railways (Qld) (1985) 159 CLR 22; 62 ALR 1; 59 ALJR 831 …. [70,225] Daniels Corporation International Pty Ltd v ACCC (2002) 213 CLR 543; 192 ALR 561 …. [130,275] Esso Australia Resources Ltd v Commissioner of Taxation (Cth) (1999) 201 CLR 49; 168 ALR 123 …. [130,275] Federal Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235; 179 ALR 625 …. [110,075], [110,100] — v James Flood Pty Ltd (1953) 88 CLR 492; [1953] ALR 903; (1953) 27 ALJR 481 …. [111,450] — v Peabody (1994) 181 CLR 359; 123 ALR 451; 68 ALJR 680 …. [110,075], [110,100] — v Spotless Services Ltd (1996) 186 CLR 404; 141 ALR 92; 71 ALJR 81 …. [110,100] Grant v Downs (1976) 135 CLR 674; 11 ALR 577; 51 ALJR 198 …. [130,275]

Gray v Macquarie Generation [2010] NSWLEC 34; BC201001539 …. [50,400] — v Macquarie Generation (No 2) [2010] NSWLEC 82; BC201003551 …. [50,400] — v Macquarie Generation (No 3) [2011] NSWLEC 3; BC201101002 …. [50,400] — v Minister for Planning (2006) 152 LGERA 258 …. [50,400] Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483; 42 ALJR 123 …. [110,825] Harper v Minister for Sea Fisheries (1989) 168 CLR 314; 88 ALR 38; 63 ALJR 687 …. [110,525] Hunter Environmental Lobby Inc v Minister for Planning [2011] NSWLEC 221; BC201109441 …. [50,400], [50,500] — v Minister for Planning (No 2) [2012] NSWLEC 40; BC201202067 …. [50,400] Matthews v Chicory Marketing Board (1938) 60 CLR 263; [1938] ALR 370; (1938) 12 ALJR 184 …. [110,525] New Zealand Flax Investments Pty Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179; [1939] ALR 1; (1938) 12 ALJR 313 …. [111,450] People’s Department Stores Inc v Wise (2004) 49 BLR (3d) 165; 4 CBR (5th) 215; 2004 SCC 68; 244 DLR (4th) 564 …. [110,825] Pharmaceutical Society v London & Provincial Supply Association Ltd (1880) 5 App Cas 857 …. [70,150] Protean (Holdings) Ltd v Environment Protection Authority [1977] VR 51; (1977) 40 LGRA 189 …. [110,125] R v Barger (1908) 6 CLR 41; 14 ALR 374 …. [110,525]

Table of Statutes References are to paragraph numbers.

CO-OPERATIVE SCHEME LEGISLATION Companies ([State]) Code s 5 …. [90,400], [90,475], [90,500] s 11 …. [90,001] s 11(1) …. [90,375] s 11(6) …. [90,375] s 27(2)(a) …. [90,500] s 34(3) …. [91,650] s 35(3) …. [91,650] s 36(1) …. [91,650] s 39 …. [91,650] s 41 …. [91,650] s 44 …. [91,650] s 64 …. [90,350] s 64(3) …. [90,350] s 76 …. [90,475] s 150 …. [92,075], [92,200] s 150A …. [92,100] s 150A(2) …. [92,100] s 151 …. [91,625] s 151(a) …. [91,600] s 151(b) …. [91,600] s 152 …. [91,650] s 153 …. [91,675]

s 153(3) …. [91,675] s 153(4) …. [91,725] s 153(7) …. [91,700] s 153(8) …. [91,725] s 157A …. [92,150] s 157A(2) …. [92,150] s 158 …. [92,125] s 173 …. [91,575]

COMMONWEALTH A New Tax System (Goods and Services Tax) Act 1999 …. [30,025] s 38 …. [111,275] Acts Interpretation Act 1901 s 2C(1) …. [70,125] s 2C(2) …. [70,125] s 15B …. [50,575] s 16C …. [130,675] Anti-Money Laundering and Counter-Terrorism Financing Act 2006 …. [30,001], [30,025] Australian National Registry of Emissions Units Act 2011 …. [32,275] s 4 …. [90,100], [90,400], [90,525], [130,725] s 9(1) …. [90,050] s 9(4) …. [90,050] s 10 …. [90,075] s 10(1) …. [90,075], [91,725] s 10(4) …. [90,200] s 10(6) …. [90,075] s 17(1) …. [90,375] s 17(2) …. [90,375] s 17(3) …. [90,375]

s 23 …. [131,325] s 24 …. [131,325] s 26(1) …. [130,900] s 26(2) …. [130,900] s 27(4) …. [130,775], [130,900] s 28B(2) …. [91,800], [91,825] s 28B(3) …. [91,800], [91,825] s 28B(4) …. [91,825] s 28B(5) …. [91,825] s 28B(6) …. [91,825] s 28B(7) …. [91,825] s 28C …. [91,850] s 28D(2) …. [92,450] s 28D(5) …. [92,450] s 28D(6) …. [92,450] s 28D(7) …. [92,450] s 28D(8) …. [92,450] s 28D(10) …. [92,450] s 28D(11) …. [92,450] s 30 …. [90,375] s 33 …. [91,625] s 33(1)(a) …. [91,600] s 33(1)(b) …. [91,600] s 33(1)(c) …. [91,600] s 33(1)(d) …. [91,600] s 33(2) …. [91,600], [91,625] s 34 …. [91,650] s 45 …. [92,075], [92,200] s 46 …. [92,125]

s 47 …. [91,675] s 47(4) …. [91,725] s 47(7) …. [91,700] s 47(8) …. [91,725] s 49 …. [90,375] s 65 …. [91,575] s 66 …. [91,575] s 69(1) …. [130,800] s 69(6) …. [130,925] s 72 …. [130,875] s 73 …. [130,900] s 75 …. [130,875] s 76 …. [130,875] s 77 …. [130,900] s 78(3) …. [130,900] s 79 …. [130,900] s 80(2) …. [130,775] s 80(3) …. [130,775] s 93A …. [131,125] s 93AA …. [131,125] Australian National Registry of Emissions Units Regulations 2011 reg 3 …. [90,150] reg 5 …. [90,275] reg 9(1) …. [90,100] reg 9(2)(a) …. [90,125] reg 9(2)(b) …. [90,125] reg 9(3) …. [90,100] reg 9(4) …. [90,225] reg 10(5) …. [90,225]

reg 13 …. [90,175] reg 13(1) …. [90,100] reg 14 …. [90,225] reg 14(2) …. [90,250] reg 15 …. [90,225] reg 16 …. [90,150], [90,225] reg 18 …. [90,225] reg 19 …. [90,225], [90,275] reg 21 …. [90,225] reg 22 …. [90,225] reg 49 …. [91,675] Sch 1 …. [90,225], [90,275] Sch 2 …. [90,300] Australian Securities And Investments Commission Act 2001 …. [30,001], [30,025] Australian Securities and Investments Commission Regulations 2001 …. [30,025] Bankruptcy Act 1966 …. [92,075] Clean Energy (Charges — Customs) Act 2011 …. [30,025], [90,025], [110,525], [111,325], [130,150] Clean Energy (Charges — Excise) Act 2011 …. [30,025], [90,025], [110,525], [111,325], [130,150] Clean Energy (Customs Tariff Amendment) Act 2011 …. [30,025] Clean Energy (Excise Tariff Legislation Amendment) Act 2011 …. [30,025], [111,325] Clean Energy (Fuel Tax Legislation Amendment) Act 2011 …. [30,025], [30,050], [111,325] Clean Energy (Household Assistance Amendments) Act 2011 …. [30,025] Clean Energy (Income Tax Rates Amendments) Act 2011 …. [30,025], [111,325] Clean Energy (International Unit Surrender Charge) Act 2011 …. [30,025], [90,025], [90,825], [91,525], [110,525], [111,050], [111,325],

[130,150] s 8(1) …. [91,525] s 8(3) …. [91,525] s 8(4) …. [91,525] Clean Energy (Tax Laws Amendments) Act 2011 …. [30,025] Clean Energy (Unit Issue Charge — Auctions) 2011 …. [30,025], [110,525], [111,325], [130,150] Clean Energy (Unit Shortfall Charge — Fixed Charge) Act 2011 …. [30,025], [90,025], [110,525], [111,325], [130,150] Clean Energy (Unit Shortfall Charge — General) Act 2011 …. [30,025], [90,025], [91,025], [110,525], [111,325], [130,150] s 8(1) …. [112,225] s 8(3)(a) …. [112,250] s 8(3)(b) …. [112,325] s 8(4) …. [112,325] Clean Energy Act 2011 …. [30,001], [30,025], [30,050], [30,075], [30,100], [30,125], [30,150], [30,175], [30,200], [30,225], [30,250], [30,275], [30,375], [30,525], [30,600], [31,025], [32,150], [32,175], [32,275], [32,675], [32,725], [32,775], [32,825], [32,875], [50,001], [50,025], [50,125], [50,325], [50,350], [50,375], [50,400], [50,425], [50,450], [50,500], [50,575], [50,925], [51,050], [51,325], [51,600], [51,975], [52,550], [70,001], [70,025], [70,050], [70,100], [70,125], [70,175], [70,225], [70,250], [70,300], [70,600], [70,650], [71,125], [71,500], [71,900], [72,350], [72,600], [72,750], [73,050], [73,075], [73,100], [73,250], [73,275], [73,300], [73,400], [73,425], [73,450], [73,775], [73,825], [73,950], [74,001], [74,125], [90,001], [90,025], [90,375], [90,425], [90,450], [90,525], [90,550], [90,625], [90,700], [91,100], [91,375], [91,450], [91,575], [91,625], [130,001], [130,075], [130,100], [130,525], [130,725], [130,750], [150,001], [150,050], [150,325] Pt 3 …. [30,050], [52,550], [70,025], [70,300], [73,725], [110,025] Div 2 …. [70,075] Div 3 …. [71,125] Div 3A …. [71,950]

Div 5 …. [52,550] Div 6 …. [52,550] Pt 4 …. [32,875] Pt 6 …. [30,050], [91,200], [91,750] Pt 7 …. [91,050], [91,350] Pt 8 …. [32,875], [90,175], [91,050], [91,100], [91,350] Pt 9 …. [110,700] Pt 10 …. [91,875] Pt 11 …. [90,425] Pt 12 …. [110,700] Pt 13 …. [130,125] Pt 15 …. [112,500] Pt 17 …. [130,001], [130,200] Pt 18 …. [130,950] Pt 19 …. [131,275] Pt 20 …. [131,125] Pt 21 …. [150,025] s 3 …. [30,125], [32,275], [32,825], [110,125], [110,500] s 3(b) …. [50,500] s 5 …. [30,175], [32,275], [32,850], [50,450], [50,975], [51,175], [70,025], [70,275], [70,325], [70,375], [70,525], [70,550], [70,625], [70,650], [70,750], [70,850], [70,975], [71,075], [71,150], [71,175], [71,200], [71,225], [71,275], [71,475], [71,900], [71,950], [71,975], [72,001], [72,225], [72,425], [72,500], [73,001], [73,025], [73,275], [73,750], [73,925], [74,100], [74,125], [90,100], [90,400], [90,450], [90,525], [90,650], [91,050], [110,075], [110,550], [111,325], [130,150], [130,725], [150,500] s 6 …. [71,200] s 9 …. [50,575], [74,100] s 11 …. [50,650] s 12 …. [50,575]

s 14 …. [32,800], [32,850], [32,875] s 15 …. [32,875] s 20 …. [70,400], [73,275], [73,650] s 20(1) …. [70,425] s 20(2) …. [70,500] s 20(4) …. [70,450] s 20(6) …. [70,400], [73,400] s 20(7) …. [70,400], [73,650] s 20(8) …. [70,525] s 20(10) …. [70,525] s 20(12) …. [70,525] s 21 …. [70,675], [70,750], [73,275] s 21(1) …. [73,275] s 21(2) …. [52,550], [70,725], [73,525] s 21(3) …. [73,275] s 21(4) …. [70,700] s 21(6) …. [70,675] s 21(7) …. [70,750] s 21(8A) …. [70,750] s 21(9) …. [70,375] s 22 …. [70,875], [70,900] s 22(2) …. [70,950] s 22(4) …. [70,925] s 22(6) …. [70,975] s 22(8) …. [70,975] s 22(10) …. [70,975], [71,075] s 23 …. [70,550], [73,275], [90,550] s 23(2) …. [70,600] s 23(4) …. [70,575]

s 23(6) …. [70,550] s 23(7) …. [70,550] s 23(8) …. [70,625] s 23(9) …. [70,575] s 23(9A) …. [70,625] s 23(9C) …. [70,625] s 24 …. [70,650], [70,775], [73,275] s 24(2) …. [52,550], [70,825], [73,525] s 24(4) …. [70,800] s 24(6) …. [70,775] s 24(7) …. [70,850] s 24(8A) …. [70,850] s 24(8C) …. [70,850] s 25 …. [70,875], [71,001] s 25(2) …. [71,050] s 25(4) …. [71,025] s 25(6) …. [71,075] s 25(7A) …. [71,075] s 25(8) …. [71,025] s 26 …. [70,375], [71,100] s 26(3) …. [52,550] s 29 …. [70,450], [110,025], [110,050], [110,075], [110,100], [110,125], [110,150], [110,800] s 29(b) …. [110,125] s 29(2) …. [110,075] s 30 …. [50,425], [52,250] s 30(1) …. [50,575] s 30(2) …. [50,425], [71,900], [73,050], [74,125] s 30(9) …. [70,550] s 30(9A) …. [70,550]

s 30(10) …. [70,550] s 31 …. [50,425] s 32 …. [70,550] s 32A …. [70,550] s 33 …. [52,550] s 33(1) …. [71,225], [71,625] s 33(2)(a) …. [71,600] s 33(2)(b) …. [71,600] s 33(3) …. [71,750] s 33(4) …. [71,750] s 34(9) …. [70,800] s 35 …. [72,675] s 35(1) …. [71,800], [71,850] s 35(2) …. [71,875] s 35(2)(a) …. [71,875] s 35(3) …. [71,400], [71,850] s 35(4) …. [52,550], [71,900] s 35(5) …. [52,550], [71,900] s 35(6) …. [52,550], [71,900] s 35(6A) …. [71,900] s 35(7) …. [71,900], [73,050] s 35(8) …. [71,900] s 35(9) …. [71,900] s 36(1) …. [71,925] s 36(2) …. [71,925] s 36A …. [71,200], [71,725] s 36B(2) …. [72,050] s 36B(4) …. [72,075] s 36B(5) …. [72,075]

s 36C …. [72,100] s 36C(2) …. [72,125] s 36C(4) …. [72,150] s 36C(5) …. [72,150] s 36D …. [72,675] s 36D(1) …. [72,175], [72,200] s 36D(2) …. [72,200] s 36D(3) …. [72,225] s 36D(4) …. [72,225] s 36E(1) …. [72,250] s 36E(2) …. [72,250] s 37 …. [72,300] s 38(1) …. [72,325] s 38(2) …. [72,325] s 39 …. [72,400] s 40(2) …. [150,500] s 40(3) …. [72,425], [150,500] s 41(1) …. [72,500] s 41(2) …. [72,500] s 42(1) …. [150,500] s 42(2) …. [72,575] s 42(3) …. [150,500] s 42(4) …. [72,575] s 43(1) …. [72,600], [150,500] s 43(2) …. [72,600], [150,500] s 43A …. [72,625] s 44 …. [72,300] s 45(1) …. [73,200] s 45(4) …. [73,200]

s 45(7) …. [72,625], [73,200] s 45(8) …. [73,200] s 45(9) …. [73,225] s 45(10) …. [73,225] s 45(12) …. [73,225] s 45(13) …. [73,200] s 46 …. [73,225] s 47(1) …. [73,200], [130,775], [130,900] s 47(2) …. [73,225], [130,775], [130,900] s 47(3) …. [73,200] s 48(1)(a) …. [72,675] s 48(1)(b) …. [72,675] s 48(2) …. [72,675] s 48(3) …. [72,675] s 49 …. [73,075] s 50 …. [73,075] s 51 …. [73,075] s 52 …. [73,075] s 53 …. [72,700] s 54 …. [72,650] s 55 …. [72,650] s 55A …. [71,275] s 55A(2) …. [71,300] s 55A(3) …. [72,350] s 55B …. [71,875], [72,775], [72,800] s 55B(3) …. [72,800] s 55B(1) …. [71,400], [72,775], [130,900] s 55B(2) …. [72,775], [130,900] s 56 …. [111,175]

s 56(1) …. [72,875], [150,500] s 56(1)(e)(i) …. [72,875] s 56(1)(e)(ii) …. [72,875] s 56(3) …. [73,001] s 56(6) …. [73,001] s 56(6A) …. [73,001] s 56(7) …. [73,001] s 57(2) …. [73,025], [130,900] s 57(3) …. [73,025] s 58(2) …. [73,050], [130,900] s 58(3) …. [73,050] s 58A …. [72,775], [72,850] s 58AA …. [72,175] s 59(2) …. [72,875] s 59(3) …. [73,025], [73,050], [130,900] s 59(4) …. [72,825], [130,900] s 59(5) …. [72,725], [73,025] s 59(6) …. [72,725] s 59(7) …. [72,750] s 60(2) …. [72,875] s 60(3) …. [73,025], [73,050], [130,900] s 60(4) …. [130,900] s 60(5) …. [73,025] s 60(6) …. [72,725] s 60(7) …. [72,750] s 62 …. [72,800], [73,025], [73,050] s 63(1) …. [73,100], [130,900] s 63(2) …. [73,100] s 63(3) …. [73,100]

s 63(4) …. [73,125] s 64(1) …. [73,150], [130,900] s 64(2) …. [73,150] s 64(3) …. [73,175], [130,900] s 64(4) …. [73,175] s 64(5) …. [73,150], [73,175] s 65 …. [73,300] s 66(1) …. [73,325], [130,775], [130,900] s 66(2) …. [130,775], [130,900] s 66(3) …. [130,775], [130,900] s 66(4) …. [73,325], [130,775], [130,900] s 66(5) …. [73,325] s 67 …. [73,375], [150,500] s 67A …. [73,375] s 68 …. [150,500] s 68(2) …. [73,400], [73,425] s 68(4) …. [73,425] s 68(5) …. [73,425] s 69 …. [73,425] s 69(3) …. [130,825] s 70 …. [150,500] s 70(2) …. [73,350], [73,450], [150,500] s 70(4) …. [73,450] s 70(5) …. [73,450] s 71 …. [112,500] s 71(2) …. [73,475] s 71(4) …. [73,475] s 71A …. [73,475] s 71A(1) …. [130,775], [130,900]

s 72(2) …. [73,475] s 72(4) …. [73,675] s 73(3) …. [150,500] s 74 …. [73,275], [73,325], [73,550], [130,800] s 74(2) …. [150,500] s 74(3)(c) …. [73,550] s 76 …. [52,550], [73,600] s 76(2) …. [150,500] s 76(4) …. [73,525] s 77 …. [52,550], [73,600] s 77(1) …. [150,500] s 77(2) …. [73,600] s 78(2) …. [73,600] s 78(3) …. [73,600] s 78(4) …. [73,600] s 78(5) …. [73,600] s 78(6) …. [73,475], [73,550], [73,600] s 78(7) …. [73,600] s 78A(1) …. [73,600] s 78A(3) …. [73,550] s 78A(5) …. [73,600] s 79 …. [73,600], [73,625] s 80 …. [73,750] s 81 …. [150,500] s 81(1) …. [73,775] s 81(4) …. [73,775] s 82 …. [73,800] s 83(2) …. [73,825] s 83(3) …. [73,825], [74,001], [150,500]

s 83(3)(a) …. [150,500] s 83(4) …. [73,850] s 83(5) …. [73,850] s 84 …. [73,650], [73,900] s 85 …. [73,650], [150,500] s 85(1) …. [73,950] s 85(4) …. [73,950] s 85(5) …. [73,950] s 85(5)(c)(i) …. [73,950] s 85(5)(c)(iii) …. [73,950] s 86 …. [73,975] s 87(2) …. [74,001] s 87(3) …. [150,500] s 87(3)(a) …. [150,500] s 87(4) …. [74,025] s 87(5) …. [74,025] s 88(1) …. [74,050] s 88(2)(a) …. [74,050] s 88(2)(b) …. [74,050] s 88(3)(a) …. [74,050] s 88(3)(b) …. [74,050] s 88(4) …. [74,050] s 89(1) …. [150,500] s 89(2) …. [74,075] s 89(3) …. [74,075], [150,500] s 89(4) …. [74,075], [150,500] s 89(5) …. [74,075] s 90(2) …. [150,500] s 90(2)(a) …. [74,100], [150,500]

s 90(2)(b) …. [74,100], [150,500] s 90(3) …. [74,100] s 91 …. [73,700] s 92 …. [73,925] s 92(1) …. [73,950] s 92(1)(e) …. [73,650] s 92A(6) …. [74,125] s 92C …. [74,125] s 92D …. [111,100] s 92G …. [74,125] s 94 …. [90,001], [90,575] s 95 …. [90,575] s 96 …. [90,575] s 97 …. [90,575] s 98 …. [90,575] s 98(1) …. [90,375], [90,425] s 98(3) …. [90,575] s 99 …. [90,575], [110,525] s 100 …. [110,525], [111,425] s 100(1) …. [90,600], [90,625] s 100(2) …. [90,675] s 100(3) …. [90,700] s 100(4) …. [90,700] s 100(5) …. [90,675] s 100(6) …. [90,725], [110,525] s 100(7) …. [90,750], [110,525] s 100(7)(a) …. [91,250] s 100(7)(c) …. [91,250] s 100(8) …. [90,750]

s 100(10) …. [90,725] s 100(12) …. [90,725] s 100(13) …. [90,725] s 100(14) …. [90,625] s 100(15) …. [90,625] s 101 …. [32,875], [90,850] s 101(1) …. [91,175] s 102 …. [90,850] s 103 …. [90,425], [92,075], [92,200], [110,525] s 103A …. [92,100] s 103A(2) …. [92,100] s 104 …. [91,625] s 104(1)(a) …. [91,600] s 104(1)(b) …. [91,600] s 104(1)(c) …. [91,600] s 104(1)(d) …. [91,600] s 104(2) …. [91,600], [91,625] s 105(1) …. [91,650] s 106(1) …. [91,675] s 106(3) …. [91,675], [150,500] s 106(5) …. [91,725] s 106(6) …. [150,500] s 106(9) …. [91,700] s 106(10) …. [91,725] s 109(1) …. [150,500] s 109(2) …. [150,500] s 109A …. [92,150] s 109A(2) …. [92,150] s 110 …. [92,125]

s 110(1) …. [90,425] s 111 …. [110,525] s 111(1) …. [90,775] s 111(2) …. [90,800] s 111(3) …. [90,800] s 111(5) …. [90,800], [91,000] s 113 …. [130,075] s 113(1) …. [90,875], [130,725] s 113(2) …. [90,875] s 113(2)(k) …. [90,975] s 113(6) …. [90,975] s 113(6)(b) …. [90,975] s 113(9) …. [90,875] s 114(4) …. [91,025] s 115 …. [91,150], [91,575], [111,850] s 116 …. [91,175] s 118 …. [70,325] s 118(3) …. [71,125], [71,600], [71,950] s 119(2) …. [150,500] s 119(4) …. [150,500] s 120(1) …. [150,500] s 120(4) …. [150,500] s 122(1) …. [91,200], [91,250] s 122(2) …. [90,425], [91,200] s 122(3) …. [91,225] s 122(4) …. [91,325] s 122(5) …. [91,325], [91,550] s 122(7) …. [91,350] s 122(8) …. [90,525], [91,475]

s 122(10) …. [90,425], [91,200], [91,325] s 122(12) …. [90,450], [91,375] s 123 …. [91,500] s 123(2) …. [90,550] s 125 …. [30,050], [70,325], [112,000] s 125(2) …. [112,025] s 125(4) …. [112,600] s 125(5) …. [112,025] s 125(6) …. [112,025] s 125(7) …. [90,450], [112,050] s 125(7)(b)(ii) …. [91,400] s 126 …. [50,350], [112,025] s 126(3) …. [52,550] s 126(4) …. [70,350], [112,075] s 126(4)(a) …. [52,550] s 126(7) …. [52,550] s 127 …. [112,025] s 128 …. [30,050], [70,325], [112,000], [112,625] s 128(2) …. [112,100] s 128(4) …. [112,650] s 128(5) …. [112,100] s 128(6) …. [112,100] s 128(7) …. [90,450], [112,125] s 128(7)(b)(ii) …. [91,400] s 128(8) …. [91,400] s 129 …. [30,050], [70,325], [112,000], [150,500] s 129(2) …. [112,075] s 129(4) …. [112,075] s 130(2) …. [112,450], [150,500]

s 130(3) …. [112,450], [150,500] s 130(4) …. [112,450] s 131 …. [112,625] s 132 …. [112,650] s 133 …. [30,050], [70,325], [112,000] s 133(2) …. [112,150] s 133(4) …. [112,675] s 133(5) …. [112,150] s 133(6) …. [91,550], [112,175] s 133(7) …. [90,525], [91,500], [112,200] s 133(8) …. [91,500] s 134 …. [70,025], [111,500], [112,225] s 134A …. [51,600], [112,550] s 134A(1) …. [112,475] s 134A(1)(a) …. [150,500] s 134A(2) …. [112,475], [150,500] s 134A(2)(a) …. [150,500] s 134A(3) …. [112,525] s 134A(4) …. [112,525] s 135 …. [112,350] s 135(1) …. [150,500] s 135(1)(a) …. [150,500] s 135(2) …. [112,550], [150,500] s 135(3) …. [112,550] s 135(4) …. [112,550] s 136 …. [112,350] s 138 …. [73,650], [73,700], [73,775] s 138(2)(a) …. [73,950] s 141 …. [112,375]

s 141(1) …. [112,375], [150,500] s 141(2) …. [112,375], [150,500] s 141(3) …. [112,375] s 141(4) …. [112,375] s 141(6) …. [112,375] s 141(9) …. [112,400] s 145 …. [91,075] s 146 …. [91,975] s 148 …. [111,100] s 151 …. [111,100] s 151(1) …. [130,775], [130,900] s 151(2) …. [130,900] s 159 …. [91,100] s 161 …. [91,100] s 161(2) …. [73,525] s 161(6) …. [73,700] s 161(7) …. [73,275], [73,525] s 162 …. [150,500] s 165(2) …. [150,500] s 165(3) …. [150,500] s 170 …. [150,500] s 183 …. [110,725] s 184 …. [110,725] s 184(1) …. [150,500] s 184(3) …. [150,500] s 184(4) …. [150,500] s 184(6) …. [150,500] s 185 …. [110,725] s 185(2) …. [90,650]

s 186 …. [32,075], [110,725] s 187 …. [110,725] s 189 …. [110,725] s 190 …. [110,725] s 191 …. [110,725] s 192 …. [110,725] s 194 …. [110,725] s 195 …. [110,725] s 196 …. [31,025], [110,725] s 197 …. [110,725] s 198 …. [110,725] s 199 …. [110,725] s 200 …. [110,725] s 201 …. [110,725] s 201(3) …. [92,000] s 201(4) …. [92,000] s 201(4)(d) …. [92,000] s 202 …. [110,750] s 208(2) …. [91,925] s 208(3) …. [91,925] s 210 …. [91,875] s 210(1) …. [91,900] s 210(2) …. [91,900] s 210(3) …. [91,150], [91,575] s 211 …. [91,875] s 212 …. [91,025] s 212(1) …. [91,975], [150,500] s 212(2) …. [91,925], [92,025] s 212(4) …. [92,025]

s 213 …. [91,025] s 213(1) …. [92,025], [150,500] s 213(3) …. [150,500] s 213(4) …. [150,500] s 218 …. [110,775] s 218(1) …. [110,775] s 218(2) …. [110,775], [130,775], [130,900] s 218(3) …. [110,775] s 218(6) …. [110,775] s 218(7) …. [110,775] s 219(1) …. [110,775] s 219(2) …. [110,775], [130,775], [130,900] s 219(3) …. [110,775] s 219(6) …. [110,775] s 219(7) …. [110,775] s 221 …. [112,500], [130,200], [130,225], [130,275], [130,300] s 221(1) …. [130,150] s 221(2) …. [130,200] s 221(3) …. [130,200] s 221(4) …. [130,200], [130,775], [130,900] s 221(5) …. [130,200] s 221(6) …. [130,200] s 222 …. [130,200] s 224(1) …. [130,225] s 224(2) …. [130,225] s 225(1) …. [130,300] s 225(2) …. [130,300] s 227 …. [111,100] s 227(1) …. [111,150]

s 227(2) …. [111,125], [130,900] s 227(3) …. [111,125] s 228 …. [111,100], [111,225] s 228(1) …. [111,225] s 228(2) …. [111,225], [130,900] s 228(3) …. [111,225], [130,900] s 228(3)(b) …. [111,225] s 230 …. [130,350] s 230(1) …. [130,350] s 230(2) …. [130,350] s 230(3) …. [130,400] s 230(4) …. [130,375] s 231 …. [130,350] s 231(2) …. [130,375] s 231(3) …. [130,375] s 231(6) …. [130,375] s 232(1) …. [130,425] s 232(2)(a) …. [130,425] s 232(2)(b) …. [130,425] s 233 …. [130,425], [130,525] s 233(4) …. [130,550] s 233(7) …. [130,575] s 234 …. [130,525] s 235(1)(a) …. [130,625] s 235(1)(b) …. [130,625] s 235(2)(a) …. [130,650] s 235(2)(b) …. [130,650] s 235(3) …. [130,600] s 237(1) …. [130,450]

s 237(2) …. [130,450] s 237(3) …. [130,450] s 237(5) …. [130,450] s 239 …. [130,475] s 240 …. [130,500] s 240(c) …. [130,475] s 241 …. [130,575] s 242 …. [130,550] s 242(2) …. [130,550] s 242(3) …. [130,550] s 242(4) …. [130,550] s 243 …. [130,500] s 244 …. [131,300] s 245 …. [130,675] s 245(1) …. [130,675] s 245(3) …. [130,675] s 245(4) …. [130,700] s 245(4)(f) …. [130,700] s 246(1) …. [130,675] s 246(2) …. [130,675] s 246(3) …. [130,675] s 248 …. [110,550] s 248(2) …. [110,550] s 248(3) …. [110,550] s 248(4) …. [110,575] s 249 …. [110,600] s 252(1) …. [130,800] s 252(3) …. [130,825] s 252(4) …. [111,125]

s 252(4)(a) …. [73,150] s 252(4)(b) …. [73,175], [73,200], [73,225] s 252(4)(c) …. [72,800], [73,025], [73,050], [73,100], [73,325], [73,475] s 252(5) …. [73,150] s 252(6) …. [110,575], [111,125] s 252(6)(a) …. [73,175], [73,200], [73,225] s 252(6)(b) …. [72,800], [73,025], [73,050], [73,100], [73,150], [73,325], [73,475] s 252(7) …. [130,925] s 253(1) …. [130,875] s 255 …. [130,875] s 256 …. [130,900] s 257 …. [130,800] s 258 …. [130,875] s 259 …. [130,875] s 260 …. [130,900] s 261(1) …. [130,750] s 261(2) …. [130,750] s 261(3) …. [130,900] s 262 …. [130,900] s 263(1) …. [130,775] s 263(2) …. [130,775] s 263(3) …. [130,775] s 265(1) …. [130,975] s 265(2) …. [130,975] s 266 …. [131,001] s 267 …. [131,025] s 268(1) …. [131,050] s 268(2) …. [131,050] s 268(3) …. [131,050]

s 268(4) …. [131,050] s 269(1) …. [131,075] s 269(4) …. [131,075] s 270 …. [131,100] s 270(a) …. [131,100] s 270(b) …. [131,100] s 270(c) …. [130,825] s 278(1) …. [131,150] s 278(2) …. [131,150] s 278(3) …. [131,150] s 278(4) …. [131,150] s 278(5) …. [131,150] s 279(1) …. [131,175] s 279(2) …. [131,175] s 281 …. [72,475], [72,575], [72,600], [73,001], [73,450], [73,600], [73,850], [74,025], [74,075], [74,100], [112,400], [112,450], [112,525], [112,550], [150,050] s 282(1) …. [150,100] s 282(2) …. [150,100] s 282(4) …. [150,125] s 282(5) …. [150,100] s 283(1) …. [150,150] s 283(3) …. [150,175] s 283(4) …. [150,175] s 284(1) …. [150,175] s 284(2) …. [150,175] s 285(1) …. [150,200] s 285(2) …. [150,200] s 286 …. [150,400] s 286(1)(d)(i) …. [150,400]

s 286(1)(d)(ii) …. [150,400] s 286(1)(d)(iii) …. [150,400] s 286(2)(a) …. [150,400] s 286(2)(b) …. [150,400] s 288 …. [32,800] s 292 …. [32,875] s 297 …. [130,125] s 302 …. [130,275] s 304 …. [150,450] s 305 …. [150,450] s 308(1) …. [90,425], [150,450] s 368 …. [72,025] Competition and Consumer Act 2010 …. [30,025], [32,250], [92,425] s 45(2) …. [92,425] s 76 …. [90,350] Corporations Act 2001 …. [30,001], [30,025], [50,075], [90,425], [92,075], [92,200], [92,225], [92,275], [92,300], [92,400] Pt 2A.2 …. [73,750], [73,775] Pt 7.10 …. [92,400] s 9 …. [74,100] s 46 …. [50,075], [73,750] s 57A …. [70,175] s 180 …. [110,825] s 249D …. [110,850] s 299 …. [110,850] s 299(1)(f) …. [110,850] s 299A …. [110,850] s 764A(1)(k) …. [90,425], [92,200] s 766A …. [92,225] s 766C …. [92,375]

s 798J …. [92,350] s 911A …. [92,225] s 1020B …. [92,300] Corporations Regulations 2001 …. [30,025] Crimes Act 1914 …. [130,525] s 4AA …. [30,700], [51,350], [72,800], [73,025], [73,050], [73,100], [73,150], [73,175], [73,200], [73,225], [73,325], [73,475] s 10 …. [130,275] Criminal Code Ch 7 Pt 7.3 …. [131,250] Div 135 …. [131,250] Div 136 …. [131,250] Div 137 …. [131,250] Criminal Code Act 1995 …. [30,025] s 136.1 …. [90,350] s 137.1 …. [90,350] s 137.2 …. [90,350] Customs Act 1901 …. [30,001], [31,025] Customs Tariff Act 1995 …. [30,001], [31,025], [50,425] Excise Act 1901 …. [30,001], [31,025] s 39K(6)(c) …. [71,900] s 61A …. [71,900] Excise Tariff Act 1921 …. [30,001], [31,025], [50,425] s 3(1) …. [71,975] Fuel Tax Act 2006 s 43.5 …. [31,025] Income Tax Assessment Act 1936 …. [30,025], [111,325] Pt 3 Div 1AB …. [111,300]

Pt IVA …. [110,100] s 6(1) …. [50,975] s 16 …. [110,625] s 51(1) …. [111,450] s 102AAB …. [50,975] s 177D …. [110,100] Income Tax Assessment Act 1997 …. [30,025], [50,975], [111,325] Legislative Instruments Act 2003 s 38 …. [32,875] Marriage Act 1961 Pt 4 Div 1 Subdiv A …. [90,150] Migration Act 1958 s 32 …. [90,275] National Greehouse and Energy Reporting Regulations 2001 …. [30,225], [30,550], [50,025], [50,400] Pt 4 …. [52,075] Div 2.3 …. [50,875] Div 4.4 …. [52,125] Div 4.8 …. [111,100] reg 1.03 …. [50,625], [50,650], [70,525], [70,625], [70,750], [70,850], [70,975], [71,075], [71,175], [71,975], [74,125] reg 2(22) …. [53,001] reg 2.14 …. [50,650] reg 2.16 …. [50,625] reg 2.16(1) …. [50,650] reg 2.16(2) …. [50,650] reg 2.18 …. [50,700] reg 2.19 …. [50,725]

reg 2.19(2) …. [50,725], [52,900], [53,100] reg 2.19(4) …. [50,725] reg 2.20 …. [50,750] reg 2.20(2) …. [52,900], [53,100] reg 2.22 …. [50,775], [52,800] reg 2.23 …. [50,400], [51,100] reg 2.24 …. [50,400] reg 2.25 …. [51,125] reg 2.27(2) …. [51,001] reg 3.02 …. [51,250] reg 3.03A …. [51,250] reg 3.04 …. [51,375] reg 4.04 …. [52,100] reg 4.04(2)(a) …. [71,325], [71,400] reg 4.04(5) …. [71,400] reg 4.04A(2)(a) …. [72,350], [73,425], [73,775], [73,950] reg 4.04A(5) …. [72,350], [73,425], [73,775], [73,950] reg 4.18(2) …. [52,225] reg 4.20 …. [52,225] reg 4.22(1A) …. [52,250] reg 4.23A …. [52,275] reg 4.26 …. [52,350] reg 5 …. [71,325] reg 6.02(1) …. [52,800], [53,001] reg 6.02(1A) …. [52,800] reg 6.02(1B) …. [53,001] reg 6.02(2) …. [52,800], [53,001] reg 6.03(1) …. [52,900], [53,100] reg 6.03(4) …. [53,100]

reg 6.04 …. [130,375] Sch 1 …. [51,150], [52,275] Sch 2 …. [50,775] Sch 3 …. [52,200] National Greenhouse and Energy Reporting Act 2007 …. [30,001], [30,025], [30,050], [30,550], [50,001], [50,025], [70,050], [90,350], [130,001], [130,100], [150,001] Pt 3 …. [50,625] Pt 3A …. [50,625] Pt 3D …. [50,625] Pt 3E …. [50,625] Pt 3F …. [50,625] Pt 5 Div 2 …. [130,950] Div 3 …. [131,125] Pt 6 …. [130,325], [150,025] Div 4 …. [112,500] Subdiv F …. [130,125] Subdiv G …. [110,175] s 1(8) …. [51,700], [51,775] s 3 …. [30,575] s 3.4 …. [51,700] s 5 …. [30,575], [51,125] s 6 …. [50,575] s 6C …. [50,575] s 7 …. [30,625], [50,050], [50,075], [50,350], [50,450], [51,100], [51,175], [51,200], [70,650], [71,175], [73,750], [110,425], [110,550] s 7A …. [50,450] s 7A(2) …. [50,450]

s 7A(3) …. [50,450] s 7B …. [71,475], [71,500] s 7B(2) …. [52,550], [71,525] s 7B(3) …. [52,550], [71,550] s 8 …. [30,625] s 8(1) …. [73,750] s 8(2) …. [50,100] s 8(3) …. [52,900], [73,750] s 8(4) …. [50,100] s 9 …. [30,175] s 9(1) …. [52,825], [53,025] s 10 …. [50,425] s 10(a) …. [50,400] s 10(aa) …. [50,400] s 10(3) …. [50,425], [51,425], [51,525] s 11 …. [30,175], [50,800] s 11(1)(a) …. [52,900], [52,925], [53,100], [53,125], [73,300] s 11A …. [50,800] s 11AA(2) …. [51,001] s 11AA(5) …. [72,350] s 11B …. [50,800], [70,375], [73,300] s 11B(1) …. [50,850] s 11B(2) …. [50,850], [51,001] s 11B(4) …. [50,875] s 11B(5) …. [72,350] s 11B(7) …. [50,900] s 11B(8) …. [50,900] s 11B(10) …. [50,950] s 11B(13) …. [50,950]

s 11B(14) …. [50,950] s 11B(15) …. [50,925] s 11B(16) …. [50,925] s 11B(17) …. [50,925] s 11B(18) …. [50,925] s 11C …. [50,800], [50,975], [70,375] s 11C(2) …. [51,001] s 11C(7) …. [51,025] s 11C(8) …. [51,025] s 11C(10) …. [51,075] s 11C(13) …. [51,075] s 11C(14) …. [51,075] s 12 …. [50,050], [50,200], [50,225], [51,525], [130,775] s 12(4) …. [51,225] s 13 …. [30,650], [50,175], [50,200], [50,275], [52,125], [52,500] s 13(1) …. [50,225] s 13(1)(d) …. [50,250] s 13(2) …. [50,275] s 14 …. [30,650], [51,200] s 15 …. [150,500] s 15A …. [50,050], [50,125], [50,325], [51,300], [130,150], [130,775] s 15A(2) …. [50,125] s 15AA …. [50,050], [50,150], [51,300], [130,150], [130,775] s 15AA(1) …. [50,350], [51,225] s 16 …. [51,375] s 17 …. [150,500] s 17(1) …. [150,500] s 17(3) …. [150,500] s 18A …. [130,150], [150,500]

s 18B …. [150,500] s 19 …. [51,525], [51,900], [51,950], [52,350], [52,375], [130,775], [150,500] s 19(4) …. [51,950] s 19(5A) …. [51,950] s 19(6)(d) …. [52,050] s 19(10) …. [51,950] s 20 …. [110,675], [130,775] s 20(1) …. [150,500] s 20(5) …. [150,500] s 22 …. [111,100], [111,200] s 22(3) …. [111,200] s 22A …. [51,900], [52,001], [52,225], [52,250], [52,375], [52,550], [71,550], [110,225], [130,150], [130,775], [150,500] s 22A(2)(c) …. [52,050] s 22AA …. [51,900], [52,001], [52,550], [130,150], [130,775] s 22AA(2)(c) …. [52,050] s 22B …. [111,100], [111,200], [130,150] s 22B(2) …. [111,200] s 22C …. [111,100], [111,200], [130,150] s 22C(2) …. [111,200] s 22E …. [52,025], [52,375], [73,875], [130,150], [130,775] s 22E(2)(d) …. [52,050] s 22F …. [111,100], [111,200], [130,150] s 22F(2) …. [111,200] s 22G …. [52,375] s 22H …. [111,100], [111,200] s 22H(2) …. [111,200] s 22L(2) …. [150,500] s 22N(1) …. [150,500]

s 22N(2) …. [150,500] s 22P(2) …. [150,500] s 22X …. [51,900], [51,975], [52,375], [73,725], [130,775] s 22X(4)(d) …. [52,050] s 22XA …. [111,100], [111,200] s 22XA(2) …. [111,200] s 23 …. [110,625] s 24 …. [110,650] s 24(5) …. [110,650] s 24(5A) …. [110,650] s 25 …. [110,675], [150,500] s 27 …. [110,650] s 27(1) …. [150,500] s 27(1A) …. [150,500] s 29 …. [130,725] s 30(1) …. [130,775] s 31(1) …. [130,875] s 31(2) …. [130,800] s 31(3) …. [130,850] s 31(4) …. [130,825] s 32 …. [130,925] s 34 …. [130,925] s 35 …. [130,800] s 36 …. [130,875] s 37 …. [130,875] s 38 …. [130,900] s 39(1) …. [130,975] s 39(2) …. [130,975] s 39(3) …. [130,975]

s 40 …. [131,001] s 41 …. [131,025] s 44 …. [131,100] s 44(a) …. [131,100] s 44(b) …. [131,100] s 44(c) …. [130,825] s 45(1) …. [131,150] s 45(2) …. [131,150] s 45(3) …. [131,150] s 45(4) …. [131,150] s 45(5) …. [131,150] s 46(1) …. [131,175] s 46(2) …. [131,175] s 47 …. [51,350], [110,550] s 47(1A) …. [110,550] s 47(1B) …. [110,550] s 47(3) …. [110,575] s 47(31) …. [110,575] s 48 …. [110,600] s 54 …. [52,750], [52,800], [53,001] s 54(1) …. [52,775], [150,500] s 54(1)(b) …. [150,500] s 54(2) …. [52,800], [150,500] s 54(3) …. [52,825], [150,500] s 54(4) …. [52,825] s 54(5) …. [52,850], [150,500] s 54A …. [52,750], [52,800], [53,001] s 54A(1) …. [52,975] s 54A(2) …. [53,001]

s 54A(3) …. [53,025] s 54A(5) …. [53,050] s 55 …. [52,750], [73,300], [73,575] s 55(1) …. [52,875] s 55(1)(a) …. [150,500] s 55(1)(b) …. [150,500] s 55(2) …. [52,900], [150,500] s 55(3) …. [52,925], [150,500] s 55(3A) …. [52,925] s 55(3B) …. [52,925] s 55(4) …. [52,925] s 55(5) …. [52,950], [150,500] s 55A …. [52,750], [73,300], [73,575] s 55A(1) …. [53,075] s 55A(2) …. [53,100] s 55A(3) …. [53,125] s 55A(4) …. [53,125] s 55A(5) …. [53,125] s 55A(6) …. [53,150] s 56 …. [150,050], [150,200] s 57 …. [130,350] s 57(2) …. [130,400] s 58 …. [130,350] s 58(1) …. [130,375] s 58(2) …. [130,375] s 58(3) …. [130,375] s 59(1) …. [130,425] s 59(2)(a) …. [130,425] s 59(2)(b) …. [130,425]

s 59(3) …. [130,450] s 60 …. [130,425], [130,525] s 61(1)(a) …. [130,625] s 61(1)(b) …. [130,625] s 61(2)(a) …. [130,650] s 61(2)(b) …. [130,650] s 61(3) …. [130,600] s 62 …. [130,375] s 63 …. [130,450] s 63(1) …. [130,450] s 64 …. [130,475] s 65(1) …. [130,475] s 66(1) …. [130,550] s 66(2) …. [130,575] s 66(3) …. [130,575] s 67 …. [130,550] s 67(2) …. [130,550] s 67(3) …. [130,550] s 67(4) …. [130,550] s 68 …. [130,500] s 69 …. [131,300] s 70(1) …. [130,675] s 70(3) …. [130,675] s 70(4) …. [130,700] s 70(4)(d) …. [130,700] s 71 …. [130,275], [130,300] s 71(1) …. [130,150] s 71(3) …. [130,175] s 71(4) …. [130,175]

s 71(5) …. [130,175] s 71(6) …. [130,175], [130,300] s 72 …. [130,175] s 73 …. [110,250], [130,775] s 73(2) …. [110,250] s 73(3) …. [110,250] s 73(4) …. [110,400] s 73(5) …. [110,250] s 73A …. [110,250], [130,775] s 73A(2) …. [110,250] s 73A(3) …. [110,250] s 73A(4) …. [110,400] s 73A(5) …. [110,250] s 74 …. [110,275] s 74(1) …. [110,275] s 74(2) …. [110,275] s 74(2A) …. [110,400] s 74(3) …. [110,275] s 74A …. [110,275] s 74A(1) …. [110,275] s 74A(2) …. [110,275] s 74A(3) …. [110,400] s 74A(4) …. [110,275] s 74AA …. [110,225], [130,775] s 74AA(2) …. [110,225] s 74AA(3) …. [110,225] s 74AAA(4) …. [110,400] s 74B …. [110,250], [130,775] s 74B(2) …. [110,250]

s 74B(3) …. [110,250] s 74B(4) …. [110,400] s 74B(5) …. [110,250] s 74C …. [110,275] s 74C(2) …. [110,275] s 74C(3) …. [110,275] s 74C(4) …. [110,400] s 74C(5) …. [110,275] s 75 …. [110,225] s 75(1) …. [110,300] s 75(3) …. [110,300] s 75A …. [110,475] s 75A(1) …. [150,500] s 75A(3) …. [150,500] National Measurement Act 1960 …. [51,500] Personal Property Securities Act 2009 …. [92,075], [92,150] s 21 …. [92,175] Privacy Act 1988 Pt 3 …. [32,075] Proceeds of Crime Act 2002 …. [92,075] Renewable Energy (Electricity) Act 2000 …. [30,001], [30,025], [31,475], [31,500], [32,150], [32,175], [130,050] Pt 4 …. [31,675] Steel Transformation Plan Act 2011 …. [30,025]

NEW SOUTHWALES Community Services (Complaints, Reviews and Monitoring) Act 1993 …. [73,375], [73,400], [110,875] Partnership Act 1892 s 1(1) …. [73,275], [73,925]

VICTORIA Environment Protection Act 1970 …. [110,125] Partnership Act 1958 s 5(1) …. [73,275], [73,925]

QUEENSLAND Partnership Act 1891 s 5(1) …. [73,275]

WESTERN AUSTRALIA Partnership Act 1895 s 7(1) …. [73,275], [73,925]

SOUTH AUSTRALIA Partnership Act 1891 s 1(1) …. [73,275], [73,925]

TASMANIA Partnership Act 1891 s 6(1) …. [73,275], [73,925]

AUSTRALIAN CAPITAL TERRITORY Partnership Act 1963 s 6(1) …. [73,275], [73,925]

NORTHERN TERRITORY Partnership Act 1997 s 5(1) …. [73,275], [73,925]

Directory National Regulatory oversight CLEAN ENERGY REGULATOR [10,001] Postal address GPO Box 621 Canberra ACT 2601 General enquiries Phone: 1300 553 542 within Australia Email: [email protected] Opening hours: Monday to Friday from 8:30 am to 8:00 pm Australian Eastern Daylight Savings Time (AEDST) and 8:30 am to 7:30 pm Australian Eastern Standard Time (AEST). www.cleanenergyregulator.gov.au

Email (Based on Clean Energy Regulator data) Contact Why Contact Email Enquiries regarding the tracking of the location and Australian National ownership of Registry of Emissions emission units issued [email protected] Units (ANREU) under the Kyoto Protocol and Australian Carbon Credit Units. General Carbon Carbon Farming Farming Initiative [email protected] Initiative enquiries.

Freedom of information (FOI)

Fraud

To submit an FOI request or if you have [email protected] an FOI enquiry. To report potential, fraudulent or [email protected] noncompliant behaviour

Greenhouse and Energy auditing enquiries. Invoicing and general Finance finance enquiries. National Greenhouse Enquiries or and Energy Reporting submissions for (NGER) NGER reporters. OSCAR Technical For technical support Support with OSCAR. Renewable Energy Enquiries about Target LRET and SRES. Greenhouse and Energy Audit

[email protected] [email protected] [email protected] [email protected] [email protected]

2 April 2012

Organisation chart for Clean Energy Regulator (as of 2 April 2012) (source: Clean Energy Regulator)

CLIMATE CHANGE AUTHORITY [10,025] The Climate Change Authority commences 1 July 2012. For background to the Authority see www.climatechange.gov.au.

PRODUCTIVITY COMMISSION [10,050] Melbourne Address Level 12, 530 Collins Street Melbourne VIC 3000, Australia Postal addressLocked Bag 2, Collins St East Locked Bag 2, Collins St East Reception Telephone: (03) 9653 2100 Fax: (03) 9653 2199 Freecall: 1800 020 083 Canberra Address Level 2, 15 Moore Street Canberra City ACT 2600, Australia Postal address GPO Box 1428 Canberra City ACT 2601, Australia Reception Telephone: (02) 6240 3200 Fax: (02) 6240 3399 Freecall: 1800 020 083 www.pc.gov.au

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION (ACCC) [10,075] ACCC Infocentre (Australian callers): 1300 303 609 www.accc.gov.au

Ministerial Departments DEPARTMENT OF CLIMATE CHANGE AND

ENERGY EFFICIENCY [10,201] For more information on the Australian Government’s climate change policy: Phone: 1800 057 590 within Australia Email: [email protected] Monday to Friday 8:30 am –8:00 pm Australian Eastern Daylight Savings Time (AEDST). Website: www.climatechange.gov.au Minister Hon Greg Combet AM MP Minister for Climate Change and Energy Efficiency PO Box 6022 House of Representatives Parliament House Canberra ACT 2600 Phone: (02) 6277 7920 Fax: (02) 6273 7330 Hon Mark Dreyfus QC MP Parliamentary Secretary for Climate Change and Energy Efficiency Parliamentary Secretary for Industry and Innovation PO Box 6022 House of Representatives Parliament House Canberra ACT 2600 Phone: (02) 6277 4305 Fax: (02) 6277 8484 Email contacts (Based on Department of Climate Change and Energy Efficiency data) Contact Australian National Registry of Emissions Units Carbon Farming Initiative

Emissions Intensive Trade exposed Industry Assistance

Email registry[email protected] General enquiries: [email protected] Domestic Offsets Integrity Committee: [email protected] [email protected]

Freedom of information co-ordinator (FOI) Greenhouse and Energy Audit Government Greenhouse and Energy Reporting (GGER) National Greenhouse and Energy Reporting (NGER) Low Carbon Communities National Authority for the Clean Development Mechanism and Joint Implementation Solar Hot Water Rebate Tax deductions for carbon sink forests

[email protected] [email protected] [email protected] [email protected] [email protected] DNA: [email protected] DFP: [email protected] [email protected] [email protected]

DEPARTMENT OF RESOURCES, ENERGY AND TOURISM (SOURCE: WEBSITE OF THE DEPARTMENT OF RESOURCES, ENERGY AND TOURISM) [10,225] Administers Energy Efficiency Opportunities Act 2006 (Cth). The Minister for Resources and Energy has established an Investment Reference Group (IRG) to advise on energy sector investments and to assist with the development of an independent review of investment issues relating to the electricity generation sector. www.ret.gov.au Minister for Resources and Energy (Minister for Tourism) The Hon Martin Ferguson AM MP PO Box 6022 House of Representatives Parliament House Canberra ACT 2600 Phone: (02) 6277 77930

TREASURY

[10,250] Administers the Fuel Tax Act 2006 (Cth). For more information regarding the Department: www.treasury.gov.au. Treasurer The Hon Wayne Swan MP PO Box 6022 House of Representatives Parliament House Canberra ACT 2600 Phone: (02) 6277 7340 Fax: (02) 6273 3420

DEPARTMENT OF SUSTAINABILITY, ENVIRONMENT, WATER, POPULATION AND COMMUNITIES [10,275] Administers the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth). For more information regarding the initiatives and measures see: www.environment.gov.au/stmosphere/index.html. The Hon Tony Burke MP PO Box 6022 Parliament House Canberra ACT 2600 Phone: (02) 6277 7340

CALENDARS FOR REPORTING [10,301] NGER Act Deadline 1 July 30 June 1 May 2013/2014/2015

Requirement Start of the reporting year for the NGER scheme. End of the reporting year for the NGER scheme. Applications for registration are due by 1

31 August

May in a fixed charge year if a person is or it may reasonably be expected that the person will be a liable entity for the current fixed charge year and the person has or may reasonably be expected to have an interim emissions number for the current fixed charge year. Applications for registration are due by 31 August following the reporting (financial) year if: a person is or was a liable entity for an eligible financial year or a controlling corporation first triggered one of the NGER Act s 13 thresholds for a controlling corporation’s group. Liable entities and controlling corporations are only required to register under the NGER Act once. If a liable entity is registered as a controlling corporation, re-registration is not required. A registered person remains registered until an application for deregistration is approved.

31 October

28 February

Carbon Pricing Mechanism Clean Energy Act 2011 (Cth)

Once registered, liable entities and controlling corporations (and other reporters such as the nominee of joint ventures, holders of liability transfer certificates and responsible entities) are required to report by 31 October. A registered person is required to submit an NGER Report for every year that the person is registered. The regulator will publish the NGER data for each reporting period (financial year) on its website by February 28 the following year.

Deadline 2 April 2012

Requirement Applications open for a certificate of eligibility for coal-fired generation assistance free carbon units.

2 May 2012

Applications close for a certificate of eligibility for coal-fired generation assistance free carbon units.

15 June 2013/2014/2015

Liable entities must surrender sufficient eligible emissions units to cover their interim emissions number. Applications open for free carbon units to be issued to eligible persons under the Jobs and Competitiveness Program. Application closes for free carbon units to be issued to eligible persons under the Jobs and Competitiveness Program (or for requesting an extension of the application deadline to 31 December). Liable entities must surrender sufficient eligible emissions units to cover their full year emissions number for the previous reporting period (financial year).

1 July 2012

31 October

1 February

GOVERNMENT INITIATIVES [10,401] Energy efficiency Community Energy Efficiency Program — to support local councils and community organisations in improving energy efficiency in council buildings, facilities and lighting; Energy Efficiency Information Grants — a merit based grants program to assist industry associations and non profits disseminate energy efficiency information; Energy Savings Initiative — to investigate the merits of a national energy savings initiative where the energy retailers are required to find and implement energy savings in households and businesses;

Living Greener — Household information and advice line — website www.livinggreener.gov.au and advice line; Low Income Energy Efficiency Program — a merit based program to provide grants for programs to assist low income households to better manage their energy use. Jobs and industry assistance Clean Energy Skills — funding for educational institutions and industry to develop the materials and expertise needed to promote clean energy skills; Coal mining assistance—help the coal sector transition to a carbon price; Energy Security Fund — measures to maintain secure energy supplies and ensure a smooth energy market transition to a clean energy future; Jobs and Competitiveness Program — free carbon units for companies that are energy intensive and trade exposed or otherwise constrained in their capacity to pass through costs in global markets. Land sector Carbon Farming Initiative — allows farmers and land managers to earn carbon credits by storing carbon or reducing greenhouse gas emissions on the land. These credits can then be sold to people and businesses wishing to offset their emissions; Carbon Farming Initiative non-Kyoto carbon fund; Indigenous Carbon Farming Fund — to support Indigenous Australians to benefit from carbon farming; Carbon Farming Skills. Other programs Charities Maritime and Aviation Support Program Climate Change Grant Program Green Loans and Green Start Programs Home Insulation Safety Plan

National Solar Schools Renewable Energy Target Smart Grid, Smart City Solar Cities Renewable Energy Bonus Scheme — Solar Hot Water Rebate. Based on Department of Climate Change and Energy Efficiency data. For further information on these initiatives go to www.climatechange.gov.au. For information relating to additional initiatives see: www.cleanenergyfuture.gov.au.

TABLE OF LEGISLATION, INTERNATIONAL POLICIES AND AGREEMENTS [10,501] LEGISLATION Building Energy BEED Efficiency Disclosure Act 2010

Cancun Agreements

Carbon Credits (Carbon Farming Initiative) Act 2011

CFI

JURISDICTION PURPOSE Commonwealth An Act to promote the disclosure of information about the energy efficiency of building, and for related purposes. International Agreements reached at the 2010 Conference of the Parties (COP) to the UNFCCC. Commonwealth

An Act about projects to remove carbon dioxide from the atmosphere and projects to avoid emissions of greenhouse gases, and for other purposes.

Clean Energy Act 2011

CEA

Commonwealth

Energy Efficiency Opportunities Act 2006

EEO

Commonwealth

Fuel Tax Act 2006

Commonwealth

Kyoto Protocol

International

Marrakesh Accords

International

National Greenhouse NGER and Reporting Act 2007

Commonwealth

Ozone Protection and Synthetic Greenhouse

Commonwealth

An Act to encourage the use of clean energy, and for other purposes. An Act to encourage more efficient use of energy by large energy using businesses, and for related purposes. An Act about fuel tax and fuel tax credits, and for related purposes. An international agreement that sets binding targets for countries and communities to reduce greenhouse gas emissions. A set of agreements reached at COP7 on the rules to meet targets set by the Kyoto Protocol. An Act to provide for the reporting and dissemination of information related to greenhouse gas emissions, greenhouse gas projects, energy production and energy consumption, and for other purposes. An to provide for measures to protect

Gas Management Act 1989

Renewable Energy (Electricity) Act 2000

United Nations Framework on Climate Change

Commonwealth

UNFCC

International

the ozone layer and to minimise emissions of synthetic greenhouse gases (SGGs) An Act for establishment and administration of a scheme to encourage additional electricity generation from renewable energy sources, and for related purposes. An multi-lateral treaty setting a framework for intergovernmental efforts to tackle climate change.

International UNITED NATIONS FRAMEWORK ON CLIMATE CHANGE [10,601] For the United Nations Framework on Climate Change: http://unfccc.int. For the Kyoto http://unfccc.int/key_documents/kyoto_protocol/items/6445.php. For the Bali Roadmap including COP 13: http://unfccc.int/key_documents/bali_road_map/items/6447.php. For the Marrakesh Accords Declaration see: http://unfcc.int/resource/docs/cop7/13a02.pdf. For the Cancun Agreements, COP 16 and Green Climate Fund:

Protocol:

http://unfccc.int/meetings/cancun_nov_2010/items/6005.php http://cancun.unfcc.int/.

and

For reports of Annex 1 parties under Kyoto Protocol: http://unfccc.int/national_reports/items/1408.php. For greenhouse gas inventory data: http://unfccc.int/ghg_data/items/3800.php.

Annex 1 Parties to the United Nations Framework Convention on Climate Change [10,625] Australia, Austria, Belarus**, Belgium, Bulgaria, Canada, Croatia**, Czech Republic**, Denmark, Estonia, European Union, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy**, Japan, Latvia, Liechtenstein**, Lithuania, Luxembourg, Malta, Monaco**, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russian Federation**, Slovakia**, Slovenia**, Spain, Sweden, Switzerland, Turkey**, Ukraine**, United Kingdom of Great Britain and Northern Ireland, United States of America ** Party for which there is a specific COP and/or CMP decision

Annex II Parties to the United Nations Framework Convention on Climate Change [10,650] Annex II Parties consist of the OECD members of Annex I, but not the EIT (economies in transition) Parties.

Non Annex I Parties to the United Nations Framework Convention on Climate Change [10,750] Afghanistan, Albania**, Algeria, Angola, Antigua and Barbuda, Argentina, Armenia**, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Burkina Fuso, Burundi, Cambodia, Cameroon, CapeVerde, Central African Republic, Chad, Chile, China, Colombia, Comoros, Congo, Cook Islands, Costa Rica, Cuba, Cyprus, Cote d’Ivoire, Democratic People’s Republic of Korea, Democratic Republic of the Congo, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Georgia, Ghana, Grenada, Guatemala, Guinea, Guinea — Bissau, Guyana, Haiti, Honduras, India, Indonesia, Iran (Islam Republic of), Iraq, Israel, Jamaica, Jordan, Kazakhstan**, Kenya, Kiribati, Kuwait, Kyrgyzstan, Lao People’s Democratic Republic, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Malaysia, Maldives, Mali, Marshall Islands, Mauritania, Mauritius, Mexico, Micronesia (Federal States of), Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nauru, Nepal, Nicaragua, Niger, Nigeria, Niue, Oman, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Republic of Korea, Republic of Moldova**, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Sao Tome and Principe, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra Leone, Singapore, Solomon Islands, Somalia, South Africa, Sri Lanka, Sudan, Suriname, Swaziland, Syrian Arab Republic, Tajikistan, Thailand, The former Yugoslav Republic of Macedonia, Timor-Leste, Togo, Tonga, Trinidad and

Tobago, Tunisia, Turkmenistan**, Tuvalu, Uganda, United Arab Emirates, United Republic of Tanzania, Uruguay, Uzbekistan**, Vanuatu, Venezuela (Bolivian Republic of), Viet Nam, Yemen, Zambia, Zimbabwe. ** Party for which there is a specific COP and/or CMP decision

TABLE OF ABBREVIATIONS AND ACRONYMS [10,801] ANREU AAUs

Australian National Registry of Emissions Units Assigned Amount Units under the Kyoto Protocol

ACUs

Australian carbon units under the Australian carbon pricing mechanism (CPM).

ACCU

CAA

An Australian carbon credit unit under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth). ACCUs include Kyoto Australian carbon credit units and non-Kyoto Australian carbon credit units. The American Power Act of 2010, a discussion draft of United States legislation released on 12 May 2010 by Senator Joseph Lieberman and Senator John Kerry. Australian Public Service Acid Rain Program introduced via amendments of the Clean Air Act (US) (CAA) by Title IV as added 15 November 1990, 42 USCS §7651 Australian Securities and Investment Commission Australian Stock Exchange Benchmark average auction charge Business as usual Basel Committee on Bank Supervision, which operates through the Bank for International Settlements (BIS). Bromofluorocarbons The Competition and Consumer Act 2010 (Cth) as amended. Clean Air Act (US) (42 USC 85)

CAMAC

Corporations and Markets Advisory Committee

CCA CCR Act CCS

Climate Change Authority The Climate Change Response Act 2002 (NZ). carbon capture and storage

APA

APS ARP

ASIC ASX BAAC BAU BCBS

BFCs C&C Act

CDM

Clean Development Mechanism projects under Article 12 of the Kyoto Protocol

CERs

Certified emission reduction units generated by CDM projects under the Kyoto Protocol

Cal ETS CERs CFCs

CH4

California Emissions Trading Scheme Certified Emissions Reduction credits Chlorofluorocarbons, man-made organohalogen compounds, which together with BFCs are ozone depleting substances (ODSs) Carbon Farming Initiative created by the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) Commodity Futures Trading Commission of the United States of America Methane

CMI CO2

Carbon Market Institute Carbon Dioxide

CO2-e

Carbon dioxide equivalent. CO2-e is a standard measure that takes account of the different global warming potential (GWP) of different greenhouse gases (GHG) and expresses the cumulative effect in a common unit. Commission of the European Communities. Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) Consumer price index Australian Government, Department of Climate Change and Energy Efficiency, (formerly the Department of Climate Change (DCC)).

CFI

CFTC

Commission COP

CPI DCCEE

DEWHA DSEWPC

Department of Environment,Water, Heritage and the Arts Australian Government, Department of Sustainability, Environment,Water, Population and Communities (formerly Department of Environment,Water, Heritage and the Arts

DOE

(DEWHA)). Designated Operational Entity within the CDM

ECFI EEUs

European Court of First Instance Eligible emissions units. EEUs comprise: carbon units ACCUs and Eligible international emissions units (IEUs).

EIA EIEUs EITE

EPA ERU

ETS EU EUAs EU ETS

Environmental Investigation Agency of the European Union (EU) Eligible International Emission Units Emissions-intensive trade-exposed — a descriptor to refer to that sector of the economy promised assistance under the Jobs and Competitiveness Program. Environment Protection Authority in Australia Emission reduction units generated by joint implementation (JI) projects under the Kyoto Protocol. Emissions Trading Scheme European Union European Union Allowances under the European Union Emissions Trading System (EU ETS). European Union Emissions Trading System established by Commission Directive (EC) No 87/2003 of 25 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Commission Directive 96/61/EC [2003] OJ L 275, 32. Relevant amending directives, decisions and regulations include: Commission Directive (EC) No 101/2004 of 13 November 2004 establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol’s project mechanisms [2004] OJ L

338/18; Commission Decision (EC) No 780/2006 of 16 November 2006 on avoiding double counting of greenhouse gas emission reductions under the Community emissions trading scheme for project activities under the Kyoto Protocol pursuant to Commission Directive 2003/87/EC of the European Parliament and the Council [2006] OJ L 316/12 notified under C(2006) 5362; Commission Regulation (EC) No 994/2008 of 8 October 2008 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council; Commission Directive (EC) No 29/2009 of the European Parliament and the Council of 23 April 2009 amending Commission Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community [2009] OJ L 140/63; Commission Regulation (EU) No 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Commission Directive 2003/87/EC of the European Parliament and the Council establishing a scheme for greenhouse gas emission allowance trading within the Community [2010] OJ L 302/1; and Commission Regulation (EU) No 1193/2011 of 18 November 2011 establishing a Union Registry for the trading period commencing 1 January 2013, and subsequent trading periods, of the Union remisisons trading scheme pursuant to Commission Directive 2003/87/EC of the European Parliament and

of the Council and Decision 280/2004/EC of the European Parliament and of the Council and amending Regulations (EC) No 2216/2004 and (EU) No 920/2010.

FCA GEDO

GHGs

Federal Court of Australia. FCFCA is the Full Court of the Federal Court of Australia. Greenhouse and Energy Data Officer, the former regulator under the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act). Greenhouse gases, defined to include emissions in CO2-e of: Carbon dioxide (CO2); Methane (CH4); Nitrous oxide (N2O); synthetic GHG, being: Sulphur hexafluoride (SF6); Hydrofluorocarbons (PFCs) of the 13 types specified in Table 1 of s 7B(2) of the NGER Act; and Perfluorocarbons (HFCs) of the 7 types specified in Table 2 of s 7B(3) of the NGER Act; and a prescribed gas.

GHGPRIP

Greenhouse Gas Pollution Reduction and Investment Program foreshadowed by the APA.

G-SIFIs GST

Financial institutions that are globally systemic. Goods and services tax imposed by the A Tax System (Goods and Services Tax) Act 1999 (Cth). Global warming potential. The GWP of any GHG is specified in the National Greenhouse and Energy Reporting Regulations 2008 (Cth) (NGER Reporting Regulations).

GWP

HCA HCFCs or HFCs

High Court of Australia Hydrofluorocarbons

IET IETA IEUs

International emissions trading International Emissions Trading Association An eligible international emissions unit under the Clean Energy Act 2011 (Cth) (CERs, ERUs and RMUs). International Monetary Fund Intergovernmental Panel on Climate Change, established by the United Nations Environment Program (UNEP) and the World Metrological Organisation (WMO).

IMF IPCC

JCP JI LEPID LGCs LRET LSCB LULUCF MDP MNC MOP MPCCC

N NAPs NCOS

Jobs and Competitiveness Program for EITE entities under Pt 7 of the CE Act. Joint Implementation projects under the Kyoto Protocol. Liable Entities Public Information Database under the Clean Energy Act 2011 (Cth) . Large-scale Generation Certificates Large-scale Renewable Energy Target Land Sector Carbon and Biodiversity Land use, land use change and forestry Markets Disciplinary Panel established by ASIC. Multi-national corporation Meeting of the Parties to the Kyoto Protocol Multi-Party Climate Change Committee established 27 September 2010 by Prime Minister the Hon Julia Gillard MP, Deputy Prime Minister and Treasurer the Hon Wayne Swan MP and the Minister for Climate Change and Energy Efficiency the Hon Greg Combet AM MP. Nitrogen National Allocation Plans for the purposes of the EU ETS National Carbon Offset Standard published by

NETF

DCCEE. National Emissions Task Force

NF3

Nitrogen trifluoride

NGER Act

National Greenhouse and Energy Reporting Act 2007 (Cth), Act No 175 of 2007.

NO N2O

Nitric oxide Nitrous oxide

NOx

Oxides of nitrogen

NPI

National Pollutant Inventory maintained by DSEWPC

NRM NZ ETS

NZUs O2

Natural Resource Management New Zealand Emissions Trading Scheme introduced into the CCR Act by the Climate Change Response (Moderated Emissions Trading) Amendment Act 2009 (NZ) (enacted as Act No 57 of 2009). New Zealand Units under the NZ ETS. Oxygen

O3

Ozone

ODSs

Ozone depleting substances. ODSs include BFCs and CFCs and other elements such as hydroxyl (OH), atomic chlorine (Cl), and atomic bromine (Br). An over-the-counter transaction. Per-fluorocarbons Reserve Bank of Australia Renewable Energy Certificate The United Nations (UN) programme for reducing emissions from deforestation and forest degradation

OTC PFCs RBA REC REDD REDD+

The UN programme that goes beyond deforestation and forest degradation

RET RMUs SEI

Renewable Energy Target Removal units generated under the Kyoto Protocol. Stockholm Environment Institute.

SES SF6

Senior Executive Service Sulphur hexafluoride

SLI SO2

Select Legislative Instrument Sulphur dioxide

SRES STCs t

Small-scale Renewable Energy Scheme Small-scale Technology Certificates Tonne(s)

TGET UN UNGA UNDP UNEP UNFCC

Prime Ministerial Task Group on Emissions Trading. United Nations General Assembly of the United Nations. United Nations Development Programme. United Nations Environment Programme. United Nations Framework Convention on Climate Change, opened for signature 9 June 1992, 1771 UNTS 165 (entered into force 21 March 1994) [31 ILM 848]. United States of America. United States Environment Protection Agency. Value added tax, equivalent to GST.

US US EPA VAT VCS

VERs WBCSD WMO WTO WRI

Voluntary Carbon Standard 2007.1 of the Voluntary Carbon Standard Association, a specification for the project-level quantification, monitoring, reporting, validation and verification of voluntary emission reduction units generated by voluntary abatement action. Voluntary emission reduction units or credits. World Business Council for Sustainable Development. World Meteorological Organisation. World Trade Organisation. World Resources Institute.

TERMS

[10,901] Australian ETS means Australian emissions trading scheme. AFOLU projects are agriculture, forestry and other land-use projects. Arbitrage means activity that attempts to profit from mispricing opportunities between markets and between products within and between markets. Authority means the Climate Change Authority established under the Climate Change Authority Act 2011 (Cth). Bali Action Plan is Decision 1/CP.13, FCCC/CP/2007/6/Add.1*, recording an agreed action plan reached by the parties to the United Nations Framework Convention on Climate Change (UNFCCC) at their 13th meeting (Conference of the Parties (COP)) at Bali, 15 December 2007. Cancun Agreements are the agreements reached by the parties to the UNFCCC at COP 17 at Cancun, 10 December 2010. Carbon units are Australian carbon units under the Australian carbon pricing mechanism (CPM). Carbon leakage means the effect when a firm facing increased costs in one country due to an emissions price chooses to reduce production or to close or relocate production to another country with less stringent climate change policies. Carbon price framework means the carbon price framework initially proposed for Australia by the Multi-Party Climate Change Committee (MPCCC) on 24 February 2011, and enacted in the Clean Energy Act 2011 (Cth) and associated Acts and Regulations. Clean Energy Regulations means the Clean Energy Regulations 2011, as amended. Clean energy laws package comprises the Clean Energy Act 2011 (Cth) as amended, the Clean Energy Regulations 2011 as amended, and associated Acts and Regulations as amended. Copenhagen Accord is Decision 2/CP.15, UN document FCCC/CP/2009/11/Add.1, recording an accord reached by the parties to the UNFCCC at COP 15 at Copenhagen, 18 December 2009. Dodd-Frank Act is the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (US) (Public Law 111-203). Derivatives are financial products derived from or based upon an underlying commodity, such as an Australian carbon unit.

Financial intermediaries means all non-liable participants in the carbon market, and includes financial institutions, financial institutions that are globally systemic (G-SIFIs), hedge funds, investors, and speculators. Futures (and Forward Contracts) are “agreements to buy or sell assets at a certain time in the future for a price that is fixed today.”1 The price for the underlying asset to be delivered on the expiration or delivery date is called the futures price. The seller of the underlying asset has a short position in the futures contact. Gaming means activity that attempts to profit from uncertainties in and differences in interpretation of legislation in a state and between states. Gaunaut Review means the Final Report to the Commonwealth, State and Territory Governments of Australia by the Garnaut Climate Change Review. GHG Protocol 2004 means the Protocol published under that name by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). Government means the political entity of a country that exercises effective sovereignty over its territory and population. Kyoto Protocol means the Protocol to the UNFCCC, opened for signature 16 March 1998, UN Doc. FCCC/CP/1997/7/Add.1 December 10, 1997 (entered into force 16 February 2005) [37 ILM 22]. Liable entity means a person liable under the Clean Energy Act 2011 (Cth). Marrakesh Accords are UN Doc. FCCC/CP/2001/13/Add.2 January 21, 2002, the agreements formally adopted at the first conference of the parties to the Kyoto Protocol in December 2005. Minister means the Minister for the time being who is Minister for Climate Change and Energy Efficiency. The Minister is the Hon Greg Combet AM MP. NGER Measurement Determination means National Greenhouse and Energy Reporting (Measurement) Determination 2008, Legislative Instrument F2008L02309, as amended, made pursuant to the NGER Act. NGER Reporting Regulations means National Greenhouse and Energy Reporting Regulations 2008, Select Legislative Instrument 127 of 2008, as amended, made pursuant to the NGER Act. Non-liable entity means a person or entity to which no obligations attach under an ETS. A non-liable entity may hold a right to emit GHG (an emissions unit) without any liability commensurate to obligations of liable entities to monitor, report and acquit GHG emissions under the ETS.

Registry is the Australian National Registry of Emissions Units. Registry account is an account established under the Australian National Registry of Emissions Units Act 2011 (Cth) for holding ACCUs, carbon units and other EEUs. Regulated GHG participants mean regulated greenhouse gas market participants. Regulator means the Clean Energy Regulator. The regulator is responsible for the Registry, liable entities under the Clean Energy Act 2011 (Cth), the CFI, national greenhouse and energy reporting under the NGER Act and renewable energy under the Renewable Energy (Electricity) Act 2001 (Cth). Review Update means the 2011 Review Update to the Garnaut Review. Scope 1, 2 or 3 emissions means either scope 1, 2 or 3 emissions as specified in the GHG Protocol 2004 as follows: Scope 1 emissions: Direct GHG emissions (excluding emissions not covered by the Kyoto Protocol) occurring from sources that are owned or controlled by the entity, and emissions from chemical production in owned or controlled process equipment. Excludes direct CO2 emissions from the combustion of biomass; Scope 2 emissions: Electricity indirect GHG emissions from the generation of purchased electricity consumed by the entity and physically occurring at the facility where electricity is generated. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organisational boundary of the entity; Scope 3 emissions: Other indirect GHG emissions (an optional reporting category allowing for the treatment of all other indirect emissions that are a consequence of the activities of the entity) that occur from sources not owned or controlled by the entity. Some examples of scope 3 activities are extraction and production of purchased materials; transportation of purchased fuels; and use of sold products and services. Secondary market trades are spot and future trades of emissions rights, derivatives and futures that occur in a market made possible by, but outside, the CPM framework. Speculation means “the purchase of a good for later re-sale rather than for use, or the temporary sale of a good with the intention of later re-purchase — in the hope of profiting from an intervening price change.”2

Spot trades are on-market trades in Australia of Australian carbon units which when registered result in ownership change under the Clean Energy Act 2011 (Cth), and in other markets, on-market trades of EUAs, NZUs, etc. State and states means the state as a person of international law.3 United States is the United States of America. ITAA36 is the Income Tax Assessment Act 1936 (Cth) as amended. ITAA97 is the Income Tax Assessment Act 1997 (Cth) as amended. Notes 1

Alex Frino and Elvis Jarnecic, Introduction to Futures and Options Markets in Australia (Pearson Prentice Hall, 2005) 1.

2

J Hirshleifer, “The Theory of Speculation Under Alternative Regimes of Markets” (1977) 32 The Journal of Finance 975, 975.

3

Article 1 of the Montevideo Convention on the Rights and Duties of States, enacted 26 December 1933 (entered into force 26 December 1934).

TABLES OF MEASURES AND CONVERSIONS [11,001] Table 1: Electricity

Table 2: Tonnes

Table 3: Joules

Table 4: Conversion Convert from

Convert to

Multiply by

Cubic foot Cubic metre Gigajoule

cubic metre cubic foot cubic metre

0.028328 35.301 26.8

Million cubic feet 1,000 cubic metres BTUs

1,000 cubic million cubic feet Joule

metres 28.328 0.0353 1054.615

Joule Million BTUs Gigajoule

BTUs Gigajoule million BTUs

0.0009482 1.054615 0.948213

Table 5: GWP Greenhouse Gas

Chemical Formula

GlobalWarming Potential

Carbon dioxide

CO2

1

Methane

CH4

21

Nitrous oxide

N2O

310

Sulphur hexafluoride

SF6

23,900

HFC 23

CHF3

11,700

HFC 32

CH2F2

650

HFC 41

CH3F

150

HFC 43 10mee

C5H2F10

1300

HFC 125

C2HF5

2800

HFC 134

C2H2F4 (CHF2CHF2)

1000

HFC 134a

C2H2F4 (CH2FCF3)

1300

HFC 143

C2H3F3 (CHF2CH2F)

300

HFC 143a

C2H3F3 (CF3CH3)

3800

HFC 152a

C2H4F2 (CH3CHF2)

140

HFC 227ea

C3HF7

2900

HFC 236fa

6300

C3H2F6 HFC 245ca

C3H3F5

560

Perfluoromethane (tetrafluoromethane) Perfluoroethane (hexafluoroethane) Perfluoropropane

CF4

6500

C2F6

9200

C3F8

7000

Perfluorobutane

C4F10

7000

Perfluorocyclobutane c C4F8

8700

Perfluoropentane

C55F12

7500

Perfluorohexane

C6F14

7400

ANZSIC CODES AND INDUSTRY CLASSIFICATIONS [12,001] Schedule 2, National Greenhouse and Energy Reporting Regulations 2008 (Cth). ANZSIC Code 440 821 694 331 01 05 490 522

ANZSIC Industry classification Accommodation Adult, community and other education Advertising services Agricultural product wholesaling Agriculture Agriculture, forestry and fishing support services Air and space transport Airport operations and other air transport support services

913 02 692 941

Amusement and other recreation activities Aquaculture Architectural, engineering and technical services Automotive repair and maintenance

641 642

Auxiliary finance and investment services Auxiliary insurance services

117 181 211 212

Bakery product manufacturing Basic chemical manufacturing Basic ferrous metal manufacturing Basic ferrous product manufacturing

213 214 182 121 731

Basic non-ferrous metal manufacturing Basic non-ferrous metal product manufacturing Basic polymer manufacturing Beverage manufacturing Building cleaning, pest control and gardening services Cafes, restaurants and takeaway food services Cement, lime, plaster and concrete product manufacturing Central banking

451 203 621 751 202 871 122 955 185 135 425 453 060 380 242 700 091 32

Central government administration Ceramic product manufacturing Child care services Cigarette and tobacco product manufacturing Civic, professional and other interest group services Cleaning compound and toiletry preparation manufacturing Clothing and footwear manufacturing Clothing, footwear and personal accessory retailing Clubs (hospitality) Coal mining Commission-based wholesaling Computer and electronic equipment manufacturing Computer system design and related services Construction material mining Construction services

152

Converted paper product manufacturing

900 113

Creative and performing arts activities Dairy product manufacturing

592 760

Data processing, web hosting & electronic information storage services Defence

426 622 244

Department stores Depository financial intermediation Domestic appliance manufacturing

822 422 243 263 261 262

Educational support services Electrical and electronic goods retailing Electrical equipment manufacturing Electricity distribution Electricity generation Electricity transmission

721 101 662 183 624 04

Employment services Exploration Farm animal and bloodstock leasing Fertiliser and pesticide manufacturing Financial asset investing Fishing, hunting and trapping

03 114 400 952 251 373

Forestry and logging Fruit and vegetable processing Fuel retailing Funeral, crematorium and cemetery services Furniture manufacturing Furniture, floor covering and other goods wholesaling Furniture, floor coverings, houseware and textile goods retailing

421 920

Gambling activities

270 201 755

Gas supply Glass and glass product manufacturing Government representation

116 360 423 310

Grain mill and cereal product manufacturing Grocery, liquor and tobacco product wholesaling Hardware, building and garden supplies retailing Heavy and civil engineering construction

912 840 63

Horse and dog racing activities Hospitals Insurance and superannuation funds

570 591 221 754

Internet publishing and broadcasting Internet service providers and web search portals Iron and steel forging Justice

134 132 693 601 753 141

Knitted product manufacturing Leather tanning, fur dressing, and leather product manufacturing Legal and accounting services Libraries and archives Local government administration Log sawmilling and timber dressing

942 696 695

Machinery and equipment repair and maintenance Management and related consulting services Market research and statistical services

111 85 223 080 332 55 231 350 661

Meat and meat product manufacturing Medical and other health care services Metal container manufacturing Metal ore mining Mineral, metal and chemical wholesaling Motion picture and sound recording activities Motor vehicle and motor vehicle part manufacturing Motor vehicle and motor vehicle parts wholesaling Motor vehicle and transport equipment rental and hiring Motor vehicle parts and tyre retailing

392

391 891

Motor vehicle retailing Museum operation

192 541

Natural rubber product manufacturing Newspaper, periodical, book and directory publishing

623 664

Non-depository financing Non-financial intangible assets (except copyrights) leasing Non-residential building construction Non-store retailing Oil and fat manufacturing

302 431 115 070 264 729 189 229 119

Oil and gas extraction On selling electricity and electricity market operation Other administrative services Other basic chemical product manufacturing Other fabricated metal product manufacturing Other food product manufacturing

663 602 249 349

Other goods and equipment rental and hiring Other information services Other machinery and equipment manufacturing Other machinery and equipment wholesaling

259 109 099 209 953 699

Other manufacturing Other mining support services Other non-metallic mineral mining and quarrying Other non-metallic mineral product manufacturing Other personal services Other professional, scientific and technical services

949 879 239 529

Other repair and maintenance Other social assistance services Other transport equipment manufacturing Other transport support services

149 732

Other wood product manufacturing Packaging services

892 951 170 184 427

Parks and gardens operations Personal care services Petroleum and coal product manufacturing Pharmaceutical and medicinal product manufacturing Pharmaceutical and other store-based retailing

372 502 191 510 80 161

Pharmaceutical and toiletry goods wholesaling Pipeline and other transport Polymer product manufacturing Postal and courier pick-up and delivery services Preschool and school education Printing and printing support services

96

Private households employing staff and undifferentiated goods-and-service-producing activities of households for own use Professional and scientific equipment manufacturing

241 671 771 452 151 245 561 471

Property operators Public order and safety services Pubs, taverns and bars Pulp, paper and paperboard manufacturing Pump, compressor, heating and ventilation equipment manufacturing Radio broadcasting Rail freight transport

472 672 424 772 954 162 301

Rail passenger transport Real estate services Recreational goods retailing Regulatory services Religious services Reproduction of recorded media Residential building construction

860 432

Residential care services Retail commission-based buying and/or selling

461 462 501 691

Road freight transport Road passenger transport Scenic and sightseeing transport Scientific research services

112 224

246 911 752

Seafood processing Sheet metal product manufacturing (except metal structural & container products) Software publishing Specialised food retailing Specialised industrial machinery and equipment wholesaling Specialised machinery and equipment manufacturing Sports and physical recreation activities State government administration

222 118 411 580 562 810 131 133 371 333 722 697 530 291

Structural product manufacturing Sugar confectionary manufacturing Supermarket and grocery stores Telecommunications services Television broadcasting Tertiary education Textile manufacturing Textile product manufacturing Textile, clothing and footwear wholesaling Timber and hardware goods wholesaling Travel agency and tour arrangement services Veterinary services Warehousing and storage services Waste collection services

292 481 482

Waste treatment, disposal and remediation services Water freight transport Water passenger transport

542 412 341

281 521

Water supply, sewerage and drainage services Water transport support services

Contents Foreword Publisher’s note Preface Table of Cases Table of Statutes Directory Chapter 1 — Legal Framework Introduction Sources of law Snapshot National legal framework — Carbon pricing mechanism Clean Energy Act 2011 (Cth) National Greenhouse and Energy Reporting Act 2007 (Cth) Fuel Tax Act 2006 (Cth) Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth) National legal framework — Energy efficiency Energy Efficiencies Opportunities Act 2006 (Cth) Building Energy Efficiency Disclosure Act 2010 (Cth) National legal framework — Renewable energy Renewable Energy (Electricity) Act 2000 (Cth) National legal framework — Land sector Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) Regulatory oversight Clean Energy Regulator Australian Climate Change Authority Land Sector and Biodiversity Board

Productivity Commission Australian Competition and Consumer Commission International framework United Nations Framework Convention on Climate Change Kyoto Protocol to the UNFCCC Ongoing modifications and additions to the UNFCCC Linking Australian targets and caps Chapter 2 — Registration, Measurement and Reporting Introduction Sources of law Who must register? Controlling corporation Controlling corporation’s group Liable entity Person who may reasonably be expected to be liable Tests for registration Emissions threshold for registration by controlling corporation Group threshold for emissions and energy Threshold for facility Prorated threshold Exceptions from threshold Emissions threshold for registration by liable entity Emissions threshold for registration by person who is a potential liable entity Emissions Emissions of GHG Covered emissions Greenhouse gases Release into the atmosphere

Direct result Territorial nexus Facility NGER reporting regulations requirements for facility Industry sector Operational control Tie-breaker tests for operational control Rules for joint ventures Rules for trusts with multiple trustees Consumption of energy Production of energy Energy Eligible financial year Voluntary registration Time for registration Form for registration Registration application by controlling corporation Registration application by liable entity Online registration Penalty for failing to register Register of registrations How are greenhouse gases measured? Overview of NGER (Measurement) Determination Emissions sources Categories of scope 1 emissions Units of measurement Carbon dioxide equivalence and global warming potential Measurement methods Uses of methods

Due diligence for methods Rules for methods Carbon capture and storage Continuous emissions monitoring Example — coal mining: fugitive emissions — underground mining activities Available methods Fugitive emissions from extraction of coal Example — coal mining: fugitive emissions — open cut mines Available methods Fugitive emissions from extraction of coal Uncertainty Guidance Reporting obligations: who must report? Report by registered corporation Report by responsible member of a controlling corporation’s group Report by liable entities Report by holders of liability transfer certificate Time for reporting Scope of information to be reported Reporting information about persons and facilities Reporting scope 1 and scope 2 emissions Scope 1 emissions from fuel combustion Scope 1 emissions from particular sources Example — reporting GHG emissions from coal mining Reporting energy production Reporting energy consumption Reporting primary or secondary fuels and energy commodities Other general reporting requirements Reporting aggregated amounts from facilities

Reporting percentages of emissions and energy Reporting about incidental emissions and energy Reporting for facilities that are networks and pipelines Reporting for facilities that are vertically integrated production processes Reporting about contractors Reporting a change in principal activity for a facility Reporting if no group thresholds met Reporting of information by another person Reporting liability and related matters under the Clean Energy Act 2011 (Cth) Special reports Greenhouse gas projects Offsets of greenhouse emissions Form for reporting On-line report Penalty for failing to report Deregistration Declaration by the regulator of facilities and/or operational control Declaration of a facility — corporate group Declaration that a corporation has operational control of a facility — corporate group Declaration of a facility — non-group entity Declaration that a corporation has operational control of a facility — non-group entity Chapter 3 — Liability under the Clean Energy Act 2011 (Cth) Introduction Sources of law Direct emitters Introduction to Division 2 Person General rules for liability for non-landfill facilities

General rules for liability for landfill facilities General rules for liability of participants in designated joint ventures General rules for liability of holders of a liability transfer certificate Facilities in the joint petroleum development area and greater sunrise unit area Natural gas suppliers Introduction to Division 3 Liable entity for the supply of natural gas Liable entity if a person quotes their obligation transfer number Liable entity if a person misuses their obligation transfer number Gaseous fuel suppliers Introduction to Division 3A General rules for liability for import of LPG or LNG for non-transport use General rules for liability for production of LPG or LNG for nontransport use Liable entity if a person quotes their obligation transfer number Liable entity if a person misuses their obligation transfer number Obligation transfer numbers Introduction to Division 4 Surrendering or cancelling an OTN Quoting an obligation transfer number Accepting or refusing to accept the quotation of an obligation transfer number Mandatory quotation of OTN Voluntary quotation of OTN Withdrawing the quotation of an OTN Misuse of an OTN Quotation of a bogus OTN OTN Register

Joint ventures Introduction to Division 5 Mandatory designated joint venture Declared designated joint venture Allocation of liability in a joint venture — participating percentage determination Should an unincorporated joint venture become a designated joint venture or allocate liability using a liability transfer certificate? Liability transfer certificates Introduction to Division 6 Transfer of liability to another member of a corporate group Transfer of liability to a person who has financial control of a facility Duration of a liability transfer certificate Surrender of a liability transfer certificate Cancellation of a liability transfer certificate Opt-in Scheme Chapter 4 — Emissions Units Introduction Sources of law The Australian National Registry of Emissions Units Registry accounts Opening a registry account Entries in registry accounts Eligible emissions units Carbon units Australian carbon credit units Eligible international emissions units Original issues of carbon units Fixed charge carbon units Auction of carbon units

Free carbon units Surrendering eligible emissions units Timing rules for surrender Surrendering carbon units Surrendering eligible Australian carbon credit units Surrendering eligible international emissions units International unit surrender charge Borrowing carbon units Cancelling emissions units Transfer of emissions units Transfer mechanics Deferral of transfers Relinquishment of carbon units Relinquishment mechanics Relinquishment for fraudulent conduct Relinquishment under the Jobs and Competitiveness Program What happens to carbon units after relinquishment? Non-compliance with a relinquishment notice Title in emissions units Emissions units as personal property Indefeasibility of title Dealing with emissions units Australian financial services licence Special dealings in emissions units Suspending a Registry account Appendix — Activity definitions for Jobs and Competitiveness Program Chapter 5 — Special Topics Introduction Anti-avoidance

Tests Section 29 factors Publication of avoidance determination Audit Sources of law Pre-submission audit Compliance audit — suspected non-compliance Compliance audit — general Conduct of audits Greenhouse and energy auditors Constitutional foundation Is the charge for carbon units a tax? Liability of executive officers Pecuniary penalty Defence Information disclosure Publication of emissions and energy data Liable entities public information database Disclosure requirements of the Corporations Act 2001 (Cth) ASX listing rules International linking Background Importing Exporting Limitations to linking International unit surrender charge Record-keeping Sources of law Compliance with record-keeping requirements

Record-keeping requirements — general Record-keeping requirements — applications to the regulator Record-keeping requirements — reports submitted to the regulator Record-keeping requirements — OTNs Taxation Goods and services tax Income taxation Stamp duty Unit surrender shortfalls and unit shortfall charge Unit shortfalls Unit shortfall charge Late payment penalty Default assessment Remission Unit surrender surplus Provisional surplus surrender number — fixed charge year Surplus and estimation error adjustment number — fixed charge year Final surplus surrender number — fixed charge year Surplus surrender number — flexible charge year Appendix Chapter 6 — Enforcement Powers of the Regulator Introduction Sources of law Information and document gathering powers Section 71 notice to give compellable information Section 221 notice to give information or produce documents Retention of documents by the regulator Claims for legal professional privilege and self-incrimination Monitoring compliance

Appointment of authorised officers and inspectors Issue and use of identity cards Exercise of power under the directions of the regulator Entering premises Monitoring powers Asking questions and seeking production of documents Procedures for obtaining monitoring warrant Form of monitoring warrant Civil penalty provisions Excuse for mistake of fact Continuing contraventions Court powers to order civil penalty Civil enforcement of penalty Infringement notices Basis for issuing an infringement notice Form of infringement notice Infringement penalty Withdrawal of an infringement notice Effect of paying the infringement notice Savings for civil penalty proceedings Enforceable undertakings Acceptable undertakings Enforcement of undertakings Monitoring compliance with the undertaking Criminal sanctions Offences under the Criminal Code Act 1995 (Cth) Offences relating to unit shortfall charge Offence to obstruct the exercise of a warrant Offences in the Australian National Registry of Emissions Units Act 2011 (Cth)

Appendix — Civil penalty provisions, penalties and infringement notice penalties Chapter 7 — Review and Appeals Introduction Source of law Processes and rules Process for internal reconsideration by the regulator Time limit for requesting internal review Grounds for reconsideration by the regulator Time limit for reconsideration of original decision Process for review by the Administrative Appeals Tribunal Time limit for application for review Merits review Judicial review Appeal to Federal Court of Australia Further appeals Appeal under the Administrative Decisions (Judicial Review) Act 1977 (Cth) Effect of review or appeal on monies owing to the regulator Liability for compensation and damages Index

[page 1]

Chapter 1 Legal Framework Introduction [30,001] This chapter provides an overview of the legal frameworks supporting the four dimensions of Australia’s clean energy future: (1) the carbon pricing mechanism; (2) energy efficiency; (3) renewable energy; and (4) action on the land to encourage land use change. The chapter also places the Australian action into the international context. Australia accounts for approximately 1.5 per cent of global greenhouse gas (GHG) emissions. The latest information published for Australia’s emissions for the year to 31 March 2012 reveals estimated national emissions of 546.8 Mt CO2-e.1 The national ambition is to reduce emissions by at least five per cent below 2000 levels by 2020,2 to 523.9 Mt CO2-e per annum,3 and 80 per cent below 2000 levels by 2050.4 The carbon pricing mechanism is the central policy in Australia’s multidimensional approach to establish a clean energy future. Its aims reflect Australia’s international obligations and domestic aspiration in GHG emissions reduction targets. [page 2] The Australian Government formally announced the carbon pricing mechanism in “Securing Australia’s Clean Energy Future: The Australian Government’s Climate Change Plan” released on “carbon Sunday”, 10 July 2011.5 That plan also detailed extensions to complementary measures in renewable energy, energy efficiency and action in the land sector and new funds, grants and assistance programs to support new investment and technology.

The carbon pricing mechanism is established by the Clean Energy Act 2011 (Cth) and a further 18 associated acts passed by the 43rd Australian Parliament on 8 November 2011, together with their regulations. The Clean Energy Act 2011 (Cth) commenced 2 April 2012, with the commencement of the Clean Energy Regulator. The carbon pricing mechanism operates from 1 July 2012, and comprises: from 1 July 2012, a three year fixed charge period to 30 June 2015; and from 1 July 2015, a cap-and-trade emissions trading scheme (ETS) (the flexible charge period). Amendments to existing federal laws by the Clean Energy (Consequential Amendments) Act 2011 (Cth) fit the carbon pricing mechanism into the Australian federal legal landscape. The Clean Energy Act 2011 (Cth) must be read with the following acts: National Greenhouse and Energy Reporting Act 2007 (Cth), an existing act providing (inter alia) for registration with the regulator and the measurement and reporting of GHG to the regulator; Australian National Registry of Emissions Units Act 2011 (Cth); Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth); Corporations Act 2001 (Cth) and Australian Securities and Investment Commission Act 2001 (Cth); Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth); Fuel Tax Act 2006 (Cth); Excise Act 1901 (Cth) and Excise Tariff Act 1921 (Cth); Customs Act 1901 (Cth) and Customs Tariff Act 1995 (Cth); Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth); and Renewable Energy (Electricity) Act 2000 (Cth). The clean energy laws package also interfaces with and relevantly modifies the existing complementary measures. [page 3] Diagram 30,001-1 is a conceptual overview of the legal framework:

Diagram 30,001-1 — Conceptual overview of legal framework

Diagram 30,002-2 is a conceptual overview of the carbon pricing mechanism. Diagram 30,002-2 — Conceptual overview of carbon pricing mechanism

Sources of law [30,025] Australia is a party to an international framework comprising: United Nations Framework Convention on Climate Change (UNFCCC); Kyoto Protocol to the UNFCCC;

Marrakesh Accords (being action taken by the parties to the UNFCCC); and decisions and agreements reached at subsequent conferences of the parties (COP) and meetings of the parties (MSP), most notably: — the Copenhagen Accord; — the Cancun Agreements; and — the Durban Platform. [page 4] The clean energy laws package (at 1 July 2012) comprises the following Acts and regulations: Clean Energy Act 2011 (Cth), as amended up to Clean Energy Legislation Amendment Act 2012 (Cth); and: — Clean Energy Regulations 2011 (Cth), as amended up to: Clean Energy Amendment Regulation 2012 (No 1) (Cth); Clean Energy Amendment Regulation 2012 (No 2) (Cth); Clean Energy Amendment Regulation 2012 (No 3) (Cth); Clean Energy Amendment Regulation 2012 (No 4) (Cth); Clean Energy (Consequential Amendments) Act 2011 (Cth); Climate Change Authority Act 2011 (Cth); Clean Energy Regulator Act 2011 (Cth); Clean Energy (Charges-Customs) Act 2011 (Cth); Clean Energy (Charges-Excise) Act 2011 (Cth); Clean Energy (Unit Issue Charge-Auctions) Act 2011 (Cth); Clean Energy (Unit Issue Charge-Fixed Charge) Act 2011 (Cth); Clean Energy (International Unit Surrender Charge) Act 2011 (Cth); Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth); Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Act 2011 (Cth); Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Act 2011 (Cth);

Clean Energy (Customs Tariff Amendment) Act 2011 (Cth), as amended up to Clean Energy (Customs Tariff Amendment) Act 2012 (Cth); Clean Energy (Excise Tariff Legislation Amendment) Act 2011 (Cth) as amended up to Clean Energy (Excise Tariff Legislation Amendment) Act 2012 (Cth); Clean Energy (Fuel Tax Legislation Amendment) Act 2011 (Cth); Clean Energy (Household Assistance Amendments) Act 2011 (Cth); Clean Energy (Income Tax Rates Amendments) Act 2011 (Cth); Clean Energy (Tax Laws Amendments) Act 2011 (Cth); Steel Transformation Plan Act 2011 (Cth). Interfacing legislation and regulations (including as relevantly amended by the clean energy laws package) (at 1 July 2012) include: A New Tax System (Goods and Services Tax) Act 1999 (Cth); Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and: — Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007; Australian National Registry of Emissions Units Act 2011 (Cth) and: — Australian National Registry of Emissions Units Regulations 2011 (Cth), as amended up to: Australian National Registry of Emissions Units Amendment Regulation 2012 (No 1) (Cth); Australian National Registry of Emissions Units Amendment Regulation 2012 (No 2) (Cth); Australian Securities and Investment Commission Act 2001 (Cth) and: — Australian Securities and Investment Commission Regulations 2001; [page 5] Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) and: — Carbon Credits (Carbon Farming Initiative) Regulations 2011 (Cth), as amended up to:

Carbon Credits (Carbon Farming Initiative) Amendment Regulation 2012 (No 1) (Cth); Carbon Credits (Carbon Farming Initiative) Amendment Regulation 2012 (No 2) (Cth); — Carbon Credits (Carbon Farming Initiative) Kyoto Australian Carbon Credit Unit Specification 2011; — Carbon Credits (Carbon Farming Initiative) Landfill Legacy Emissions Avoidance Project Specification 2011; — Carbon Farming (Quantifying Carbon Sequestration by Permanent Environmental Plantings of Native Tree Species using the CFI Reforestation Modelling Tool) Methodology Determination 2012; Competition and Consumer Act 2010 (Cth); Corporations Act 2001 (Cth) and: — Corporations Regulations 2001 (Cth), as amended up to: Corporations Amendment Regulation 2012 (No 1); Criminal Code Act 1995 (Cth); Fuel Tax Act 2006 (Cth); Ozone Protection and Synthetic Greenhouse Gas Management Act 1999 (Cth); Income Tax Assessment Act 1936 (Cth) (ITAA36); Income Tax Assessment Act 1997 (Cth) (ITAA97); National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) and: — National Greenhouse and Energy Reporting Regulations 2008 (as amended), up to: National Greenhouse and Energy Reporting Amendment Regulation 2012 (No 1); — National Greenhouse and Energy Reporting (Measurement) Determination 2008 (as amended) up to: National Greenhouse and Energy Reporting (Measurement) Amendment Determination 2012 (No 1); — National Greenhouse and Energy (Audit) Determination 2009.

The energy efficiency laws package comprises the following Acts and Regulations: Building Energy Efficiency Disclosure Act 2010 (Cth) (BEED Act) and: — Building Energy Efficiency Disclosure Regulations 2010; — Building Energy Efficiency Disclosure Determination 2011; — Building Energy Efficiency Disclosure (Disclosure Affected Buildings) Determination 2011; Energy Efficiency Opportunities Act 2006 (Cth) (EEO Act) and: — Energy Efficiency Opportunities Regulations 2006. The renewable energy laws package comprises the following Acts and Regulations: Renewable Energy (Electricity) Act 2000 (Cth) (RET Act) and: — Renewable Energy (Electricity) Regulations 2001 (Cth). The land sector action laws package comprises the following Acts and Regulations: Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) and: — Carbon Credits (Carbon Farming Initiative) Regulations 2011, as amended up to: [page 6] Carbon Credits (Carbon Farming Initiative) Amendment Regulation 2012 (No 1); Carbon Credits (Carbon Farming Initiative) Amendment Regulation 2012 (No 2); — Carbon Credits (Carbon Farming Initiative) Kyoto Australian Carbon Credit Unit Specification 2011; — Carbon Credits (Carbon Farming Initiative) Landfill Legacy Emissions Avoidance Project Specification 2011; and — Carbon Farming (Quantifying Carbon Sequestration by

Permanent Environmental Plantings of Native Tree Species using the CFI Reforestation Modelling Tool) Methodology Determination 2012.

Snapshot [30,050] The linchpin of the clean energy laws package is the Clean Energy Act 2011 (Cth), underpinned by (and to be read with) the National Greenhouse and Energy Reporting Act 2007 (Cth) (the NGER Act) and its associated regulations. Obligations for liable entities arise under both the NGER Act and the Clean Energy Act 2011 (Cth) broadly as follows: Activity Registration Measurement of emissions Reporting of emissions Liability Acquiring carbon units Surrender of eligible emissions units

Source of Law NGER Act NGER Act NGER Act Clean Energy Act 2011 (Cth) Clean Energy Act 2011 (Cth) Clean Energy Act 2011 (Cth)

The NGER Act and regulations provide for: registration by controlling corporations and liable entities with the regulator; measurement of GHG, energy consumption and energy production; and reporting of GHG, energy consumption and energy production by registered entities. The Clean Energy Act 2011 (Cth) and associated regulations provide for the issue and acquisition of carbon units and the acquittal of emissions of greenhouse gases by surrender of eligible emissions units by: liable entities — persons with operational control of facilities with covered scope 1 emissions of 25,000 tonnes carbon dioxide equivalent or more; natural gas and gaseous fuels suppliers; persons who quote obligation transfer numbers;

certain joint venturers; and holders of liability transfer certificates. [page 7] Follow this four step guide to marrying the NGER Act and the Clean Energy Act 2011 (Cth): Step 1: Determine liability to register with the regulator: NGER Act, ss 12, 15A, 15AA. A failure to register if required is a civil liability penalty. If registered, go to step 2. Step 2: Is a report to the regulator required? NGER Act, ss 19, 20, 21, 21A, 22A, 22AA, 22E, 22G, 22X. A failure to submit a report if required (and in the approved form as per the National Greenhouse and Energy Reporting Regulations 2008 (Cth) and National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth)) is a civil liability penalty. Step 3: Determine if a liable entity: Clean Energy Act 2011 (Cth) Pt 3. If a liable entity, go to step 4. Step 4 In order to avoid a unit shortfall, surrender eligible emissions units: Clean Energy Act 2011 (Cth), Pt 6. The core rules for unit shortfall penalty are set out in ss 125, 128, 129 and 133 of the Clean Energy Act 2011 (Cth). By the relevant surrender deadline, a liable entity with an emissions number more than zero must surrender eligible emissions units equal to the emissions number of the liable entity, thereby so ensuring that the person does not have a unit shortfall. The surrender deadline in the fixed charge period, 1 July 2012 to 30 June 2015 is: 15 June in the eligible financial year 75 per cent of the previous year’s provisional emissions number or a self-assessed estimate of emissions;

1 February in the following compliance period: the balance of the emissions number for the preceding eligible financial year. The surrender deadline in the flexible charge period after 1 July 2015 is: 1 February in the following compliance period: 100 per cent of the emissions number for the preceding eligible financial year. The unit shortfall penalty is: in the fixed charge period, 1 July 2012 to 30 June 2015: 130 per cent of the fixed charge for carbon units; in the flexible charge period after 1 July 2015: 200 per cent of the benchmark average auction charge for carbon units in the preceding eligible financial year. A “carbon price equivalent” is applied to certain liquid and gaseous fuels and synthetic GHG through existing laws: the Fuel Tax Act 2006 (Cth)6 re-prices fuel and gas consumption; the Ozone Protection and Synthetic Greenhouse Gas Management Act 1999 (Cth)7 impacts the importation and manufacture of ozone depleting substances (ODS). [page 8]

National legal framework — Carbon pricing mechanism [30,075] The carbon pricing mechanism comprises these laws: the Clean Energy Act 2011 (Cth); the NGER Act; and the Australian National Registry of Emissions Units Act 2011 (Cth) and intersects with: the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth); and

the international framework.

CLEAN ENERGY ACT 2011 (CTH) Commencement, historical background, amendments and regulations [30,100] The Clean Energy Act 2011 (Cth), Act No 131 of 20118 was passed 8 November 2011 and received Royal Assent 18 November 2011. Clean Energy Act 2011 (Cth) commenced 2 April 2012. Amending Acts: — Clean Energy Legislation Amendment Act 2012 (Cth); Regulations: — Clean Energy Regulations 2011 (Cth);9 Amending Regulations: — Clean Energy Amendment Regulation 2012 (No 1) (Cth);10 — Clean Energy Amendment Regulation 2012 (No 2) (Cth);11 and — Clean Energy Amendment Regulation 2012 (No 3) (Cth).12 — Clean Energy Amendment Regulation 2012 (No 4) (Cth).13

Objects [30,125] The main act in the clean energy future laws package, the Clean Energy Act 2011 (Cth) establishes the governing rules for a carbon pricing mechanism operating in Australia from 1 July 2012. The objects of the Clean Energy Act 2011 (Cth) are:14 (a) to give effect to Australia’s international obligations. [page 9] Australia is a signatory to the UNFCCC and has assumed binding obligations to reduce national GHG emissions pursuant to the Kyoto Protocol. (b) to support the development of an effective global response to

climate change, consistent with Australia’s national interest. Australia’s national interest is ensuring that average global temperatures do not increase by more than two degrees Celsius above pre-industrial levels. (c) to take flexible and cost-effective action that helps Australia meet a long-term target of reducing net greenhouse gas emissions to 80 per cent below 2000 levels by 2050. The 2050 target is national emissions of approximately 110 Mt CO2-e per annum. (d) to create the framework that allows the market-place to price greenhouse gas emissions in a way that: “(i) encourages investment in clean energy; and (ii) supports jobs and competitiveness in the economy; and (iii) supports Australia’s economic growth while reducing pollution.”

Summary of the carbon pricing mechanism [30,150] Desired GHG emission reductions are to be achieved by liable entities. Liable entities must register, measure and report emissions or potential emissions under the NGER Act. The Clean Energy Act 2011 (Cth) creates the system for assessing if a liable entity, calculating emissions numbers and meeting obligations in respect of emissions through payment and surrender processes for eligible emissions units. Liability is imposed by way of a unit shortfall charge if eligible emissions units surrendered by a liable entity are not equal to reported GHG emissions (or potential GHG emissions in the case of natural gas and gaseous fuels suppliers).

Liable entities [30,175] The Clean Energy Act 2011 (Cth) imposes liability on a liable entity15 for their GHG emissions in the compliance period, or if a natural gas or gaseous fuels supplier, for the potential GHG emissions embodied in the natural gas and/or gaseous fuel they supply in that period. Liable entities under the Clean Energy Act 2011 (Cth) are limited to:

the person16 with operational control17 of a facility18 emitting covered emissions19 in a covered sector in the compliance period, the financial year from 1 July to 30 June; or [page 10] a member of a corporate group or person with financial control that is the holder of a liability transfer certificate (LTC); or a participant in a mandatory designated joint venture or a declared designated joint venture; or a person who has quoted an obligation transfer number (OTN); or a supplier of natural gas or gaseous fuel; a person who opts in under the Opt-in scheme.

Covered sectors [30,200] Covered sectors within the coverage of the Clean Energy Act 2011 (Cth) and defined in regulations made under the NGER Act are: stationary energy; industrial processes; fugitive emissions (except decommissioned coal mines); and non-legacy waste.

Covered emissions [30,225] GHGs within the coverage of the Clean Energy Act 2011 (Cth)20 are scope 1 emissions21 of any of the following greenhouse gases released in Australia: carbon dioxide (CO2); methane (CH4); and nitrous oxide (N2O);22 The covered GHGs must meet definitions in regulations. Different greenhouse gases are made equivalent (called carbon dioxide equivalence (CO2-e)) through their global warming potential (GWP). GWPs

are specified in the National Greenhouse and Energy Reporting Regulations 2008. [page 11]

Liability threshold [30,250] Before liability as a direct emitter under the Clean Energy Act 2011 (Cth) is attracted, scope 1 emissions at facility level must exceed a (prorated) threshold of equal to or more than 25,000 tonnes (t) (25 K) CO2-e per annum. The tests for liability apply both in respect of the whole of the eligible financial year, and for a part of the year (called control days). The threshold is prorated across the number of control days, if control does not exist for the whole of the eligible financial year. Generally, provision is made to avoid double-counting of GHG emissions where emissions from a facility are attributable to the combustion of natural gas or gaseous fuel obtained from an (upstream) supplier.23

Fixed charge and flexible charge periods [30,275] The carbon pricing mechanism comprises a three year fixed charge period from 1 July 2012 until to 30 June 2015, followed from 1 July 2015 by a cap-and-trade emissions trading scheme (ETS) (the flexible charge period). The liability mechanism in the Clean Energy Act 2011 (Cth) is similar in the fixed charge and the flexible charge periods, the major exception being the restriction of trading of emissions units acquired for a fixed charge. The price of carbon units from 1 July 2012 to 30 June 2015 is fixed, starting at $23, rising from 1 July 2013 to $24.15 and from 1 July 2014 to $25.40. From 1 July 2015, the price of carbon units will be determined by the carbon markets, subject to a price collar and cap for three years. The floor (lowest) price for carbon units will be $15 (rising by four per cent in real terms) and the ceiling price will be $20 higher than the expected international price in 2015–2016 (rising by five per cent in real terms). From 1 July 2018, the price of carbon units will be determined by the carbon markets.

Eligible emissions units

[30,300] Eligible emissions units in the carbon pricing mechanism are: the carbon unit; Kyoto compliant Australian carbon credit units (ACCUs) arising under the Carbon Farming Initiative (CFI), subject to a cap on use in the fixed charge period by direct (non-landfill) emitters, set at five per cent of liability; and in the flexible charge period, eligible international emissions units (EIEUs), including Certified Emission Reduction units (CERs) issued under the Clean Development Mechanism (CDM) and Emission Reduction Units (ERUs) issued under the Joint Implementation (JI) programs established by the Kyoto Protocol (also subject to a cap on use, set at 50 per cent of liability up to 2020). Each eligible emissions unit covers emissions of 1 t CO2-e defined GHG (for a nominated compliance period). [page 12]

Carbon units [30,325] Carbon units will be originally issued by the regulator (on behalf of the Australian government). A carbon unit of a particular vintage may not be issued later than 1 February in the following compliance period. The carbon unit will be personal property. The carbon unit will be represented by an electronic entry in the Australian National Registry of Emissions Units (Registry). Each carbon unit will have an identification number, including four digits representing vintage (the year of issue). The carbon unit may be cancelled, surrendered or transferred (if issued free or if issued for a vintage year starting on or after 1 July 2015). Only carbon units held on the Registry may be surrendered. Legal title in carbon units will only be transferred by entry into an account in the Registry. In the flexible charge period: carbon units will have an indefinite life, until cancelled or surrendered; carbon units may be banked into future periods; and

carbon units of the next vintage after the compliance period may be borrowed, subject to a cap on use, set at five per cent of liability. The creation of equitable interests and security interests in carbon units will be permitted.

Surrender timetable [30,350] There are two surrender dates in the fixed charge period. 75 per cent of the previous year’s provisional emissions number, or a self-assessed estimate of emissions (that is greater than 75 per cent of the emissions for the current compliance year) must be surrendered by 15 June in the compliance year (the provisional surrender deadline), and the balance by 1 February in the next compliance year (the “true-up” surrender deadline). The true-up surrender deadline in the flexible charge period is 1 February in the year after the compliance period.

The ETS cap [30,375] The short term target is for Australia to reduce national GHG emissions five per cent below 2000 levels by 2020, and the long term target is to reduce national GHG emissions 80 per cent below 2000 levels by 2050. The “cap” in the cap-and-trade carbon pricing mechanism from 1 July 2015 is an emissions target separately established in accordance with the Clean Energy Act 2011 (Cth). The carbon pricing mechanism will operate only for a defined subset of Australia’s GHG emissions. The government estimates that the Clean Energy Act 2011 (Cth) will apply up to approximately 500 emitters, responsible for approximately half of Australia’s total GHG emissions.24 [page 13]

Trading markets [30,400] The carbon pricing mechanism will establish the Australian carbon market, which will comprise primary, secondary and derivatives carbon markets.

Primary market [30,425]

The primary market is created by the issue of carbon units by the regulator. In the period to 30 June 2015, carbon units will be issued to liable entities for a fixed price25 upon application in writing to the regulator, or free under assistance programs. For vintages from 1 July 2015, carbon units will be issued to successful bidders in auctions conducted by the regulator.

Secondary markets [30,450] The secondary market encapsulates exchanges of carbon units via: private treaty; transactions in regulated financial markets; and over-the-counter (OTC) exchanges. Carbon units (other than fixed price carbon units) which may be transferred may be acquired by anyone with a Registry account and hence the secondary markets for carbon units will be open to all.

Derivatives markets [30,475] The forward or derivatives market includes futures, derivatives and other structured or synthetic products.26 The Interagency Working Group for the Study on Oversight of Carbon Markets described a derivative, or a derivative contract as: a financial instrument whose value is based on, or derived from, the value of an underlying asset (eg a stock), commodity (eg wheat and oil) or measurable event (eg weather or a bankruptcy). In carbon markets, derivative contracts could be based on the price of carbon emission allowances or offset credits.27

Collins and Palmer (2008) describe the forward market in the following terms: The forward market involves agreements to buy or sell, or the option to buy or sell, or swap an asset (which can be of any kind) at a set price on an agreed future date. Forward trading can occur on an exchange through standardised futures contracts or on the OTC market by transactions negotiated through brokers or directly between counterparties.28

Unit shortfall charge [30,500] In the fixed charge period, the unit shortfall charge is 130 per cent of the relevant fixed price for the compliance year. In the flexible charge period, the unit shortfall charge will be 200 per cent of the benchmark average auction charge (BAAC) for the compliance year. The unit shortfall charge is not deductible for income tax purposes.

[page 14]

Structure of the Clean Energy Act 2011 (Cth) [30,525] The Clean Energy Act 2011 (Cth) is arranged into parts, conveniently grouped as follows: General provisions

Liability

Special items Transparency

Enforcement

Pt 1 — objects and definitions, Territorial coverage Pt 2 — carbon pollution cap Pt 21 — review of decisions Pt 22 — review by Climate Change Authority Pt 23 — miscellaneous machinery Pt 3 — liable entities Div 2 — direct emitters of greenhouse gases Div 3 — suppliers of natural gas Div 3A — suppliers of gaseous fuels Div 4 — obligation transfer numbers Div 5 — designated joint ventures Div 6 — liability transfer certificates Div 7 — Opt-in scheme Pt 4 — carbon units Pt 5 — emissions number Pt 6 — surrender of eligible emission units Pt 11 — relinquishment of carbon units Pt 7 — Jobs and Competitiveness Program Pt 8 — Coal-fired electricity generation Pt 9 — publication of information by the regulator Pt 10 — fraudulent conduct Pt 12 — notification of holdings Pt 13 — information gathering Pt 14 — record keeping Pt 15 — monitoring powers Pt 21 — review of decisions Pt 13 — information gathering

Pt 15 — monitoring powers Pt 16 — liability of chief executive officer Pt 17 — civil penalty orders Pt 18 — administrative penalties Pt 19 — offences relating to unit shortfall charge Pt 20 — enforceable undertakings Pt 23 — legal professional privilege

NATIONAL GREENHOUSE AND ENERGY REPORTING ACT 2007 (CTH) Commencement, historical background, amendments and regulations [30,550] The National Greenhouse and Energy Reporting Act 2007 (Cth), Act No 175 of 2007 was passed 16 August 2007 and received Royal Assent, 15 September 2007. [page 15] The National Greenhouse and Energy Reporting Act commenced 1 July 2008. Amending Acts: — National Greenhouse and Energy Reporting Amendment Act 2008 (Cth); — Clean Energy (Consequential Amendments) Act 2011 (Cth); — Clean Energy Legislation Amendment Act 2012 (Cth). Regulations: — National Greenhouse and Energy Reporting Regulations 2008 (Cth); Amending Regulations: — National Greenhouse and Energy Reporting Amendment Regulation 2009 (No 1) (Cth); — National Greenhouse and Energy Reporting Amendment Regulation 2009 (No 2) (Cth);

— National Greenhouse and Energy Reporting Amendment Regulation 2011 (No 1) (Cth); — National Greenhouse and Energy Reporting Amendment Regulation 2011 (No 2) (Cth); Determinations: — National Greenhouse and Energy (Measurement) Determination 2008 (Cth); — National Greenhouse and Energy (Audit) Determination 2009 (Cth); — Auditor Registration Instrument 2010 (Cth).

Objects [30,575] The objects of the NGER Act include: informing the public and government policy formulation; assisting Australia meet its international greenhouse gas reporting obligations; and underpinning an emissions trading scheme in Australia: s 3. The NGER Act mandates a national approach and avoids duplication in the states and territories by annihilating any existing or future state or territory laws that require reporting or disclosure of similar information.29

Summary of registration, measurement and reporting under the NGER Act [30,600] The NGER Act establishes Australia’s national framework for registration, measurement, reporting and dissemination of information about GHG emissions, energy consumption and energy production, and GHG projects. The NGER Act is the measurement and reporting platform for the Clean Energy Act 2011 (Cth). [page 16]

Registration with regulator [30,625] An obligation to apply for registration with the regulator30 is imposed on: controlling corporations; liable entities; and potentially liable entities. A controlling corporation is a “constitutional corporation” that does not have a “holding company” incorporated in Australia: s 7 of the NGER Act. A constitutional corporation (defined by reference to paragraph 51(xx) of the Constitution) is a foreign corporation or a trading or financial corporation formed within the limits of the Commonwealth of Australia. A definition of holding company (and “subsidiary”, as defined in the Corporations Act) is supported by the definition of a controlling corporation’s “group” — the controlling corporation is defined to be the corporation at the top of the corporate hierarchy of companies incorporated in Australia: s 8 of the NGER Act. A foreign company operating in Australia without an Australian holding company may register. If there is a group of companies with an ultimate Australian holding company, the Australian parent company may register. If there is a group of companies with an ultimate foreign holding company, then only the Australian holding company that is owned by the foreign parent company may register.

Registration thresholds [30,650] Registration is mandatory: if a person is or was a liable entity under the Clean Energy Act 2011 (Cth): s 15A; if a person is or is likely to be a liable entity with an interim emissions number in a fixed charge year under the Clean Energy Act 2011 (Cth): s 15AA; if a controlling corporation’s group meets one or more of the thresholds for a trigger financial year: s 12.

The threshold tests (s 13 of the NGER Act) for a controlling corporation group for mandatory registration by the controlling corporation from 1 July 2010 are set out in Table 30,650-1: Table 30,650-1 — NGER Act Corporate Group Thresholds Greenhouse gases emitted from Carbon dioxide equivalence: 50,000 operation of facilities within the tonnes group under operational control Energy produced from the operation of facilities within the group under 200 terajoules operational control Energy consumed from the operation of facilities within the group under 200 terajoules operational control [page 17] Registration is also mandatory if any liable entity or entity within a controlling corporation’s group has operational control of a facility which during the year causes: • emission of greenhouse gases that have a carbon dioxide equivalence of 25,000 tonnes or more; • production of energy of 100 terajoules or more; or • consumption of energy of 100 terajoules or more. If not required to register, a corporation may still apply for registration if the corporation or one of its group members undertakes or propose to undertake a “greenhouse gas project”; s 14 of the NGER Act.

Registration timetable [30,675] Registration is required by 31 August in the year following the compliance year. However in the fixed charge period, registration is required by 1 May if, as at 1 April in the compliance year, the person is or is reasonably likely to be a liable entity with an interim emissions number at 15 June in the compliance year.

Penalty for failure to register

[30,700] The penalty for failing to register is up to: 2000 penalty units31 (currently, $220,000) for a person; 10,000 penalty units (currently, $1,100,000) for any other entity. A potential further penalty of up to 100 penalty units per day (currently, $11,000 per day) accrues for each day not registered. The chief executive officer of a corporation may also be liable for the corporation’s failure to register, and face a civil penalty up to $220,000.

Greenhouse gases [30,725] “Greenhouse gas” is defined in s 5 of the NGER Act to mean: carbon dioxide (CO2); or methane (CH4); or nitrous oxide (N2O); or sulphur hexafluoride (SF6); or hydro fluorocarbon — of a kind specified in the regulations; or per fluorocarbon — of a kind specified in the regulations. Water vapour, oxides of nitrogen (NOx), nitric oxide (NO), sulphur dioxide (SO2), chlorofluorocarbons (CFCs) (bromofluorocarbons and other man-made organohalogen compounds which are ozone depleting substances (ODSs)) are not GHG. Nitrogen trifluoride (NF3) is recognised as a GHG in the international context and in the California Emissions Trading Scheme (California ETS), but not yet in Australia. A number of key definitions in the NGER Act are left undefined in the NGER Act and are specified in regulations. These include the definition of: emissions of greenhouse gas; reduction of greenhouse gas emissions; removal of greenhouse gas; offsets of greenhouse gas emissions.

[page 18]

Energy [30,750] “Energy” includes fuel and other energy commodities specified in the regulations. The regulations also define: production of energy; consumption of energy. “Greenhouse gas project” means an activity (or series of activities) designed to remove or reduce the emission of greenhouse gases and that meet requirements stipulated in regulations. Further, if the activity is located in Australia’s exclusive economic zone, it will only qualify to the extent that it is an oil or gas extraction activity (or series of activities).

Facility [30,775] A “facility” is an activity or series of activities that involve greenhouse gas emissions, or the production or consumption of energy, and that are a single undertaking or enterprise meeting requirements stipulated in regulations, or alternatively are declared by the regulator to be a facility: s 9.

Operational control [30,800] “Operational control” is defined in ss 11, 11A, 11B and 11C of the NGER Act — only one person can have operational control over a facility at any one time. The general rule in the NGER Act is that a person has operational control over a facility if the person has the authority to introduce and implement any or all of the following (meeting requirements stipulated in regulations): operating policies; health and safety policies; environmental policies unless the regulator declares the corporation to have operational control of the facility: ss 55–55A of the NGER Act. If two or more persons could satisfy the general test in relation to a facility

for an eligible financial year, but one of the persons has the greatest authority to introduce and implement operating policies and environmental policies, then the person with that greatest authority will have operational control. If two or more persons could satisfy the general test in relation to a facility for an eligible financial year, but no particular person has the greatest authority to introduce and implement operating policies and environmental policies, then those persons must jointly nominate (by 30 April in a fixed charge year) one of them to be the nominated person in relation to the facility (save that a foreign person cannot be nominated). The nominated person shall be taken to have operational control over the facility (including if the facility is a facility of a joint venture). If no nomination is made, then each person is taken to have operational control. A similar tie-breaker rule applies to a trust with multiple trustees.

Groups [30,825] The concept of the controlling corporation’s group is important, as it relates to registration and reporting obligations. The group includes the controlling corporation and its subsidiaries (unless the controlling corporation is not incorporated in Australia): s 8 of the NGER Act. [page 19]

Registration mechanics [30,850] The application to register must be made before 31 August in the year following the eligible financial year. In the fixed charge period, liable entities and potentially liable entities must register by 1 May in the eligible financial year. Applications are made to the regulator in writing or on-line. They are required to identify the liable entity or controlling corporation and be in the form and contain such other information as specified in the regulations. The regulator will keep a register of registered corporations. Registration is mandatory if the regulator is satisfied that ss 12, 15A or 15AA requires the person to apply for registration. Also, the regulator may register a corporation if satisfied that s 14 permits the corporation to apply for registration.

Reporting obligations [30,875] As a general rule, the registered entity must in respect of each year it is registered provide a report to the regulator relating to: greenhouse gas emissions; and energy production; and energy consumption from the operation of facilities under operational control (including for controlling corporations within its group). A civil penalty of up to 2000 penalty units applies for breach of this obligation. The report is due by 31 October after each compliance year (note however that a s 22AA report is due by 15 June in the compliance year). The report must be made on-line in a manner and form approved by the regulator (using the Online System for Comprehensive Activity Reporting (OSCAR)). The report must be based upon the National Greenhouse and Energy Reporting Regulations 2008 (Cth) (NGER Reporting Regulations) and the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth) (NGER Measurement Determination) and contain the information stipulated in the regulations. A registered entity will be required to keep appropriate records of activities so that it may accurately report, and will be required to retain those records for 5 years. If a registered corporation is carrying out a greenhouse gas project, it may also report relating to: reduction of greenhouse gas emissions; removals of greenhouse gases; and offsets of greenhouse gas emissions.

Reporting obligations by regulator [30,900] The information provided by a registered entity to the regulator must be published by the regulator on a website and by 28 February, unless a request for non-publication is made.

Non-disclosure of information may be sought on the basis that it reveals or is capable of revealing trade secrets, or any other matter of commercial value that would be destroyed or diminished if disclosed, about a specific facility, technology or corporate initiative. [page 20] The regulator may also disclose its information to the states and territories, to other government departments for statistical purposes and for facilitating review of Australia’s compliance with international obligations relating to reporting of greenhouse gas emissions and the production and consumption of energy.

Monitoring compliance by regulator [30,925] The regulator and its authorised officers are given a wide range of entry, search and execution powers to examine any activity conducted by a registered entity (or entity that should be registered) that may relate to compliance with or for the purposes of the NGER Act or to gather information relating to the NGER Act. The regulator may require an external auditor to be appointed to examine compliance.

Regulations [30,950] The NGER Reporting Regulations provide definitions of concepts used in the NGER Act and further detail to support registering and reporting under the NGER Act. The NGER Measurement Determination specifies the methodologies for monitoring and measuring: greenhouse gas emissions; the production of energy; and the consumption of energy arising from the operation of facilities. The NGER Act and its Regulations must be read together.

FUEL TAX ACT 2006 (CTH)

Commencement, historical background, amendments and regulations [30,975] The Fuel Tax Act 2006 (Cth), Act No 72 of 2006 was passed 22 June 2006 and received Royal Assent 26 June 2006. The Fuel Tax Act 2006 (Cth) commenced 1 July 2006. Amending Acts: — Clean Energy (Fuel Tax Legislation Amendment) Act 2011 (Cth); — Clean Energy Legislation Amendment Act 2012 (Cth). Regulations: — Fuel Tax Regulations 2006 (Cth).

Objects [31,000] The Fuel Tax Act 2006 (Cth) introduced a single system of fuel tax credits to remove/reduce the incidence of fuel tax levied on taxable fuels from 1 July 2006, and a framework for the taxation of gaseous fuels from 1 July 2011, when fuel tax was levied on liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG) for the first time.

Summary of the carbon price under the Fuel Tax Act 2006 (Cth) [31,025] Households and on-road commercial vehicles 4.5 tonnes and under currently pay the full rate of fuel excise. From 1 July 2012, they will continue to pay excise under current arrangements but they will not also pay a carbon price. All other fuel uses (except fuel used in the fishing, forestry and agriculture industries, and non-combustion use of fuel) will be subject to a carbon price. The carbon price is proposed not to apply to fuel used in heavy transport until 1 July 2014. [page 21] Liability for fuel tax currently arises under the Excise Act 1901 (Cth), the Excise Tariff Act 1921 (Cth), the Customs Act 1901 (Cth) and the Customs

Tariff Act 1995 (Cth). The design of the Fuel Tax Act 2006 (Cth) ensures that fuel tax is effectively only applied to fuel used in private vehicles (and for certain other private purposes), to fuel used on-road in light commercial vehicles for business purposes (see Table 30,025-1) and to aviation fuels. Table 30,025-1 — Summary of fuel tax credits Business Use Private Use gross vehicle Full fuel tax Full fuel tax Use on roads mass ≤4.5 tonnes payable payable gross vehicle Fuel tax payable mass >4.5 tonnes up to the amount or more of the road-user charge, balance offset by a fuel tax credit (subject to carbon price from 1 July 2014) Emissions from non-transport liquid petroleum gas and liquefied natural gas (LPG and LNG) are brought into the mandatory carbon pricing mechanism from 1 July 2013. Emissions from non-transport compressed natural gas (CNG) is brought into the mandatory carbon pricing mechanism from 1 July 2012. Fuel tax credit entitlements under the Fuel Tax Act 2006 (Cth) will not be reduced for business use of gaseous fuels (CNG, LPG and LNG) when those fuels are covered under the carbon pricing mechanism. When the gaseous fuels are covered under the Fuel Tax Act 2006 (Cth), the agriculture, fishing and forestry industries will still be entitled to a fuel tax credit equivalent to the amount of the carbon charge that is embedded in the price of the fuel. The liable entity for non-transport LPG and LNG under the Clean Energy Act 2011 (Cth) will be the person for whom customs duty or excise duty is or was payable on an amount of fuel that is entered for home consumption after import or manufacture. Liability will apply to LPG and LNG for which excise is remitted on the basis that the LPG or LNG is not intended to be used in an internal combustion engine in a motor vehicle or vessel. The fuel tax credit entitlement (with some exceptions noted below) will be reduced by an amount equivalent to what the carbon price on the fuel

emissions would be (if those emissions were subject to a carbon price). The carbon price reduction is achieved by amending the formula for the amount of fuel tax credit for taxable fuel (Fuel Tax Act 2006 (Cth) s 43-5) as follows: Amount of effective fuel tax — Amount of carbon reduction The formula for the amount of carbon reduction is worked out, to 3 decimal places, as follows: Quantity of fuel × Carbon price × Carbon emission rate LNG and CNG are measured in kilograms, and all other fuels are measured in litres. [page 22] The carbon price tracks the carbon unit charge set in the Clean Energy Act 2011 (Cth) for the fixed charge period: starting from 1 July 2012 at 2300 cents, rising from 1 July 2013 to 2415 cents and from 1 July 2014 to 2540 cents. From 1 July 2015, the carbon price is calculated at six monthly intervals (in the same manner the six monthly average charge is calculated under the Clean Energy Act 2011 (Cth) s 196). For the first half of the calendar year (1 January to 30 June), the carbon price is the average charge achieved for auctions of carbon units in the six months period ending the last November before the start of that half year. For the last half of the calendar year (1 July to 31 December), the price is the average charge achieved for auctions of carbon units in the six months period ending the last May before the start of that half year. The carbon emission rate is set as: gasoline — 0.0024; LPG — 0.0016; LNG — 0.0029; CNG — 0.0029; denatured ethanol for use in an internal combustion engine — nil; biodiesel or renewable diesel — nil or any other taxable fuel (other than a blend of taxable fuels) — 0.0027. If the fuel is a blend, then the amount of carbon reduction that applies to

the blend is worked out as the sum of the amount that applies to each constituent fuel. No carbon reduction applies to fuel: covered by the opt-in scheme; acquired, manufactured or imported for use in agriculture, fishing operations or forestry; acquired, manufactured or imported for use in a vehicle with a gross vehicle mass of more than 4.5 tonnes travelling on a public road or acquired, manufactured or imported for use otherwise than by combustion of the fuel. The opt-in scheme will allow businesses that are large fuel users and would pay an effective carbon price through the fuel tax system to voluntarily opt-in to the carbon pricing mechanism for the emissions associated with their use of fuel. To opt-in to the carbon pricing mechanism, businesses will apply to the regulator. Once a business has opted into the carbon pricing mechanism, they will no longer pay an effective carbon price through the fuel excise and fuel tax credit systems, and they will have the same obligations as other liable entities under the carbon pricing mechanism.

OZONE PROTECTION AND SYNTHETIC GREENHOUSE GAS MANAGEMENT ACT 1989 (CTH) Commencement, historical background, amendments and regulations [31,050] The Ozone Protection Act (1989),32 Act No 7 of 1989 received Royal Assent 16 March 1989 and commenced 16 March 1989. Related acts: — Ozone Protection (License Fees — Import) Act 1989 (Cth); [page 23] — Ozone Protection (License Fees — Manufacture) Act 1989 (Cth);

Amending acts: — Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Act 2011 (Cth); — Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Act 2011 (Cth); — Clean Energy (Consequential Amendments) Act 2012 (Cth). Regulations: — Ozone Protection and Synthetic Greenhouse Gas Management Regulations 1995; — Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Regulations 2004; — Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Regulations 2004. Amending Regulations: — Ozone Protection and Synthetic Greenhouse Gas Management Amendment Regulation 2012 (No 1); — Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Regulation 2012 (No 1); — Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Regulation 2012 (No 1).

Objects [31,075] The primary objective of the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth) was to institute the Australian system of controls for the manufacture, import and export of substances that deplete ozone in the atmosphere (ozone depleting substances (ODS)) thereby giving effect to Australia’s obligations under the Vienna Convention for the Protection of the Ozone Layer33 and Montreal Protocol on Substances that Deplete the Ozone Layer.34

Summary of the carbon price for synthetic GHG [31,100] The Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Act 2011 and the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Act 2011 relevantly amend their

underlying acts to apply an equivalent carbon charge to the import and manufacture of synthetic greenhouse gases (SGGs) and equipment which contains SGG (SGG equipment). SGGs comprise hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6). The carbon charge component applies in addition to the existing levies which currently apply to the import and manufacture of SGGs and “precharged equipment” (which includes equipment containing ODS (ODS equipment) as well as SGG equipment). The amount of levy is: [Number of tonnes CO2-e of SGG × Applicable charge] + [Number of tonnes of SGG × Prescribed rate] [page 24] The carbon dioxide equivalence of an amount of SGG is the amount of the SGG multiplied by the value specified in the regulations for that kind of SGG. The carbon dioxide equivalence of SGG that is not a greenhouse gas is zero. The applicable charge tracks the carbon unit charge set in the Clean Energy Act 2011 (Cth) for the fixed charge period: starting from 1 July 2012 at $23.00, rising from 1 July 2013 to $24.15 and from 1 July 2014 to $25.40. From 1 July 2015, the applicable charge will be the benchmark average auction charge for the previous financial year. The prescribed rate is currently $165 per tonne.35 The levy will be payable if a person has a controlled substances licence to import or manufacture SGGs. A “controlled substances licence” allows the import, manufacture or export of hydrochlorofluorocarbons (HCFCs), methyl bromide or SGGs. Because Australia has the only approved destruction facilities in this region and has destroyed ODS and SGGs from New Zealand and some Pacific Island countries, the levy applicable to SGGs does not apply if the SGG is imported for the purpose of destruction of that SGG and the conditions specified in the regulations are satisfied.

National legal framework — Energy efficiency

[31,125] Energy efficiency reduces energy consumption and energy costs and helps conserve energy resources for the future. The Australian government promotes energy efficiency through a range of programs, for example: energy rating labelling for appliances and equipment; a nationwide house energy rating scheme and energy star ratings for buildings; building codes, subsidies and rebates for insulation, lighting, solar panels and hot water systems for homes and offices; and mandatory schemes for identifying energy efficiency opportunities and disclosing building energy efficiency.

ENERGY EFFICIENCIES OPPORTUNITIES ACT 2006 (CTH) Commencement, historical background, amendments and regulations [31,150] The Energy Efficiencies Opportunities Act 2006 (Cth), Act No 31 of 2006 received Royal Assent 6 April 2006 and commenced 1 July 2006. Amending Acts: — Energy Efficiency Opportunities Amendment Act 2007(Cth); Regulations: — Energy Efficiency Opportunities Regulations 2006 (Cth); Amending Regulations: — Energy Efficiency Opportunities Amendment Regulation 2012 (No 1) (Cth). [page 25]

Objects [31,175] The Energy Efficiency Opportunities (EEO) program encourages large energy-using businesses (those consuming more than 0.5 petajoules of energy) to improve their energy efficiency by requiring them to identify,

evaluate and report publicly on cost effective energy savings opportunities.

Summary of the EEO Act under a carbon price [31,200] Of the corporations obligated to report by the end of 2010, 207 indicated that they had assessed 85 per cent of their energy use and identified opportunities to save 141.9 PJ of energy per year (9.8 per cent of their assessed energy use) or 2.5 per cent of Australia’s total energy use. These identified energy savings are equivalent to: emissions reductions of 11.2 million tonnes per annum, or two per cent of Australia’s total GHG emissions; and financial benefit for EEO program corporations worth an estimated $1.2 billion per annum. From 1 July 2011, the EEO program extended to electricity generation corporations and this will increase the coverage of the EEO program to approximately 57 per cent of Australia’s total energy use. Under the Clean Energy future plans, the EEO program is to be further expanded. The Government has adopted many of the recommendations of the 2010 Prime Minister’s Task Group on Energy Efficiency and announced: extending base funding for the EEO program out to 30 June 2017; expanding the EEO program to include energy transmission and distribution networks, and major greenfield and expansion projects; and establishing a voluntary scheme for medium sized energy users.

BUILDING ENERGY EFFICIENCY DISCLOSURE ACT 2010 (CTH) Commencement, historical background, amendments and regulations [31,225] The Building Energy Efficiency Disclosure Act 2010 (Cth), Act No 67 of 2010 received Royal Assent 28 June 2010, and commenced 1 July 2010. Regulations:

— Building Energy Efficiency Disclosure Regulations 2010; — Building Energy Efficiency Disclosure Determination 2011; — Building Energy Efficiency Disclosure (Disclosure Affected Buildings) Determination 2011.

Objects [31,250] The object of the Building Energy Efficiency Disclosure Act 2010 (Cth) (BEED Act) is to mandate disclosure of the energy efficiency rating of certain buildings and the energy efficiency of lighting for those buildings. [page 26]

Summary of the Building Energy Efficiency Disclosure Act [31,275] The BEED Act redresses the information asymmetries between building owners and prospective tenants or buyers by requiring disclosure of the energy efficiency rating of certain buildings and the energy efficiency of lighting for those buildings. Tenants or buyers may thus understand the energy efficiency performance of premises before making purchase or lease decisions.

Disclosure affected buildings and areas of a building [31,300] Disclosure affected buildings includes buildings or areas of the building used or capable of being used as an office with a net lettable area (NLA) of 2,000m2 or more.

Disclosing and non-disclosing entities [31,325] Unless exempted, disclosing entities are: Australian trading and financial companies and foreign companies (“constitutional corporations”) who own, lease or sublease a disclosure affected building or disclosure affected area of a building; any person that a constitutional corporation who is a prospective purchaser or lessee requests in writing to give an energy efficiency certificate.

Prohibition on sale, lease or sublease [31,350] Unless there is a current and valid building energy efficiency certificate (BEEC) registered for a disclosure affected building, the owner or lessee of the building (as appropriate) may not: sell; or offer to sell; or offer to enter into a contract under which a contingent obligation or right to sell is created; invite offers to purchase; or offer to lease the building or a disclosure affected area of the building; or invite offers to lease the building or a disclosure affected area of the building; or advertise the building for sale or lease unless the current valid energy efficiency rating for the building or area of the building is included in the advertisement in the manner approved by the Secretary. A civil penalty of a fine up to $110,000 applies for a breach, and continues daily up to the day after the making of any civil penalty order.

Current and valid Building Energy Efficiency Certificate [31,375] A BEEC sets out the energy efficiency rating of the building and the energy efficiency of the lighting for the building (limited to the lighting that might reasonably be expected to remain if the building is sold, let or sublet). The BEEC also includes guidance on improving energy efficiency. A BEEC remains current for a period of no more than 12 months, from when the certificate is issued. In order for a BEEC to be valid, the issuing authority must be satisfied that the energy efficiency rating specified in the certificate for the building (or area of the building) is appropriate for the building, and the assessment of the energy efficiency of the lighting for the building is also appropriate for the building (or the area of the building). [page 27]

Application for and issue of Building Energy Efficiency Certificate [31,400] The issue of a BEEC is based on an application made by an accredited assessor or alternatively, information provided by an auditing authority, based on the NABERS (National Australian Built Environment Rating System) rating system. BEECs are maintained in a Building Energy Efficiency Register. There is also an Energy Efficiency Non-disclosure Register disclosing instances of non-disclosure by repeat offenders. An owner, lessor, lessee and/or sublessee may seek damages from a court if an accredited assessor fails to comply with the duty to determine energy efficiency rating (of either the building or lighting in the building) according to the promulgated methods and standards.

Enforcement [31,425] It is a civil penalty to: attempt to contravene any civil penalty provision in the BEED Act; or aid, abet, counsel or procure a contravention of a civil penalty provision; or induce (by threats, promises or otherwise) a contravention of a civil penalty provision; or be in any way, directly or indirectly, knowingly concerned in, or party to, a contravention of a civil penalty provision; or conspire with others to effect a contravention of a civil penalty provision. Mistake of fact is a complete defence to a civil penalty order, provided if at or before the time of the conduct constituting the contravention, the person considered whether or not facts existed, and was under a mistaken but reasonable belief about those facts; and had those facts existed, the conduct would not have constituted a contravention of the civil penalty provision. As an alternative to prosecution, an infringement notice may issue if there are reasonable grounds for belief that a civil penalty provision has been contravened. An infringement notice must be issued within 12 months of the alleged contravention. The penalty in an infringement notice cannot exceed 10 per cent of the maximum penalty. Payment of the infringement notice is not an admission of liability, and payment within 28 days (or such longer time

as may be granted) will extinguish civil proceedings.

National legal framework — Renewable energy [31,450] Renewable energy systems use non-fossil fuel sources such as solar, wind and hydro (water) to generate power. Energy produced from renewable sources contributes to the reduction of Australia’s greenhouse gas emissions. The Australian government was the first in the world to introduce a mandatory target for the uptake of renewable energy in power supplies. [page 28]

RENEWABLE ENERGY (ELECTRICITY) ACT 2000 (CTH) Commencement, historical background, amendments and regulations [31,475] The Renewable Energy (Electricity) Act 2000 (Cth), Act No 174 of 2000 received Royal Assent 21 December 2000 and commenced 1 July 2001. Amending Acts: — Renewable Energy (Electricity) Amendment Act 2006 (Cth); — Renewable Energy (Electricity) Amendment Act 2009 (Cth); — Renewable Energy (Electricity) Amendment Act 2010 (Cth); — Renewable Energy (Electricity) (Large-scale Generation Shortfall Charge) Act 2000 (Cth); — Renewable Energy (Electricity) (Charge) Amendment Act 2010 (Cth); — Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Act 2010 (Cth); — Clean Energy (Consequential Amendments) Act 2011 (Cth); Regulations:

— Renewable Energy (Electricity) Regulations 2001 (Cth). Amending Regulations: — Renewable Energy (Electricity) Amendment Regulation 2012 (No 1) (Cth); — Renewable Energy (Electricity) Amendment Regulation 2012 (No 2) (Cth); — Renewable Energy (Electricity) Amendment Regulation 2012 (No 3) (Cth); — Renewable Energy (Electricity) Amendment Regulation 2012 (No 4) (Cth); — Renewable Energy (Electricity) Amendment Regulation 2012 (No 5) (Cth).

Objects [31,500] The Renewable Energy Target (RET) aims for 20 per cent of Australia’s electricity supply to be sourced from renewable sources by 2020. The objects of the Renewable Energy (Electricity) Act 2000 (Cth) are to: encourage the additional generation of electricity from renewable sources; reduce emissions of GHG in the electricity sector; and ensure that renewable energy sources are ecologically sustainable: s 3. The RET is designed to speed up the adoption of renewable energy technologies. The government plans to complement the RET with a new range of programs also designed to help smooth the transition to a clean energy future. The government predicts that by the early 2020s, the amount of electricity coming from sources like solar, wind, water and geothermal will be almost as large as all of Australia’s current household electricity use. [page 29]

Summary of the RET and its interface with the carbon price [31,525] The RET is a national ambition focused primarily on electricity

retailers and wholesale buyers in liable grids exceeding 100 megawatt per annum. The RET scheme combines all state and territory renewable energy targets into a single national scheme. The RET became mandatory in 2001 (called the Mandatory Renewable Energy Target (MRET)) with a compliance level of electricity to be sourced from renewable sources annually set for 2002 at 1100 GWh and increasing in subsequent years until 2010 to an initial maximum target set at 9500 GWh. In 2009, the mandatory renewable target was raised to 45,000 GWh by 2020, representing 20 per cent of Australia’s energy supply (see Table 32,1752). In 2009, the MRET was replaced with the Renewable Energy Target (RET) scheme by the Renewable Energy (Electricity) Amendment Act 2010 (Cth). This amendment was also responsible for introducing the Solar Credits scheme. In June 2010, The Renewable Energy (Electricity) Amendment Act 2010 (Cth), the Renewable Energy (Electricity) (Charge) Amendment Act 2010 (Cth), and the Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Act 2010 (Cth) separated the RET scheme into two parts, effective from 1 January 2011: Large-scale Renewable Energy Target (LRET) and Small-scale Renewable Energy Scheme (SRES). The LRET has a target of 41,000 GWh by 2020 and only large-scale renewable energy projects are eligible. The LRET is designed to encourage renewable energy from wind farms, ocean waves and tide, hydroelectricity, bagasse, geothermal aquifers and black liquor. Waste coal mine gas is eligible until 31 December 2020 only if the gas is used in the generation of electricity by a power station. The SRES targets a theoretical 4000 GWh annually and is eligible only to small-scale or household installations.

Methodology for compliance [31,550] Each liable entity is required to meet its obligations annually and to prove that it has in fact sourced its appropriate amount of electricity from recognized renewable energy sources. The Renewable Energy (Electricity) Act 2000 (Cth) creates the system for assessing and meeting liability through creation and surrender processes for Renewable Energy Certificates (RECs) for the generation of electricity using eligible renewable energy sources.

RECs are created both as large-scale generation certificates (LGCs) and small-scale technology certificates (STCs). The two types of RECs (large-scale and small-scale) create separate obligations for liable entities under the RET scheme: LGCs are created in relation to the generation of electricity by accredited power stations; STCs are created in relation to the installation of solar water heaters (SWHs) and small generation units (SGUs). LRET requires liable entities to purchase a set number of LGCs each year. A Renewable Power Percentage (RPP) is set in the regulations by 31 March annually and is applied when calculating the number of LGCs to be purchased. For 2011, the RPP was set at 5.62 per cent. For 2012, the RPP is set at 9.15 per cent. LGCs are purchased directly from renewable energy power stations or from LGC Agents. [page 30] Table 31,550-1 — Adjusted renewable energy targets until 2030 Year Target (GWh) RPP 2012 16,763 9.15% 2013 19,088 2014 16,950 2015 18,850 2016 21,431 2017 26,031 2018 30,631 2019 35,231 2020 41,850 2021–2030 41,000 Liability is imposed by way of a renewable energy shortfall charge, if RECs surrendered by a liable entity are not equal to their renewable energy target.

Creation of RECs [31,575] The RET and the regulations allow for the creation of a REC which certifies that an amount of 1 MWh of energy has been produced and supplied

to the national grid from a renewable source. RECs can be created form two primary sources: LGCs — accredited renewable energy power stations can produce LGCs from generations in excess of the power station’s 1997 generation level (the year the MRET was announced — referred to as the baseline year). During the accreditation process the regulator determines the baseline amount. LGCs for eligible parties are created in an electronic form through the REC Registry and are not valid or available for purchase or surrender until they are registered by the regulator. STCs — deemed outputs from eligible SWHs and SGUs (such as small-scale solar panels and photovoltaic units, wind turbines or microhydro systems, solar water heaters and pumps). The REC once created, can be banked, traded and/or surrendered to meet the liability of a generator or other liable party under the Renewable Energy (Electricity) Act 2000 (Cth). RECs operate like a traded stock and vary in price dependant on demand in the financial cycle at any given time. Banked RECs may be surrendered at any time up to the cessation of the scheme in 2020. Owners of the SWH generally receive accredited RECs on a once-off basis, the number being determined by the regulator after tests have been conducted to establish the efficiencies of the SWH unit when mapped against a baseline model. RECs may be claimed by the owner but most often are assigned to a broker, usually the SWH supplier, who retains the RECs for sale at a time they deem appropriate. SGUs have a perpetual REC cycle and create RECs annually. [page 31]

Register [31,600] A REC Register records the creation, trading and surrender of RECs. A full history of the life of a REC is recorded and is available for scrutiny in the public domain.

Regulator

[31,625] The Office of Renewable Energy Regulator (ORER) was created to administer the creation, assignment, trading and surrendering of RECs. The ORER was subsumed by the Clean Energy Regulator from 2 April 2012. The regulator’s responsibilities include: accrediting renewable energy power stations under the RET; overseeing the creation, validation and surrender of RECs; assessing annual Energy Acquisitions Statements and Electricity Generation returns; ensuring the integrity of the scheme by undertaking audits under the Renewable Energy Act.

Reports by regulator [31,650] The regulator produces two annual reports. One report provides financial information about the regulator in the way most other government bodies operate and a second provides full disclosure and accountability for the RECs created, traded and surrendered for the year the report covers.

Renewable Energy Shortfall Charge [31,675] A liable entity is required to “cover” the assigned number of MWhs annually by surrendering the appropriate number of RECs by the surrender date. However, the Renewable Energy (Electricity) Act 2000 (Cth) provides for a leeway of 10 per cent. Where the REC surrender shortfall is outside 10 per cent the whole shortfall creates a liability for Renewable Energy Shortfall Charge penalty under the provisions of Pt 4 of the Renewable Energy (Electricity) Act 2000 (Cth). The penalty is capped at $40 per REC not surrendered. The Renewable Energy (Electricity) Act 2000 (Cth) allows a three year opportunity to recoup losses incurred by the penalties associated with a maximum 10 per cent shortfall. Penalties may be redeemed if the relevant number of RECs is surrendered within the following three years of the penalty being paid and there are sufficient RECs offered for surrender against the compliance year being assessed.

National legal framework — Land sector [31,700] Agriculture and forestry emissions are excluded (among others) from the carbon pricing mechanism. However, agricultural and forestry activities currently make up 23 per cent of Australia’s emissions. In order to unlock the GHG abatement opportunities available in the land sector and as the incentive to take action to increase carbon storage in the landscape, farmers, forest growers and landholders have been offered access to carbon markets. [page 32] The Australian carbon credit unit (ACCU), an offset credit representing 1 t CO2-e reduction in emissions achieved through programs approved and implemented under the carbon farming initiative (CFI), will substitute for a carbon unit in the carbon pricing mechanism and will be saleable in voluntary carbon markets. In the fixed charge period, no more than five per cent of liability under the Clean Energy Act 2011 (Cth) may be satisfied with “Kyoto compliant” ACCUs. After 1 July 2015, there is no limit.

CARBON CREDITS (CARBON FARMING INITIATIVE) ACT 2011 (CTH) Commencement, historical background, amendments and regulations [31,725] The Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act), No 101 of 2011 (Cth) was passed 23 August 2011 and received Royal Assent, 15 September 2011. The CFI Act commenced 1 December 2011. Amending Acts: — Clean Energy (Consequential Amendments) Act 2011 (Cth); — Clean Energy Legislation Amendment Act 2012 (Cth);

Regulations: — Carbon Credits (Carbon Farming Initiative) Regulations 2011 (Cth); — Carbon Credits (Carbon Farming Initiative) Kyoto Australian Carbon Credit Unit Specification 2011 (Cth); — Carbon Credits (Carbon Farming Initiative) Landfill Legacy Emissions Avoidance Project Specification 2011 (Cth); — Carbon Credits (Carbon Farming Initiative) Amendment Regulation 2012 (No 1) (Cth); — Carbon Credits (Carbon Farming Initiative) Amendment Regulation 2012 (No 2) (Cth); — Carbon Farming (Quantifying Carbon Sequestration by Permanent Environmental Plantings of Native Tree Species using the CFI Reforestation Modelling Tool) Methodology Determination 2012.

Objects [31,750] The objects of the CFI Act are to: give effect to Australia’s international obligations (under the UNFCCC and the Kyoto Protocol); create incentives for people to carry on land based offsets projects; and increase carbon abatement in a manner that is consistent with the protection of Australia’s natural environment and improves resilience to the effects of climate change: s 3. [page 33]

Summary of the Carbon Farming Initiative (CFI) [31,775] The CFI aims to provide financial incentives for farmers, forest growers, landholders and landfill operators to develop projects that will reduce greenhouse gas emissions. The CFI is targeted at the generation of carbon credits from sectors not covered by mandatory liability under the carbon pricing mechanism. It enables projects developed and implemented within the rules of the CFI to be issued with ACCUs which can be sold into

carbon markets. Kyoto compliant ACCUs will be issued when a CFI project relates to activities/emissions that are within Australia’s Kyoto Protocol emissions reporting inventory. Permitted activities include: reforestation; the capture and combustion of landfill gas; reduction of nitrous oxide emissions from fertiliser use; and managing methane emissions from piggeries and dairies. Voluntary ACCUs will be issued when a CFI project relates to activities/emissions that are outside of Australia’s Kyoto Protocol emissions reporting inventory. Relevant activities include: increasing the carbon in soils; sequestering carbon in shrubbery or lands that fall short of the definition of a carbon forest sink; and use of biochar to enrich soils. CFI projects comprise emissions avoidance projects and carbon sequestration projects. In order to create a CFI project, a project proponent (which may be an individual or a company) must first make an application to the regulator to become a recognised offsets entity. The CFI Act provides a mechanism for approval of methodologies for reducing GHG emissions. Each methodology must be approved by the minister. However, before it is approved it must be assessed and endorsed by an independent body of experts called the Domestic Offsets Integrity Committee (DOIC). Approved methods will include carbon capture and storage (sequestering carbon emissions underground), capture and disposal of methane (from livestock farming), savannah burning (management of savannas by controlled burning), reforestation, forest protection and forest establishment. Integrity standards built into the CFI Act provide key concepts that underpin the CFI and its methodologies that must be met by project proponents.

Additionality

[31,800] Emissions abatement or sequestration must be additional to business as usual emissions on the site or sites — the reduction in emissions must not have occurred without the CFI project.

Permanence [31,825] When emissions are taken out of the atmosphere and stored by sequestration projects, they must not be re-released back into the atmosphere (otherwise the reduction in emissions will no longer be additional). Under the CFI an emissions reduction is considered permanent if it is guaranteed for at least 100 years. This will impose ongoing obligations running with lands that have hosted sequestration projects. [page 34]

Leakage [31,850] Leakage occurs where an emissions reduction activity causes emissions to rise outside of the boundaries of the project, thus neutralising the benefit of reducing emissions by the particular project. An example would be a reforestation or reduced native forest deforestation project that resulted in increased deforestation outside of the boundaries of the CFI project.

Measurable and verifiable [31,875] Measurement and monitoring systems must be consistent over time, must enable abatement estimates to be audited and must be complied with in carrying out a CFI project. Methodologies set out in detail the technical requirements for measurement of emissions reductions for particular kinds of projects and the ability to quantify and verify emissions reductions through technical measurement processes (which are different for each different project type).

Conservative [31,900]As far as is possible, conservative assumptions, numerical values and procedures consistent with the peer reviewed science in relation to carbon offsetting should be used to ensure that abatement and other claims are not over-estimated and should be built into the technical mechanisms and formulae used in methodologies.

Internationally consistent [31,925] Estimation and accounting methods must be consistent with (not necessarily the same as) the National Greenhouse Accounts. When a project proponent has all regulatory approvals, and is carrying out the CFI project, the proponent applies to the regulator to obtain a certificate of entitlement and ACCUs from the registry issued by the regulator. The Australian government is supporting the CFI with a range of complementary measures designed to boost participation in the CFI. These measures include a Carbon Farming Futures Fund to support the development of new opportunities through research and the development of methodologies, an Indigenous Carbon Farming Fund to assist the participation of indigenous Australians in the CFI, and a Non-Kyoto Carbon Fund to help initiate the development of projects to produce ACCUs for voluntary markets.

Regulatory oversight [31,950] The Australian government remains responsible for climate change policy. The government will rely on the following new and existing statutory bodies to contribute to, and help reinforce the core aims of the government’s policies: Clean Energy Regulator; Climate Change Authority Land Sector and Carbon Biodiversity Board; Productivity Commission; Australian Competition and Consumer Commission (ACCC); and Australian Securities and Investment Commission (ASIC). [page 35]

CLEAN ENERGY REGULATOR Commencement, historical background, amendments and regulations [31,975] The Clean Energy Regulator Act 2011 (Cth), Act No 163 of 2011

was passed 8 November 2011 and received Royal Assent 4 December 2011. The Clean Energy Regulator Act 2011 (Cth) established the Clean Energy Regulator (the regulator) as a new statutory authority. The regulator commenced operation 2 April 2012.

Objects [32,000] The role of the regulator is to: educate about the carbon price mechanism; assess emissions data; allocate emissions units; operate the Australian National Registry of Emissions Units (registry); monitor, facilitate and enforce carbon liability compliance; administer the NGER Act, the RET and the CFI; and accredit auditors for the CFI and NGER Act.

Introduction to the Clean Energy Regulator [32,025] The regulator was established because there was no single existing regulator in a position to provide the breadth of regulatory oversight required by the Clean Energy legislative package. Indeed, the establishment of the regulator sets the Australian emissions trading scheme apart from the EU ETS. This is because there is no separate regulator in the European Union that has similar functions to the Australian regulator. The functions of the regulator are illustrated in Diagram 32,025-1. Diagram 32,025-1 — Functions of the regulator36

The regulator incorporates the existing regulatory functions of the Office of

the Renewable Energy Regulator (ORER) and the Greenhouse and Energy Data Officer (GEDO), as well as some responsibilities of the Department of Climate Change and Energy Efficiency (DCCEE). Previously, the ORER administered the RET, the GEDO administered the NGER Act, and the DCCEE administered the Registry. [page 36] The establishment of the regulator represents significant regulatory consolidation. Inter alia, this consolidation is intended to: reduce the risk of conflicts or gaps emerging between multiple regulatory bodies; streamline procedures for reporting and surrender of emissions units; and reduce the administrative burden for businesses that would otherwise be required to deal with multiple regulators. The regulator consists of a chair and at least two (but no more than four) other members. Ms Chloe Munro is the current Chair and Chief Executive Officer. Other members are Ms Jennie Granger, Dr Michael Sargent, Ms Anne T Brown and Ms Virginia Malley. A person is eligible for appointment to the regulator if they have experience and standing in one of the following fields — economics, industry, energy production and supply, energy measurement and reporting, greenhouse gas emissions measurement and reporting, greenhouse gas abatement measures, financial markets, trading of environmental instruments, land resource management and public administration.

Independence of the regulator [32,050] The independence of the regulator is demonstrated by the limited scope for ministerial directions to the regulator.37 As with other regulators, such as the Australian Securities and Investments Commission (ASIC), the regulator is subject to ministerial direction on general matters only. This approach ensures that the regulator is accountable to the minister while preventing the minister from intervening in specific instances. The minister may, by legislative instrument, give directions to the regulator in relation to the performance of its functions and the exercise of its powers.

However, a direction must be of a general nature only, and must not be inconsistent with the objects of the Clean Energy Act, Carbon Credits (Carbon Farming Initiative) Act, National Greenhouse and Energy Reporting Act or Renewable Energy (Electricity) Act.

Secrecy [32,075] The regulator has extensive information gathering powers (discussed in chapter six). The regulator also has responsibilities for publishing information about its operations, emissions units and liable entities. The disclosure responsibilities (including for the Liable Entities Public Information Database (LEPID) under s 186 of the Clean Energy Act 2011 (Cth)) are outlined in Diagram 32,075-1. The regulator is subject to the secrecy requirements (Pt C of the Clean Energy Regulator Act 2011 (Cth)) that apply to government departments and agencies. [page 37] Diagram 32,075-1 — The regulator’s obligation to publish information38

The Clean Energy Act 2011 (Cth) seeks to ensure that information is not disclosed unnecessarily. However, information may be disclosed under the following circumstances:

personal information collected under Pt 3 is subject to the Privacy Act 1988 (Cth);39 an official of the regulator may disclose or use protected information if it is for the purposes of a climate change law, the performance of the regulator’s functions under a climate change law, the official’s employment or service as an official of the regulator;40 protected information can be disclosed or used seven years after the information was provided to the regulator to assist CFI methodology development (if provided as a part of a project declaration or a methodology determination);41 [page 38] an official of the regulator may disclose protected information to a Royal Commission;42 and particular protected information may be disclosed if it will assist certain agencies, bodies or persons, including but not limited to the Australian Bureau of Statistics, the ACCC, the Australian Prudential Regulation Authority, ASIC, the Productivity Commission, the Australian Energy Regulator and the Reserve Bank of Australia.43

AUSTRALIAN CLIMATE CHANGE AUTHORITY Commencement, historical background, amendments and regulations [32,100] The Climate Change Authority Act No 143 of 2011 (Cth) was passed 8 November 2011 and received Royal Assent, 29 November 2011. The Climate Change Authority Act 2011 (Cth) established the Climate Change Authority (authority) and the Land Sector Carbon and Biodiversity Board (LSCB Board).

Objects [32,125] The authority is an independent body established:

to advise on aspects of the Clean Energy laws — in particular the carbon price and the CFI; to review Australia’s national emissions targets and annual pollution caps; to advise the government, although it should be remembered that final decisions remain the prerogative of the government. The authority commences operation 1 July 2012.

Introduction to the Climate Change Authority [32,150] The creation of the independent authority is one of the important pieces of the Clean Energy legislative package that was not a part of the previous Carbon Pollution Reduction Scheme (CPRS). The government’s intentions are to ensure best practice governance of the most critical decisions in relation to Australia’s clean energy future. The authority has three key functions. These are to: recommend future pollution caps; recommend the indicative national trajectory and emissions budget; and advise on meeting national emissions reduction targets. Additionally, the authority is mandated to review the following Acts: Clean Energy Act 2011 (Cth); Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth); National Greenhouse and Energy Reporting Act 2011 (Cth); Renewable Energy (Electricity) Act 2000 (Cth); and Climate Change Authority Act 2011 (Cth). [page 39] Membership of the authority consists of the Chair, the Chief Scientist and seven other members. The current Chair is Mr Bernie Fraser. The Chief Scientist, Professor Ian Chubb AC, is an ex-officio member. Authority members are Dr Lynn Williams, Mr John Marley, Professor David Kardy, Ms Heather Ridout, Professor Hamilton, Ms Elara Rubin and Professor John

Quiggan. Each member (with the exception of the Chief Scientist) is appointed by the Climate Change Minister. To be eligible for appointment (other than to the role of Chief Scientist) the person must have experience and standing in one of the following fields— climate science, economics (including environmental economics), industry, social policy, technology development and adoption, employment policy, energy production and supply, greenhouse gas emissions measurement and reporting, greenhouse gas abatement measures, financial markets and investment, trading of environmental instruments, land resource management, environmental management and public administration. The authority is required to prepare a corporate plan at least once every three years, outlining its objectives, strategies and policies. The authority has a similar role to the Committee on Climate Change in the United Kingdom: see Box 32,150-1. Box 32,150-1 — The United Kingdom’s Climate Change Committee The United Kingdom’s Climate Change Committee is an independent body established under Pt 2 of the Climate Change Act 2008 (UK). The functions of the Climate Change Committee are to: advise on the level of the 2050 target; advise on the carbon budget; report on progress; advise on emissions from international aviation and shipping; and advise on other areas upon request.44 The Climate Change Act 2008 (UK) requires the United Kingdom to reduce emissions by at least 80 per cent by 2050 compared to 1990 levels, and has helped to shape the United Kingdom’s approach to climate change. For example, in 2008, the UK Parliament raised the national emissions reduction target from 60 per cent to 80 per cent in response to recommendations from the Climate Change Committee. Furthermore, in December 2008 the Climate Change Committee outlined the United Kingdom’s first three carbon budgets, as well as the 2050 emissions reduction target, and this advice was accepted and legislated by the UK Parliament. The latest (2010) report outlines the United Kingdom’s fourth carbon budget.

The Climate Change Committee is required to report on its activities, objectives and priorities. To date it has published three corporate plans, the latest of which is Corporate Plan 2011–2014. The Climate Change Act 2008 (UK) also established the Adaptation Sub-Committee as a sub-committee of the Climate Change Committee. The purpose of the Adaptation Sub-Committee is to help the United Kingdom prepare for and adapt to the impacts of climate change. There are similarities between the Adaptation Sub-Committee and Australia’s Land Sector Carbon and Biodiversity Board. [page 40]

Reviews by the authority [32,175] The authority is to carry out reviews as specified in the Climate Change Authority Act 2011 (Cth): see Table 32,175-1. Table 32,175-1 — Reviews to be conducted by the Climate Change Authority Clean Energy Act 2011 (Cth) The authority will periodically review the carbon pricing mechanism. The first review must be completed before 31 December 2016 and the second before 31 December 2018. Subsequent reviews must be conducted within five years of the previous deadline. The authority will review the pollution caps, the indicative national emissions trajectory and the carbon budget. The first review is to be completed by 28 February 2014 and the second by 28 February 2016. Subsequent reviews will be undertaken annually and will be completed by 28 February each year. The authority will also review Australia’s progress towards meeting emissions reduction targets and the national carbon budget. The first review is to be completed by 28

National Greenhouse and Energy Reporting Act 2007 (Cth)

Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth)

Renewable Energy (Electricity) Act 2000 (Cth)

Climate Change Authority Act 2011 (Cth)

February 2014, and subsequent reviews are to be completed annually. The authority will conduct periodic reviews of the National Greenhouse and Energy Reporting Act 2007 (Cth). The first review will be completed before 31 December 2018 (but not before 30 June 2016) and the second by 31 December 2023. Subsequent reviews will be completed within five years of the last review. The authority will conduct periodic reviews of the operation of the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth). The first review will be completed by 31 December 2014. Subsequent reviews will be conducted every three years. The authority will conduct periodic reviews of matters relating to the operation of the Renewable Energy (Electricity) Act 2000 (Cth). The first review will be conducted as soon as practicable after 30 June 2012. Subsequent reviews will be conducted every two years. The authority will conduct special reviews of matters specified by the minister, or by both Houses of Parliament by resolution, which relate to climate change and are covered by any of the legislative powers of the Parliament or the executive power of the Commonwealth. [page 41]

The authority is to carry out reviews as specified in the Clean Energy Act

2011 (Cth): see Table 32,175-2. Table 32,175-2 — Reviews to be conducted as outlined in the Clean Energy Act Reviews of the Clean The authority is to undertake periodic reviews of the Energy Act 2011 Clean Energy Act 2011 (Cth). This includes review (Cth) of: (a) the effectiveness and efficiency of the Clean Energy Act 2011 (Cth) and associated provisions; (b) whether there should be any changes to Australia’s emissions reduction targets and carbon budget; (c) the process that should apply to the setting of carbon pollution caps; (d) policies and procedures that should apply to the auctioning of carbon units; (e) the provisions that should apply in relation to the issue of carbon units for a fixed charge; (f)

the provisions that should apply in relation to minimum reserve charges for the issue of carbon units as a result of an auction;

(g) the provisions that should apply in relation to charges for the surrender of eligible international emissions units; (h) the extent to which units other than carbon units should be able to be surrendered; (i)

the extent to which a liable entity should be able to avoid liability for unit shortfall charge in relation to an eligible financial year by surrendering a carbon unit with a vintage year that is later than the eligible financial year;

(j)

the arrangements for the governance and

administration, including the functions and powers of the regulator, the minister’s power to give directions to the regulator, and the other powers of the minister; (k) the relationship between the Clean Energy Act 2011 and the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth). [page 42] Reviews of the pollution cap

The authority is to undertake periodic reviews of the carbon pollution caps, including the level of carbon pollution caps, and any indicative national emissions trajectory and national carbon budget. When conducting this review the authority must have regard to: (a) Australia’s international obligations; (b) undertakings relating to the reduction of emissions that Australia has given under international climate change agreements; (c) Australia’s medium-term and long-term emissions reduction targets; (d) progress towards the reduction of emissions; (e) global action to reduce emissions; (f)

estimates of the global emissions budget;

(g) the economic and social implications associated with pollution caps; (h) voluntary action; (i)

estimates of greenhouse gas emissions that are not covered by the Clean Energy Act 2011 (Cth);

(j)

estimates of the number of ACCUs that are

likely to be issued; (k) the extent of non-compliance with the Clean Energy Act 2011 (Cth) and associated provisions; (l)

the extent to which liable entities have failed to surrender sufficient units to avoid the unit shortfall charge;

(m) any acquisitions or proposed acquisitions by the Commonwealth of eligible international emissions units; (n) other matters the authority considers relevant. In addition, a report on a review must: set out recommendations for an indicative national emissions trajectory and a national carbon budget; deal with the extent to which any indicative national emissions trajectory and national carbon budget are expected to be met by; emissions that are reflected in the provisional emissions numbers of liable entities; emissions that are attributable to activities in the Australian economy and are not reflected in the provisional emissions numbers of liable entities; the purchase of eligible international emission units (whether by the Commonwealth or other persons). [page 43]

Reviews of the level of the pollution cap for 2020–2021

Periodic reviews of progress towards the emission reduction targets and carbon budget

On 1 November 2014, if there are no regulations in effect setting the carbon pollution cap and the carbon pollution cap number for the year beginning on 1 July 2015, the authority must review the level of the carbon pollution cap for the year beginning on 1 July 2020. The review must be completed before the end of 28 February 2015. The authority is to conduct reviews of progress towards the medium-term and long-term targets, and progress in achieving any national carbon budget. When conducting this review the authority must have regard to: (a) the level of emissions in Australia; (b) the level of purchases of eligible international emissions units; (c) the level of emissions that are attributable to activities in the Australian economy and are not reflected in the provisional emissions numbers of liable entities; (d) voluntary action to reduce greenhouse gas emissions; (e) other matters the authority considers relevant. The first review must be completed before the end of 28 February 2014, and each subsequent review must be completed within 12 months of the previous deadline.

LAND SECTOR AND CARBON BIODIVERSITY BOARD [32,200] The objective of the Land Sector and Carbon Biodiversity Board (LSCB Board) is to advise the Environment Minister, the Climate Change Minister and the Agriculture Minister about land sector climate change measures. These include a $1.7 billion land sector package providing funding over six years for the Biodiversity Fund, the Indigenous Carbon Farming Fund and the Regional Natural Resource Management Planning for Climate Change Fund.

The LSCB Board is also to advise the Environment Minister about performance indicators, implementation and guidelines for the funding of Australia’s Biodiversity Fund that: protect, manage or restore biodiverse ecosystems; and establish, protect, manage, improve or restore levels of carbon sequestered in living biomass or in dead organic matter. The LSCB Board consists of the Chair and four other members. The LSCB Board members are the Hon Bob Debus AM (Chair), Professor Lesley Hughes, Mr David Crombie, Mr Joe Ross and Ms Anna Skarbek. Each member of the Board must have experience and standing in one of the following fields — agricultural science, economics (including environmental economics), conservation ecology, greenhouse gas emissions measurement and reporting, greenhouse gas abatement measures, public administration, business management, the management or care of indigenous-held land (within the meaning of the Aboriginal and Torres Strait Islander Act 2005). [page 44]

PRODUCTIVITY COMMISSION [32,225] The Productivity Commission will independently review and report to the government on: industry assistance under the Jobs and Competitiveness Program (in the third year of the carbon pricing mechanism, 2014–2015), including: — competitiveness of emissions-intensive and trade-exposed industries; and — the assistance rates or the carbon productivity contribution that applies to any particular activity; industry assistance under the Coal Sector Jobs Package; and the carbon emissions reduction activities undertaken by Australia’s trading partners internationally.45

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION [32,250] Businesses may be liable under the Competition and Consumer Act

2010 (Cth) for penalties up to $1.1 million per contravention for misleading consumers or providing false information. Claims about the impact of the carbon price on business and prices must be truthful and accurate, based on reasonable and substantiated grounds, and must not mislead consumers. However, business is not generally required to justify or explain why prices have increased. The role of the Australian Competition and Consumer Commission (ACCC) does not include setting or restricting price increases related to the impacts of a carbon price. The ACCC promotes competition, encourages fair business dealings and protects consumers from misleading and deceptive conduct. The ACCC will undertake a compliance and enforcement role in relation to claims made about the impact of a carbon price.

International framework [32,275] Australia is a signatory to the United Nations Framework Convention on Climate Change46 (UNFCCC) and its Kyoto Protocol.47 The Kyoto Protocol is supplemented by the Marrakesh Accords.48 The Kyoto Protocol allocates rights to emit GHG emissions among nominated developed countries, by setting an “assigned amount” for emissions limitation and reduction commitments in a (first) five year commitment period to 31 December 2012. [page 45] Australia, as a ratifying party, has bound itself to take action to limit national GHG emissions to 108 per cent of 1990 levels in that first commitment period.49 The objects of the Clean Energy Act 2011 (Cth)50 place the domestic legislation firmly within the international context, and in particular the international response to climate change and Australia’s associated international commitments. Eligible emissions units, the unit of currency in the Clean Energy Act 2011 (Cth) (discussed further in chapter four) are defined in the Clean Energy Act 2011 (Cth) to include eligible international emissions units (EIEUs).51 EIEUs are in turn defined in the Australian National Registry of Emissions Units Act

2011 (Cth) to include: Certified Emissions Reduction credits (CERs) generated by Clean Development Mechanism (CDM) projects (other than temporary CERs and long term CERs) under art 12 of the Kyoto Protocol; Emissions Reduction Units (ERUs) generated by Joint Implementation (JI) projects under art 6 of the Kyoto Protocol; Assigned Amount Units (AAUs) and removal units (RMUs) recognised under the Kyoto Protocol and non-Kyoto International Emissions Units. The international mechanisms for these EIEUs are discussed in turn below. The present assumption is that in the operation of the Clean Energy Act 2011 (Cth) from 1 July 2015, the achievement of Australia’s national emissions reduction target and the linkage of the carbon price mechanism to the international market, the international framework will comprise international climate change agreements that continue and support the creation and trade of EIEUs.52

UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE [32,300] The UNFCCC sets the overarching framework for international and intergovernmental climate change action and GHG emissions negotiations. The UNFCCC was adopted at the Rio Earth Summit on 9 May 199253 and entered [page 46] into force on 21 March 1994. Australia ratified the UNFCCC on 30 December 1992. As of March 2012 the UNFCCC has 195 Parties (194 States and one regional economic integration organisation).54

Objects [32,325] Article 2 states the UNFCCC objective is “to achieve […] stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”

The UNFCCC directs parties to “take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects.”55 However, it does not specify any target level for GHG concentrations, nor does it specifically define the greenhouse gases to be stabilised. The UNFCCC also directs parties to “protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.”56 Reflective of this ideal, the UNFCCC defines countries according to their economic development. Annex 1 countries, including Australia, are those considered to be developed economies (and in some cases, economies in transition). Non-Annex 1 countries, including China and India, are those considered to be developing economies.57 The UNFCCC imposes an obligation on Australia to adopt national policies and take measures to mitigate climate change by limiting anthropogenic emissions and protecting carbon sinks. It is to this obligation that the first object of the Clean Energy Act 2011 (Cth) refers. Article 4.2(a) of the UNFCCC states:58 … Parties shall adopt national policies and take corresponding measures on the mitigation of climate change, by limiting its anthropogenic emissions of greenhouse gases and protecting and enhancing its greenhouse gas sinks and reservoirs […] These Parties may implement such policies and measures jointly with other Parties and may assist other Parties in contributing to the achievement of the objective of the Convention. However, it was left to subsequent agreement (the Kyoto Protocol) to define the relevant policies and measures and move the international negotiations towards emission reductions. [page 47]

Conference of the Parties [32,350] Under the UNFCCC, parties attend the Conference of the Parties (COP) each year. The annual COP occurs in November and/or December, and despite ongoing meetings throughout the year is the most public forum in which the international negotiations take place. Several significant additions to the UNFCCC have been negotiated at these COPs, including the Kyoto Protocol, the Copenhagen Accord, the Cancun Agreements, and Durban

Platform.

KYOTO PROTOCOL TO THE UNFCCC [32,375] The Kyoto Protocol was adopted unanimously at the third Conference of the Parties (COP 3) in Kyoto, Japan on 11 December 1997, and came into force on 16 February 2005. As of March 012 there are 192 Parties (191 states and one regional economic integration organisation) to the Kyoto Protocol. Although the Kyoto Protocol was adopted unanimously, ratification has proven contentious. Australia ratified the Kyoto Protocol on 3 December 2007, and the ratification entered into force on 11 March 2008. Australia’s ratification was the first international action taken by former Prime Minister the Hon Kevin Rudd MP, after being elected Prime Minister on 24 November 2007. The United States of America is the only developed country signatory to have failed to ratify the Kyoto Protocol. However, in December 2011, Canada became the first developed country to withdraw from the Kyoto Protocol.59

Objects [32,400] A key difference between the UNFCCC and the Kyoto Protocol is that while the UNFCCC encouraged developed countries to stabilise emissions, the Kyoto Protocol commits them to do so. The Kyoto Protocol does this by identifying six specific GHG, outlining specific emissions limitation and reduction goals, and establishing market mechanisms through which to achieve these reductions.

Binding commitments [32,425] UNFCCC Annex 1 countries that have ratified the Kyoto Protocol accept binding emissions limitation and reduction commitments, specified as targets in Annex B of the Kyoto Protocol for a specified commitment period, and measured against a baseline of 1990 emissions.60 The Annex B emissions limitation and reduction commitments are expressed as the “assigned amount” of emissions in each commitment period. These assigned amounts of emissions are unitised and represented by Assigned Amount Units (AAUs).

The European Union collectively agreed to an emissions reduction of eight per cent, the USA to seven per cent, and Japan to six per cent. However, as noted, the USA has not ratified the Kyoto Protocol and is therefore not bound to comply with its quantitative emissions reduction commitment. [page 48] Australia committed to keeping national emissions within 108 per cent of 1990 levels — one of only three developed countries to secure an increase in emissions.61 Australia is on track to meet this commitment.62

GHG [32,450] The Kyoto Protocol identified six GHGs that contribute to climate change: see Table 32,450-1. Table 32,450-1 — Kyoto Protocol greenhouse gases Carbon dioxide (CO2) Sulfur hexafluoride (SF6) Nitrous Oxide (N2O)

Hydrofluorocarbons (HFCs)

Methane (CH4)

Perfluorocarbons (PFCs)

AAUs [32,475] Article 3 of the Kyoto Protocol defines AAUs. Article 3(7) provides: In the first quantified emission limitation and reduction commitment period […] the assigned amount for each Party included in Annex I shall be equal to the percentage inscribed for it in Annex B of its aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases listed in Annex A in 1990 […] multiplied by five. At the beginning of the first commitment period each Annex-1 country was assigned AAUs equal to the percentage (in Annex B) of its aggregate CO2-e emissions in the 1990 base year, multiplied by five (being the five year duration of the first commitment period).63 These AAUs do not expire and can be banked for use in the second commitment period.

Removal units [32,500] The Kyoto Protocol also established Removal Units (RMUs).

RMUs are credits that represent an allowance to emit 1t CO2-e absorbed and/or removed by a carbon sink in an Annex 1 country. RMUs are defined in Article 3.3 of the Kyoto Protocol: The net changes in greenhouse gas emissions by sources and removals by sinks resulting from direct human-induced land-use change and forestry activities, limited to afforestation, reforestation and deforestation since 1990, measured as verifiable changes in carbon stocks in each commitment period, shall be used to meet the commitments under this Article of each Party included in Annex I. [page 49]

Compliance mechanism [32,525] Within 14 months of the end of the first commitment period, all Parties, including Australia, will be required to submit their emissions inventory for the first commitment period to independent expert review. Parties will have 100 days to rectify non-compliance with their emissions reduction targets through the purchase of relevant credits in the carbon market. If parties fail to comply, the Enforcement Branch of the Executive Board will take steps in relation to the Party’s access to the Kyoto carbon market and its emissions reduction targets in the second commitment period.64 In late 2011 at the 17th Conference of the Parties (COP17) in Durban, South Africa, the parties agreed to establish a second commitment period under the Kyoto Protocol — known as the Durban Platform.

Flexibility mechanisms in the Kyoto Protocol [32,550] The Kyoto Protocol established and governs the international carbon market. Articles 6, 12 and 17 introduce three flexibility mechanisms: the Clean Development Mechanism (CDM); Joint implementation (JI); and international emissions trading. These flexibility mechanisms were specifically created in order to assist developed countries achieve their specified emission reductions more cheaply

than they could without an international market and reliant only on domestic means. As mechanisms under the Kyoto Protocol, the CDM, JI and emissions trading will continue through the second commitment period.

Clean Development Mechanism [32,575] Under the Clean Development Mechanism (CDM), emissions reduction projects in non-Annex 1 countries can earn Certified Emission Reduction credits (CERs). CERs may be sold to Annex 1 countries to meet a part of their emissions limitation and reduction targets under Annex B of the Kyoto Protocol. Article 12 of the Kyoto Protocol defines the purpose of the CDM as: … to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments. The CDM is a market-based instrument that provides a revenue stream for emissions reduction activities in developing countries and a source of lowcost abatement for developed countries. Australia’s carbon market will link under the Clean Energy Act 2011 (Cth) to the international market including the CDM post-1 July 2015. The CDM market and its fate post-2012 are therefore important factors for the achievement of emissions reduction and Australian clean energy laws. The CDM has helped to shape the global carbon market: see Table 32,5751. The CDM was the first global carbon credit scheme that provided a standardised emissions [page 50] offset — a CER. Each CER is equivalent to 1t CO 2-e emissions reduction. This standardisation was the result of rigorous project methodology, development and implementation criteria. Table 32,575-1 — CDM projects and production of CERs65 CDM PROJECTS 3886 registered

AVERAGE ANNUAL CERs 571,446,694

EXPECTED CERs to 2012 >2,120,000,000

>5,600 in pipeline

N/A

>2,700,000,000

Methodology development and governance under the CDM66 offers significant lessons for methodologies and governance under the Carbon Farming Initiative (CFI) (discussed below).

Joint Implementation [32,600] Joint Implementation (JI) allows an Annex B country (a developed country with an emissions limitation and reduction commitment under the Kyoto Protocol) to earn Emissions Reduction Units (ERUs) from an emission reduction or emission removal project in another Annex B Party.67 Each ERU is equivalent to 1t CO2-e. Article 6 of the Kyoto Protocol explains the mechanism: … any Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy. JI is essentially the mirror of the CDM. While the CDM encourages investment by developed countries in developing countries, JI encourages investment between developed countries. Furthermore, JI differs from the CDM in that the host country transfers ERUs to the project developer. Unlike CERs, ERUs are not additional credits. The host country is required to cancel an equivalent number of AAUs and/or RMUs. Joint implementation has not achieved the same level of emissions reductions as the CDM. This is partly because JI projects are only likely to be approved in countries with AAUs in excess of what they require to surrender to meet their emissions reduction target specified in the Kyoto Protocol. For example, the Australian government previously stated that it will not approve JI projects during the first commitment period.68 However, the CFI Act defines new rules for registering domestic CFI offsets projects that are Kyotocompliant as JI projects. [page 51]

International emissions trading [32,625] The third Kyoto Protocol flexibility mechanism is international

emissions trading. Article 17 of the Kyoto Protocol provides: The Parties included in Annex B may participate in emissions trading for the purposes of fulfilling their commitments under Article 3. Any such trading shall be supplemental to domestic actions for the purpose of meeting quantified emission limitation and reduction commitments under that Article. International emissions trading allows countries with surplus AAUs (emissions assigned to a country but not emitted by that country) to sell up to 10 per cent of their AAUs to other countries that have failed their emissions reduction target. The Kyoto Protocol established a market—the carbon market—in which AAUs and RMUs are a commodity and can be sold. In addition to AAUs and RMUs, the international emissions market allows the sale of other Kyoto Protocol units — CERs and ERUs: see Table 32,625-1. Significantly, the Kyoto Protocol also permits private entities to trade, when such entities are authorised by the state (although the country remains responsible for its compliance obligations).69 Table 32,625-1 — Summary of international emissions units UNIT UNIT SOURCE AAU Assigned Amount Unit Emissions units resulting from countries “assigned amounts” under the Kyoto Protocol CER Certified Emissions Generated by a project Reduction under the Clean Development Mechanism ERU Emission Reduction Generated by a Joint Unit Implementation project RMU Removal Unit Based on land-use, landuse change and forestry (LULUCF) project activities [page 52]

ONGOING MODIFICATIONS AND ADDITIONS

TO THE UNFCCC [32,650] The UNFCCC and the Kyoto Protocol bestow significant discretionary authority on the meetings of the COPs (and meetings of the parties to the Kyoto Protocol (MOPs)).70 This authority enables the annual COPs (and accompanying MOPs) to oversee the evolution of the international climate change regime by directing and adjusting the implementation of the UNFCCC and Kyoto Protocol. This has resulted in a number of additions to the international climate change framework, including COP 15, COP 16 and COP 18.

COP15: The Copenhagen Accord [32,675] The 2009 Copenhagen Accord was reached at the 15th Conference of the Parties (COP 15), held in Copenhagen, Denmark from 7 to 19 December 2009.71 The Copenhagen Accord does not have the legal force of the Kyoto Protocol, and did not commit parties to a post-Kyoto international regime. However, it did move the international negotiations a degree, and (inter alia): recognised that the increase in global temperature should be below 2°C above pre-industrial levels;72 agreed that developed countries (Annex I Parties) would commit to economy-wide emissions targets for 2020 and would strengthen their existing targets, with all reductions to be measured, reported and verified in accordance with COP guidelines;73 and agreed that developing countries (non-Annex I Parties) would implement mitigation actions to slow emissions growth, with Least Developed States and Small Island Developing States to undertake voluntary action with international support.74 These three achievements of the Copenhagen Accord are relevant to the Clean Energy Act 2011 (Cth). This is because the second objective of the Clean Energy Act 2011 (Cth) is to support the development of an effective global response to climate change, consistent with Australia’s national interest in ensuring that average global temperatures do not increase by more than two degrees Celcius above pre-industrial levels. This is also linked to the third objective, which is to meet Australia’s long-term target of reducing net greenhouse gas emissions to 80 per cent below 2000 levels by 2050 in a flexible and cost-effective way.

Australia’s quantified economy-wide emissions target for 2020 communicated to the international community is in the following terms:75 Australia will reduce its greenhouse gas emissions by 25% on 2000 levels by 2020 if the world agrees to an ambitious global deal capable of stabilising levels of greenhouse gases in the atmosphere at 450 ppm CO2-e or lower. Australia will unconditionally reduce our emissions by 5% below 2000 levels by 2020, and by up to 15% by 2020 if there is a global agreement which falls short of securing atmospheric stabilisation at 450 ppm CO2-e and under which major

[page 53] developing economies commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia’s.

COP16: The Cancun Agreements [32,700] The 2010 Cancun Agreements were reached at the 16th Conference of the Parties (COP 16), held in Cancun, Mexico from 29 November to 10 December 2010.76 These agreements included the Green Climate Fund, the Technology Mechanism, and the Cancun Adaptation Framework.77 COP16 also achieved a commitment to a maximum temperature rise of 20C above pre-Industrial levels, with the possibility of lowering that maximum to 1.50C. This commitment was overshadowed by the fact that the pledges put forward by countries accounted for approximately only 60 per cent of the emission reductions needed for a 50 per cent chance of stabilising temperatures at the 20C goal.78 The 2010 Cancun Agreements79 anchored the mitigation pledges made by developed and developing countries in the Copenhagen Accord to the UNFCCC. The Cancun Agreements recognise the imperative to ensure global temperature does not increase by more than 2 0C above pre-industrial levels.

COP17: The Durban Platform [32,725] The 17th Conference of the Parties (COP 17) was held in Durban, South Africa from 28 November to 9 December 2011. Decision I/CMP.7 was a major outcome of COP 17, and is known as the Durban Platform. Point 1 of the decision established a second commitment period under the Kyoto Protocol. It stated:80 … that the second commitment period under the Kyoto Protocol shall begin on 1 January 2013 and end either on 31 December 2017 or 31 December 2020, to be decided by the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol at its seventeenth session.

The decision also amended Annex B to the Kyoto Protocol. Although the decision failed to include quantified emission limitation and/or reduction commitments for the second commitment period (these remain listed as “n/a”), the decision did include pledges for the reduction of emissions by 2020. Significantly, the decision added a seventh greenhouse gas to the original six listed in Annex A of Kyoto Protocol — nitrogen trifluoride (NF3). The Durban Platform included a decision to adopt a universal legal agreement on climate change as soon as possible, and no later than 2015. As discussed above, the form and status of this agreement will directly impact Australia’s international obligations, as well as have practical relevance to the Australian carbon market established by the Clean Energy Act 2011 (Cth). [page 54]

COP18: Doha 2012 [32,750] The 18th Conference of the Parties (COP 18) will be held in Doha, Qatar from 6 November to 7 December 2012. This will be the last COP in the first commitment period and the final meeting before the second commitment period commences.

LINKING [32,775] In the future, the Clean Energy Act 2011 (Cth) may also allow the emissions units (the units of currency) of emissions trading schemes in other countries to qualify as eligible emissions units, thereby directly linking the Clean Energy Act 2011 (Cth) with those emissions trading schemes. Europe operates the European Union Emissions Trading System (EU ETS) with its second phase of operation spanning from 2008 to 2012, and a third phase planned for 2013 to 2020. New Zealand has established the New Zealand Emissions Trading Scheme (NZ ETS). California will commence a California Emissions Trading Scheme (California ETS) from 1 January 2013. The EU ETS and NZ ETS already permit substitution of CERs and ERUs for their domestic units, and to that extent, the Clean Energy Act 2011 (Cth) indirectly links to those emissions trading schemes, because it allows (post-1 July 2015) the same Kyoto units to be used for compliance purposes in the

carbon pricing mechanism.

AUSTRALIAN TARGETS AND CAPS [32,800] Australia has agreed by ratifying the Kyoto Protocol to limit annual national greenhouse gas emissions to 108 per cent of 1990 levels between 2008 and 2012. While Australia is on track to meet this limit,81 national greenhouse gas emissions are forecast to increase by 24 per cent by 2020 on 2000 levels (see Diagram 32,800-1). There are three critical concepts to Australia’s emissions reduction commitments: the emissions reduction target; the carbon pollution cap; and the carbon pollution cap; and Section 14 of the Clean Energy Act 2011 (Cth) provides that regulations may declare the carbon pollution cap number for a specified flexible charge year. However, as noted above, ss 288–293 of the Clean Energy Act 2011 (Cth) specifically require the authority to review whether there should be changes to Australia’s emission reduction targets and caps. [page 55]

Diagram 32,800-1 — Australia’s projected emissions and emission reduction targets82

Australia’s emissions reduction target [32,825] In addition to the Kyoto Protocol target, the Australian government committed to reducing emissions by five per cent below 2000 levels by 2020. The target is unconditional and has bipartisan support.83 The government submitted this unconditional target to the Copenhagen Accord on 27 January 2010.84 In addition, the government committed:85 Australia will reduce its greenhouse gas emissions by 25% on 2000 levels by 2020 if the world agrees to an ambitious global deal capable of stabilising levels of greenhouse gases in the atmosphere at 450 ppm CO2-eq or lower. Australia will unconditionally reduce our emissions by 5% below 2000 levels by 2020, and by up to 15% by 2020 if there is a global agreement which falls short of securing atmospheric stabilisation at 450 ppm CO2-eq and under which major developing economies commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia’s.

However, these commitments are not bipartisan. The Gillard government has also committed to reduce emissions by 80 per cent below 2000 levels by 2050. Again, this is not a bipartisan target. The third objective of the Clean Energy Act 2011 (Cth) addressed Australia’s international commitments to reduce national emissions. The objective states that [page 56] Australia will “take action directed towards meeting Australia’s long-term

target of reducing Australia’s net greenhouse gas emissions to 80 per cent below 2000 levels by 2050.”86 Table 32,825-1 outlines the means of setting the emission reduction targets in the European Union. Table 32,825-1 — Setting emissions reduction targets in the European Union Each member state in the European Union has a National Allocation Plan (NAP), which must be approved by the European Commission. The combined reductions outlined in the NAPs sets the overall cap on the total emissions allowed from all the installations covered by the EU ETS. The cap is converted into permits — one allowance equals one 1 t CO2-e — which are then distributed to installations covered by the EU ETS. Phase III (2013–2020) intends to achieve two-thirds of the EU’s unilateral 20 per cent emissions reduction target by 2020 on 1990 levels — saving approximately 500Mt CO2e per annum by 2020.87 This emissions reduction target may be increased, as the EU has outlined a conditional offer to move to a 30 per cent reduction by 2020 compared to 1990 levels “if other developed countries commit themselves to comparable emission reductions and developing countries contribute adequately according to their responsibilities and respective capabilities.”88 The cap for 2013 is 2,039,152,882 permits, which will decrease each year by 1.74 per cent of the average annual total quantity of permits issued by member states between 2008 and 2012 (equivalent to an annual reduction of 37,435,387).89

Australia’s carbon pollution cap and carbon budget [32,850] Section 14 of the Clean Energy Act 2011 (Cth) defines the “carbon pollution cap” as: the total number of auctioned carbon units; the total number of free carbon units issued through the Jobs and Competitiveness Program; and the total number of free carbon units issued to coal-fired electricity generators. Section 5 of the Clean Energy Act 2011 (Cth) defines the “carbon budget”

as the total amount of net Australian emissions of greenhouse gases during a specified period.

The carbon pollution cap [32,875] The carbon pollution cap will be determined by regulations: Clean Energy Act 2011 (Cth) s 14. The DCCEE has stated that the regulations on pollution caps will be made before 31 May 2014.90 [page 57] These regulations will determine the quantity of emissions (in the form of CO2-e) that will be the carbon pollution cap for a specified flexible charge year. The Minister is responsible for making a recommendation to the GovernorGeneral about regulations to be made for the purposes of s 14. When making this recommendation, the Minister must have regard: to Australia’s international obligations under international climate change agreements; to the most recent report that was given to the Minister by the authority under s 292 of the Clean Energy Act 2011 (Cth) and that dealt with carbon pollution caps and carbon budgets. The Minister may also have regard to: undertakings relating to the emission reductions that Australia has given under international climate change agreements; the national medium-term and long-term emission reduction targets; progress towards reducing emissions; progress towards reducing emissions; estimates of the global emissions budget; the economic and social implications associated with various levels of carbon pollution caps; voluntary action to reduce national emissions; estimates of emissions that are not covered by the Clean Energy Act 2011 (Cth);

estimates of the number of ACCUs likely to be issued; the extent of non-compliance with the Clean Energy Act 2011 (Cth) and associated regulations; the extent to which liable entities incur liability for the unit shortfall charge; any acquisitions or proposed acquisitions of eligible international emissions units by the government; and other matters the Minister considers relevant. The Minister must take all reasonable steps to ensure regulations that: declare the carbon pollution cap and the carbon pollution cap number for the flexible charge year beginning on 1 July 2015; and declare the carbon pollution cap and the carbon pollution cap number for each of the next four flexible charge years are tabled in each House of the Parliament under s 38 of the Legislative Instruments Act 2003 (Cth) not later than 31 May 2014.91 These regulations must not be made after 31 May 2014. If no regulations have been made at the start of May 2014, the Minister must take all reasonable steps to ensure that such regulations are passed. These regulations must not be made after the end of the relevant month of May. Following a motion upon notice, either House of the Parliament may pass a resolution disallowing the regulations (Clean Energy Act 2011 (Cth) s 15). For the resolution to be effective: the notice must be given in that House within 15 sitting days after the copy of the regulations was tabled in the House; [page 58] the resolution must be passed within 15 sitting days of that House after the giving of that notice. If no such resolution is passed, the regulations take effect on the day immediately after the last day upon which such a resolution could have been passed (assuming that notice of a motion was given in each House on the last day of the 15 sitting day period).

If there are no regulations that declare the carbon pollution cap and the carbon pollution cap number for the flexible charge year beginning on 1 July 2015, the default carbon pollution cap for 2015–16 will be determined according to the formula: Total emissions numbers for the eligible financial year beginning on 1 July 2012 — 38,000,00092 In this formula, “total emissions numbers for the eligible financial year beginning on 1 July 2012” means the estimate entered in the LEPID in relation to the eligible financial year beginning on 1 July 2012. If there are no regulations that declare the carbon pollution cap and the carbon pollution cap number for a particular flexible charge year beginning on or after 1 July 2016, then the default carbon pollution cap for the flexible charge year will be determined according to the formula: Carbon pollution cap number for the previous flexible charge year — 12,000,00093 Part 4 of the Clean Energy Act 2011 (Cth) also deals with the carbon pollution cap. Section 101 provides that the regulator must ensure that no more than 15 million carbon units with a particular vintage year are issued as a result of auctions during a financial year if: the financial year begins more than 12 months before the start of the vintage year; there are no regulations in effect that declare the carbon pollution cap and the carbon pollution cap number for the vintage year. If there are no regulations that declare the carbon pollution cap and the carbon pollution cap number for the vintage year the regulator must also ensure that no more than 15 million carbon units with a particular vintage year are issued during auctions conducted during the first six months of the financial year immediately preceding the vintage year. Further, the regulator must ensure that the sum of the: total number of carbon units with a particular vintage year offered at auctions; total number of free carbon units with that vintage year issued in accordance with the Jobs and Competitiveness Program; and total number of free carbon units with that vintage year issued in

accordance with Pt 8 (to coal-fired electricity generators) equals the carbon pollution cap number for that vintage year.94 1 Australian National Greenhouse Accounts, Quarterly Update of Australia’s National Greenhouse Gas Inventory, March Quarter 2012 (Australian Government, Department of Climate Change and Energy Efficiency, 2 August 2012) 3. These figures include land use, land use change and forestry (LULUCF). Per capita emissions equate to emissions of 25.5 t CO2-e per person and have declined 21 per cent from 1990. Australia’s per capita emissions top a list of 185 countries: UNEP Urban Environment Unit, “Representative GHG Baselines for Cities and their Respective Countries” (2010) United Nations Environment Program: www.unep.org/urban_environment. 2 The five per cent reduction is an unconditional commitment, reflected in the Copenhagen Accord, Decision 2/CP.15, UN document FCCC/CP/2009/11/Add.1. The amount of the reduction may increase up to 25 per cent below 2000 national emissions if other nations also commit to emissions reductions (Former Prime Minister the Hon Kevin Rudd MP, Deputy Prime Minister and Treasurer the HonWayne Swan MP and Senator the Hon Penny Wong, former Minister for Climate Change, Energy Efficiency and Water, “A new target for reducing Australia’s carbon pollution” (Press Release, 4 May 2009). 3 Australian Government, Department of Environment and Water Resources, “National Greenhouse Gas Inventory: Analysis of Recent Trends and Greenhouse Indicators 1990 to 2005” (Report, Department of Environment and Water Resources, 2006). 4 Senator the Hon Penny Wong, former Minister for Climate Change, Energy Efficiency and Water, “Climate Change: A Responsibility Agenda”, (Speech delivered at the Australian Industry Group Luncheon, Melbourne, 6 February 2008). An 80 per cent reduction would reduce Australian GHG emissions to approximately 110 Mt CO2-e per annum. 5 Australian Government, “Securing a Clean Energy Future: The Australian Government’s Climate Change Plan” (Policy Paper, Australian Government, 10 July 2011). 6 As amended by the Clean Energy (Fuel Tax Legislation Amendment) Act 2011 (Cth). 7 As amended by the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Act 2011 (Cth) and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Act 2011 (Cth). 8 Introduced into the House of Representatives by the Hon Greg Combet, AM MP, Minister for Climate Change and Energy Efficiency and read 1st time, 13 September 2011. Passed House of Representatives, 12 October 2011. Introduced into the Senate, 12 October 2011. Passed the Senate, 8 November 2011. 9 SLI 221 of 2011, made 23 November 2011, F2011L02473. 10 SLI 12 of 2012, made 22 February 2012, F2012L00417. 11 SLI 51 of 2012, made 21 March 2012, F2012L00904. 12 SLI 100 of 2012, made 14 June 2012, F2012L01230. 13 SLI 126 of 2012, made 28 June 2012, F2012LO1403. 14 Clean Energy Act 2011 (Cth) s 3. 15 Liability is discussed in chapter three. A “liable entity” is defined in the Clean Energy Act 2011 (Cth) as a “person” who is liable under the Clean Energy Act 2011 (Cth). 16 Section 5 of the Clean Energy Act 2011 (Cth) defines “person” exclusively to be any of the following:

(a) an individual; (b) a body corporate; (c) a trust; (d) a corporation sole; (e) a body politic; (f)

a local governing body.

17 “Operational control” is defined in the NGER Act s 11. 18 “Facility” is defined in NGER Act s 9. 19 Excluded emissions include emissions from agriculture, emissions from entities with facilities in non-covered sectors, emissions captured under the related Clean Energy law package, emissions from de-commissioned underground mines, and legacy emissions from landfill and closed landfill. 20 Other GHG include: nitrogen trifluoride (NF3); sulphur hexafluoride (SF6); hydrofluorocarbons (HHCs); and perfluorocarbons (PFCs). Scope 1, 2 or 3 emissions means one of the following types of emissions as specified in the GHG Protocol 2004: Scope 1 emissions: direct GHG emissions (excluding emissions not covered by the Kyoto Protocol) occurring from sources that are owned or controlled by the entity, and emissions from chemical production in owned or controlled process equipment. Excludes direct CO2 emissions from the combustion of biomass Scope 2 emissions: electricity indirect GHG emissions from the generation of purchased electricity consumed by the entity and physically occurring at the facility where electricity is generated. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organisational boundary of the entity Scope 3 emissions: other indirect GHG emissions (an optional reporting category allowing for the treatment of all other indirect emissions that are a consequence of the activities of the entity) that occur from sources not owned or controlled by the entity. Some examples of scope 3 activities are extraction and production of purchased materials; transportation of purchased fuels; and use of sold products and services. GHG Protocol 2004, published under that name by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). 22 Per fluorocarbons from aluminium smelting are also included in the Clean Energy Act 2011 (Cth). 23 If an obligation transfer number (OTN) is not quoted, the emissions are not counted in a facility’s provisional emissions number. If an OTN is quoted, the emissions do not count towards the natural gas supplier’s liability. 24 Australian Government, “Securing a Clean Energy Future: the Australian government’s climate change plan” (Policy, Australian Government, 10 July 2012) p 27. 25 The fixed price is called a safety valve. 26 The forwards or derivatives markets are primarily risk management and price discovery markets where the price is tied to the price of the underlying carbon unit. Actual transfer of a carbon unit cannot

occur in this market, because of ss 104 and 110 of the Clean Energy Act 2011 (Cth). 27 Interagency Working Group for the Study on Oversight of Carbon Markets, “Report on the Oversight of Existing and Prospective Carbon Markets” (Report, US Commodity Futures Trading Commission, 18 January 2011) p 15. 28 Anthony Collins and Sally Palmer, “The Role of Financial Markets in Emissions Trading” (2008) 27 Australian Resources and Energy Law Journal at 41, 45. 29 National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) s 5. 30 Up to 2 April 2012, the regulator was the Greenhouse and Energy Data Officer. 31 See s 4AA of the Crimes Act 1914 (Cth). 1 penalty unit = A$110. 32 Subsequently renamed the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth). 33 Opened for signature 22 March 1985, 1513 UNTS 293 (entered into force 22 September 1988). 34 Opened for signature 16 September 1987, 1522 UNTS 3 (entered into force 1 January 1989). 35 Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Regulations 2004 reg 5; Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Regulations 2004 reg 5. 36 Source: Clean Energy Regulator Bill 2011 (Cth), Explanatory Memorandum at 7. 37 Clean Energy Regulator Act 2011 (Cth) ss 41?42. 38 Source: Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) p 248. 39 Clean Energy Regulator Act 2011 (Cth) s 43. 40 Clean Energy Regulator Act 2011 (Cth) ss 44?46. 41 Clean Energy Regulator Act 2011(Cth) s 47. 42 Clean Energy Regulator Act 2011 (Cth) s 48. 43 Clean Energy Regulator Act 2011 (Cth) s 49. 44 Climate Change Act 2008 (UK) ss 33?38. 45 Climate Change Act 2011 (Cth) ss 64?66. 46 United Nations Framework Convention on Climate Change, opened for signature 4 June 1992, 1771 UNTS 107 (entered into force 21 March 1994). 47 Kyoto Protocol, opened for signature 16 March 1998, UN Doc FCCC/CP/1997/7/Add.1, 10 December 1997 [being the Report of the Conference of the Parties on its third session, held at Kyoto from 1 to 11 December 1997] (entered into force 16 February 2005). 48 Marrakesh Accords, UN Doc FCCC/CP/2001/13/Add.2, 21 January 2002 [being the Report of the Conference of the Parties on its seventh session, held at Marrakesh from 29 October to 10 November 2001] (entered into force and formally adopted at the first conference of the parties to the Kyoto Protocol in December 2005). 49 Australia ratified the Kyoto Protocol on 11 March 2008. 50 Clean Energy Act 2011 (Cth) s 3. 51 Eligible emissions units include: carbon units (created under the Clean Energy Act 2011 (Cth)),

Australian carbon credit units (ACCUs) (created under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth)) and eligible international emissions units (EIEUs). Substitution is permitted, as follows: in the fixed charge period to 30 June 2015, carbon units can be substituted by ACCUs (limited to five per cent of liability); and in the flexible charge period from 1 July 2015, carbon units can be substituted by: — ACCUs; and — EIEUs (limited to 50 per cent of liability). 52 Clean Energy Act 2011 (Cth) s 5 defines an “international agreement” as “an agreement whose parties are (a) Australia and a foreign country; or (b) Australia and 2 or more foreign countries.” Section 5 defines an “international climate change agreement” as “(a) the Climate Change Convention; or (b) any other international agreement, signed on behalf of Australia, that (i) relates to climate change; and (ii) imposes obligations on Australia to take action to reduce greenhouse gas emissions; or (c) an international agreement, signed on behalf of Australia, that (i) relates to climate change; and (ii) is specified in a legislative instrument made by the Minister for the purposes of this definition.” 53 The UNFCCC was the first binding international legal agreement to address global climate change. The symbolic successor to the Rio Earth Summit was Rio+20, held in Rio de Janiero, Brazil 4?6 June 2012. See 30,550 www.uncsd2012.org. 54 For the most current list of signatories and Parties, see: http://unfccc.int/essential_background/convention/status_of_ratification/items/2631txt.php UNFCCC Art 3(3). 55 UNFCCC Art 3(3). 56 UNFCCC Art 3(1). 57 Twenty years on, the definition of Annex 1 and non-Annex 1 countries remains contentious, particularly in the case of China and India. A complete list of Annex 1 and non-Annex 1 countries is at: www.unfccc.int/parties_and_observers/items/2704.php. 58 UNFCCC Art 4.2(a). 59 Canada’s withdrawal will come into effect on 15 December 2012 — two weeks before the conclusion of the first commitment period. For the most current list of Signatories and Parties, see: www.unfccc.int/kyoto_protocol/status_of_ratification/items/2613.php. 60 In 2006 Parties to the Kyoto Protocol amended Annex B in Decision 10/CMP.2. To date, only 27 Parties have signed the amendment and the amendment has therefore not entered into force. 61 Iceland secured a target of 110 per cent and Norway 101 per cent. See: www.unfccc.int/kyoto_protocol/items/3145.php. 62 Australian Government, “The Australian Government Submission to the United Nations Framework Convention on Climate Change” (Australian Government, Australian National Greenhouse Accounts, National Inventory Report, April 2012) p xi. 63 UNFCCC (2006) COP/MOP Decision 13 CMP.1. 64 Kyoto Protocol Arts 5, 7 and 8; UNFCCC (2006) COP/MOP Decision 27/CMP.1 65 Up-to-date statistics on the CDM market is at www.cdm.unfccc.int/Statistics/index.html. 66 The most up-to-date information www.cdm.unfccc.int/methodologies/index.html.

on

CDM

methodologies

is

at:

67 A complete list of eligible countries is found at: www.ji.unfccc.int/JI_Parties/index.html. 68 Australian Government, “Australia’s National Guidelines and Procedures for Approving Participation in Joint Implementation Projects” (Policy, Australian Government, Department of Climate Change and Energy Efficiency, 2010) p 8. 69 UNFCCC (2006) COP/MOP Decision 13 CMP.1 point 33. 70 UNFCCC (1992) art 7; Kyoto Protocol (1997) Art 13. 71 Copenhagen Accord (2009) Decision 2/CP.15. 72 Copenhagen Accord (2009) Decision 2/CP.15 points 1 and 2. 73 Copenhagen Accord (2009) Decision 2/CP.15 point 4. 74 Copenhagen Accord (2009) Decision 2/CP.15 point 5. 75 The Copenhagen Accord emission reduction commitments of all Annex 1 Parties may be found at: www.unfccc.int/meetings/copenhagen_dec_2009/items/5264.php. 76 Copenhagen Accord (2009) Decision 2/CP.15. 77 The various Cancun www.unfccc.int/meetings/cancun_nov_2010/items/6005.php.

Agreements

are

at:

78 See “A note on the gaps” at: www.unfccc.int/meetings/cancun_nov_2010/meeting/6266.php. 79 Cancun Agreements (2010) Decision 1/CP.16. 80 Durban Agreement (2011) Decision I/CMP.7 (UN Boc FCCC/KP/CMP/2011/10/Add.1). 81 Australian National Greenhouse Accounts Quarterly Update of Australia’s National Greenhouse Gas Inventory, March Quarter 2012 (Australian Government, Department of Climate Change and Energy Efficiency, 2 August 2012) 15. 82 Source: Department of Climate Change and Energy Efficiency “Factsheet: Australia’s emission reduction targets”, Australian Government, Department of Climate Change and Energy Efficiency, 2012. 83 Liberal Party of Australia (2011) “The Coalitions Direct Action Plan”. The Coalition’s Direct Action Plan also specifies a 5 per cent greenhouse emissions reduction target below 2000 levels by 2020. 84 For a list of all targets submitted to the www.unfccc.int/meetings/copenhagen_dec_2009/items/5264.php.

Copenhagen

Accord,

see:

85 UNFCCC (2011) “Appendix 1: Quantified economy-wide emission targets for 2020”. 86 Clean Energy Act 2011 (Cth) Pt 1 s 3. 87 Department of Environment and Climate Change (2011) “EU ETS Phase III (2013?2020)”. 88 United Nations Framework Convention on Climate Change (UNFCCC) (2011) “Appendix 1: Quantified economy-wide emission targets for 2020”. 89 European Commission (2011) “Cap”. 90 DCCEE, “Regulations”, Australian Government, Department of Climate Change and Energy Efficiency, 2012 91 Clean Energy Act 2011 (Cth) s 16.

92 Clean Energy Act 2011 (Cth) s 17. 93 Clean Energy Act 2011 (Cth) s 18. 94 Clean Energy Act 2011 (Cth) s 102.

[page 59]

Chapter 2 Registration, Measurement and Reporting Introduction [50,001] This chapter explains the requirements under the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) and regulations for registration, measurement and reporting of GHG emissions and consumption and production of energy. Registration is mandatory for: liable entities under the Clean Energy Act 2011 (Cth); entities that are potential liable entities under the Clean Energy Act 2011 (Cth); and controlling corporations of corporate groups whose members have scope 1 and scope 2 greenhouse gas emissions and consumption and production of energy that exceeds (or may exceed) designated thresholds. For other persons, registration is voluntary. The rules for registration apply (transitionally) to the fixed charge period in the carbon pricing mechanism (1 July 2012 to 30 June 2015) and for eligible financial years after 1 July 2015. An annual reporting obligation attaches to registered persons. The electronic report is due by 31 October, and must detail scope 1 and scope 2 emissions of greenhouse gases, and consumption and production of energy in accordance with the NGER Act and regulations. Significant penalties apply for failing to register and failing to correctly report.

Sources of law [50,025] Relevant primary laws referenced in this chapter are: National Greenhouse and Energy Reporting Act 2007 (Cth); National Greenhouse and Energy Reporting Regulations 2008 (Cth); National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth); and Clean Energy Act 2011 (Cth). [page 60]

Who must register? [50,050] An obligation to apply for registration with the regulator is imposed on: a “controlling corporation” (NGER Act s 12);1 a “liable entity” (NGER Act s 15A); and a person who may be a liable entity (NGER Act s 15AA).2

CONTROLLING CORPORATION [50,075] A controlling corporation is a “constitutional corporation” that does not have a “holding company” incorporated in Australia.3 By application of the relevant definitions, a controlling corporation is defined to be: the Australian incorporated holding company at the top of a corporate hierarchy of companies incorporated in Australia (or overseas); or a foreign company if it operates in Australia through a branch. A constitutional corporation is: a foreign company; or a trading or financial company formed within Australia.4

A holding company is the parent of a “subsidiary”.5 “Subsidiary” has the same meaning as in s 46 of the Corporations Act 2001 (Cth).6 In s 46 of the Corporations Act 2001 (Cth), a company (the first body) is subsidiary of another company (the other body)— if, and only if: (a) the other body: (i)

controls the composition of the first body’s board; or

(ii) is in a position to cast, or control the casting of, more than one half of the maximum number of votes that might be cast at a general meeting of the first body; or (iii) holds more than one half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or (b) the first body is a subsidiary of a subsidiary of the other body.

The adoption of the standard Corporations Act 2001 (Cth) definition of “subsidiary” means that a company cannot be a subsidiary of a shareholder where the shareholder owns and controls no more than 50 per cent of the shares or votes in the company. [page 61] “Controlling corporation” registration is permitted for: an Australian incorporated company (ie a corporation that is not a member of a group of companies); a foreign company operating in Australia through a branch (ie directly without any controlling shareholding in Australian companies); the Australian incorporated holding company of a group of companies: — if the ultimate holding company for the group of companies is the Australian incorporated company; or — if the ultimate holding company for the group of companies is a foreign incorporated company (ie the Australian incorporated holding company is the head company in Australia, owned by the foreign parent company). The concepts of holding company and subsidiary are also important for the definition of a “controlling corporation’s group”.

CONTROLLING CORPORATION’S GROUP

[50,100] The definition of controlling corporation is supported by the definition of a “controlling corporation’s group”.7 The concept of the controlling corporation’s group is important because emissions and energy thresholds apply to a group for the purposes of registration and reporting by a controlling corporation. The group includes: the controlling corporation; and its subsidiaries. The controlling corporation’s group may consist of the controlling corporation alone8 If the controlling corporation is not incorporated in Australia, then its subsidiaries are not included in the controlling corporation’s group.9 From 1 July 2012, a controlling corporation’s group will not include a joint venture or partnership.

LIABLE ENTITY [50,125] A person who is or was a liable entity under the Clean Energy Act 2011 (Cth) for the current eligible financial year must apply to be registered with the regulator.10 “Person” means any of the following: (a) an individual; (b) a body corporate; (c) a trust; (d) a corporation sole; (e) a body politic; or (f)

a local governing body.11 [page 62]

However, separate registration by a liable entity is not required if the person is already registered under the NGER Act at the end of a current eligible financial year.12

PERSON WHO MAY REASONABLY BE

EXPECTED TO BE LIABLE [50,150] In the fixed charge years from 1 July 2012 to 30 June 2015, registration is mandatory for a person who, as at 1 April in the current fixed charge year: is a liable entity for a current fixed charge year; or reasonably may be expected to be a liable entity for a current fixed charge year; and has or reasonably may be expected to have an interim emissions number for the current fixed charge year.13

Tests for registration [50,175] A controlling corporation’s group must in a financial year meet one or more thresholds specified in s 13 of the NGER Act before the controlling corporation is required to register. The threshold tests are discussed in [50,200]. A liable entity or a person who is a potential liable entity must register on account of that status, as outlined in [50,125] and [50,150]. A liable entity or a person who is a potential liable entity may also be a controlling corporation. Save for eliminating the requirement to re-register, the NGER Act does not provide any mechanism for registration under one section of the NGER Act to be moved to another classification under another section.

Emissions threshold for registration by controlling corporation [50,200] Registration under s 12 of the NGER Act requires the members of the controlling corporation group to relevantly exceed the threshold of emissions, or consumption or production of energy under s 13, before the obligation to register becomes mandatory. The s 13 threshold applies: based on “control days” and is prorated accordingly; and

at the level of: — controlling corporation group; and — facility. The s 13 threshold tests for a controlling corporation of a controlling corporation’s group are a fourfold test: three group tests and a facility test. [page 63]

GROUP THRESHOLD FOR EMISSIONS AND ENERGY [50,225] A threefold “group” threshold test applies: the s 12 obligation to register arises if a controlling corporation’s group meets one or more of the following thresholds for the whole of the eligible financial year: see Table 50,225-1:14 Table 50,225-1 — NGER Act s 13 Thresholds for controlling corporation groups Test Threshold 1. Greenhouse gases emitted from the operation of facilities under the Carbon dioxide equivalence: operational control of entities that are 50,000 tonnes members of the group. 2. Energy produced from the operation of facilities under the 200 terajoules operational control of entities that are members of the group. 3. Energy consumed from the operation of facilities under the 200 terajoules operational control of entities that are members of the group. These tests require the aggregation across all facilities under the operational control of all the entities making up the corporate group of all: scope 1 and scope 2 emissions of GHG; and energy production; and energy consumption.

The “grouping” threshold test operates independently of the “facility” threshold test. The grouping threshold test ignores thresholds for any facility within the group. The group threshold tests are a bright-line test for the purposes of registration only. The concept of “facility” is discussed in [50,600]. The concept of “operational control” is discussed in [50,775].

THRESHOLD FOR FACILITY [50,250] Registration by a controlling corporation is also mandatory if any entity within the controlling corporation’s group has operational control of a facility which during the year causes:15 emission of 25,000 tonnes CO2-e of GHG or more; production of energy of 100 terajoules or more; or consumption of energy of 100 terajoules or more. [page 64]

PRORATED THRESHOLD [50,275] The s 13 threshold is prorated for the number of days of control of a facility by a controlling corporation or entity within the controlling corporation’s group: NGER Act s 13(2).

EXCEPTIONS FROM THRESHOLD [50,300] The controlling corporation’s group excludes facilities in respect of which there is a reporting transfer certificate or a financial control liability transfer certificate held by another person (based on the days held by the other person).16

Emissions threshold for registration by liable entity

[50,325] Some tests for determining whether a person is a liable entity under the Clean Energy Act 2011 (Cth) require the person to exceed a threshold for scope 1 emission of covered GHG. However, if a person is or was a liable entity under the Clean Energy Act 2011 (Cth) then application for registration under s 15A of the NGER Act is mandatory, unless already registered.

Emissions threshold for registration by person who is a potential liable entity [50,350] A person who is a potential liable entity must register if the entity will have or reasonably be expected to have an “interim emissions number”17 for the current fixed charge year.18 The concept of interim emissions number is discussed in [70,350].

Emissions [50,375] There is a distinction between “emissions of greenhouse gases” under the NGER Act and “covered emissions” upon which liability is referenced under the Clean Energy Act 2011 (Cth). The NGER Act requires the measurement and reporting of scope 1 and scope 2 emissions, whereas liability for direct emitters under the Clean Energy Act 2011 (Cth) is calculated based only on a subset of scope 1 emissions from covered facilities released into the atmosphere in Australia. [page 65]

EMISSIONS OF GHG [50,400] The NGER Act defines “emission of greenhouse gas” as a scope 1 and scope 2 emission of greenhouse gas. The meaning of “greenhouse gas” is discussed in [50,450]. Scope 1 emission of GHG and scope 2 emission of GHG are defined in s 10(a) and (aa) of the NGER Act to have the meaning specified in regulations.

In the National Greenhouse and Energy Reporting Regulations 2008 (Cth) (NGER Reporting Regulations) “emissions of greenhouse gas” by definition has the meaning given by regs 2.23 and 2.24. Regulation 2.23 defines scope 1 emission of GHG, in relation to a facility, to mean: the release of greenhouse gas into the atmosphere as a direct result of an activity or series of activities (including ancillary activities) that constitute the facility

The meaning of “facility” and activities that constitute the facility are discussed in [50,600]. The meanings of “release” and “atmosphere” are discussed in [50,475]. Regulation 2.24 defines scope 2 emission of GHG, in relation to a facility, to mean: the release of greenhouse gas into the atmosphere as a direct result of one or more activities that generate electricity, heating, cooling or steam that is consumed by the facility but that do not form part of the facility

Regulations 2.23 and 2.24 broadly mirror the GHG Protocol’s internationally accepted meaning of scope 1, 2 and 3 emissions.19 The GHG Protocol classifies scope 1, 2 and 3 emissions as follows: Scope 1 emissions: Direct GHG emissions (excluding emissions not covered by the Kyoto Protocol) occurring from sources that are owned or controlled by the entity, and emissions from chemical production in owned or controlled process equipment. Excludes direct CO2 emissions from the combustion of biomass. Scope 2 emissions: Electricity indirect GHG emissions from the generation of purchased electricity consumed by the entity and physically occurring at the facility where electricity is generated. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organisational boundary of the entity. Scope 3 emissions: Other indirect GHG emissions (an optional reporting category allowing for the treatment of all other indirect emissions that are a consequence of the activities of the entity) that occur from sources not owned or controlled by the entity. Some examples of scope 3 activities are extraction and production of purchased materials; transportation of purchased fuels; and use of sold products and services.

The correct classification of emissions will be important, as noted, because it affects liability. The classification also reveals the intersection of the carbon pricing mechanism with state-based regulatory regimes, for example, state planning authorities and environmental regulators. Since the judgment of Pain J in the case of Gray v Minister for Planning (2006) 152 LGERA 258; [2006] NSWLEC 720; BC200609683, environmental impact assessment under state planning laws have generally considered scope 1, 2 and 3 emissions from proposed projects. [page 66]

However, in a series of judgments in Gray v Macquarie Generation [2010] NSWLEC 34; BC201001539; Gray v Macquarie Generation (No 2) [2010] NSWLEC 82; BC201003551; Gray v Macquarie Generation (No 3) [2011] NSWLEC 3; BC201101002, the right of the holder of a license to carry on the business operation of power generation has been confirmed to implicitly authorise the release of greenhouse gases (scope 1 emissions) as an incident of the method of generation of electricity in accordance with the license. The importance of scope 1 emissions within the Clean Energy Act 2011 (Cth) has been further recognised by Justice Pain in Hunter Environmental Lobby Inc v Minister for Planning [2011] NSWLEC 221; BC201109441 and Hunter Environmental Lobby Inc v Minister for Planning (No 2) [2012] NSWLEC 40; BC201202067, where her Honour accepted that compliance with the Clean Energy Act 2011 (Cth) would be an adequate response to the issue of scope 1 emissions from the project. In this regard, Pain J said: I am satisfied that the scheme as represented in the CE Act, together with related legislation (Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth); NGER Act 2007 (Cth)), meets at a practical level the purpose of imposing a condition requiring the offsetting of Scope 1 GHG emissions: at [18].

The Hunter Environmental Lobby case concerned the proposed expansion of the Ulan coal mine in the Hunter Valley in NSW. The applicants had objected to the issue of planning approval to Ulan Coal Mines Ltd and sought a variation to the approval to add a condition that the company should acquire offsets credits to mitigate its scope 1 and scope 2 emissions associated with the project. This case was the first opportunity to consider whether a liability for scope 1 emissions under the Clean Energy Act 2011 (Cth) was a relevant consideration in the formulation of conditions (if any) that might attach to the issue of a planning permit for the expansion of mining activities. The conclusion of Pain J, if followed, would remove the regulation of scope 1 emissions out of the jurisdiction of the states.20

COVERED EMISSIONS [50,425] The government stated in “Securing Australia’s Clean Energy Future: The Australian Government’s Climate Change Plan” that liability for GHG emissions under the Clean Energy Act 2011 (Cth) is to be limited to the following:21 emissions from the stationary energy sector; fugitive emissions; industrial process emissions; and emissions from non-legacy waste.

The policy is intended to be reflected in the concept of “covered emissions”used in s 30 (and also in s 31) of the Clean Energy Act 2011 (Cth).22 [page 67] Section 30(2)–(12) of the Clean Energy Act 2011 (Cth) provide for emissions from the operation of a facility that are not covered emissions: see Table 50,425-1. However, the list of emissions excluded from coverage by s 30(2)–(12) of the Clean Energy Act 2011 (Cth) cannot be assumed to be a non-exclusive list. Table 50,425-1 — Emissions excluded from coverage under the Clean Energy Act 2011 emissions attributable to the combustion of: — liquid petroleum fuel; — liquefied petroleum gas (LPG); — liquefied natural gas (LNG); — compressed natural gas (CNG) that has been subject to duty under the Customs Tariff Act 1995 (Cth) or the Excise Tariff Act 1921 (Cth)23 (other than LPG, LNG and CNG brought within the Clean Energy Act 2011 (Cth) through the Opt-in Scheme). emissions attributable to the combustion of: — biomass; — biofuel; — biogas.24 emissions of methane from the digestive tract of livestock.25 emissions of methane or nitrous oxide from the decomposition of livestock urine or dung.26 emissions of methane from rice fields or rice plants.27 emissions of methane or nitrous oxide form the burning of savannas or grasslands.28 emissions of methane or nitrous oxide from the burning of: — crop stubble in fields;

— crop residues in fields; — sugar cane before harvest.29 emissions of carbon dioxide, methane or nitrous oxide from soil (unless the emissions are attributable to the operation of a landfill facility).30 emissions (not covered above) due to changes in the levels of carbon sequestered in living biomass, dead organic matter or soil attributable to land use, changes in land use (including land clearing) and forestry activities (unless the emissions are attributable to the operation of a landfill facility).31 [page 68] fugitive emissions from the operation of a decommissioned underground mine.32 legacy and exempt landfill emissions from the operation of a landfill.33 solid waste emissions from landfill facilities closed after 1 July 2012.34 emissions of sulphur hexafluoride, or a hydrofluorocarbon or a perfluorocarbon (unless attributable to aluminium production).35 Covered emissions from the operation of a facility are scope 1 emission of GHG meeting all of the following tests: (a) the GHG must be “released into the atmosphere as a direct result of the operations of a facility”; and (b) the GHG must be “released in Australia”; and (c) the minister has determined under s 10(3) of the NGER Act the methods (or the criteria for methods) for measuring scope 1 emissions.36 Covered emissions from the operation of a facility are to be measured using the methods determined under s 10(3) of the NGER Act (or using methods which meet the criteria determined) “where the use of those methods satisfies any conditions specified in the determination under that subsection.”37 Emissions from non-covered sectors and activities, such as emissions from commercial buildings, holiday resorts, and explosives, are not covered by the Clean Energy Act 2011 (Cth). The approach of not defining covered emissions exhaustively in the Clean

Energy Act 2011 (Cth), relies on subordinate regulations to complete the definition of liability (including regulations made under another act (the NGER Act)). The Clean Energy (Consequential Amendments) Act 2011 (Cth)38 amends s 10 of the NGER Act, as noted above, to provide for scope 1 and scope 2 emissions to be defined in regulations and for different methods or criteria for methods to be used to measure scope 1 emissions from different sources. This approach differed from the approach adopted in the Carbon Pollution Reduction Scheme Bill 2010 (Cth) and the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2010 (Cth). Item 159 of the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2010 had provided for new subss 2A and 2B to be inserted in s 10 of the NGER Act as follows: (2A) The regulations must: (a) declare that specified scope 1 emissions of greenhouse gas are covered by the carbon pollution reduction scheme; and (b) declare that the remaining scope 1 emissions of greenhouse gas are not covered by the carbon pollution reduction scheme. (2B) Regulations made for the purposes of paragraph (2A)(a) must not declare that [certain specified emissions are] scope 1 emission[s] covered by the carbon pollution reduction scheme.

[page 69] During the consultation process on the Clean Energy Bill 2011 (Cth), the Law Council of Australia (LCA) submitted that a definitive list of excluded emissions should be included in s 30. The LCA does not support the use of regulations to define liability.39 Emissions will not be covered if (despite not being included within one of the express exclusions in s 30) no provision is made for their measurement under a measurement determination.

GREENHOUSE GASES [50,450] The biosphere is comprised of nitrogen (N) (78.08 per cent by volume approximately), oxygen (O2) (20.95 per cent by volume approximately) and all other gases (one per cent by volume approximately, including water vapour, CO2, 0.038 per cent by volume approximately, and hydrogen and argon). Though present in the biosphere in different proportions, they are in flux. The foundational elements, oxygen, nitrogen, hydrogen and carbon in the biosphere, are vital to all life on this planet. From 1 July 2012, in Australia, 24 gases will be defined as GHG, although

the regulator may prescribe additional gases.40 As noted in [32,450] the Kyoto Protocol identifies a bundle of six GHG.41 GHGs are self-evidently a legislative construct. GHGs as defined42 excludes: gases that deplete the ozone in the upper atmosphere;43 sulphur dioxide (SO2); oxides of nitrogen (NOx); and all other air pollutants registered on the National Pollutant Inventory (NPI).44 GHGs also exclude water vapour. In the Clean Energy Act 2011 (Cth) “greenhouse gas” has the same meaning as in the NGER Act. Greenhouse gas is defined in s 7 of the NGER Act to have the meaning given in s 7A, and this definition applies for both the NGER Act and the Clean Energy Act 2011 (Cth). GHG are: (a) carbon dioxide (CO2); (b) methane (CM4); (c) nitrous oxide (N2O); (d) sulfur hexafluoride (SF6); (e) a hydrofluorocarbon (HFC) of a kind specified in the table in subsection (2);

[page 70] (f)

a perfluorocarbon (PFC) of a kind specified in the table in subsection (3); and

(g) a prescribed gas.

Hydrofluorocarbons in Table 1 in NGER Act s 7A(2) are set out in Table 50,450-1:

1

Table 50,450-1 — Hydrofluorocarbons Hydrofluorocarbon Chemical formula CHF3 HFC-23

2

HFC-32

CH2F2

3

HFC-41

CH3F

Item

4

HFC-43-10mee

C5H2F10

5

HFC-125

C2HF5

6

HFC-134

C2H2F4 (CHF2CHF2)

7

HFC-134a

C2H2F4 (CH2FCF3)

8

HFC-143

C2H3F3 (CHF2CH2F)

9

HFC-143a

C2H3F3 (CF3CH3)

10

HFC-152a

C2H4F2 (CH3CHF2)

11

HFC-227ea

C3HF7

12

HFC-236fa

C3H2F6

13

HFC-245ca

C3H3F5

Perfluorocarbons in Table 2 in NGER Act s 7A(3) are set out in Table 50,450-2:

3

Table 50,450-2 — Perfluorocarbons Hydrofluorocarbon Chemical formula Perfluoromethane CF4 (tetrafluoromethane) Perfluoroethane C2F6 (hexafluoroethane) C3F8 Perfluoropropane

4

Perfluorobutane

C4F10

5

Perfluorocyclobutane

c-C4F8

6

Perfluoropentane

C5F12

7

Perfluorohexane

C6F14

Item 1 2

GHG are made equivalent, called carbon dioxide equivalence (CO2-e) based upon their global warming potential (GWP). These concepts are explained in [51,525].

RELEASE … INTO THE ATMOSPHERE [50,475] Each definition of scope 1 emission and scope 2 emission relevantly requires there to be a “release” of the GHG “into the atmosphere” “as a direct result” for:

scope 1 emissions — of an activity or series of activities (including ancillary activities) that constitute the facility; or [page 71] scope 2 emissions — of one or more activities that generate electricity, heating, cooling or steam that is consumed by the facility but that do not form part of the facility. The key concepts are analysed below.

Atmosphere [50,500] The expression “atmosphere” is not defined in the Acts or Regulations. The Macquarie Dictionary defines “atmosphere” as “the gaseous fluid surrounding the earth; the air.” Precisely, earth’s atmosphere is the layer of gases surrounding earth retained by earth’s gravity. The most immediate and lowest layer of the earth’s atmosphere is the troposphere, containing approximately threequarters of the atmosphere (from the earth’s surface to approximately seven kilometres at the poles and 17 kilometres at the equator) and the next layer is the stratosphere (up to 50 kilometres), containing the ozone layer. Further out is the mesosphere, ionosphere (known also as the thermosphere (containing the Karman line boundary to outer space at 100 kilometres)), the exosphere and the magnetosphere, and further beyond is the opaque photosphere and the start of stellar atmosphere. In order to give effect to the objects of the Clean Energy Act 2011 (Cth), a wide interpretation of what comprises the atmosphere will be required. However, in order to prove the direct connection between the activity that constitutes the facility and the release, it would be prudent to measure the actual releases of GHG in the immediate proximity of the facility. In the absence of measurement data, the design of the Acts is to impose a statutory estimation of emissions upon a liable entity, thereby implicitly assuming the existence of the “statutory” release. The Clean Energy Act 2011 (Cth) ignores that the earth’s surface and its adjacent atmosphere (called the biosphere) are naturally and beneficially heated through the greenhouse effect. The greenhouse effect means that earth’s: global mean climate is determined by incoming energy from the Sun and by the properties of the

Earth and its atmosphere, namely the reflection, absorption and emission of energy within the atmosphere and at the surface.45

As radiation (energy) from the sun passes through the atmosphere approximately 26 per cent of its available energy is reflected or scattered back to space by clouds, gases and other atmospheric particles, and approximately 19 per cent is absorbed by them. Of the remaining 55 per cent of the solar energy a further four per cent approximately is reflected from the surface back to space, so that, on average, about 51 per cent of the sun’s radiation reaches the surface. The sun’s energy is naturally used in a number of processes, including the heating of the ground surface, the melting of ice and snow and the evaporation of water, and plant photosynthesis. The heating of the ground by sunlight causes the earth’s surface to become a radiator of energy in the long wave band (infrared radiation). This emission of energy is generally directed to space. However, only a small portion of this energy actually makes [page 72] it back to space. The majority of the outgoing infrared radiation is absorbed within the atmosphere (hence, the greenhouse effect) by water vapour and the greenhouse gases, especially carbon dioxide,46 and methane. Greenhouse gases are therefore important. They are uniformly mixed, accumulative pollutants,47 which are both naturally occurring and man-made. Absorption of long wave radiation by GHG within the atmosphere causes additional heat energy to be added to the earth’s atmospheric system, starting a new cycle. The now warmer atmospheric GHG molecules begin radiating long wave energy in multiple directions. Over 90 per cent of this emission of long wave energy is directed back to the earth’s surface where it once again is absorbed by the surface. The warming of the ground by the long wave radiation causes the ground surface to once again radiate, repeating the cycle, again and again. Over the history of the earth, scientists have established that these cycles have varied, and earth’s climate has been affected accordingly.48 The Intergovernmental Panel on Climate Change (IPCC) notes that: Changes have occurred in several aspects of the atmosphere and surface that alter the global energy budget of the Earth and can therefore cause the climate to change. Among these are increases in greenhouse gas concentrations that act primarily to increase the atmospheric absorption of outgoing radiation, and increases in aerosols (microscopic airborne particles or droplets) that act to reflect and absorb incoming solar radiation and change cloud radiative properties. Such changes cause a radiative forcing of the climate system.49

The concern of contemporary climatologists is that the anthropogenic contribution of GHG to the atmosphere may alter the relatively stable cycle patterns until (in theory) no more absorption will be available (called

perturbing the radiative balance). In summary, because GHG are able to change the energy balance of earth via absorption/desorption, the amount of heat energy added to the atmosphere by the greenhouse effect is controlled, and thus scientists predict, adversely enhanced by the concentration of GHG in the earth’s atmosphere (hence, the “enhanced greenhouse effect”). Nordhaus (2008) warns: These warming effects are amplified through feedback effects in the atmosphere, oceans, and land. The resulting climate changes, such as changes in temperature extremes, precipitation patterns, storm location and frequency, snowpacks, river runoff and water availability, and ice sheets, may have profound impacts on biological and human activities that are sensitive to the climate.50

[page 73] IPCC models predict that out of balance cycles may trigger climate change tipping points potentially harmful to human life. Avoiding this trigger (being a rise in global mean surface temperature of no more than 2°C (degrees centigrade) above pre-industrial levels and 450 parts per million (ppm) of GHG concentration in the atmosphere)51 is listed in s 3(b) as one of the objects of the Clean Energy Act 2011 (Cth). The aim of the Clean Energy Act 2011 (Cth) is not to eliminate GHG from the atmosphere.52 However, any positive benefits from the man-made release of GHG53 will not stop or offset liability under the Clean Energy Act 2011 (Cth). The aim of the Clean Energy Act 2011 (Cth) is to set up the mechanism to deal with climate change by encouraging the use of clean energy.

Release [50,525] The expression “release” is not defined in the Acts or Regulations. In the Macquarie Dictionary, to “release” means to “free from confinement, …; let go.” In its context in the definitions of scope 1 and scope 2 emissions, “release” is a neutral, intransitive verb. Whilst the release must comprise GHG and be the direct result of activity that comprises the facility, the expression does not imply that the release must be done with intention or by a liable entity. The “release” also does not imply that ownership is required of the air54 or the GHG.55 The capture of GHG emissions for permanent storage should not result in a

release of GHG emissions.56

DIRECT RESULT [50,550] The release of GHG into the atmosphere must be as a “direct result” of an activity or series of activities (including ancillary activities) that constitute the facility (for scope 1 emissions) or as a “direct result” of one or more activities that generate electricity, heating, cooling or steam that is consumed by the facility but that do not form part of the facility (for scope 2 emissions). [page 74] The words are concerned with factual causation.57 Paraphrased, did the activity or activities directly cause the release of the emissions? As an example of how the “direct result” test might operate, let us consider the fatal explosion in 1998 at the Esso Longford Gas Plant located in Victoria. The Longford Gas Plant complex consists of three gas processing plants and one crude oil stabilisation plant. Assume that these are facilities, and emissions from these facilities are covered emissions. The facts of this tragedy — extracted from the Royal Commission into the accident headed by former High Court Judge, Sir Darryl Dawson AC KBE CB58 — revealed that during the morning of Friday 25 September 1998, a pump supplying heated lean oil to heat exchanger GP905 in Gas Plant No 1 went offline for four hours, due to an increase in flow from the Marlin Gas Field, causing an overflow of condensate in the absorber. Temperatures throughout GP905 normally ranged from 60°C to 230°C (140°F to 446°F). Investigators estimated that, due to the failure of the lean oil pump, parts of GP905 experienced temperatures as low as -48°C (-54°F). Ice had formed on the unit, and it was decided to resume pumping heated lean oil in to thaw it. When the lean oil pump resumed operation, it pumped oil into the heat exchanger at 230°C (446°F). The temperature differential caused a brittle fracture in the GP905 exchanger at 12.26pm. It was estimated that approximately 10 metric tonnes of hydrocarbon vapour were immediately vented from the rupture. A vapour cloud formed and drifted downwind. When it reached a set of heaters 170 metres away, it ignited. This caused a burning vapour cloud. The flame front burnt its way through the vapour cloud, without causing an explosion. However, when the flame front reached the rupture in the heat exchanger, a fierce jet fire developed that lasted for two days. The rupture of GP905 also led to other

releases and minor fires. Fault is absent in the expression “direct result.” Nor does the expression exclude accidental releases. However, it is probably necessary when answering the causation question to determine whether or not the plant was operating at the time of the release — it would appear that “inactivity” is not within scope. In the context of negligence legislation, the factual causation test is determined by the “but for” test.59 Applying a “but for” test to the facts in the Esso Longford Gas Plant explosion would directly link the operation of the facility to the release of emissions on 25 September 1998 and for the 2 days thereafter. But for the activity of the facility, there would be no release of emissions. Thus, even though the explosion was an accident, the release of emissions would be counted.

TERRITORIAL NEXUS [50,575] Sections 9–10 of the Clean Energy Act 2011 (Cth) and ss 6–6C of the NGER Act provide in similar terms for the extension of the Acts to external territories and Australia’s exclusive economic zone. The Clean Energy Act 2011 (Cth) extends to the continental shelf and the Joint [page 75] Petroleum Development Area. Both the Clean Energy Act 2011 (Cth) and the NGER Act do not apply to the extent that their application would be inconsistent with the exercise of rights of foreign ships.60 Australia is defined in s 5 of the Clean Energy Act 2011 (Cth) when used in a geographical sense: for the purposes of Pt 3 (liable entities) and Pt 7 (Jobs and Competitiveness Program), Australia includes the external territories, the exclusive economic zone, the continental shelf and the Joint Petroleum Development Area; in all other cases, it includes the external territories. Section 15B of the Acts Interpretation Act 1901 (Cth) provides that a reference in an Act to Australia, or to the Commonwealth, is taken to include a reference to the coastal sea of Australia and the Act is taken to have effect

in, and in relation to, the coastal sea of Australia as if that coastal sea were part of Australia. The section also provides that a reference in an act to all or any of the external territories (whether or not one or more particular Territories are referred to) is taken to include a reference to the coastal sea of any territory to which the reference relates, and an Act that is in force in an external territory is taken to have effect in, and in relation to, the coastal sea of the territory as if that coastal sea were part of the territory. The coastal sea is:61 (a) in relation to Australia, (i)

the territorial sea of Australia and

(ii) the sea on the landward side of the territorial sea of Australia and not within the limits of a State or internal Territory and includes the airspace over, and the sea-bed and subsoil beneath, any such sea; (b) in relation to an external territory, means: (i)

the territorial sea adjacent to the territory; and

(ii) the sea on the landward side of the territorial sea adjacent to the Territory and not within the limits of the Territory; and includes the airspace over, and the sea-bed and subsoil beneath, any such sea.

The implication is that the greenhouse gas emissions within the reach of the NGER Act and the Clean Energy Act 2011 (Cth) are to be limited to Australia and its territories. In contrast, the s 13 threshold tests for controlling corporation groups under the NGER Act are not limited geographically. Section 13 of the NGER Act should be read subject to s 15B of the Acts Interpretation Act 1901 (Cth), so that the facilities from which emissions are released or energy is produced or consumed and that count towards the thresholds for registration are located only in Australia. The Clean Energy Act 2011 (Cth) specifically provides that in order for an emission of GHG to be covered emissions within the scope of the Clean Energy Act 2011 (Cth), the emissions must be released in Australia.62

FACILITY [50,600] The NGER Act defines a “facility” as an activity or series of activities that involve: production of GHG emissions; or [page 76] production of energy; or consumption of energy;

and that are: a single undertaking at a single site (or deemed to occur at a single site) meeting requirements stipulated in regulations; or a single enterprise meeting requirements stipulated in regulations; or declared by the regulator to be a facility.63 To an extent, the definition of facility is circular. The concept of facility has no fixed meaning, for whatever “activity” produces greenhouse gases, or consumes or produces energy, will be a facility. An “activity” is defined as including: (a) a condition; or (b) a circumstance; or (c) a state of affairs; relating to: (d) solid waste; or (e) carbon capture and storage; or (f)

other storage; or

(g) stockpiling; or (h) any other matter or thing.64

Thus, facilities can be manufacturing plants, mine sites, mineral, chemical and element processing plants, office buildings, high-rise residential towers, resorts, hospitals, computer servers, electricity power stations, shopping centres, universities, etc.

NGER REPORTING REGULATIONS REQUIREMENTS FOR FACILITY [50,625] The expression “facilities of the person” is defined in reg 1.03 of the NGER Reporting Regulations to mean a facility about which the person is required to report under Pts 3, 3A, 3D, 3E or 3F of the NGER Act. Regulations 2.16–2.20 of the NGER Reporting Regulations specify the circumstances in which an activity, or a series of activities, will form part of a single undertaking or enterprise.

Regulation 2.16 Activities at a single site [50,650] Regulation 2.16(1) provides the base case for activities that form

part of a single undertaking or enterprise, as follows: (1) Activities that together produce 1 or more products or services (the primary production process) will form part of a single undertaking or enterprise if the activities occur at a single site.

“Single site” is defined in reg 1.03 to mean “a single physical area that can include a series of geographical locations in close proximity to one another.” Whether there is a single site for an activity or activities will be a question of fact in [page 77] each case. Close proximity does not require the locations to be adjacent. The Explanatory Statement accompanying the release of the NGER Reporting Regulations uses the following example to illustrate:65 For example, in an urban area three factories spread across a city with three separate addresses would be three different sites. However, in a non-urban setting close proximity could imply longer distances. For example, a series of mines within a single area (ie series of physical locations) that form a primary production process may be kilometres apart. Although these activities are kilometres apart, if they are on the same or adjoining tenements or are the only activities occurring in that area they may be considered to be a single site. In most instances each site will have its own street address. In addition, in a small number of circumstances, such as offshore activities, an address may not exist. In these cases the boundary of the activities would generally be equated to a location such as a group of platforms or exploration site.

Activities associated with stockpiles of inputs and outputs and the means of their conveyance may well be within a single physical area even if stored in a geographical location away from processing or manufacturing plant, if they are in close proximity. However, it is more difficult to say of activities at a port facility located some many kilometres away from a mine site, for example, that those services form part of the single site that is the mine. Regulation 2.16(2) deals with activities that produce by-products: (2) If there is another activity or series of activities (the other production process) that: (a) is under the overall control of the corporation that has overall control of the primary production process; and (b) produces 1 or more other products or services for the primary production process (which are not used solely in the primary production process); then as long as that other production process occurs at the same site as the primary production process, all of the activities in the primary production process and the other production process will form part of a single undertaking or enterprise.

“Overall control” is defined in reg 1.03 of the NGER Reporting Regulations to have the meaning given in reg 2.14. In reg 2.14, “overall control” replicates ss 11–11A of the NGER Act. Regulation 2.14 provides: (1) A corporation has overall control in relation to an activity or series of activities (including ancillary activities) if the corporation has the authority to introduce and implement any or all of the following for the activity or series of activities:

(a) operating policies; (b) health and safety policies; (c) environmental policies. (2) If more than 1 corporation could satisfy subregulation (1) at any 1 time, then the corporation that has the greatest authority to introduce and implement the policies mentioned in paragraphs (1) (a) and (c) is taken, for the purposes of these Regulations, to have overall control in relation to the activity or series of activities (including ancillary activities).

Regulation 2.17 Listed activities at a different site [50,675] Listed activities are defined in reg 1.03 of the NGER Reporting Regulations as any one of the following: (a) record keeping; (b) communication;

[page 78] (c) purchasing materials or equipment; (d) managing the employment, training and payment of employees; (e) storage (including warehousing) of materials or equipment; (f)

transport of persons or goods of a kind not covered by regulation 2.19;

(g) sales promotion; (h) cleaning and maintaining buildings and other structures; (i)

maintenance of equipment;

(j)

security and surveillance.

A listed activity undertaken at a site different to an activity or a series of activities undertaken by a person will form part of a single undertaking or enterprise of the person if: the listed activity and series of activities is under the overall control of the person; the person identifies a listed activity as part of a series of activities and identifies the listed activity to be ancillary to an activity in that series; the listed activity is undertaken within the same state or territory as the series of activities; and the person records the decision to identify that listed activity. If no decision about a listed activity is recorded, then the listed activity itself will form part of a single undertaking or enterprise.

Regulation 2.18 Listed activity for more than 1 single undertaking or enterprise [50,700] Regulation 2.18 of the NGER Reporting Regulations replicates reg 2.17 in the case of a listed activity in more than one series of activities undertaken by a person. If the listed activity is identified as ancillary to an activity in more than one of the series of activities, then the listed activity will form part of each of the single undertakings or enterprises comprising the relevant series of activities in the proportions specified in the decision recording the identification. If the listed activity is identified as ancillary to an activity in one only of the series of activities, then the listed activity will form part of a single undertaking or enterprise with that series of activities. If no decision is recorded, then the listed activity itself will form part of a single undertaking or enterprise.

Regulation 2.19 Transport sector activities [50,725] Regulation 2.19 of the NGER Reporting Regulations applies to principal activity in the following industry sectors: (a) Air and space transport (490); (b) Postal and courier pick-up and delivery services (510); (c) Rail freight transport (471); (d) Rail passenger transport (472); (e) Road freight transport (461); (f)

Road passenger transport (462);

(g) Scenic and sightseeing transport (501); (h) Waste collection services (291); (i)

Water freight transport (481);

(j)

Water passenger transport (482).

[page 79] If an activity that is the principal activity in a series of activities is attributable to one of these industry sectors and attributable to a single state or territory, then all of the activities will form part of the same single undertaking or enterprise if the activity and any ancillary activities to it are under the overall control of the same person. Principal activity is defined in reg 2.19(4) of the NGER Reporting Regulations as activity in the series of activities that:

(a) results in the production of a product or service that is produced for sale on the market; and (b) produces the most value for the series out of any activities in the series.

An activity is attributable to a single state or territory if fuel to be consumed in carrying out the activity is purchased in the state or territory (reg 2.19(2)).

Regulation 2.20 Electricity, gas, water and sewerage supply and telecommunications services [50,750] Regulation 2.20 of the NGER Reporting Regulations applies to activity in the following industry sectors: (a) Electricity transmission (262); (b) Electricity distribution (263); (c) Gas supply (270); (d) Water supply, sewerage and drainage services (281); (e) Telecommunications services (580).

If an activity in a series of activities is in one of these industry sectors, then the activity and any ancillary activities to it will form part of the same single undertaking or enterprise if they are under the overall control of the same person.

INDUSTRY SECTOR [50,775] “Industry sector” means an ANZSIC industry classification and code listed in Sch 2 to the NGER Reporting Regulations.66 The ANZSIC codes are reproduced in the Directory. Regulation 2.22 of the NGER Reporting Regulations sets out the circumstances in which activities will be attributable to the same industry sector as an identified principal activity. As a general rule, if all activities form part of a single undertaking or enterprise, then they are attributable to the industry sector applicable to the principal activity for the undertaking or enterprise, as identified (and recorded) by the person with overall control. However, if a single undertaking or enterprise involves construction of infrastructure for another activity being undertaken in the future, and both the infrastructure and future activity are under the same overall control, then, all of the activities that form part of the single undertaking or enterprise are

attributable to the same particular industry sector as the future activity.

Operational control [50,800] “Operational control” is defined in ss 11, 11A, 11B and 11C of the NGER Act. Only one person can have operational control over a facility at any one time. [page 80] A person has operational control over a facility if the person has the authority to introduce and implement any or all of the following: operating policies; health and safety policies; environmental policies, and meets requirements stipulated in the Regulations,67 unless the regulator declares a particular person to have operational control of the facility.68 The concept of overall control in the NGER Reporting Regulations uses similar language.69

TIE-BREAKER TESTS FOR OPERATIONAL CONTROL [50,825] Tie-breaker tests for operational control commence 1 July 2012. If two or more persons could satisfy the general test in relation to a facility for an eligible financial year (or part thereof) but one of the persons has the greatest authority to introduce and implement operating policies and environmental policies throughout the eligible financial year, then, provided the regulator has not made a determination of operational control, the person with the greatest authority to introduce and implement operating policies and environmental policies will be deemed to have operational control over the facility throughout the period.70

RULES FOR JOINT VENTURES [50,850] A “joint venture” is defined as “an unincorporated enterprise

carried on by 2 or more persons in common otherwise than in partnership.”71 The liability rules for joint ventures (Clean Energy Act 2011 (Cth) Pt 3, Div 5) are discussed in [73,250]. Section 11B of the NGER Act provides tie-breaker rules applicable to joint ventures, to be read in conjunction with the liability rules for joint ventures. The aim of the tie-breaker rules is to essentially force all persons with shared control of a facility to nominate one person to have operational control, or failing such nomination, to fasten operational control on all the persons. The tie-breaker nomination operates if a facility passes the “eligible nomination test” at a particular time. The eligible nomination test requires that: two or more persons (each called relevant persons) could satisfy the general operational control test in relation to a facility at that particular time in an eligible financial year; but no particular person has the greatest authority to introduce and implement operating policies and environmental policies; and no declaration of operational control has been made by the regulator.72 All the relevant persons may jointly nominate one of them to the nominated person in relation to a facility for the period nominated in the nomination.73 [page 81]

Form for nomination [50,875] The nomination must be made in writing in the approved form and be accompanied by such information and documents as are specified in the NGER Reporting Regulations. The nomination must be given by a participant in the joint venture to the regulator and takes effect when it is given to the regulator. Division 2.3 of the NGER Reporting Regulations makes provision for nominations in relation to joint ventures in regs 2.08–2.10. Box 50,875-1 sets out the type of information a nomination will require. Box 50,875-1 — Information required in joint venture nomination of nominated person74 a statement to the effect that the nominee is being nominated as the

nominated person for the joint venture for the purposes of the NGER Act; a statement to the effect that all of the participants in the joint venture have agreed to the nomination; the nominee’s name, postal address and identifying details; the name, position, telephone number, email address and postal address of a contact person for the nominee; the name, postal address and identifying details of the controlling corporation for the nominee (if applicable) and the name, position, telephone number, email address and postal address of a contact person for the controlling corporation for the nominee (if applicable); the name, postal address and identifying details of the joint venture; the name, postal address and identifying details of each participant in the joint venture (other than the nominee); the name, position, telephone number, email address and postal address of a contact person for each participant in the joint venture (other than the nominee). A foreign person cannot be nominated if it is possible to nominate a person who is not a foreign person75

Time for nomination [50,900] The nomination for a period that covers a start day in a fixed charge year must be made by 1 May in the fixed charge year, if it could reasonably be expected that a person would have had an interim emissions number for the fixed charge year if it were assumed that person had operational control (and no other person had operational control over the facility) in the first nine months of the fixed charge year.76 The nomination for a period that covers a start day in a flexible charge year must be made no later than by 31 August in the next compliance year.77 [page 82]

Effect of nomination

[50,925] If: a nomination is in force in relation to a facility throughout a particular period; the facility passes the eligible nomination test at all times during the period; and the facility is a facility of a joint venture, the nominated person shall be taken throughout the period to have operational control over the facility for the purposes of the NGER Act.78 If the facility is not a facility of a joint venture, the nominated person shall be taken throughout the period to have operational control over the facility for the purposes of the NGER Act and the Clean Energy Act 2011 (Cth).79 If no nomination is made, then each relevant person is taken to have operational control.80 Where more than one person is deemed to have operational control, a provisional emissions number (if any) is allocated to each person using the formula:

The unadjusted provisional emissions number is the provisional emissions number if it were assumed that only one person had operational control of the facility for the period. The concept of provisional emissions number is discussed at [70,375].

Cancelling or replacing a nomination [50,950] A nomination may be cancelled or replaced. The regulator may cancel a nomination in relation to a facility if: the facility does not pass the eligible nomination test; or the facility passes the eligible nomination test but the nominated person: — is not a relevant person; or — has become an externally-administered body corporate; or — has become an insolvent under administration; or

— has an unsatisfactory compliance record.81 The concept of unsatisfactory compliance record is discussed in [130,075]. A replacement nomination must be expressed to replace an original nomination, upon which the original nomination will be taken to have been revoked.82 If a nomination is in force but the facility ceases to pass the eligible nomination test, then each nominator must notify the regulator of the cessation within 30 days after the cessation. A failure to notify is a civil liability penalty of $44,000. [page 83]

RULES FOR TRUSTS WITH MULTIPLE TRUSTEES [50,975] Section 11C of the NGER Act provides tie-breaker rules applicable to trusts with multiple trustees. The aim of the tie-breaker rules is to essentially force trusts with control of a facility shared among multiple trustees to nominate one trustee to have operational control, or failing such nomination, to fasten operational control on all the trustees. A “trust” is defined in s 5 of the Clean Energy Act 2011 (Cth) to mean a person in the capacity of trustee, or as the case requires, a trust estate. “Trustee” is defined83 to have the same meaning as in the Income Tax Assessment Act 1997 (Cth) (ITAA97). The dictionary of definitions in s 9951 of the ITAA97 defines “trustee” as a trustee (within the ordinary meaning of that expression) of a superannuation fund, an approved deposit fund or a pooled superannuation trust, or alternatively the person who manages the fund or trust, or otherwise, to have the meaning given by s 6(1) of the Income Tax Assessment Act 1936 (Cth) (ITAA36). In s 6(1) of the ITAA36, trustee includes every person: appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law; or who is an executor or administrator, guardian, committee, receiver, or liquidator; or having or taking upon himself the administration or control of income affected by any express or implied trust; or

acting in any fiduciary capacity; or having the possession, control or management of the income of a person under any legal or other disability. “Trust estate” is defined to have the same meaning as in the ITAA97.84 However, there is currently no separate definition for the term ‘trust estate’ in the ITAA97 (or in the ITAA36 either).85 Generally, the trust estate will reference the bundle of assets, liabilities and income (less expenses) owned by and under the control of the trustee in that capacity and in accordance with the trust obligations imposed on the trustee for the benefit of the beneficiaries. The tie-breaker nomination operates if a facility passes the “eligible nomination test” at a particular time. The eligible nomination test requires that: a trust has operational control over a facility; there are two or more trustees of the trust; and the regulator has not made a determination of operational control.

Form for nomination [51,001] The nomination must be made in writing in the approved form and be accompanied by such information and documents as are specified in the of the NGER Reporting Regulations. The nomination becomes effective when they are submitted to the regulator.86 Regulations 2.27–2.29 of the NGER Reporting Regulations specify the information to accompany nominations to be submitted to the regulator. Regulation 2.28 applies if a [page 84] person or trustee is first nominated to have operational control over a facility under ss 11AA(2), 11B(2) or 11C(2) of the NGER Act, and reg 2.29 applies for subsequent nominations.87 Box 51,001-1 sets out the information to accompany the initial nomination: Box 51,001-1 — Operational control information accompanying nomination of a person or trustee (a) the nominee’s name and identifying details (if any); (b) if the nominee is an individual — the following:

(i)

the nominee’s telephone number, email address and residential address;

(ii) if the nominee’s postal address is different from the nominee’s residential address — the nominee’s postal address (c) if the nominee is not an individual — the following: (i)

the postal address of the head office of the nominee;

(ii) the name, position, telephone number, email address and postal address of a contact person for the nominee; (d) which section of the Act the nominee is nominated for; (e) the period for which the nominee is nominated (the relevant period); (f)

the name of the facility for which the nominee is nominated;

(g) all of the following that apply to the facility: (i)

if the facility has a street address — that address;

(ii) if the facility is a network or pipeline facility or a transport facility — the state or territory to which the activities constituting the facility are attributable; (iii) if the facility is not a network or pipeline facility or a transport facility — the latitude and longitude of the site where the activities constituting the facility are undertaken; (h) a statement that no declaration under s 55 or 55A of the Act applies in relation to the facility at any time during the relevant period. The nomination is to be accompanied by a statement of consent by each other person or trustee who could satisfy the operational control test, together with: their name, postal address and identifying details; the name, position, telephone number, email address and postal address of a contact person; and if the nominee is a foreign person, a statement that all of the persons or trustees consenting are also foreign. Subsequent nominations follow a similar process.

Time for nomination [51,025] The nomination for a period that covers a start day in a fixed charge year must be made by 1 May in the fixed charge year, if it could reasonably be expected that a trustee would have had an interim emissions number for the fixed charge year if it were assumed that the trustee had operational control (and no other trustee had operational [page 85] control over the facility) in the first nine months of the fixed charge year.88 The nomination for a period that covers a start day in a flexible charge year must be made no later than by 31 August in the next compliance year.89

Effect of nomination [51,050] The nominated trustee shall be taken throughout the period to have operational control over the facility for the purposes of the NGER Act and the Clean Energy Act 2011 (Cth). If no nomination is made, then each trustee is relevantly taken to have operational control. Where more than one trustee is deemed to have operational control, a provisional emissions number (if any) is allocated to each trustee using the formula:

The unadjusted provisional emissions number is the provisional emissions number if it were assumed that only one trustee had operational control of the facility for the period. The concept of provisional emissions number is discussed at [70,375]. Box 51,050-1 — Operational control information accompanying nomination of a person or trustee (a) the nominee’s name and identifying details (if any); (b) if the nominee is an individual — the following: (i)

the nominee’s telephone number, email address and residential address;

(ii) if the nominee’s postal address is different from the

nominee’s residential address — the nominee’s postal address (c) if the nominee is not an individual — the following: (i)

the postal address of the head office of the nominee;

(ii) the name, position, telephone number, email address and postal address of a contact person for the nominee; (d) which section of the Act the nominee is nominated for; (e) the period for which the nominee is nominated (the relevant period) (f)

the name of the facility for which the nominee is nominated;

(g) all of the following that apply to the facility: (i)

if the facility has a street address — that address;

(ii) if the facility is a network or pipeline facility or a transport facility — the state or territory to which the activities constituting the facility are attributable; (iii) if the facility is not a network or pipeline facility or a transport facility — the latitude and longitude of the site where the activities constituting the facility are undertaken; (h) a statement that no declaration under s 55 or 55A of the Act applies in relation to the facility at any time during the relevant period. [page 86]

Cancelling or replacing a nomination [51,075] A nomination may be cancelled or replaced. The regulator may cancel a nomination in relation to a facility if: the facility does not pass the eligible nomination test, or the facility passes the eligible nomination test but the nominated trustee: — is not a trustee; or — has become an externally-administered body corporate; or — has become an insolvent under administration; or — has an unsatisfactory compliance record.90

The concept of unsatisfactory compliance record is discussed in [130,075]. A replacement nomination must be expressed to replace an original nomination, upon which the original nomination will be taken to have been revoked.91 If a nomination is in force but the facility ceases to pass the eligible nomination test, then each trustee must notify the regulator of the cessation within 30 days after the cessation. A failure to notify is a civil liability penalty of $44,000.

Consumption of energy [51,100] Consumption of energy is defined in s 7 of the NGER Act to have the meaning given by s 10 of the NGER Act. Section 10(1)(f) provides that consumption of energy has the meaning specified by the Regulations. In the NGER Reporting Regulations, consumption of energy is specified in reg 2.23. For paragraph 10(1)(f) of the Act, consumption of energy, in relation to a facility, means the use or disposal of energy from the operation of the facility, including own-use and losses in extraction, production and transmission.

Production of energy [51,125] Production of energy is defined in s 5 of the NGER Act to have the meaning given by s 10 of the NGER Act. Section 10(1)(e) provides that production of energy has the meaning specified by the Regulations. In the NGER Reporting Regulations, production of energy is specified in reg 2.25. For paragraph 10(1)(e) of the Act, production of energy, in relation to a facility, means either of the following: (a) the extraction or capture of energy from natural sources for final consumption by or from the operation of the facility or for use other than in the operation of the facility; (b) the manufacture of energy by the conversion of energy from one form to another form for final consumption by or from the operation of the facility or for use other than in the operation of the facility.

Reporting of intermediate production is not required (unless specified in relation to greenhouse gas emissions). Co-generation of energy (often referred to as combined heat and power (CHP) because it involves the production of two forms of energy, such as high-temperature heat and electricity, from the

same process) does not require reporting. [page 87]

Energy [51,150] “Energy” is defined to include fuel and any other energy commodity of a kind specified in the Regulations.92 Regulation 2.03 of the NGER Reporting Regulations defines the kinds of fuels and other energy commodities in Sch 1 to the Regulations and specifies whether they are a primary or secondary fuel or energy commodity (or require to be so nominated). These fuels and other energy commodities are reproduced in Table 51,150-1,. Table 51,150-1 — Fuels and other energy commodities specified for the purposes of the definition of energy in s 7 of NGER Act Schedule 1, National Greenhouse and Energy Reporting Regulations 2008 Primary or Item Fuel and other energy commodities secondary fuel or energy commodity Solid fossil fuels and coal based products 1 Black coal (other than that used to produce Primary coke) 1A Sub-bituminous coal Primary 1B Anthracite Primary 2 Brown coal Primary 3 Coking coal Primary 4 Coal briquettes Secondary 5 Coal coke Secondary 6 7

Coal tar Solid fossil fuels other than those mentioned in items 1 to 5 Fuels derived from recycled materials 8 Industrial materials and tyres that are derived from fossil fuels, if recycled and combusted to produce heat or electricity 9

Secondary Nomination required Primary

Non-biomass municipal materials, if recycled Primary

9

Non-biomass municipal materials, if recycled Primary and combusted to produce heat or electricity

Primary solid biomass fuels 10 Dry wood 11 Green and air dried wood 12 13 14

Primary Primary

Sulphite lyes Primary Bagasse Primary Biomass municipal and industrial materials, Primary if recycled and combusted to produce heat or electricity [page 88]

15

Charcoal

Secondary

16

Primary solid biomass fuels other than those mentioned in items 10–15

Primary

Gaseous fossil fuels 17 Natural gas distributed in a pipeline 18 Coal seam methane that is captured for combustion 19 Coal mine waste gas that is captured for combustion 20 Compressed natural gas 21 Unprocessed natural gas 22 Ethane 23 Coke oven gas 24 Blast furnace gas 25 Town gas 26 Liquefied natural gas 27 Gaseous fossil fuels other than those mentioned in items 17–26 Biogas captured for combustion 28 Landfill biogas that is captured for combustion 29 Sludge biogas that is captured for combustion

Secondary Primary Primary Secondary Primary Nomination required Secondary Secondary Secondary Secondary Nomination required Primary Primary

30

A biogas that is captured for combustion, other than those mentioned in items 28–29

Primary

Petroleum based oils and petroleum based greases 31 Petroleum based oils (other than petroleum based oils used as fuel)

Secondary

32 Petroleum based greases Petroleum based products other than petroleum based oils and petroleum based greases 33 Crude oil including crude oil condensates 34 Other natural gas liquids 35 Gasoline (other than for use as fuel in an aircraft)

Secondary

36

Secondary

Gasoline for use as fuel in an aircraft

Primary Primary Secondary

[page 89] 37

Kerosene (other than for use as fuel in an aircraft)

Secondary

38 39 40 41 42 43 44 45 46 47 48 49

Kerosene for use as fuel in an aircraft Heating oil Diesel oil Fuel oil Liquefied aromatic hydrocarbons Solvents if mineral turpentine or white spirits Liquefied petroleum gas Naphtha Petroleum coke Refinery gas and liquids Refinery coke Bitumen (including bitumen production), other than consumption for noncombustion purposes Waxes Petroleum based products other than: (a) petroleum based oils and petroleum based

Secondary Secondary Secondary Secondary Nomination required Secondary Nomination required Secondary Secondary Secondary Secondary Secondary

50 51

Secondary Nomination required

greases mentioned in items 31–32 (b) petroleum based products mentioned in items 33–50 Biofuels 52 Biodiesel 53 Ethanol for use as a fuel in an internal combustion engine 54 Biofuels other than those mentioned in items 52–53 Petrochemical feedstock 55 Carbon black if used as a petrochemical feedstock 56 Ethylene if used as a petrochemical feedstock 57 Petrochemical feedstock other than those mentioned in items 55–56 Energy commodities 58 Sulphur 59 Solar energy for electricity generation 60 Wind energy for electricity generation

Primary Primary Primary Secondary Secondary Secondary Nomination required Primary Primary [page 90]

61 62 63 64 65 66

Water energy for electricity generation Geothermal energy for electricity generation Uranium Hydrogen Electricity Energy commodities other than those mentioned in items 58 to 65 and in the form of steam, compressed air or waste gas acquired by any means from outside the facility boundary (regardless of whether any payment or exchange has been made) either to produce heat or for another purpose

Primary Primary Primary Nomination required Nomination required

Eligible financial year [51,175] An eligible financial year is the 12 months from 1 July to 30 June.93

Voluntary registration [51,200] If not required to register, a corporation may still apply for registration if the corporation or one of its group members undertakes or propose to undertake a “greenhouse gas project.”94 A “greenhouse gas project” is defined as an activity or series of activities (meeting the requirements specified in the Regulations) designed to remove or reduce the emission of greenhouse gases.95 However, a greenhouse gas project cannot include an activity, or a series of activities, in the exclusive economic zone, except to the extent that it is an oil or gas extraction activity or a series of oil or gas extraction activities.

Time for registration [51,225] The application to register must be made no later than 31 August in the year following the compliance year (NGER Act, s 12(4)). Earlier registration may be required under a transitional rule (see below). [page 91] As a transitional measure in the fixed price period, an application to register must be made by 1 May in the compliance year (the current fixed charge year) if a liable entity, or an entity that may reasonably be expected to be liable, will have or may reasonably be expected to have an interim emissions number (NGER Act, s 15AA(1)).

Form for registration [51,250] The application for registration is required to be in the form and contain such other information as specified in the Regulations (NGER Act, ss 15, 15A(4), 15AA(4)):

NGER Reporting Regulations 3.02–3.03 specify the form of application and the information to be included in the registration application by a controlling NGER Reporting Regulation 3.03A specifies the information to be included in the registration application by a liable entity. Applications for registration are made using the (National Greenhouse and Energy Reporting) Registration Application Tool.

REGISTRATION APPLICATION BY CONTROLLING CORPORATION [51,275] The application by a controlling corporation must be in writing, include an authentication of identity, identify the financial year for which the application is made and the section of the NGER Act under which the controlling corporation is applying to be registered, and must contain the information set out in Box 51,275-1: Box 51,275-1 — Information to accompany an application to register by controlling corporation (a) a statement that the applicant is a controlling corporation; (b) details of the controlling corporation, including: (i)

its name; and

(ii) its trading name (if any); and (iii) its identifying details [Australian Business Number or equivalent]; and (iv) the street address of its head office; and (v) the postal address of its head office; and (vi) the name, position, telephone number, email address and postal address of a contact person for the controlling corporation; (c) details of at least one executive officer (or equivalent) of the controlling corporation, including the officer’s name, telephone number, email address and postal address; (d) the name of each affected group member of the controlling corporation:

for an application under s 12 of the NGER Act — during the financial year for which the controlling corporation’s application is made; or for an application under s 14 of the NGER Act — that is undertaking or is proposing to undertake a greenhouse gas project to which the controlling corporation’s application relates; (e) for each affected group member mentioned in para (d): the member’s trading name (if any); and the member’s identifying details; [page 92] (f)

a statement about whether the controlling corporation is also a liable entity, or is likely to be a liable entity, mentioned in subs 15A(1) or 15AA(1) of the NGER Act;

(g) if a personal identification number has been issued by the regulator to the controlling corporation—the controlling corporation’s personal identification number; (h) if the controlling corporation is a foreign person — details of a contact person in Australia for the controlling corporation, including the contact person’s name, telephone number and postal address.

REGISTRATION APPLICATION BY LIABLE ENTITY [51,300] The application by a liable entity must be in writing, include an authentication of identity, identify the financial year for which the application is made and the section of the NGER Act (s 15A or s 15AA) under which the liable entity is applying to be registered, and must contain the information set out in Box 51,300-1: Box 51,300-1 — Information to accompany an application to register by liable entity (1) The following information:

(a) the applicant’s name and trading name (if any); (b) if the applicant is not an individual — the street address of the head office of the applicant; (c) which section of the NGER Act the applicant is applying under; (d) the year for which the applicant is first required to register; (e) if a personal identification number has been issued by the Regulator to the applicant — the applicant’s personal identification number. (2) The application must also set out the following information if the information has not previously been given to the regulator: (a) the applicant’s identifying details (if any); (b) a statement about whether the applicant is an individual, a body corporate, a trust, a corporation sole, a body politic or a local governing body; (c) if the applicant is a subsidiary of a controlling corporation registered under the NGER Act — a statement to that effect, and the identifying details of the controlling corporation; (d) if the applicant is an individual — the following: (i)

the applicant’s telephone number, email address and residential address;

(ii) if the applicant’s postal address is different from the applicant’s residential address — the applicant’s postal address; (e) if the applicant is not an individual — the following: (i)

the postal address of the head office of the applicant;

(ii) the name, position, telephone number, email address and postal address of a contact person for the applicant; [page 93] (f)

if the applicant is a body corporate — details of at least one executive officer (or equivalent) of the body corporate, including the officer’s name, telephone number, email address and postal address;

(g) if the applicant is a trust — the name and postal address of each trustee; (h) if the applicant is a corporation sole — the name and postal address of the individual who makes up the corporation sole; (i)

if the applicant is a body politic or local governing body — the name and postal address of at least one officeholder of the body politic or local governing body;

(j)

if the applicant is a body established under a law of the Commonwealth, a state or territory (other than a general law allowing incorporation as a company or body corporate) — the following: (i)

the name of the legislation;

(ii) the date the body was established; (iii) whether the body is a Commonwealth, state or territory body.

Online registration [51,325] Registration under the NGER Act is made online at: www.cleanenergyregulator.gov.au/national-greenhouse-and-energy-reporting and www.oscar.gov.au/Deh.Oscar.Extension.Web/Content/NgerRegistrationApplication The User Guide for the Registration Application Tool is online at: www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/NGER-reporters/How-to-register/Pages/default.aspx Before starting the registration process it is advisable to have all the necessary information on hand (including ABN, other identifying details, and addresses). The Registration Application Tool has six screens for user input (log-in, preliminary details, address details, contact details, group members and confirm details) and screens for data confirmation and completion of the

applica Telephone assistance is available: 1300 553–542. When completed, the online form must be: printed; and signed by the Chief Executive Officer of a controlling corporation or the equivalent authorised representative of the applicant; and posted by the due date to the regulator Clean Energy Regulator GPO Box 621 CANBERRA ACT 2601 or scanned and emailed by the due date to the regulator at: [email protected] A “threshold estimator” tool, and a user guide, to assist users to self assess if a controlling corporation is likely to need to register and report under the NGER Act, and/or a person is likely to be a liable entity under the Clean Energy Act 2011 (Cth) are [page 94] accessible online at: www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Forms-and-calculators/Pages/default.aspx. Based on data entered by the user the on-line tool provides an estimate of covered emissions, scope 1 and scope 2 GHG, energy production, and energy consumption.

Penalty for failing to register [51,350] The civil penalty for failing to register is: for controlling corporations, 2000 penalty units96 ($220,000), for liable entities (or if it may be reasonably be expected that a person will be a liable entity):

— if an individual, 2000 penalty units; — otherwise, 10,000 penalty units ($1,100,000). A potential further penalty of 100 penalty units per day ($11,000 per day) accrues for each day not registered. The chief executive officer of a corporation may also be liable for a corporation’s failure to register.97

Register of registrations [51,375] The regulator keeps a register of registered persons. The following information is kept in the register for each registered person:98 (a) the registered person’s name, identifying details and trading name (if any); (b) the section of the NGER Act under which the person applied for registration; (c) the reporting year for which the person was first registered; (d) information about the person’s compliance with the NGER Act, including information about: (i)

whether the person has been convicted of an offence under the Act; and

(ii) whether a court order has been made against the person for the contravention of a civil penalty provision in the NGER Act; (e) information about greenhouse and energy audits carried out in relation to the person, including information about: (i)

whether a greenhouse and energy audit has been carried out in relation to the person; and

(ii) the type of audit carried out; and (iii) the name of the audit team leader appointed to carry out the audit; and (iv) the findings of the audit. The register kept by the regulator also discloses:

the name of each affected group member of the controlling corporation’s group during the financial year for which the application for registration is made; the name of each affected group member of the controlling corporation’s group that is undertaking or is proposing to undertake a greenhouse gas project; and [page 95] the name, identifying details and trading name (if any) of each affected group member of the controlling corporation’s group for each reporting year, as set out in the controlling corporation’s report given to the regulator for that year. More information is also available from: the Australian National Registry of Emissions Units (discussed in [90,050]) and the Liable Entities Public Information Database (LEPID) (discussed in [110,700]).

HOW ARE GREENHOUSE GASES MEASURED? [51,400] The methodologies for measuring greenhouse gas emissions, the production of energy and the consumption of energy from the operation of facilities are specified in the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth) (NGER Measurement Determination).

Overview of NGER (Measurement) Determination [51,425] The NGER Measurement Determination is made pursuant to s 10(3) of the NGER Act. The NGER Measurement Determination is organised into chapters: Chapter 1 deals with general matters, definitions, measurement, standards and methods, and requirements for carbon capture and storage and continuous emissions monitoring;

Chapter 2 deals with emissions from fuel combustion (solid fuels, gaseous fuels and liquid fuels) and emissions from fuel use by certain industries; Chapter 3 deals with fugitive emissions from coal mining and oil and natural gas, and carbon capture and storage; Chapter 4 deals with emissions from industrial processes (mineral products, the chemical industry, the metal industry, and emissions of hydrofluorocarbons and sulphur hexafluoride); Chapter 5 deals with emissions from waste (solid waste and wastewater handling (domestic, commercial and industrial) and waste incineration); Chapter 6 deals with energy consumption and production; Chapter 7 deals with scope 2 emissions; and Chapter 8 deals with assessment of uncertainty. Through these chapters the NGER Measurement Determination deals exhaustively with the measurement and the methods of measurement of scope 1 and scope 2 emissions released in relation to a source, from the operation of a facility and the measurement of energy consumption and energy production. Schedules to the NGER Measurement Determination provide energy content factors, emission factors, standards and frequency for analysing the relevant factors for solid fuels, and carbon content factors. Compliance with the NGER Measurement Determination by registered persons (controlling corporations and liable entities) is mandatory. Section 1.12 provides: [page 96] The measurement of emissions released from the operation of a facility is to be done by estimating the emissions in accordance with this Determination.99

The estimate must include an assessment of uncertainty in accordance with the determination.100

Emissions sources [51,450] There are four broad categories of source of emissions: (1) fuel combustion;

(2) fugitive emissions; (3) industrial processes; and (4) waste. Sources of emissions are specified in s 1.10 of the NGER Measurement Determination as follows (Table 51,450-1): Item 1 1A 2 2A 2B 2C 2D 2E 2F 2G 2H 2I 2J 2K 2L 2M 3 3A 3B 3C

3D

Table 51,450-1 — Sources of emissions Category of source Source of emissions Fuel combustion Fuel combustion Fugitive emissions Underground mines Open cut mines Decommissioned underground mines Oil or gas exploration Crude oil production Crude oil transport Crude oil refining Natural gas production or processing (other than emissions that are vented or flared) Natural gas transmission Natural gas distribution Natural gas production or processing — flaring Natural gas production or processing — venting Carbon capture and storage Industrial processes Cement clinker production Lime production Use of carbonates for the production of a product other than cement clinker, lime or soda ash Soda ash use

3E 3F

Soda ash production Ammonia production

3G

Nitric acid production [page 97]

3H

Adipic acid production

3I 3J

Carbide production Chemical or mineral production, other than carbide production, using a carbon reductant or carbon anode Iron, steel or other metal production using an integrated metalworks Ferroalloys production Aluminium production Other metals production

3K 3L 3M 3N 3O

Emissions of hydrofluorocarbons and sulphur hexafluoride gases

4 4A 4B 4C

Waste Solid waste disposal on land Wastewater handling (industrial) Wastewater handling (domestic or commercial) Waste incineration

4D

Categories of scope 1 emissions [51,475] Scope 1 emissions comprise four categories of direct emissions: UNFCCC Category 1.A — fuel combustion activities, which deals with emissions released from fuel combustion; UNFCCC Category 1.B — fugitive emissions from fuels, which deals with emissions mainly released from the extraction, production, flaring of fuels, processing and distribution of fossil fuels; UNFCCC Category 2 — industrial processes emissions, which deals with emissions released from the consumption of carbonates and the

use of fuels as feedstocks or as carbon reductants, and the emission of synthetic gases in particular cases, and UNFCCC Category 6 — waste emissions, which deals with emissions which are mainly released from the decomposition of organic material in landfill or wastewater handling facilities.

Units of measurement [51,500] The following units of measurement and rules for conversion (applying the National Measurement Act 1960 (Cth)) are specified: Table 51,500-1 — Units of measurement CO2-e tonnes Emissions of greenhouse gases Energy

Gigajoules [page 98]

Solid fuel Liquid fuel Gaseous fuels

Tonnes Kilolitres Cubic metres (at standard conditions)

Carbon dioxide equivalence and global warming potential [51,525] Greenhouse gases are made equivalent (called carbon dioxide equivalence, CO2-e). CO2-e employs a formula that determines the global warming potential (GWP) of each greenhouse gas and then references each greenhouse gas to carbon dioxide as the base unit with a CO2-e of 1. GWP is a construct, based on a scientific estimate of the atmospheric life of GHGs measured over a period of 100 years and their relative capacity to absorb solar radiation. The use of GWP assumes substitutability among greenhouse gases. GWPs to be used in Australia are mandated by the NGER Act and the NGER Reporting Regulations (reproduced in Table 51,525-1).101 Table 51,525-1 — Global warming potential of greenhouse gases

Table 51,525-1 — Global warming potential of greenhouse gases Item Greenhouse gas Chemical formula GWP 1

Carbon dioxide

CO2

1

2

Methane

CH4

21

3

Nitrous oxide

N2 O

310

4

Sulphur hexafluoride SF6

23,900

5

HFC-23

CHF3

11,700

6

HFC-32

CH2F2

650

7

HFC-41

CH3F

150

8

HFC-43-10mee

C5H2F10

1300

9

HFC-125

C2HF5

2800

10

HFC-134

C2H2F4 (CHF2CHF2) 1000

11

HFC-134a

C2H2F4 (CH2FCF3)

12

HFC-143

C2H3F3 (CHF2CH2F) 300

13

HFC-143a

C2H3F3 (CF3CH3)

3800

14

HFC-152a

C2H4F2 (CH3CHF2)

140

1300

[page 99] 15

HFC-227ea

C3HF7

2900

16

HFC-236fa

C3H2F6

6300

17

HFC-245ca

C3H3F5

560

18

Perfluoromethane

CF4

6500



(tetrafluoromethane)

19

Perfluoroethane

C2F6

9200

20

(hexafluoroethane) Perfluoropropane

C3F8

7000

21

Perfluorobutane

C4F10

7000

22

Perfluorocyclobutane c-C4F8

8700

23

Perfluoropentane

C5F12

7500

24

Perfluorohexane

C6F14

7400

Australian formulas in the NGER Reporting Regulations embed the climate change science used in the IPCC 2nd Assessment Report in 1995. Internationally, GWP are those accepted from time to time by the IPCC and the COP to the UNFCCC.102 Absolute certainty is absent,103 and there is currently disagreement over GWPs between institutions. For example, in relation to methane, the NGER Reporting Regulations specify a GWP of 21, whilst the IPCC now specify 23 and the regulations for the California ETS specify 25.

Measurement methods [51,550] The NGER Measurement Determination details four accepted methods for measurement. In summary, these are: (1) Method 1 (known as the default method) — is derived from the National Greenhouse Accounts methods and is based on national average estimates; (2) Method 2 — is a facility specific method using industry practices for sampling and Australian or equivalent standards for analysis; (3) Method 3 — is the same as method 2 but is based on Australian or equivalent standards for both sampling and analysis; and (4) Method 4 — provides for facility specific measurement of emissions by continuous emissions monitoring (CEM) or periodic emissions monitoring (PEM). Method 4 is the highest method. Methods 1, 2 and 3 are lower methods than Method 4. Methods 2, 3 and 4 are higher methods than Method 1. If the use of a method is temporarily unavailable because of a mechanical or technical failure of equipment, then for a period of up to a maximum of six weeks, emissions must [page 100] be calculated based on the daily average of emissions for the year.104 Down time of more than six weeks is deemed to be a change in method.

Uses of methods

[51,575] Only one method of measurement for a source may be used at a time.105 Further, as a general rule, the method selected for a source must be used for at least four reporting years (four eligible financial years). As an exception, it is possible within that period to move to a higher method. If only one method has been used continuously for four reporting years, then it is possible thereafter to move to a lower method.

Due diligence for methods [51,600] The NGER Act and the Clean Energy Act 2011 (Cth) are selfassessment systems. Abramowicz (1999) suggests that in a self-assessment regime, “legal consequences are designed to ensure that the [liable entity] has an incentive to be honest, or at least not too dishonest.”106 Abramowicz also notes a combination of self-assessment and market mechanisms may permit “manipulability” and accordingly warns that “we must anticipate that … others might engage in … behaviour with ulterior motives.”107 Since reporting of scope 1 GHG emissions (as part of the report of GHG emissions and energy consumption and energy production under the NGER Act) forms the basis for determining the emissions number against which liability for under surrender of eligible emissions units in tested in the Clean Energy Act 2011 (Cth), it follows that the accurate measurement of scope 1 emissions is critical. Any error in inputs, conversions, application of formulae and outputs, whether or not intentional, and particularly if cumulative, may result in an understatement or overstatement. Notwithstanding that measurement is an estimate, and inherently uncertain, the tests for imposition of unit shortfall penalty under the Clean Energy Act 2011 (Cth) make scant allowance for error in measurement. The powers of the regulator to remit a unit shortfall charge are limited as prescribed in s 134A of the Clean Energy Act 2011 (Cth) (discussed in ch 5) to circumstances where the liable entity, before any relevant investigative action is taken, voluntarily discloses to the regulator that its emissions number submitted in its report under the NGER Act is incorrect. If the liable entity has applied for the remission of part of the amount of unit shortfall charge, the regulator may

(subject to limits on the amount remitted) grant a remission if satisfied it would be fair and reasonable to remit that part, having regard to: (a) the circumstances that resulted in the incorrect number being specified in the report; and

[page 101] (b) whether the person took reasonable precautions, and exercised due diligence, to avoid the incorrect number being specified in the report; and (c) such other matters (if any) as the Regulator considers relevant.108

The exercise of due diligence in measurement and reporting does not imply that there must be an independent audit or verification of data, methods and application of methods.109 However, it would be prudent to adopt measurement systems and record keeping systems that allow for the crosschecking of inputs, conversions, application of formulae and outputs.

Rules for methods [51,625] The NGER Measurement Determination prescribes specific formulas to be used in the measurement of emissions and energy. Accordingly, the arrangement of the NGER Measurement Determination is by source of emissions, and then by methods of measurement available for selection for that source. Thus, not every method (ie having a full choice of Methods 1 to Method 4) is available for every source of emission. A particular challenge in using the NGER Measurement Determination is to correctly identify the source of a particular release of greenhouse gas from the operation of a facility. The NGER Measurement Determination does not provide any rule for selection of source and method, nor does it provide any tie-breaker rule for choosing source. Section 1.13 of the NGER Measurement Determination requires estimates of emissions to be prepared having regard to these principles: (a) transparency — emission estimates must be documented and verifiable; (b) comparability — emission estimates using a particular method and produced by a registered [entity] in an industry sector must be comparable with emission estimates produced by similar [entities] in that industry sector using the same method and consistent with the emission estimates published by the Department of Climate Change and Energy Efficiency in the National Greenhouse Accounts; (c) accuracy — having regard to the availability of reasonable resources by a registered [entity] and the requirements of the NGER Measurement Determination, uncertainties in emission estimates must be minimised and any estimates must neither be over nor under estimates of the true values at a 95% confidence level; (d) completeness — all identifiable emission sources … must be accounted for (NGER Measurement Determination s 1.10, see Table 51,450-1).

A facility may comprise more than one source of emissions and hence its report of emissions must include all sources of emissions. However, if a source of emissions is not included in the NGER Measurement Determination, then (strictly) it is not covered for reporting or for liability. Special requirements are also specified for carbon capture and storage (CCS) and using CEM and PEM in Method 4.

CARBON CAPTURE AND STORAGE [51,650] Division 1.2.3 of the NGER Measurement Determination deals with CCS. For the purposes of that division, CO2 is “captured for permanent storage” only if it is transferred to/captured by a “relevant person” being: (a) the registered holder of a greenhouse gas injection licence under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) for the purpose of being injected into an identified greenhouse gas storage formation under such licence; or

[page 102] (b) the holder of an injection and monitoring licence under the Greenhouse Gas Geological Sequestration Act 2008 (Vic) for the purpose of being injected into an underground geological formation under such licence; or (c) the registered holder of a greenhouse gas injection licence under the Offshore Petroleum and Greenhouse Gas Storage Act 2010 (Vic) for the purpose of being injected into an identified greenhouse gas storage formation under such licence; or (d) the holder of a GHG injection and storage lease under the Greenhouse Gas Storage Act 2009 (Qld) for the purpose of being injected into a GHG stream storage site under such lease; or (e) the holder of an approval under the Barrow Island Act 2003 (WA) for the purpose of being injected into an underground reservoir or other subsurface formation in accordance with Barrow Island Act 2003 (WA); or (f)

the holder of a gas storage licence under the Petroleum and Geothermal Energy Act 2000 (SA) for the purpose of being injected into a natural reservoir under such licence.

An amount of carbon dioxide that is captured for permanent storage may be deducted in the estimation of emissions under the NGER Measurement Determination only if the CO2 that is captured for permanent storage is captured by, or transferred to, a relevant person. The relevant person must issue a written certificate that specifies the amount of CO2, the volume of the CO2 stream containing the transferred CO2 and its concentration. The amount of CO2 that may be deducted is the amount specified in that certificate. The amount of CO2 that is captured for permanent storage must be estimated in accordance with ss 1.19E–1.19N of the NGER Measurement Determination.

The volume of CO2 (expressed as cubic metres) may be determined: from the volume specified by the relevant person if accurate and evidenced by invoices issued by the relevant person; or by measurement during the compliance year at the point of capture from a facility using appropriate volumetric measurement (depending upon whether or not the CO2 is super-compressed) and using approved gas measuring equipment meeting transmitter and accuracy requirements and other standards relevant to flow devices (s 1.19K), flow computers (s 1.19L) and gas chromatographs (s 1.19M). The CO2 stream must be sampled using ISO 10715:1997 (or equivalent) and the concentration of CO2 in the steam must be analysed at least once a month using ISO 6974 (or equivalent). Volumetric measurement of non-super-compressed CO2 must be at standard conditions using a flow computer that: measures and analyses flow signals and relative density; continuously records volumetric flow rate; uses an integration device that is isolated from the flow computer; uses measurements, calculations and procedures for determining volume in accordance with the National Measurement Act and designated publications for orifice plate measuring systems and turbine measuring systems, or an equivalent internationally recognised documentary standard. Equipment that measures super-compressed CO2 must calculate supercompressibility by using composition data or an approved alternative method. The NGER Measurement Determination also provides that if it is necessary to correct for deviation from the ideal gas law in determining volume in relation to the super-compressed CO2 stream, the [page 103] correction must be determined using the relevant method contained in the publication entitled American Gas Association Transmission Measurement Committee Report No 8 (1992) Super-compressibility.110

CONTINUOUS EMISSIONS MONITORING

[51,675] Part 1.3 of the NGER Measurement Determination provides how to obtain an estimate of mass emissions using Method 4 (direct measurement of emissions) and rules for the use of CEM and PEM equipment. For a gas type (j), the estimate of emissions during the year is the sum of representative and unbiased estimates of mass emissions for each hour of the year. The formula for obtaining an estimate of the mass of emissions of CO2, CH4 or N2O released at the time of measurement at a monitoring site within the area occupied for the operation of a facility is:

where: Mjct is the mass of emissions in tonnes of gas type (j) released per second. MMj is the molecular mass of gas type (j) measured in tonnes per kilomole which: (a) for methane is 16.04 × 10-3; or (b) for carbon dioxide is 44.01 × 10-3; or (c) for nitrous oxide is 44.01 × 10-3 Pct is the pressure of the gas stream in kilopascals at the time of measurement. FRct is the flow rate of the gas stream in cubic metres per second at the time of measurement. Cjct is the proportion of gas type (j) in the volume of the gas stream at the time of measurement. Tct

is the temperature, in degrees kelvin, of the gas at the time of measurement.111

The estimate of mass emissions obtained using this formula is to be converted into CO2-e tonnes and also converted into a representative and unbiased estimate of the mass emissions for that hour. The NGER Measurement Determination does not specify how the latter conversion is to occur, but it does require it to be reconciled against an estimate of the GHG emitted from the facility for the same period using Method 1. Use of continuous emissions monitoring equipment and periodic emissions

monitoring equipment must meet an appropriate standard for performance characteristics, location of sampling positions, measurement of volumetric flow rates in the gas stream, measurement of concentrations of GHG in the gas stream and frequency of measurement. Table 51,675-1 lists appropriate standards for the NGER Measurement Determination. [page 104] Table 51,675-1 — NGER Measurement Determination standards Sampling positions standards AS 4323.1–1995 Stationary source emissions — Selection of sampling positions. AS 4323.1–1995 Amdt 1-1995 Stationary source emissions — Selection of sampling positions. ISO 10396:2007 Stationary source emissions — Sampling for the automated determination of gas emission concentrations for permanently-installed monitoring systems. ISO 10012:2003 Measurement management systems — Requirements for measurement processes and measuring equipment. USEPA — Method 1 — Sample and Velocity Traverses for Stationary Sources (2000). Flow rates standards ISO 10780:1994 Stationary source emissions — Measurement of velocity and volume flowrate of gas streams in ducts. ISO 14164:1999 Stationary source emissions — Determination of the volume flowrate of gas streams in ducts — Automated method. USEPA Method 2 Determination of Stack Gas Velocity and Volumetric flowrate (Type S Pitot tube) (2000). USEPA Method 2A Direct Measurement of Gas Volume Through Pipes and Small Ducts (2000). Gas concentration standards USEPA Method 3A Determination of oxygen and carbon dioxide concentrations in emissions from stationary sources (instrumental analyzer procedure) (2006). USEPA Method 3C Determination of carbon dioxide, methane, nitrogen, and oxygen from stationary sources (1996). ISO 12039:2001 Stationary source emissions — Determination of carbon

ISO 12039:2001 Stationary source emissions — Determination of carbon monoxide, carbon dioxide and oxygen — Performance characteristics and calibration of automated measuring system. CEM and PEM equipment also must be tested for performance and calibration using an appropriate standard. As a minimum requirement, the NGER Measurement Determination prescribes that a cylinder of calibration gas must be certified as being within two per cent of the concentration specified on the cylinder label by an accredited laboratory that meets the requirements of ISO 17025 and applicable state or territory legislation, and is accredited to ISO Guide 34:2000.112 CEM equipment must operate for more than 90 per cent of the period for which it is used to monitor an emission (excluding down time), and readings must be taken frequently enough to produce data which is representative and unbiased. [page 105] PEM sampling must be undertaken during the year for a sufficient duration to produce representative data that may be reliably extrapolated to provide estimates of emissions across the full range of operating conditions for that year.

Example — coal mining: fugitive emissions — underground mining activities [51,700] Let us consider Div 3.2.2 of Pt 3.2 of the NGER Measurement Determination as an example of the application of the determination — in this case, to fugitive emissions from underground coal mines (other than decommissioned mines). “Fugitive emissions” are defined in s 1.8 of the NGER Measurement Determination as the release of emissions that occur during the extraction, processing and delivery of fossil fuels. Section 3.4 of the NGER Measurement Determination specifies the available methods that must be used for estimating emissions released during a year from the operation of a facility that is constituted by underground mining activities.

“Underground mine” is defined in s 1.8 of the NGER Measurement Determination to mean a “coal mine that allows extraction of coal by mining at depth, after entry by shaft, adit or drift, without the removal of overburden.” The terms “coal” and “coal mine” are not defined. Other definitions (from both the NGER Reporting Regulations and the NGER Measurement Determination) relevant to coal mining include: coal briquette means an agglomerate formed by compacting a coal particulate material in a briquette press, with or without added binder material coal mine waste gas means a substance that: (a) consists of: (i)

naturally occurring hydrocarbons; or

(ii) a naturally occurring mixture of hydrocarbons and non-hydrocarbons; and (b) is: (i)

drained from: (A) a coal mine that is covered by a lease (however described) that authorises coal mining; or (B) a closed coal mine that is, or was, covered by a lease (however described) that authorises, or authorised, coal mining; or

(ii) conveyed in a ventilation air shaft or duct to the surface of a mine mentioned in subparagraph (i). coal seam methane means a substance that: (a) consists of: (i)

naturally occurring hydrocarbons; or

(ii) a naturally occurring mixture of hydrocarbons and non-hydrocarbons; and (b) consists mainly of methane; and (c) is drained from a coal seam; and (d) is not coal mine waste gas; and (e) has not been injected into a natural gas supply pipeline. decommissioned underground mine means an underground coal mine where the following activities have not occurred for at least the previous 12 months, and are not expected to occur in the future:

[page 106] (a) coal production; (b) drainage of methane from the mine (including pre-draining activities); (c) active mine ventilation, including the operation of ventilation fans at the mine gassy mine means an underground mine that has at least 0.1% methane in the mine’s return ventilation non-gassy mine means an underground mine that has less than 0.1% methane in the mine’s return ventilation

AVAILABLE METHODS [51,725] Section 3.4 mandates that the following methods must be used: for estimating fugitive emissions of CO2 and CH4 that result from the extraction of coal from the underground mine — Method 4 under s 3.6;113 for estimating the following emissions released from coal mine waste gas flared from the underground mine: — CO2 — either Method 1 under s 3.14, Method 2 under s 3.15 or Method 3 under s 3.16;114 — CH4 — Method 1 under s 3.14;115 — N2O — Method 1 under s 3.14;116 for estimating fugitive emissions of CO2 and CH4 that result from venting or other fugitive release of gas from the underground mine before coal is extracted from the mine — Method 4 under Pt 1.3;117 for estimating fugitive emissions of CH4 that result from post-mining activities related to a gassy mine — Method 1 under s 3.17;118 and for estimating incidental emissions — any method consistent with the NGER Measurement Determination principles.119 Section 3.5 purports to provide for the use of Method 1 for fugitive emissions from the extraction of coal, but it is not clear that this is correct, because a note to s 3.4(2) states that “there is no method 1, 2 or 3 for subsection (2).” Section 3.5 provides: For paragraph 3.4(2)(a),120 method 1 is:

where: Ej

is the fugitive emissions of methane (j) that result from the extraction of coal from the mine during the year measured in CO2-e tonnes.

Q

is the quantity of run-of-mine coal extracted from the mine during the year measured in tonnes

[page 107] EFj is the emission factor for methane (j), measured in CO2-e tonnes per tonne of run-of-mine coal extracted from the mine, as follows: (a) for a gassy mine — 0.305; (b) for a non-gassy mine — 0.008.

FUGITIVE EMISSIONS FROM EXTRACTION OF COAL [51,750] Section 3.6 provides: For s 3.4(2) and (3), Method 4 is:

where: Ej is the fugitive emissions of gas type (j) that result from the extraction of coal from the mine during the year, measured in CO2-e tonnes. CO2-ejgen, total is the total mass of gas type (j) generated from the mine during the year before capture and flaring is undertaken at the mine, measured in CO2-e tonnes and estimated using the direct measurement of emissions in accordance with subsection (2). gj is the factor for converting a quantity of gas type (j) from cubic metres at standard conditions of pressure and temperature to CO2-e tonnes, being: (a) for methane — 6.784 × 10-4 × 21; and (b) for carbon dioxide — 1.861 × 10-3. Qij,cap is the quantity of gas type (j) in coal mine waste gas type (i) captured for combustion from the mine and used during the year, measured in cubic metres and estimated in accordance with Div 2.3.6. Qij,flared is the quantity of gas type (j) in coal mine waste gas type (i) flared from the mine during the year, measured in cubic metres and estimated in accordance with Div 2.3.6. Qijtr is the quantity of gas type (j) in coal mine waste gas type (i) transferred out of the mining activities during the year measured in cubic metres.

For Qijtr in the above formula, the quantity of gas type (j) is required to be estimated in accordance with Div 2.3.6 of the NGER Measurement Determination as if a reference in that division to quantities of gaseous fuels combusted from the operation of a facility was a reference to quantities of gaseous fuels transferred out of the operation of a facility. Either continuous emissions monitoring or periodic emissions monitoring of the gas stream at the underground mine may be used (in accordance with the rules that apply to their use) in the Method 4 direct measurement of emissions released from the extraction of coal during a year.121 The formula given in s 1.21(1) must be used to obtain an estimate of the mass emissions rate of CO2 and CH4 at the time of measurement, and that estimate must be converted into CO2-e tonnes. From those calculations, an average mass emission rate for the gas type measured in CO2-e tonnes per hour must be calculated. [page 108] The total mass of emissions from the underground mine for the year is then calculated by multiplying the average hourly emissions rate (in CO2-e tonnes) by the number of hours during the year.

Example — coal mining: fugitive emissions — open cut mines [51,775] Let us consider Div 3.2.3 of Pt 3.2 of the NGER Measurement Determination as another example of the application of the determination—in this case, to fugitive emissions from open cut mining activities. Section 3.19 of the NGER Measurement Determination specifies the available methods that must be used for estimating emissions released during a year from the operation of a facility that is constituted by an open cut mine. “Open cut mine” is defined in s 1.8 of the NGER Measurement Determination to mean a “mine in which the overburden is removed from coal seams to allow extraction by mining that is not underground mining.”

AVAILABLE METHODS [51,800] Section 3.19 states that the following methods must be used:

for estimating fugitive emissions of CH4 that results from the extraction of coal from the mine — Method 1 under s 3.20, Method 2 under s 3.21 or Method 3 under s 3.26;122 for estimating fugitive emissions of CO2 that results from the extraction of coal from the mine — Method 2 under s 3.21 if Method 2 is used for CH4 or Method 3 under s 3.26 if Method 3 is used for CH4;123 for estimating the following emissions released from coal mine waste gas flared from the open cut mine: CO2—either Method 1 under s 3.27, Method 2 under s 3.28 or Method 3 under s 3.29;124 CH4 — Method 1 under s 3.27;125 N2O — Method 1 under s 3.27;126 for estimating fugitive emissions of CO2 and CH4 that result from venting or other fugitive release of gas from the mine before coal is extracted from the mine — Method 4 under Pt 1.3;127 for estimating incidental emissions — any method consistent with the NGER Measurement Determination principles.128 [page 109]

FUGITIVE EMISSIONS FROM EXTRACTION OF COAL [51,825] Method 1 is:

where: Ej

is the fugitive emissions of methane (j) that result from the extraction of coal from the mine during the year measured in CO2-e tonnes.

Q

is the quantity of run-of-mine coal extracted from the mine during the year measured in tonnes.

EFj is the emission factor for methane (j), measured in CO2-e tonnes per tonne of run-of-mine coal extracted from the mine, taken to be the following:

(a) a mine in New South Wales — 0.045; (b) for a mine in Victoria — 0.0007; (c) for a mine in Queensland — 0.017; (d) for a mine in Western Australia — 0.017; (e) for a mine in South Australia — 0.0007; (f)

for a mine in Tasmania — 0.014.129

Method 2 is:

where: Ej

is the fugitive emissions of gas type (j) that result from the extraction of coal from the mine during the year, measured in CO2-e tonnes.

γj

is the factor for converting a quantity of gas type (j) from cubic metres at standard conditions of pressure and temperature to CO2-e tonnes, as follows: (a) for methane — 6.784 ×10-4 ×21; (b) for carbon dioxide — 1.861 × 10-3.

Σz (Sj,z) is the total of gas type (j) in all gas bearing strata (z) under the extraction area of the mine during the year, measured in cubic metres, where the gas in each strata is estimated under s 3.22.130 Method 2 requires each gas in a gas bearing strata to be estimated in accordance with ss 3.22 and 3.23 and sampled and analysed in accordance with requirements specified in ss 3.24 and 3.25 of the NGER Measurement Determination. Method 3 is the same as Method 2 under s 3.21.

Uncertainty [51,850] The NGER Measurement Determination also requires the assessment of uncertainty. Uncertainty is to be assessed at three levels — at source, facility and the registered person level.131 [page 110]

Uncertainty must be assessed so that the range for an emissions estimate encompasses the actual amount of the emissions within 95 per cent confidence,132 using133 the rules in Pts 8.3 and 8.4 of the NGER Measurement Determination, replicating the GHG Protocol Guidance on Uncertainty Assessment in GHG Inventories and Calculating Statistical Parameter Uncertainty published under the GHG Protocol by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI) (GHG Protocol Uncertainty Guidance). Rules for uncertainty estimates for emissions estimates using Method 1 are in Pt 8.3 of the NGER Measurement Determination. Rules for uncertainty estimates for emissions estimates using Methods 2, 3 and 4 are in Pt 8.4 of the NGER Measurement Determination. For Method 1: s 8.5(1) requires the aggregation of the uncertainty of the emissions factor, the energy content factor and the activity data for the source in accordance with the formula in s 8.11. s 8.5(2) requires the aggregation of total uncertainty for each source associated with a facility in accordance with the formula in s 8.12; s 8.5(3) requires the aggregation of total uncertainty for each facility under the operational control of the registered person in accordance with the formula in s 8.13. The formula in s 8.11 provides: For section 8.5(1) and subject to subsections (2) and (3), in assessing uncertainty of the estimates of scope 1 emissions that are estimated using method 1 for a source, the aggregated uncertainty for emissions from the source is to be worked out in accordance with the following formula:

where: D

is the aggregated percentage uncertainty for the emission source.

A

is the uncertainty associated with the emission factor for the source, expressed as a percentage.

B

is the uncertainty associated with the energy content factor for the source, expressed as a percentage.

C

is the uncertainty associated with the activity data for the source, expressed as a percentage.

Uncertainty in the aggregation and interpretation of data embraces scientific uncertainty, statistical uncertainty and estimation uncertainty (both model and parameter uncertainty).134 Consistently throughout Ch 8 of the NGER Measurement Determination and in the GHG Protocol Uncertainty Guidance, scientific and model uncertainty is eliminated by being put beyond the scope of most inventory efforts.135 Accordingly, the focus in Method 1 is upon uncertainties in emissions factors, energy content factors and activity data. [page 111] Sections 8.6–8.10 each provide rules and tables of uncertainty levels for assessment of uncertainty for estimates of: carbon dioxide emissions from combustion of fuels; methane and nitrous oxide emissions from combustion of fuels; fugitive emissions; emissions from industrial process sources; and emissions from waste. Continuing the example of underground and open cut coal mines, a table in s 8.8 provides the aggregated uncertainty of emissions of fugitive emissions estimated using Method 1136 as: underground coal mines — 50 per cent; and open cut coal mines — 50 per cent. For Methods 2, 3 and 4, only statistical uncertainties are to be worked out, using the GHG Protocol Uncertainty Guidance (and ignoring item 4 of Pt 7 of that Guidance).

Guidance [51,875] The regulator provides an online uncertainty calculator. Data entered in the online reporting process is required to be fed through the uncertainty calculator as part of the submission process. The uncertainty calculator is available at: www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Forms-and-Calculator/Pages/Default.aspx

Reporting obligations: who must report? [51,900] Reporting obligations attach to: registered corporations (NGER Act s 19); the responsible member of a controlling corporation’s group (NGER Act s 22X); liable entities (NGER Act ss 22A and 22AA); holders of liability transfer certificates (NGER Act s 22E); and holders of reporting transfer certificates (NGER Act s 22G). The NGER Act does not provide any tie-breaker rule to eliminate an obligation for multiple reporting by the same entity within different parts or sections of the NGER Act. Rather, the NGER Act relevantly provides that a report required under s 22A, for example, may be set out in the same document as the report required under s 19 of the NGER Act.

REPORT BY REGISTERED CORPORATION [51,950] Section 19 of the NGER Act provides that a registered corporation must provide to the regulator a report in the required manner and form and based on the methods determined by the Minister setting out the information specified in the regulations for each eligible financial year, detailing: greenhouse gas emissions; and energy production; and [page 112] energy consumption from the operation of facilities under operational control of the corporation and members of the corporation’s group. However, the registered corporation is not required to report in respect of a facility if:

another person is the holder of a reporting transfer certificate in relation to that facility; or if the reporting obligation has been agreed to be transferred to a responsible member of the controlling corporation’s group; or the facility is subject to a financial control LTC.137

REPORT BY RESPONSIBLE MEMBER OF A CONTROLLING CORPORATION’S GROUP [51,975] If a facility is under the operational control of a member of a controlling corporation’s group or that member is the holder of a liability transfer certificate in relation to that facility issued under the Clean Energy Act 2011 (Cth), then the member and the controlling corporation may agree to transfer reporting obligations for the facility to the member. Provided that the controlling corporation and the responsible member have before the end of the financial year jointly notified the regulator in writing of the agreement and the facility to which the agreement relates, s 22X of the NGER Act specifies that the responsible member must provide to the regulator a report in the required manner and form and based on the methods determined by the minister setting out the information specified in the regulations for the whole (or part) of the eligible financial year, detailing: greenhouse gas emissions; and energy production; and energy consumption from the operation of the facility.

REPORT BY LIABLE ENTITIES [52,001] Section 22A of the NGER Act provides that a liable entity must provide to the regulator a report in the required manner and form and setting out the information specified in the regulations for an eligible financial year relating to: (a) the calculation of the person’s provisional emissions numbers for the eligible financial year; and (b) if a provisional emissions number of the person for the eligible financial year is attributable to scope 1 emissions of greenhouse gas — those emissions; and (c) if a provisional emissions number of the person for the eligible financial year is

attributable to potential greenhouse gas emissions embodied in an amount of natural gas — those potential greenhouse gas emissions; and (d) the calculation of the person’s emissions number for the eligible financial year.

Section 22AA imposes an to report on a person who is a liable entity and has an interim emissions number for the fixed charge year. The report for the fixed charge year must detail the calculation of the person’s interim emissions numbers for the fixed charge year, identifying any scope 1 emissions of greenhouse gas and any potential greenhouse gas emissions embodied in supply of natural gas. The concept of interim emissions number is discussed in [73,350]. [page 113]

REPORT BY HOLDERS OF LIABILITY TRANSFER CERTIFICATE [52,025] Section 22E of the NGER Act provides that a person, who was the holder of a financial control liability transfer certificate in relation to a facility during the whole or a part of an eligible financial year, must provide to the regulator a report in the required manner and form and based on the methods determined by the minister setting out the information specified in the regulations for each eligible financial year, detailing: greenhouse gas emissions; and energy production; and energy consumption from the operation of the facility.

Time for reporting [52,050] The annual report is due to be given to the regulator by 31 October in each year (NGER Act ss 19(6)(d), 22A(2)(c), 22E(2)(d) and 22X(4)(d)). The report for the fixed charge years is due to be given to the regulator by 15 June in each fixed charge year (NGER Act s 22AA(2)(c)).

Scope of information to be reported

[52,075] Part 4 of the NGER Reporting Regulations sets out the manner and form and information to be included in the report to the regulator. Division 4.3 specifies general information about persons and facilities. Division 4.4 specifies the reporting of scope 1 and scope 2 emissions and energy consumption and production. Division 4.5 specifies the reporting of alternate and additional information. Division 4.6 deals with reporting where no NGER Act s 13 thresholds are met. Division 4.7 deals with reporting of information by other persons.

Reporting information about persons and facilities [52,100] Box 52,100-1 sets out the general information about the person providing the report to be included in the report (NGER Reporting Regulation reg 4.04). Box 52,100-1 — Information to be reported about persons the name and identifying details (if any) of the person; the postal and street addresses of the head office of the person; details of at least one executive officer (or equivalent) of the person, including the officer’s name, telephone number, email address and postal address; if the person is not an individual — the name, position, telephone number, email address and postal address of a contact person for the person; if the person is an individual — the person’s telephone number, email address and residential address, and if the person’s postal address is different from the person’s residential address, the person’s postal address; [page 114] the identifying details for each entity that is a member of the

corporation’s group and that has operational control over one or more of the facilities of the person, together with the identifying details of the holding company if the member has a holding company incorporated in Australia. Box 52,100-2 sets out the general information about facilities to be included in the report (NGER Reporting Regulation reg 4.04A). Box 52,100-2 — Information to be reported about facilities the name of the facility; the facility’s street address (if any); if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken; if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable; if the facility is a network or pipeline facility, the state or territory in which the facility is located; if the facility is a transport facility or a network or pipeline facility which is not a single site facility and which does not have a street address, a brief description of the location of the facility, and the activities constituting the facility; the industry sector to which the activities constituting the facility are attributable; the facility identification number issued by the regulator (if any); (if applicable) the name of the entity of a controlling corporation’s group that has operational control of the facility and specifying the number of days, and the dates, in the reporting year for which the entity has operational control of the facility (if that entity has operational control of the facility for only part of the reporting year); (if applicable) which member of the corporation’s group is reporting about the facility under s 22X of the NGER Act.

Reporting scope 1 and scope 2 emissions [52,125] Liable entities, controlling corporations whose group exceed the NGER Act s 13 thresholds, designated responsible members of a controlling corporation group and holders of a liability transfer certificate must report scope 1 and scope 2 emissions in accordance with Div 4.4 of the NGER Reporting Regulations. Division 4.4 must be read in conjunction with Div 4.5 which requires controlling corporations and responsible members in certain circumstances to aggregate emissions (but also makes allowance for de minimis reporting exemptions and reporting of incidental emissions). Division 4.4 mirrors the NGER Measurement Determination and details the reporting requirement for emissions from particular sources. [page 115]

SCOPE 1 EMISSIONS FROM FUEL COMBUSTION [52,150] All reports are required to include information in relation to emissions from fuel combustion for the facility during the compliance year, identifying: the amount of each greenhouse gas that is emitted during the year, in CO2-e; the total amount of GHG emitted from the combustion of each fuel during the year, in CO2-e; the energy content factor that the person used to measure the amount of each fuel combusted in the facility during the year; and if the person used Method 2, 3 or 4 in the NGER Measurement Determination to estimate the greenhouse gases emitted, the facility specific emission factor or factors that the person used to estimate emissions from the combustion of each fuel during the year.138

SCOPE 1 EMISSIONS FROM PARTICULAR SOURCES [52,175] Subdivision 4.4.3 of the NGER Reporting Regulations provides very detailed rules for reporting GHG emissions from particular sources. Subdivision 4.4.3 must be read with Sch 3 of the NGER Reporting

Regulations. Subdivision 4.4.3 and Sch 3 mesh as set out in Table 52,175-1: Table 52,175-1 — Emissions coverage and sources Regulation Emissions coverage Schedule 3 Source 4.10 Coal mining Part 1 1. Open cut mine 2. Underground mine 3. Decommissioned mine 4.11

Oil or gas

Part 2











































1. Oil or gas exploration 2. Crude oil production 3. Crude oil transport 4. Crude oil refining 5. Natural gas production or processing (other than venting or flaring) 6. Natural gas transmission 7. Natural gas distribution 8. Natural gas production or processing — flaring 9. Natural gas production or processing — venting [page 116]

4.12 4.13

Carbon capture and storage Carbon capture and storage





Part 3

1. Cement clinker production 2. Lime production





















4.14

Chemical products

Part 4

























4.15

Metal products

Part 5



















4.16

Hydrofluorocarbons; sulphur hexafluoride gases



4.17

Waste

Part 6

3. Use of carbonate for production of mineral product (other than cement, clinker, lime or soda ash) 4. Soda ash use 5. Soda ash production 1. Ammonia production 2. Nitric acid production 3. Adipic acid production 4. Carbide production 5. Chemical or mineral production (other than carbide production) using carbon reductant or carbon anode 1. Iron, steel or other metal production using integrated metalworks 2. Ferroalloys production 3. Aluminium production 4. Production of other metals

1. Solid waste disposal on land



















2. Wastewater handling — Industrial 3. Wastewater handling — domestic or commercial 4. Waste incineration

4.17A

Uncertainty



[page 117]

Regulation 4.06 permits a person reporting as a participant in a designated joint venture in relation to a facility of the designated joint venture to refer to information reported by any other participant in the designated joint venture. The report must state the name and identifying details of the other participant who provided the report.

Example — reporting GHG emissions from coal mining [52,200] Regulation 4.10 must be read with Sch 3 of the NGER Reporting Regulations, because the report under the Regulations is limited to emissions during the compliance year from any source listed in Pt 1 of Sch 3. Part 1 of Sch 3 relevantly lists the following sources: source 1 — open cut mine; source 2 — underground mine; and source 3 — decommissioned underground mine. A liable entity is not required to report emissions from a decommissioned underground mine. The report for a coal mine must include information about emissions from the facility during the year, and identify: the type of the source; the methods in the NGER Measurement Determination used to estimate the emissions from the source; and

the total amount of greenhouse gas emitted from the source, in CO2-e, and if one or more GHG is emitted from the source during the reporting year, the amount of each GHG that is emitted, in CO2-e. The report for an underground mine must also include the following information (Box 52,200-1): Box 52,200-1 — Information to be reported for underground coal mines Item Method Matters to be identified 1 Method 1 for the source, as (a) the location of the mine by set out in the NGER state or territory Measurement Determination139 (b) the tonnes of raw coal produced (c) the tonnes of coal mine waste gas (CO2-e) flared [page 118] 2

Method 4 for the source, as set out in the NGER Measurement Determination





(a)

the location of the mine by state or territory

(b)

the tonnes of raw coal produced the tonnes of methane (CO2e) and the tonnes of carbon dioxide captured for energy production on site the tonnes of methane (CO2e) and the tonnes of carbon dioxide captured and transferred off site the tonnes of methane (CO2e) and the tonnes of carbon dioxide flared

(c)

(d)



(e)





The report for an open cut mine must also include the following information (Box 52,200-2): Box 52,200-2 — Information to be reported for open cut coal mines Item Method Matters to be identified

Item

Method

Matters to be identified

1

Method 1 for the source, as set out in the NGER Measurement Determination

(a) the location of the mine by state or territory









2

Methods 2 and 3 for the source, as set out in the NGER Measurement Determination





















(b) the tonnes of raw coal produced (c) the tonnes of coal mine waste gas flared (a) the location of the mine by state or territory (b) the tonnes of raw coal produced (c) the tonnes of methane (CO2e) and the tonnes of carbon dioxide captured for energy production on site (d) the tonnes of methane (CO2e) and the tonnes of carbon dioxide captured and transferred off site (e) the tonnes of methane (CO2e) and the tonnes of carbon dioxide flared (f) the tonnes of methane (CO2e) and the tonnes of carbon dioxide vented

Australian Coal Research Limited, through the Australian Coal Association Research Program (ACRAP, 2011), provides “Guidelines for the implementation of Methods 2 and 3 for open cut coal mine fugitive GHG emissions reporting.” [page 119]

Reporting energy production [52,225] Liable entities are not required to report energy production in their report under s 22A of the NGER Act.140

If a person produces energy in the operation of a facility, the report to the regulator must include information for the facility identifying the type and amount of energy content of the energy produced during the compliance year. However, energy production is generally only reported in circumstances where the operation of the facility consumes energy during a reporting year and to the extent of the electricity generated for the facility: if a generating unit for the facility has the capacity to produce 0.5 megawatts or more of electricity and generates more than 100,000 kilowatt hours of electricity in a reporting year, by that unit; or if there is more than 1 generating unit for the facility, each of which has the capacity to produce 0.5 megawatts or more of electricity and each of which generates more than 100,000 kilowatt hours of electricity in a reporting year, by each of those units.141 The rules for reporting energy production are set out in Box 52,225-1. Box 52,225-1 — Information to be reported about the production of energy production of electricity using any of the following methods: — thermal generation; — geothermal generation; — solar generation; — wind generation; — water generation; or — biogas generation. the amount and energy content of the electricity that was produced from the operation of the facility during the reporting year, using 1 or more of the above methods, for each of the following purposes: — for use for the purposes of the operation of the facility; — for use outside the operation of the facility other than for supply to an electricity transmission or distribution network; — for use outside the operation of the facility for supply to an electricity transmission or distribution network. [page 120]

Reporting energy consumption [52,250] Rules for reporting energy consumption are set out in Box 52,2501. Box 52,250-1 — Information to be reported about the consumption of energy142 the amount and energy content of the energy type consumed by means of combustion for: — producing electricity in generating units each of which has the capacity to produce 0.5 megawatts or more of electricity and each of which generates more than 100,000 kilowatt hours of electricity in a reporting year; — producing a chemical product or metal product; — transport, other than transport that involves the consumption of international bunker fuel; — a purpose other than a purpose mentioned in subparagraphs (i) or (ii) or transport. the amount and energy content of the energy type consumed by a means other than combustion, if that amount: — exceeds the reporting thresholds mentioned in the NGER Measurement Determination for this paragraph; — is not reported elsewhere under the regulations. the criteria in the NGER Measurement Determination used to estimate the amount and energy content of the energy type consumed. the methods in the NGER Measurement Determination used to estimate greenhouse gas emissions from the consumption of the energy. the amount and energy content of the energy type consumed during the year to produce any chemical or metal product during a year: — for its carbon content in a chemical process; or — as feedstock. the amount and energy content of the energy type consumed in the

production during the year of any chemical product containing carbon. Liable entities are not required to report energy consumption in their report under s 22A of the NGER Act (reg 4.22(1A) of the NGER Reporting Regulations). However, if the consumption of energy produces a covered emission (within s 30 of the Clean Energy Act 2011 (Cth)), then the liable entity must include the following information in its report for the facility under s 22A: the amount and energy content of the energy type consumed by means of combustion; the criteria in the NGER Measurement Determination used to estimate the amount and energy content of the energy type consumed; and the methods in the NGER Measurement Determination used to estimate greenhouse gas emissions from the consumption of the energy. [page 121] If energy is consumed in a cogeneration process that produces at least 30 megawatts of electricity, the report must identify the amount and energy content of the energy type consumed to produce the electricity and the other product during the year.143

Reporting primary or secondary fuels and energy commodities [52,275] If the operation of the facility produces fuel or an energy commodity that is mentioned in Sch 1 to the NGER Reporting Regulations and is not classified as being a primary or secondary fuel or energy commodity, the report to the regulator must state whether the person nominates the fuel to be a primary fuel or energy commodity or a secondary fuel or energy commodity.144

Other general reporting requirements

[52,300] Division 4.5 specifies further general reporting requirements for reports: reporting aggregated amounts from facilities (reg 4.25); reporting percentages of emissions and energy (reg 4.26); reporting about incidental emissions and energy (reg 4.27); reporting for facilities that are networks and pipelines (reg 4.28); reporting for vertically integrated production process facilities (reg 4.29); reporting about contractors (reg 4.30); reporting a change in principal activity for a facility (reg 4.31).

REPORTING AGGREGATED AMOUNTS FROM FACILITIES [52,325] Where the report of a liable entity or controlling corporation includes one or more facilities whose operation emits GHG of less than 25 kilotonnes, or consumes or produces less than 100 terajoules of energy, and all of those facilities are within one state or territory and attributable to one industry sector, then a report under NGER Act s 19 or 22X may include the greenhouse gas emissions, and consumption and production of energy, from the operation of the facilities as aggregated amounts for all facilities for which a member of the group has operational control or the business unit has administrative responsibility. The data may be aggregated either by reference to a member of the corporation’s group or by reference to a business unit (but not both). If data is aggregated, the report does not need to include that information separately for each facility. If reporting aggregated amounts, the report must identify the member with operational control or business unit with administrative responsibility, each of the facilities for which the member or the business unit has operational control and the state or territory to which the facility’s activities are attributable. If the facility is a transport facility or a network or pipeline facility, the report must identify the street address of the facility (if any) or if the facility does not have a street address and is not a single site facility, the report must provide a brief description of the activities constituting the facility.

[page 122] If the facility is not a transport facility or a network or pipeline facility, the report must identify either the street address of the facility (if any) or the latitude and longitude of the site where the activities constituting the facility are undertaken.

REPORTING PERCENTAGES OF EMISSIONS AND ENERGY [52,350] Reporting percentages under reg 4.26 of the NGER Reporting Regulations applies only to NGER Act s 19 reports by controlling corporations. Before adopting an estimated percentage approach in lieu of any other method under the NGER Measurement Determination, the following conditions must be met: the operation of a facility must emit GHG of three kilotonnes or less or consume or produce 15 terajoules or less of energy; the GHG emissions and consumption and production of energy from the operation of the facility each relevantly comprise less than two per cent of the group’s total GHG emissions and consumption and production of energy; the controlling corporation is not required to collect or provide information about the greenhouse gas emissions or the consumption or production of energy from the operation of the facility under any other commonwealth, state or territory law; and the total of the GHG emissions and consumption and production of energy from the operation of all the facilities to be reported under reg 4.26 is relevantly less than five per cent of the group’s total GHG emissions and consumption and production of energy. An estimated percentage report must identify the number of facilities for which the report provides the estimate. It may include the GHG emissions, energy consumption and energy production for all such facilities as an estimate of the percentage of the group’s total GHG emissions, energy consumption and energy production.

REPORTING ABOUT INCIDENTAL EMISSIONS

AND ENERGY [52,375] Reporting incidental emissions and energy under reg 4.27 applies to a report provided to the regulator under ss 19, 22A, 22E, 22G or 22X of the NGER Act, if any facility of the person reporting has an emission of GHG or consumption or production of energy that is incidental to the total GHG emissions or consumption or production or energy by the facility. Emissions of GHG will be considered incidental if: emissions from the consumption of a particular fuel or energy commodity or, if the emissions are not attributable to a particular fuel or energy commodity, from a source, is less than 0.5 per cent of the total amount of GHG emitted from the operation of the facility and 3 kilotonnes CO2-e for a year; the total emissions is less than the lesser of two per cent of the total amount of GHG emitted from the operation of the facility or 12 kilotonnes CO2-e; and information about those emissions is not required to be collected or provided under any other Commonwealth, state or territory law; and the person provides a statement that measurement of emissions of GHG from these sources using another method or criteria in the NGER Measurement Determination would cause significant hardship or expense. [page 123] Consumption and production of energy will be considered incidental if: consumption or production of a particular fuel or energy commodity from the operation of the facility is less than 0.5 per cent of the total amount of energy consumed or produced from the operation of the facility and 15 terajoules of energy for a year; the total consumption or production of all fuel or energy commodities is less than the lesser of two per cent of the total amount of energy consumed or produced from the operation of the facility or 60 terajoules; information about the consumption or production of those fuels or energy commodities is not required to be collected or provided under any other commonwealth, state or territory law;

the person provides a statement that measurement of the consumption or production of those fuel or energy commodities using another method or criteria in the NGER Measurement Determination would cause the person significant hardship or expense; and it is reasonable to conclude that significant hardship or expense would occur. Where the conditions for reporting about incidental emissions and energy are satisfied, the report may include an estimate of the GHG emissions and the consumption or production of energy from the operation of the facility that are incidental using criteria specified in the NGER Measurement Determination. However, a liable entity may only report incidental emissions in a report provided under s 22A if a second report is provided under ss 19, 22E, 22G or 22X in relation to the same facility.

REPORTING FOR FACILITIES THAT ARE NETWORKS AND PIPELINES [52,400] Information about GHG emissions or production or consumption of energy for a facility is required to be apportioned if the facility is physically located in more than one state or more than one state and one territory and the facility is in one of the following industry sectors: Electricity distribution (263); Electricity transmission (262); Gas supply (270); Pipeline and other transport (502); Telecommunications services (580); Water supply, sewerage and drainage services (281). The apportionment must be in respect of each state and territory (if any) that the facility is physically located in and must include information as to the apportionment.

REPORTING FOR FACILITIES THAT ARE VERTICALLY INTEGRATED PRODUCTION

PROCESSES [52,425] Regulation 4.29 applies to facilities that are vertically integrated production processes. A vertically integrated production process is defined as: a production process with 2 or more stages involving 2 or more facilities: (a) that occurs at 1 or more locations; and (b) except for the final stage in the production process — where the output of 1 facility in a stage in the production process is the input for another facility in another stage in the process; and

[page 124] (c) where output of the facility in the final stage of the production process results in the production of a product or service that is sold on the market.145

If facilities of a reporting person include facilities that are a vertically integrated production process and the production process is located in only one state or territory, including the offshore waters adjacent to the state or territory, then the person may aggregate the information required to be provided from the operation of all the facilities in the production process. If data is aggregated, the report does not need to include that information separately for each facility. The report of aggregated data must identify each facility in the vertically integrated production process and apportion information into a relevant ANZSIC division applicable to each of the facilities within the production process. Table 52,425-1 sets out ANZSIC divisions.146 Item 1 2

Table 52,425-1 — ANZSIC divisions ANZSIC alpha ANZSIC divisions character A Agriculture, forestry and fishing B Mining

3 4

C D

5 6 7 8 9

E F G H I

Manufacturing Electricity, gas, water and waste services Construction Wholesale trade Retail trade Accommodation and food services Transport, postal and warehousing

10

J

Information, media and telecommunications Financial and insurance services Rental, hiring and real estate services Professional, scientific and technical services

11 12 13

K L M

14 15 16 17 18

N O P Q R

Administrative and support services Public administration and safety Education and training Health care and social assistance Arts and recreation services

19

S

Other services

Aggregated data about contractors may also be included in the aggregated data for a vertically integrated production process. [page 125]

REPORTING ABOUT CONTRACTORS [52,450] If a contractor conducts an activity or activities that form part of a facility during a compliance year and the contractor’s activity cause the production of 25,000 t or more of GHG emissions or the consumption or production of 100 terajoules or more of energy, then the report (in addition to all reported information) must include for each contractor that conducts such activity or activities: the name of each contractor; each contractor’s identifying details; the total GHG emissions produced by each contractor’s activity or activities; the total energy produced by each contractor’s activity or activities, and the total energy consumed by each contractor’s activity or activities.147

REPORTING A CHANGE IN PRINCIPAL ACTIVITY FOR A FACILITY

[52,475] The principal activity of a facility is the activity that results in the production of a product or service that is produced for sale on the market and produces the most value for the facility out of any of the activities forming part of the facility. If the reported principal activity of a facility ceases for a period of least two years to be the principal activity of the facility, then a new principal activity and industry sector must be identified and recorded (including the date that the principal activity changed) and included in the report for the compliance year in which the change occurred.148

Reporting if no group thresholds met [52,500] If a controlling corporation’s group does not meet the NGER Act s 13 thresholds during a compliance year, the report must include a statement to that effect.

Reporting of information by another person [52,525] Section 20 of the NGER Act provides a mechanism for a registered corporation to exclude from its report information determined by the regulator to be provided by another person. Either the registered corporation or the other person may apply to the regulator for the determination. The application must be made in the manner and form specified in Div 4.7 of the NGER Reporting Regulations. If the regulator is satisfied of the following matters, the regulator may, in writing, determine that the information is to be provided by the other person (and not the registered corporation): (a) information that the registered corporation would, … be required to include in a report … is information that: (i)

is not in the possession or under the control of the registered corporation; and

(ii) is in the possession or under the control of another person with whom the registered corporation, or a member of the corporation’s group, has a contractual relationship; and

[page 126] (b) the registered corporation: (i)

is not entitled to acquire the information from the other person; or

(ii) is entitled to acquire the information from the other person only because the other person is obliged to assist the corporation to comply with this Act; and (c) the other person has refused to give the information to the registered corporation; and (d) any other requirements specified in the regulations have been met;

The regulator is obliged to give written notice of the determination (or decision refusing to make a determination) to each of the registered corporation and the other person. If a determination is made, the other person must provide the information as specified to the regulator on or before the date specified in the determination. The application to make a s 20 determination must be in writing and: specify the authenticated identity of the registered corporation using a method (if any) approved by the regulator and notified in the Gazette; state the business name, head office postal address, identifying details and name, position, telephone number, email address and postal address of a contact person for both the registered corporation and the other person; detail the information that would be required to be included in the report of the registered corporation that is the subject of the application and not in the possession or under the control of the registered corporation but is under the control of the other person; include a statement to the effect that that information is information that the registered corporation is not entitled to acquire from the other person or alternatively is entitled to acquire from the other person only because the other person is obliged to assist the corporation to comply with the Act, and include written documentation, or a statement to the effect, that the other person has refused to give the information (including any reasons given for the refusal) and the other person supports, or does not support, the application.149

Reporting liability and related matters under the Clean Energy Act

2011 (Cth) [52,550] A registered person, being a liable entity (or a person who is likely to be a liable entity), must include in the report under ss 22A or 22AA of the NGER Act information as required in Div 4.6A of the NGER Reporting Regulations (Boxes 52,550-1–52,550-5). [page 127] Box 52,550-1 — Information required in s 22A report Each section in Pt 3 of the Clean Energy Act 2011 (Cth) under which the person is a liable entity (reg 4.32C(1)); For each facility under the operational control of the person: — a statement about whether the person had operational control of the facility for the whole of the reporting year or only part of the year — if the person had operational control of the facility for only part of the reporting year, the number of days, and the dates, in the year that the person had operational control of the facility (reg 4.32C(2)); The person’s emissions number (reg 4.32F(1)); For each facility of the person that passes the relevant threshold test under Pt 3 of the Clean Energy Act 2011 (Cth): — the total amount of covered emissions, legacy emissions, and exempt landfill emissions, from the operation of the facility; — the provisional emissions number for the facility (reg 4.32F(2)); Whether the person is a participant in a designated joint venture under Div 5 of Pt 3 of the Clean Energy Act 2011 (Cth) that has a facility, and, if so: — the participating percentage of the person in relation to the facility, determined under ss 76 or 77 of the Clean Energy Act; and — the person’s provisional emissions number in relation to the facility as calculated under ss 21(2) or 24(2) of the Clean Energy Act (reg 4.32G);

For each facility of a designated joint venture under Div 5 of Pt 3 of the Clean Energy Act 2011 (Cth) in which the person is a participant: — a statement about whether the designated joint venture had the facility for the whole of the reporting year or only part of the year; — if the designated joint venture had the facility for only part of the reporting year — the number of days, and the dates, in the year that the designated joint venture had the facility (reg 4.32C(3)); Whether a liability transfer certificate in relation to a facility was issued to the person under Div 6 of Pt 3 of the Clean Energy Act 2011 (Cth) and, if so the day the certificate came into force and whether the certificate was issued under Subdivision A or B of that Division (reg 4.32C(4)); The person’s obligation transfer number (OTN) (reg 4.32D); If a facility of a person emits covered emissions from the operation of the facility that is in the Joint Petroleum Development Area or the Greater Sunrise unit area: — whether the facility is in the Joint Petroleum Development Area or the Greater Sunrise unit area or both; — the prescribed percentage in relation to the facility for the year — the unadjusted provisional emissions number in relation to covered emissions from the operation of the facility for the year; and — the adjusted provisional emissions number in relation to covered emissions from the operation of the facility for the year (reg 4.32H); If a facility of the person is a large gas consuming facility: — each OTN quoted for natural gas consumed at the facility during the reporting year; and — for each OTN quotation, the amount of natural gas (in gigajoules) supplied for use at the facility (reg 4.32J). [page 128]

Box 52,550-2 — Information required in s 22AA report (reg 4.32N) Using provisional emissions number for previous year to work out an interim emissions number for the reporting year A statement that the interim emissions number is based on a provisional emissions number or numbers for a particular facility or facilities for the previous year; The provisional emissions number for the previous year for each facility; If more than one provisional emissions number was used to work out the interim emissions number, the total of those provisional emissions numbers; The interim emissions number for the reporting year calculated under s 26(3) of the Clean Energy Act 2011 (Cth). Estimating provisional emissions number to work out an interim emissions number for the reporting year A statement that the interim emissions number is based on an estimate of the provisional emissions number for the reporting year; The estimate that is the interim emissions number for s 126(4)(a) of the Clean Energy Act 2011 (Cth); If a provisional emissions number or numbers for a particular facility or facilities for the previous year could have been used to work out the interim emissions number under s 126(2) and (3) of the Clean Energy Act 2011 (Cth), the reasons why the provisional emissions number or numbers for the previous year were not used to work out the interim emissions number; How the estimate was worked out, including an explanation of: — any calculations that relate to the estimate; — the method of measurement used to work out the estimate; — any assumptions that were made for the purpose of working out the estimate; — the reasons for the choice of method and the making of the assumptions. Box 52,550-3 — Information required from a natural gas supplier in s

22A report (reg 4.32K) Confirmation that the person has a provisional emissions number under s 33 of the Clean Energy Act 2011 (Cth); The person’s provisional emissions number; The total amount of natural gas (in gigajoules) supplied by the person that is attributable to the provisional emissions number; The total amount of natural gas (in gigajoules) for which an OTN was quoted to the person; For each OTN quoted: — the OTN; and — the total amount of natural gas (in gigajoules) supplied in relation to quotations of that OTN; The methods used to calculate the potential greenhouse gas emissions embodied in the amount of natural gas supplied by the person that is attributable to the provisional emissions number; [page 129] If the default method in s 7B(2) of the NGER Act is used: — the amount of natural gas (in gigajoules), measured in accordance with the NGER Measurement Determination to which the method was applied; — the value, specified in the determination made by the Minister under s 7B(2) that relates to the amount of natural gas; — the amount of greenhouse gas emissions (in CO2-e) that would be released into the atmosphere as a result of the combustion of the natural gas; If the prescribed alternative method in s 7B(3) of the NGER Act is used: — the amount of natural gas (in gigajoules), measured in accordance with the NGER Measurement Determination to which the method was applied — the emission factor mentioned in the NGER Measurement Determination that the person used to estimate the potential

greenhouse gas emissions embodied in the natural gas; — the amount of greenhouse gas emissions (in CO2-e) that would be released into the atmosphere as a result of the combustion of the natural gas; the sum of the amounts of GHG (in CO2-e). Box 52,550-4 — Information required from a natural gas supplier in s 22AA report (reg 4.32N) The interim emissions number for the relevant eligible financial year worked out under s 126(7) of the Clean Energy Act 2011 (Cth); the amount of natural gas (in gigajoules), measured in accordance with the NGER Measurement Determination, that was supplied during the relevant eligible financial year, assuming that the relevant eligible financial year ended on 31 March in that financial year. Box 52,550-5 — Information required from an OTN holder in s 22A report (reg 4.32L) The section of the Clean Energy Act 2011 (Cth) under which the person has a provisional emissions number; The person’s provisional emissions number; The total amount of natural gas (in gigajoules) supplied to the person that is attributable to the provisional emissions number, before any netted-out numbers are applied under s 35(4) of the Clean Energy Act 2011 (Cth); [page 130] For each natural gas supplier that supplied natural gas to the person for which an OTN was quoted: — the amount of natural gas (in gigajoules) supplied by the supplier and — the methods used to calculate the potential greenhouse gas emissions embodied in each amount of natural gas supplied; for each OTN quotation for which the person used the default

method in s 7B(2) of the NGER Act: — the amount of natural gas (in gigajoules), measured in accordance with the NGER Measurement Determination to which the method was applied — the value, specified in the determination made by the Minister under s 7B(2) that relates to the amount of natural gas; For each OTN quotation for which the person used the prescribed alternative method in s 7B(3) of the NGER Act: — the amount of natural gas (in gigajoules) to which the method was applied; — the emission factor mentioned in the NGER Measurement Determination that the person used to estimate the potential greenhouse gas emissions embodied in the natural gas; For each amount of natural gas supplied to the person for which an OTN was quoted, the amount of GHG emissions (in CO2-e) that would be released into the atmosphere as a result of the combustion of the amount of natural gas; The sum of the amounts of greenhouse gases (in CO2-e); If the person has one or more netted-out numbers under s 35(5)–(9) of the Clean Energy Act 2011 (Cth), the subsection or subsections of the Clean Energy Act 2011 (Cth) under which the person has a netted-out number or numbers and the amount of natural gas (in gigajoules) that is attributable to netted-out numbers under each subsection; The methods used to calculate the potential greenhouse gas emissions embodied in each amount of natural gas that is attributable to netted-out numbers; For each netted-out number for which the person used the default method in s 7B(2) of the NGER Act: — the amount of natural gas (in gigajoules), measured in accordance with the NGER Measurement Determination to which the method was applied; — the value, specified in the determination made by the Minister under s 7B(2) that relates to the amount of natural gas; For each netted-out number for which the person used the prescribed alternative method in s 7B(3) of the Act:

— the amount of natural gas (in gigajoules) to which the method was applied — the emission factor mentioned in the NGER Measurement Determination that the person used to estimate the potential greenhouse gas emissions embodied in the natural gas; [page 131] The sum of the amounts of natural gas (in gigajoules) attributable to netted-out numbers and for each such amount of natural gas the amount of greenhouse gas emissions (in CO2-e) that would be released into the atmosphere as a result of the combustion of the amount of natural gas; The sum of the amounts of greenhouse gases (in CO2-e); The person’s provisional emissions number after that number has been reduced by the total of the person’s netted-out numbers under s 35(4) of the Clean Energy Act 2011 (Cth); If the person has a netted-out number under s 35(6) of the Clean Energy Act 2011 (Cth), details that will identify the facility or facilities where the natural gas is used (if known); and for each such facility, the amount of greenhouse gas emissions that are attributable to the netted-out number and the facility.

Special reports [52,575] The NGER Act makes limited provision for any alterative basis for reporting, however it does allow for reporting in relation to greenhouse gas projects150 and offsets of greenhouse emissions.

GREENHOUSE GAS PROJECTS [52,600] A registered corporation may provide a report may the regulator in the approved manner and form and containing prescribed information relating to the reduction of GHG emissions and removals of GHG from a greenhouse gas project that the corporation, or one or more members of the corporation’s group, has undertaken during a financial year (or such longer period allowed

by the regulator).151

OFFSETS OF GREENHOUSE EMISSIONS [52,625] A registered corporation may provide a report to the regulator in the approved manner and form and containing prescribed information relating to the offsets152 of GHG emissions by the corporation, or one or more members of the corporation’s group, during that year.153

Form for reporting [52,650] Reporting is required in a manner and form approved by the regulator. [page 132]

On-line report [52,675] Reports to the regulator are submitted on-line using the Online System for Comprehensive Activity Reporting (OSCAR). OSCAR is a web-based data-gathering and benchmarking tool that standardises the calculation of greenhouse gas emissions to produce comparable datasets. Organisations input and update their energy and greenhouse data online.

Penalty for failing to report [52,700] The penalty for failing to accurately report is up to 2000 penalty units (currently $220,000) for an individual or controlling corporation, and up to 10,000 penalty units (currently $1,100,000) for a liable entity (other than an individual). A potential further penalty of 100 penalty units per day (currently $11,000 per day) applies for each day a report is inaccurate. The chief executive officer of a corporation may also be liable for the corporation’s failure to report.

Deregistration [52,725] A registered person may apply to the regulator to be deregistered.154 The application for deregistration must be in writing in the form approved by the regulator and contain the information required by the Regulations. Box 52,725-1 lists the information sought for deregistration (NGER Reporting Regulations reg 3.05). The regulator must remove the name of the registered person from the register if the regulator is satisfied that: the person is not a liable entity for the financial year in which the application is made and is not likely to be a liable entity for any of the next two financial years; the person does not hold a reporting transfer certificate; and the person has complied with the person’s obligations under the NGER Act. The regulator is required to given notice of the regulator’s decision on the application. The regulator may also remove a person’s name from the register if the regulator is satisfied that the person has ceased to exist. The registered person ceases to be registered under the NGER Act when the regulator has removed the name from the register. [page 133] Box 52,725-1 — Information required in a deregistration application the applicant’s name and identifying details (if any); if the applicant is an individual, the applicant’s telephone number, email address and residential address and if the applicant’s postal address is different from the applicant’s residential address, the applicant’s postal address; if the applicant is not an individual, the name, position, telephone number, email address and postal address of a contact person for the applicant; if the applicant is a body corporate, details of at least one executive

officer (or equivalent) of the body corporate, including the officer’s name, telephone number, email address and postal address; if the applicant is a trust, the name and postal address of each trustee; if the applicant is a corporation sole, the name and postal address of the individual who makes up the corporation sole; if the applicant is a body politic or local governing body, the name and postal address of at least one officeholder of the body politic or local governing body; a statement that the applicant does not hold a reporting transfer certificate; a statement that the applicant has complied with the applicant’s obligations under the NGER Act; a statement that the applicant is not, and is not likely to be, a liable entity for the financial year in which the application is made and the two financial years following the financial year in which the application is made; if a personal identification number has been issued by the regulator to the applicant, the applicant’s personal identification number; if there are likely to be covered emissions from the operation of the facility (for which the applicant was registered) for the financial year in which the application is made; and the two financial years following the financial year in which the application is made, the application must also set out an estimate of the amount of those covered emissions, and a statement about why the covered emissions will be unlikely to exceed the emissions threshold; if the applicant is unlikely to supply natural gas in the financial year in which the application is made and the two financial years following the financial year in which the application is made, the application must also set out a statement about why the applicant is unlikely to do so; if the applicant is a controlling corporation of a group, the application must also set out the identifying details of each affected member of the group and provide a statement that the controlling corporation’s group is unlikely to meet any of the thresholds under s 13 of the NGER Act for the financial year in which the application is made and the two financial years following the financial year in

which the application is made and include any relevant estimates of energy production, energy consumption, greenhouse gas emissions and emissions-producing activities resulting from the corporation’s group; any relevant information or data that relates to the foregoing information. [page 134]

Declaration by the regulator of facilities and/or operational control [52,750] The regulator may, upon application or on its own initiative, declare for controlling corporations and non-group entities, that an activity or series of activities (including ancillary activities) are a facility (NGER Act ss 54 and 54A) and/or that a corporation or non-group entity has operational control of a facility (NGER Act ss 55 and 55A).

DECLARATION OF A FACILITY — CORPORATE GROUP [52,775] The regulator may, on its own initiative or following an application by a controlling corporation of a corporate group, declare that an activity or series of activities (including ancillary activities) are a facility.155

Application to the regulator by controlling corporation to declare a facility [52,800] An application by a controlling corporation must: be made in a manner and form approved by the regulator; identify the controlling corporation; and identify the facility for which a declaration is sought.156

Box 52,800-1 sets out the information that must be included in the s 54 application. Box 52,800-1 — Information required in a NGER Act s 54 application for regulator to declare a facility the applicant’s name, identifying details if any (ABN, ACN, ARBN or trading name and street address), and (if the applicant is not an individual) their head office postal address; a description of the activities that are the subject of the application; the name of the proposed facility; a statement setting out which of the proposed facility’s activities are proposed to be the principal activity (ie the activity that results in the production of a product or service that is produced for sale on the market, and produces the most value for the series out of any activity in the series)157 and ancillary activities; [page 135] a statement about whether the activities are, or are proposed to be, carried out at a single physical location, a series of physical locations or at different sites; for each of the activities that are the subject of the application: — the street address, or other description of the site where the activities will be carried out; — if the activities will not constitute a transport facility, or a network or pipeline facility, the latitude and longitude of the site where the activities will be carried out; — if the activities will constitute a transport facility — the State or Territory to which the activities are attributable; — if the activity constitutes a network or pipeline facility — the state or territory (may be more than one) in which it is located; if the activities are, or are proposed to be, carried out at a series of physical locations or at different sites — a statement explaining how the activities at the different physical locations or different sites form, or will form, a single undertaking or enterprise;

a statement about whether another activity or series of activities are, or will be, the subject of a further application to be declared a facility that is held by a corporate group (under NGER Act s 54) or held by a non-group entity (under NGER Act s 54A) in relation to the same site; if other activities are, or will be, the subject of a further application to be declared a facility that is held by a corporate group (under NGER Act s 54) or held by a non-group entity (under NGER Act s 54A) in relation to the same site — a statement setting out the details of the other activities and explaining how all of the activities at the site relate, or will relate, to each other; the industry sector to which the activity that is proposed to be the principal activity is attributable under NGER Reporting Regulations reg 2.22;158 the controlling corporation’s telephone number and email address; the following information about the member of the corporation’s group that has overall control in relation to the activity or series of activities that are the subject of the application: — the member’s name, identifying details and postal address; — the name, position, telephone number, email address and postal address of a contact person for the member; and — whether the member is a controlling corporation, or a controlling corporation’s subsidiary covered by NGER Act s 8(3) because it is not also the subsidiary of another body corporate outside the same corporate group.159

Decision on application to declare a facility [52,825] When considering whether to make a declaration that an activity or series of activities are a facility, the regulator must have regard to circumstances in which an activity or activities will form part of a single undertaking or enterprise, and the need for each facility to be distinct from and not overlap with activities that constitute other facilities.160 [page 136] The rules for determining whether an activity or activities will form part of a single undertaking or enterprise are discussed in [50,600]–[50,725].

The regulator must inform the applicant in writing of the decision about whether to declare a facility or refuse the application.161

Declaration of a facility on the regulator’s own initiative [52,850] The regulator may, on its own initiative, declare that an activity or series of activities are a facility by informing (in writing) the person that has, or that the regulator reasonably believes has, operational control of the facility to which the declaration relates.162

DECLARATION THAT A CORPORATION HAS OPERATIONAL CONTROL OF A FACILITY — CORPORATE GROUP [52,875] The regulator may, on its own initiative or following an application by a controlling corporation or another member of the corporation’s group, declare that the controlling corporation or a group member has operational control of a facility.163

Application to the regulator to declare that a corporation has operational control of a facility [52,900] An application by a controlling corporation or its subsidiary must: be made in a manner and form approved by the regulator; identify the company or group member that will have operational control of the facility; and identify the facility for which a declaration is sought.164 Box 52,900-1 sets out the information that must be included in a s 55 application. Box 52,900-1 — Information required in a NGER Act s 55 application for regulator to declare a corporation has operational control

whether the applicant is a controlling corporation, or a controlling corporation’s subsidiary covered by NGER Act s 8(3) because it is not also the subsidiary of another body corporate outside the same corporate group; the applicant’s name, identifying details if any (ABN, ACN, ARBN or trading name and street address), and (if the applicant is not an individual) their head office postal address; for each person that the applicant considers has authority to introduce and implement one or more of the operating policies, health and safety policies, or environmental policies165 in relation to the facility for which the declaration is sought — the name, identifying details if any (ABN, ACN, ARBN or trading name and street address), head office postal address, and the name, telephone number and email address of their contact person; [page 137] evidence showing that the applicant has substantial authority to introduce and implement operating policies and/or environmental policies for the facility. This evidence may consist of details of contracts or arrangements the period for which the declaration is sought, and an explanation if this period is less than a financial year; the name of the facility; if the facility is not a transport facility, or a network or pipeline facility — the facility’s street address or site description, the latitude and longitude of the site where the activities constituting the facility will be carried out, the industry sector166 to which these activities are attributable, and (if the applicant is a group member) the state or territory to which the activities constituting the facility are attributable; if the activity constitutes a network or pipeline facility — the state or territory (may be more than one) in which it is located, and the specified industry sector to which the activities constituting the facility are attributable. The specified industry sectors are — electricity distribution, electricity transmission, gas supply, pipeline and other transport, telecommunications services, and water supply, sewerage and drainage services;167

if the activities will constitute a transport facility — the single state or territory, and the specified industry sector related to transport, to which the activities constituting the facility are attributable, Activities are attributable to a single state or territory if fuel to be consumed in carrying out the activities is purchased in the state or territory. The specified industry sectors are — air and space transport, postal and courier pick-up and delivery services, rail freight transport, rail passenger transport, road freight transport, road passenger transport, scenic and sightseeing transport, waste collection transport, water freight transport, and water passenger transport;168 if the applicant is a controlling corporation — their telephone number and email address; if the applicant is a controlling corporation’s subsidiary—the name, position, telephone number, email address and postal address of a contact person for the applicant, and the controlling corporation’s written consent to the making of the declaration.169 [page 138]

Decision on application to declare that a corporation has operational control of a facility [52,925] When considering whether to make a declaration that a controlling corporation or group member has operational control of a facility, the regulator must have regard to whether the applicant has the authority to introduce and implement one or more of the operating policies, health and safety policies, or environmental policies in relation to the facility for which the declaration is sought.170 The regulator must not declare that a controlling corporation or another member of the corporation’s group has operational control of a facility unless the regulator is satisfied that the corporation or member has substantial authority to introduce and implement operating policies and/or environmental policies for the facility.171 The regulator must not declare that a member of a controlling corporation’s group (other than the controlling corporation) has operational control of a facility on application made by the member unless the controlling corporation has given written consent to the making of the declaration.172

The regulator must inform the applicant in writing of the decision about whether to declare that the applicant has operational control of the facility or refuse the application.173

Declaration of a facility on the regulator’s own initiative [52,950] The regulator may, on its own initiative, declare that a controlling corporation or group member has operational control of a facility relates by informing the controlling corporation or group member in writing.174

DECLARATION OF A FACILITY — NONGROUP ENTITY [52,975] The regulator may, on its own initiative or following an application by a non-group entity, declare that an activity or series of activities (including ancillary activities) are a facility.175

Application to the regulator to declare a facility [53,001] An application by a non-group entity must be made in a manner and form approved by the regulator and identify the facility for which a declaration is sought.176 Box 53,001-1 sets out the information to be included in a s 54A application. [page 139] Box 53,001-1 — Information required in a NGER Act s 54A application the applicant’s name, identifying details if any (ABN, ACN, ARBN or trading name and street address), and (if the applicant is not an individual) their head office postal address; a description of the activities that are the subject of the application; the name of the proposed facility; a statement setting out which of the proposed facility’s activities are proposed to be the principal activity (ie the activity that results in the production of a product or service that is produced for sale on the market, and produces the most value for the series out of any activity

in the series)177 and ancillary activities; a statement about whether the activities are, or are proposed to be, carried out at a single physical location, a series of physical locations or at different sites; for each of the activities that are the subject of the application: — the street address, or other description of the site where the activities will be carried out; — if the activities will not constitute a transport facility, or a network or pipeline facility, the latitude and longitude of the site where the activities will be carried out; — if the activities will constitute a transport facility—the state or territory to which the activities are attributable; — if the activity constitutes a network or pipeline facility — the state or territory (may be more than one) in which it is located; if the activities are, or are proposed to be, carried out at a series of physical locations or at different sites — a statement explaining how the activities at the different physical locations or different sites form, or will form, a single undertaking or enterprise; a statement about whether another activity or series of activities are, or will be, the subject of a further application to be declared a facility that is within a corporate group (under NGER Act s 54) or held by a non-group entity (under NGER s 54A) in relation to the same site; if other activities are, or will be, the subject of a further application to be declared a facility that is within a corporate group (under NGER Act s 54) or held by a non-group entity (under NGER s 54A) in relation to the same site —a statement setting out the details of the other activities and explaining how all of the activities at the site relate, or will relate, to each other; the industry sector to which the activity that is proposed to be the principal activity is attributable under NGER reg 2.22;178 if the applicant is an individual — their telephone number, email address, residential address and postal address (if different); if the applicant is not an individual — the name, position, telephone number, email address and postal address of a contact person for the applicant;179

[page 140]

Decision on application to declare a facility [53,025] When considering whether to make a declaration that an activity or series of activities are a facility, the regulator must have regard to circumstances in which an activity or activities will form part of a single undertaking or enterprise, and the need for each facility to be distinct from and not overlap with activities that constitute other facilities.180 The rules for determining whether an activity or activities will form part of a single undertaking or enterprise are discussed in [50,600]–[50,725]. The regulator must inform the applicant in writing of the decision about whether to declare a facility or refuse the application.181

Declaration of a facility on the regulator’s own initiative [53,050] The regulator may, on its own initiative, declare that an activity or series of activities are a facility by informing the corporation, joint venture or partnership that has, or that the regulator reasonably believes has, operational control of the facility to which the declaration relates in writing.182

DECLARATION THAT A CORPORATION HAS OPERATIONAL CONTROL OF A FACILITY — NON-GROUP ENTITY [53,075] The regulator may, on its own initiative or following an application by a non-group entity, declare that the non-group entity has operational control of a facility.183

Application to the regulator to declare that a nongroup entity has operational control of a facility [53,100] An application by a non-group entity must be made in a manner and form approved by the regulator and identify the facility for which a

declaration is sought.184 Box 53,100-1 sets out the information to be included in a s 55A application. Box 53,100-1 — Information required in a NGER Act s 55A application a statement that the applicant is a non-group entity; the applicant’s name, identifying details if any (ABN, ACN, ARBN or trading name and street address), and (if the applicant is not an individual) their head office postal address; [page 141] for each person that the applicant considers has authority to introduce and implement one or more of the operating policies, health and safety policies, or environmental policies185 in relation to the facility for which the declaration is sought — the name, identifying details if any (ABN, ACN, ARBN or trading name and street address), head office postal address, and the name, telephone number and email address of their contact person; evidence showing that the applicant has substantial authority to introduce and implement operating policies and/or environmental policies for the facility. This evidence may consist of details of contracts or arrangements the period for which the declaration is sought, and an explanation if this period is less than a financial year; the name of the facility; if the facility is not a transport facility, or a network or pipeline facility — the facility’s street address or site description, the latitude and longitude of the site where the activities constituting the facility will be carried out, the industry sector186 to which these activities are attributable, and (if the applicant is a group member) the state or territory to which the activities constituting the facility are attributable; if the activity constitutes a network or pipeline facility — the state or territory (may be more than one) in which it is located, and the specified industry sector to which the activities constituting the facility are attributable. The specified industry sectors are — electricity distribution, electricity transmission, gas supply, pipeline

and other transport, telecommunications services, and water supply, sewerage and drainage services;187 if the activities will constitute a transport facility — the single state or territory, and the specified industry sector related to transport, to which the activities constituting the facility are attributable, Activities are attributable to a single state or territory if fuel to be consumed in carrying out the activities is purchased in the state or territory. The specified industry sectors are — air and space transport, postal and courier pick-up and delivery services, rail freight transport, rail passenger transport, road freight transport, road passenger transport, scenic and sightseeing transport, waste collection transport, water freight transport, and water passenger transport;188 if the applicant is an individual — their telephone number, email address, residential address and postal address (if different); if the applicant is not an individual — the name, position, telephone number, email address and postal address of a contact person for the applicant; [page 142] evidence showing that the applicant has authority to introduce and implement operating policies, health and safety policies, and environmental policies189 in relation to the facility;190

Decision on application to declare that a non-group entity has operational control of a facility [53,125] When considering whether to make a declaration that a non-group entity has operational control of a facility, the regulator must have regard to whether the applicant has the authority to introduce and implement one or more of the operating policies, health and safety policies, or environmental policies in relation to the facility for which the declaration is sought.191 The regulator must not declare that a non-group entity has operational control of a facility unless the regulator is satisfied that the corporation or member has substantial authority to introduce and implement operating policies and/or environmental policies for the facility.192

The regulator must inform the applicant in writing of the decision about whether to declare that the applicant has operational control of the facility or refuse the application.193

Declaration of a facility on the regulator’s own initiative [53,150] The regulator may, on its own initiative, declare that a non-group entity has operational control of a facility by informing the entity in writing.194 1 After registration, a controlling corporation is called a “registered corporation”, National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) s 7. 2 After registration, a liable entity (including a person who may be a liable entity) and a registered corporation are each called a “registered person”, NGER Act s 7. 3 NGER Act s 7. 4 A constitutional corporation is one to which s 51(xx) of the Constitution applies: NGER Act s 7, Constitution s 51(xx). 5 NGER Act s 7. 6 NGER Act s 7. 7 NGER Act s 8. 8 NGER Act s 8(4). 9 NGER Act s 8(2). 10 NGER Act s 15A. 11 Clean Energy Act s 5, NGER Act s 7. 12 NGER Act s 15A(2). 13 NGER Act s 15AA. 14 NGER Act s 13(1). 15 NGER Act s 13(1)(d). 16 NGER Act s 13(3)–(4). 17 “Interim emissions number” is defined in s 7 of the NGER Act to have the meaning prescribed in the Clean Energy Act 2011 (Cth). In the Clean Energy Act 2011 (Cth) “interim emissions number” has the meaning given by s 126 of the Clean Energy Act 2011 (Cth). 18 NGER Act s 15AA(1). 19 GHG Protocol, published by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI).

20 The case also raised potential constitutional issues, but these were not canvassed in the judgment. 21 Australian Government, “Securing a Clean Energy Future: The Australian Government’s Climate Change Plan” (Policy Paper, Australian Government, 10 July 2011) xiii. 22 In the definitions in s 7 of the Clean Energy Act 2011 (Cth), “covered omissions” is defined to have the meaning given in s 30 of the Clean Energy Act 2011 (Cth). 23 Clean Energy Act 2011 (Cth) s 30(2). 24 Clean Energy Act 2011 (Cth) s 30(3). 25 Clean Energy Act 2011 (Cth) s 30(4)(a). 26 Clean Energy Act 2011 (Cth) s 30(4)(b). 27 Clean Energy Act 2011 (Cth) s 30(4)(c). 28 Clean Energy Act 2011 (Cth) s 30(4)(d). 29 Clean Energy Act 2011 (Cth) s 30(4)(e). 30 Clean Energy Act 2011 (Cth) s 30(4)(f), s 30(5). 31 Clean Energy Act 2011 (Cth) s 30(6)–(7). 32 Clean Energy Act 2011 (Cth) s 30(8). 33 Clean Energy Act 2011 (Cth) s 30(9)–(9A). 34 Clean Energy Act 2011 (Cth) s 30(10). 35 Clean Energy Act 2011 (Cth) s 30(11)–(12). 36 Clean Energy Act 2011 (Cth) s 30(1). 37 Clean Energy Act 2011 (Cth) s 31 replicates s 30(1)(c). 38 Clean Energy (Consequential Amendments) Act 2011 (Cth) items 334, 335 and 339 of Sch 1, General amendments — Pt 2 amendments commencing on 1 July 2012. 39 Both as a matter of public policy and as a matter of best practice legislative drafting. 40 For example, nitrogen trifluoride (NF ) is recognised in the California Emissions Trading Scheme as 3 a greenhouse gas. 41 Refer to Table 32,450-1. 42 NGER Act s 7; Clean Energy Act s 5; UNFCCC Art 5(1). 43 Gases that deplete the ozone in the upper atmosphere include the radical catalysts: nitric oxide (NO), nitrogen oxide (NOx), hydroxyl (OH), atomic chlorine (Cl), and atomic bromine (Br), (collectively, ozone depleting substances (ODSs)) and elements of many man-made organohalogen compounds, especially chlorofluorocarbons (CFCs) and bromofluorocarbons (BFCs). See Mario J Molina and F Sherwood Rowland, “Stratosheric sink for chlorofluoromethanes: chlorine atomc-atalysed destruction of ozone” (1974) 249 Nature 810; F Sherwood Rowland and Mario J Molina, “The CFC-Ozone Puzzle: Environmental science in the global arena” (Paper presented at the The John H Chafee Memorial Lecture on Science and the Environment, at the First National Conference on Science, Policy and the Environment, Washington (DC), 7 December 2000). 44 See also National Environment Protection (Ambient Air Quality) Measure (Cth).

45 S Solomon et al, “Technical Summary” Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Report, Intergovernmental Panel on Climate Change, 2007). 46 Andrew A Lacis et al, “Atmospheric CO2: Principal Control Knob Governing Earth’s Temperature” (2010) 330 Science 356. 47 Tom H Tietenberg, Environmental and Natural Resource Economics (Pearson Addison Wesley, 7th ed, 2006). 48 See, for example, Ian Plimer, Heaven and Earth (Connor Court Publishing, 2009). 49 S Solomon et al, “Technical Summary” Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Report, Intergovernmental Panel on Climate Change, 2007) 21. Intergovernmental Panel on Climate Change, “Summary for Policymakers of the Synthesis Report of the IPCC Fourth Assessment Report” (Report, Intergovernmental Panel on Climate Change, 2007) noting that “most of the observed increase in globally-averaged temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic GHG concentrations” 5. 50 William D Nordhaus, A Question of Balance (Yale University Press, 2008) 2. 51 Copenhagen Accord (2009) Decision 2/CP.15. 52 Hunter Environmental Lobby Inc v Minister for Planning [2011] NSWLEC 221; BC201109441, per Pain J at [74]. 53 For example, although present in the atmosphere in relatively small volumes (as carbon dioxide), carbon is contained in every living cell in every organism on earth, in the oceans and in soils, and in fossil fuel deposits. 54 See Kevin Gray, “Property in thin air” (1991) 50(2) Cambridge Law Journal 292; John Stuart Mill, Principles of Political Economy (Liberty Fund, first published 1848, reproduced in JM Robson (ed), The Collected Works of John Stuart Mill, Liberty Online Library ed, 1965) preliminary remarks 8; John H Dales, Pollution property & prices (University of Toronto Press, 1968) 60–62. 55 See David W Barnes, “Enforcing Property Rights: Extending Property Rights Theory to Congestible and Environmental Goods” (1982) 10 Boston College Environmental Affairs Law Review 583, 589. 56 Division 1.2.3 of the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (NGER Measurement Determination) defines the meaning of “captured for permanent storage” and the rules for deducting an amount of carbon dioxide so stored from the estimate of emissions. 57 Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; 260 ALR 628; [2009] HCA 48; BC200910035. As a statutory test, the words will govern litigation in relation to them. 58 “The Esso Longford Gas Plant Accident — Report of the Longford Royal Commission” (Report, June 1999). 59 Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420 at 440; 260 ALR 628; [2009] HCA 48; BC200910035 at [45]. 60 Clean Energy Act 2011 (Cth) s 12, NGER Act s 6C. 61 Acts Interpretation Act 1901 (Cth) s 15B(4). 62 Clean Energy Act 2011 (Cth) s 30(1). 63 NGER Act s 9.

64 NGER Act s 7. 65 Explanatory Statement National Greenhouse and Energy Reporting Regulations 2008, SLI No 127 of 2008,7. 66 NGER Act s 7, NGER Reporting Regulations regs 1.03, 2.06. 67 NGER Act s 11. The operational control applies for the NGER Act and the Clean Energy Act 2011 (Cth). 68 NGER Act ss 55–55A. 69 NGER Reporting Regulations reg 2.14. 70 NGER Act s 11A. 71 NGER Act s 7, Clean Energy Act 2011 (Cth) s 5. 72 NGER Act s 11B(1). 73 NGER Act s 11B(2). The day the nomination is specified to come into force is called the “start day.” 74 NGER Reporting Regulations regs 2.08–2.60, reflecting updating by the Clean Energy Legislation Amendment Act 2012 (Cth). 75 NGER Act s 11B(4). 76 NGER Act s 11B(7). 77 NGER Act s 11B(8). 78 NGER Act s 11B(15). 79 NGER Act s 11B(16). 80 NGER Act s 11B(17), (18). 81 NGER Act s 11B(10). 82 NGER Act s 11B(13), (14). 83 Clean Energy Act 2011 (Cth) s 5, NGER Act s 7. 84 Clean Energy Act 2011 (Cth) s 5, NGER Act s 7. 85 In s 102AAB of the Income Tax Assessment Act 1936 (Cth) (ITAA36) “trust estate” is defined, in relation to a transfer of property or services, to mean the trust estate or, as the case requires, the trustee of the trust estate. 86 NGER Reporting Regulations reg 2.27(2). 87 NGER Reporting Regulations regs 2.27–2.29 reflects updating by the Clean Energy Legislation Amendment Act 2012 (Cth). 88 NGER Act s 11C(7). 89 NGER Act s 11C(8). 90 NGER Act s 11C(10). 91 NGER Act s 11C(13), (14).

92 NGER Act s 7. 93 NGER Act s 7; Clean Energy Act s 5. 94 NGER Act s 14. 95 NGER Act s 7. 96 See s 4AA of the Crimes Act 1914 (Cth). 1 penalty unit = A$110. 97 NGER Act s 47. 98NGER Act s 16; NGER Reporting Regulations reg 3.04. 99NGER Measurement Determination s 1.12. 100NGER Measurement Determination s 1.14. 101NGER Act ss 10(3), 12 and 19; Clean Energy Act s 31; NGER Reporting Regulations reg 2.02. The tabular presentation in the regulations implies a confidence that our biophysical knowledge of carbon flows between the atmosphere and the biosphere is sufficiently certain so as to permit the measurement and reporting of emissions of GHG. 102Kyoto Protocol art 5(3). 103Intergovernmental Panel on Climate Change, “Summary for Policymakers of the Synthesis Report of the IPCC Third Assessment Report” (3rd Assessment Report, Intergovernmental Panel on Climate Change, 2001). 104NGER Measurement Determination s 1.19. 105NGER Measurement Determination s 1.18. 106Michael Abramowicz, “The Law-and-Markets Movement” (1999) 49 American University Law Review 327, 364 (interpolation added). 107Michael Abramowicz, “The Law-and-Markets Movement” (1999) 49 American University Law Review 327, 389. 108Clean Energy Act 2011 (Cth) s 134A(2). 109An audit is mandatory for registered persons with emissions greater than 125,000 t CO -e. 2 110Published by the American Gas Association. 111NGER Measurement Determination s 1.21(1). 112NGER Measurement Determination s 1.34(4). 113NGER Measurement Determination s 3.4(2), (3). 114NGER Measurement Determination s 3.4(4)(a). 115NGER Measurement Determination s 3.4(4)(b). 116NGER Measurement Determination s 3.4(4)(c). 117NGER Measurement Determination s 3.4(5). 118NGER Measurement Determination s 3.4(6). 119NGER Measurement Determination s 3.4(7).

120Paragraph 3.4(2)(a) does not exist. 121NGER Measurement Determination s 3.6(2). 122NGER Measurement Determination s 3.19(2). 123NGER Measurement Determination s 3.19(3), (4). 124NGER Measurement Determination s 3.19(5)(a). 125NGER Measurement Determination s 3.19(5)(b). 126NGER Measurement Determination s 3.19(5)(c). 127NGER Measurement Determination s 3.19(6). 128NGER Measurement Determination s 3.19(7). 129NGER Measurement Determination s 3.20. 130NGER Measurement Determination s 3.21. 131NGER Measurement Determination s 8.1. 132NGER Measurement Determination s 8.2. 133NGER Measurement Determination s 8.3. 134GHG Protocol, GHG Protocol Guidance on Uncertainty Assessment in GHG Inventories and Calculating Statistical Parameter Uncertainty (GHG Protocol Uncertainty Guidance), 2. 135GHG Protocol Uncertainty Guidance 2. 136Assuming that Method 1 is available — see the discussion in [51,650]. 137NGER Act s 19(4), (5A), (10). 138NGER Reporting Regulations reg 4.07. 139Assuming that Method 1 is available — see the discussion in [51,650]. 140NGER Reporting Regulations reg 4.18(2). 141NGER Reporting Regulations reg 4.20. 142NGER Reporting Regulations reg 4.22. 143NGER Reporting Regulations reg 4.23. 144NGER Reporting Regulations reg 4.23A. See Table 50,425-1. 145NGER Reporting Regulations reg 1.03. 146The Directory sets out a complete list of ANZSIC industry codes. 147NGER Reporting Regulations reg 4.30. 148NGER Reporting Regulations reg 4.31. 149NGER Reporting Regulations reg 4.33. 150 See [90,350] for the meaning of greenhouse gas project.

151 NGER Act s 21. 152 The term “offsets” of greenhouse gas emissions is defined in NGER Act s 7 to have the meaning given in s 10. In s 10 of the NGER Act, “offsets of greenhouse gas emissions” is given the meaning specified in the regulations. There is no definition of “offsets” in the regulations. The term “eligible offsets project” has the same meaning as in the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth). 153 NGER Act s 21A. 154 NGER Act s 18B. 155 NGER Act s 54(1). 156 NGER Act s 54(2). 157 NGER Reporting Regulations reg 6.02(2). 158 NGER Reporting Regulations reg 6.02(1). 159 NGER Reporting Regulations reg 6.02(1A). 160 NGER Act ss 9(1), 54(3). 161 NGER Act s 54(4). 162 NGER Act s 54(5). 163 NGER Act s 55(1). 164 NGER Act s 55(2). 165 NGER Act s 11(1)(a). 166 The industry sectors are defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes: NGER Reporting Regulations Sch 2. 167 NGER Reporting Regulations reg 2.20(2). The industry sectors are defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes: Sch 2. 168 NGER Reporting Regulations reg 2.19(2)–(3). The industry sectors are defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes: Sch 2. 169 NGER Reporting Regulations reg 6.03(1)–(3). 170 NGER Act ss 11(1)(a), 55(3). 171 NGER Act s 55(3A). 172 NGER Act s 55(3B). 173 NGER Act s 55(4). 174 NGER Act s 55(5). 175 NGER Act s 54A(1). 176 NGER Act s 54A(2). 177 NGER Reporting Regulations reg 6.02(2). 178 NGER Reporting Regulations reg 6.02(1).

179 NGER Reporting Regulations reg 6.02(1B). 180 NGER Act ss 9(1), 54A(3). 181 NGER Act s 54A(4). 182 NGER Act s 54A(5). 183 NGER Act s 55A(1). 184 NGER Act s 55A(2). 185 NGER Act s 11(1)(a). 186 The industry sectors are defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes: NGER Reporting Regulations Sch 2. 187 NGER Reporting Regulations reg 2.20(2). The industry sectors are defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes: Sch 2. 188 NGER Reporting Regulations reg 2.19(2)-(3). The industry sectors are defined by the ANZSIC codes. 189 NGER Act s 11(1)(a). 190 NGER Reporting Regulations reg 6.03(1), (4). 191 NGER Act ss 11(1)(a), 55A(3). 192 NGER Act s 55A(4). 193 NGER Act s 55A(5). 194 NGER Act s 55A(6).

[page 143]

Chapter 3 Liability under the Clean Energy Act 2011 (Cth) Introduction [70,001] This chapter details and analyses the rules for determining liability for emissions of greenhouse gases (GHG) under the Clean Energy Act 2011 (Cth). [70,025] The Clean Energy Act 2011 (Cth) is a self-assessment mechanism that works by levying1 a unit shortfall charge on persons who are liable entities, if the liable entity does not surrender to the regulator sufficient eligible emissions units equal to the emissions number of the liable entity in an eligible financial year. A “liable entity” is defined in Clean Energy Act 2011 (Cth) as: a person who is a liable entity under a provision of the act; or a person who is a liable entity under the “Opt-in scheme.”2 Part 3 of the Clean Energy Act 2011 (Cth) identifies the persons who are liable entities for an eligible financial year. Liability is defined in Divs 2–7 for: direct emitters (Div 2); natural gas suppliers (Div 3); suppliers of gaseous fuels (Div 3A); obligation transfer numbers (Div 4); designated joint ventures (Div 5); liability transfer certificates (Div 6); and opt-in scheme (Div 7).

A “person” means any of the following: (a) an individual; (b) a body corporate; (c) a trust; (d) a corporation sole; (e) a body politic; (f)

a local governing body.

These dimensions of person are discussed in [70,125]–[70,275]. “Eligible emissions units” are the subject of Ch 4. [page 144] Part 3 of the Clean Energy Act 2011 (Cth) also identifies the provisional emissions numbers of liable entities. The concept of “emissions number” is discussed in [70,325]. The concepts of “interim emissions number” and “provisional emissions number” are discussed in [70,350] and [70,375]. As appropriate, the interim emissions number or provisional emissions number of a liable entity is used to work out the emissions number and the number of eligible emissions units that must be surrendered by a liable entity to avoid being liable to pay unit shortfall charge. Unit shortfall charges are discussed in Ch 5. Analysis of liability follows the order in Pt 3 of the Clean Energy Act 2011 (Cth). Liability under the Fuel Tax Act 2006 (Cth) and the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Cth) is discussed in Ch 8 of the online subscription service.

Sources of law [70,050] The primary laws referenced in this chapter are: Clean Energy Act 2011 (Cth) as amended by Clean Energy Legislation Amendment Act 2012 (Cth); Clean Energy Regulations 2011 (Cth) as relevantly amended by: — Clean Energy Amendment Regulation 2012 (No 1) (Cth);

— Clean Energy Amendment Regulation 2012 (No 2) (Cth); — Clean Energy Amendment Regulation 2012 (No 3) (Cth); — Clean Energy Amendment Regulation 2012 (No 4) (Cth). The Clean Energy Act 2011 (Cth) and the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) (and associated Regulations) must be read together. Each Act uses common terms. Registration, measurement and reporting of GHG emissions under the NGER Act underpin the application of the Clean Energy Act 2011 (Cth).

Direct emitters INTRODUCTION TO DIVISION 2 [70,075] Division 2 of Pt 3 of the Clean Energy Act 2011 (Cth) deals with the liability of direct emitters. In summary, if a person emits covered emissions, the person is a liable entity for the financial year (the eligible financial year). Direct emitters are persons who have operational control of a facility which emits 25,000 tonnes or more of carbon dioxide equivalence (CO2-e) of scope 1 emissions of greenhouse gas released into the atmosphere in Australia as a direct result of the operation of a facility. The number of CO2-e tonnes of this GHG is a provisional emissions number of the person for the financial year. Division 2 also deals specifically with: persons who are liable for emissions from a facility because they are members of a joint venture (JV); persons who hold a liability transfer certificate (LTC); and landfill operators. [page 145] [70,100] Chapter 2 discussed the important concepts of: scope 1 and scope 2 emissions ([50,400]) and covered emissions ([50,425]);

emissions ([50,375]) of greenhouse gases ([50,475]); carbon dioxide equivalence (CO2-e) ([70,625]); released into the atmosphere ([50,475]) and released in Australia ([50,575]) direct result ([50,550]); facilities ([50,600]); operational control ([50,800]); and eligible financial year ([51,175]) in the context of the NGER Act, and these same terms and concepts apply in the Clean Energy Act 2011 (Cth).

PERSON [70,125] Section 2C(1) of the Acts Interpretation Act 1901 (Cth) provides that in any Commonwealth Act, “expressions used to denote persons generally (such as ‘person’ …) include a body politic or corporate as well as an individual.” Section 2C(2) of the Acts Interpretation Act further provides that “express references … to companies, corporations or bodies corporate do not imply that expressions [such as person] do not include companies, corporations or bodies corporate.” The definition of person in the Clean Energy Act 2011 (Cth) is exhaustive. A “person” means any of the following: (a) an individual; (b) a body corporate; (c) a trust; (d) a corporation sole; (e) a body politic; (f)

a local governing body.

Individual [70,150] An individual is understood at common law as a single person, as opposed to a group.3 Where the context requires or implies, an individual usually refers to a natural person as opposed to an artificial person.4

Body corporate [70,175] The term “body corporate” is not further defined in the Clean Energy Act 2011 (Cth) or the NGER Act. Generally, the term is used interchangeably with “corporation.”5 A “corporation” is commonly defined as in Black’s Law Dictionary as: An entity (usually a business) having authority under law to act as a single person distinct from the shareholders who own it and having rights to issue stock and exist indefinitely; a group or succession of persons established in accordance with legal rules into a legal or juristic person

[page 146] that has legal personality distinct from the natural persons who make it up, exists indefinitely apart from them, and has the legal powers that its constitution gives it6

A corporation is defined in s 57A of the Corporations Act 2001 (Cth) to include a company (in turn defined (s 9) as a company registered under the Corporations Act 2001 (Cth)), a body corporate and an unincorporated body, but not to include an exempt public authority or a corporation sole.

Trust [70,200] As noted in chapter two, a “trust” is defined to mean a person in the capacity of trustee, or as the case requires, a trust estate. By application of relevant definitions,7 “trustee” means: a trustee (within the ordinary meaning of that expression) of a superannuation fund, an approved deposit fund or a pooled superannuation trust; every person: — appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law; or — who is an executor or administrator, guardian, committee, receiver, or liquidator; or — having or taking upon himself the administration or control of income affected by any express or implied trust; or — acting in any fiduciary capacity; or — having the possession, control or management of the income of a person under any legal or other disability. The “trust estate” generally will reference the bundle of assets, liabilities

and income (less expenses) owned by and under the control of the trustee in that capacity and in accordance with the trust obligations imposed on the trustee for the benefit of the beneficiaries.

Corporation sole [70,225] The term “corporation sole” is not further defined in the Clean Energy Act 2011 (Cth) or the NGER Act. Generally a corporation sole refers to a series of successive persons holding an office, with a continuous personality viewed by legal fiction as akin to a corporation.8 The High Court of Australia has concluded that a corporation sole may have two capacities — that of a natural person and that of the corporation — and the distinction between those capacities and the capacity to which an enactment refers will be determined by legislative context: Crouch v Commissioner for Railways (Qld) (1985) 159 CLR 22; 62 ALR 1; (1985) 59 ALJR 831; BC8501072. As the Clean Energy Act 2011 (Cth) is concerned with the covered emissions from facilities under the operational control of a person, the reference to a corporation sole appears focused on corporate capacity. [page 147]

Body politic [70,250] The term “body politic” is not further defined in the Clean Energy Act 2011 (Cth) or the NGER Act. Black’s Law Dictionary classes a body politic as “a group of people regarded in a political (rather than private) sense and organised under a common governmental authority.” However, in the Revised Explanatory Memorandum (EM) accompanying the Clean Energy Bill 2011 (Cth), it is suggested that the body politic is the Australian, state and territory governments. Clause 1.116 of the EM states: 1.116 The Australian Government and the state, territory and local governments are bound by the bill. In line with normal practice, the Crown is not subject to prosecution for a criminal offence or a pecuniary penalty, with the exception of penalties for late payment of shortfall charge and for failure to meet relinquishment requirements. This protection does not apply to an authority of the Crown, such as a body conducting a business activity.

Local governing body [70,275] The term “local governing body” is defined to mean “a local

governing body established by or under a law of a state or territory.”9 [70,300] A controlling corporation’s group is not a person for the Clean Energy Act 2011 (Cth). Although the NGER Act requires a controlling corporation to aggregate data about the CO2-e scope 1 GHG emissions of facilities under the operational control of members of the controlling corporation’s group (including the controlling corporation), each member of the group and the controlling corporation, as appropriate, could be the liable entity under Pt 3 of the Clean Energy Act 2011 (Cth). In order to avoid this result, the members of a controlling corporation’s group could utilise the LTC mechanism (discussed in [73,425]) to transfer liability to the controlling corporation.

Emissions number [70,325] “Emissions number” is defined for each person for each eligible financial year. For the purposes of this Act, the person’s emissions number for the eligible financial year is the total of the person’s provisional emissions numbers (if any) for the eligible financial year.10

Unit shortfall (if any) is measured11 against a person’s emissions number.

Interim emissions number [70,350] The concept of “interim emissions number” applies only for the fixed charge period, 1 July 2012 to 30 June 2015 and only for liable entities or potentially liable entities. [page 148] “Interim emissions number” is defined in Clean Energy Act 2011 (Cth) s 126. For direct emitters (Div 2, Pt 3), s 126(2) provides: For the purposes of this Act, if: (a) one or more persons (who may consist of or include the relevant person) had a provisional emissions number for the previous eligible financial year under a particular provision of Division 2 of Part 3 in so far as that provision applies to a particular facility; and (b) the relevant person is likely to have a provisional emissions number for the relevant eligible financial year under that provision in so far as that provision applies to that facility; then: (c) the number worked out using the formula in subsection (3) is an interim emissions number of the person for the relevant eligible financial year; or

(d) if: (i) the conditions specified in the regulations are satisfied; and (ii) a lesser number is ascertained in accordance with the regulations; the lesser number is an interim emissions number of the person for the relevant eligible financial year

The relevant (s 126(3)) formula is: 0.75 × total provisional emissions numbers (being the total of the provisional emissions numbers in s 126(2)(a)). For the fixed charge year 1 July 2012 to 30 June 2013, the financial year beginning 1 July 2011 is to be assumed to be an eligible financial year. No regulations have as yet been promulgated for s 126(2)(d). Providing an estimate of the provisional emissions number may be used as an alternative to the formula approach (meaning that s 126(2) will not apply). A person may give a reasonable estimate of 75 per cent of the provisional emissions number of the person for the relevant eligible financial year under a provision of Div 2 of Pt 3, and that estimate will be the person’s interim emissions number.12 The reasonable estimate must be provided in writing to the regulator before 15 June in the relevant fixed charge year.

Provisional emissions number [70,375] “Provisional emissions number” is defined to have the meaning given by Pt 3 or the Opt-in Scheme (as affected by ss 11B and 11C of the NGER Act).13 The provisional emissions number (PEN) is defined for each person made a liable entity under Pt 3 (for the whole or part of an eligible financial year): For direct emitters with operational control of non-landfill facilities passing the threshold test, or that is a large gas consuming facility, the provisional emissions number is the total amount of covered emissions from the operation of the facility having a CO2-e of a particular number of tonnes. For a participant in a designated joint venture having a facility (other than a landfill facility) passing the threshold test, or that is a large gas consuming [page 149]

facility, the provisional emissions number is the person’s participating percentage in the total amount of covered emissions from the operation of the facility of the designated joint venture having a CO2-e of a particular number of tonnes. For the holder of a liability transfer certificate in relation to facility (other than a landfill facility) passing the threshold test, or that is a large gas consuming facility, the provisional emissions number is the total amount of covered emissions from the operation of the facility having a CO2-e of a particular number of tonnes. For direct emitters with operational control of landfill facilities passing the threshold test, the provisional emissions number is the total amount of covered emissions from the operation of the landfill facility having a CO2-e of a particular number of tonnes. For a participant in a designated joint venture having a landfill facility passing the threshold test, the provisional emissions number is the person’s participating percentage in the total amount of covered emissions from the operation of the facility of the designate joint venture having a CO2-e of a particular number of tonnes. For the holder of a liability transfer certificate in relation to landfill facility passing the threshold test, the provisional emissions number is the total amount of covered emissions from the operation of the facility having a CO2-e of a particular number of tonnes. The relevantly applicable threshold test for each division of Pt 3 is discussed below. The concept of a “large gas consuming facility” is discussed in [71,275]. The quotation of an obligation transfer number (OTN) may result in a change to a PEN. Adjustments to the provisional emissions number are also required for facilities within the Joint Petroleum Development Area and/or the Greater Sunrise unit area.14 A provisional emissions number ending in 0.5 or more is rounded up to the nearest whole number, and a number ending in less than 0.5 tonnes is rounded down.15

GENERAL RULES FOR LIABILITY FOR NONLANDFILL FACILITIES

[70,400] A person will be a liable entity where the following conditions are met: a facility is under the operational control of the person; the facility is not a landfill facility; the operational control exists for the whole of the eligible financial year or a part of the year; the facility passes the threshold test or; the facility is a large gas consuming facility; and the total amount of covered emissions from the operation of the facility has a CO2-e of a particular number of tonnes.16 [page 150] The general rule does not apply if the facility was held by a designated joint venture,17 or if a liability transfer certificate was in force in relation to the facility.18

Control days [70,425] If a facility is under the operational control of a person for less than all of the eligible financial year, the days of the year during which operational control exists are called “control days.”19

Facility threshold test [70,450] The threshold test is determined by the number of control days. [70,450] The threshold test is determined by the number of control days.20

Whole year control The threshold test for full year operational control is covered emissions having a CO2-e of not less than 25,000 tonnes.

Part year control The threshold test for part year operational control requires covered

emissions having a CO2-e of not less than the following formula:

The threshold test is a bright-line test. A facility emitting 24,999 CO2-e scope 1 emissions for the whole financial year will not pass the threshold test. The regulator may exercise a discretion to determine that the threshold test does not apply to a person. This “anti-avoidance” rule21 is discussed at [110,025].

Large gas consuming facility [70,475] The concept of “large gas consuming facility” is discussed at [71,275]. Generally, a facility will be considered a large gas consuming facility if so much of the total amount of covered emissions from the operation of the facility during the financial year as is attributable to the combustion of natural gas has a CO2-e of not less than 25,000 tonnes.22 [page 151]

Provisional emissions number [70,500] A liable entity’s provisional emissions number (PEN) is the total amount of covered emissions from the operation of the facility (including a large gas consuming facility) (during the year or the control days) that has a carbon dioxide equivalence of a particular number of tonnes.23

Eliminating double counting [70,525] If: an amount of a facility’s covered emissions was attributable to the combustion of natural gas withdrawn from a gas supply pipeline for supply to the facility by a natural gas supplier; and the recipient of the gas did not quote its obligation transfer number (OTN) in relation to that supply, then the amount of covered emissions attributable to the natural gas does not

count towards the provisional emissions number of the person with operational control of the facility (and the natural gas supplier has liability for these emissions). The amount of those covered emissions attributable to the natural gas does count towards the threshold test.24 The operation of obligation transfer numbers is discussed at [72,275]. If: an amount of a facility’s covered emissions was attributable to the combustion of compressed natural gas (CNG);25 and that compressed natural gas was not manufactured at the facility using natural gas that was supplied by a natural gas supplier to a person (who may be the person in operational control of the facility) who quoted their OTN in relation to the supply of the natural gas, then the amount of covered emissions attributable to the compressed natural gas does not count towards the provisional emissions number of the person with operational control of the facility (and the natural gas supplier has liability for these emissions). The amount of those covered emissions attributable to the natural gas does count towards the threshold test.26 If: an amount of a facility’s covered emissions was attributable to the nontransport combustion27 of liquefied petroleum gas (LPG) or liquefied natural gas (LNG) that was supplied by a gaseous fuel supplier to a recipient (who may be the person in operational control of the facility); and the recipient did not quote their OTN in relation to the supply of the LPG or LNP; and [page 152] the gaseous fuel supplier has a preliminary emissions number for the eligible financial year (under s 36B or s 36C) that is wholly or partly attributable to the import, manufacture or production of the LPG or LNP, then the amount of covered emissions attributable to the non-transport

combustion of LPG or LNG does not count towards the provisional emissions number of the person with operational control of the facility (and the gaseous fuel supplier has liability for these emissions). The amount of those covered emissions attributable to the LPG or LNG does count towards the threshold test.28

GENERAL RULES FOR LIABILITY FOR LANDFILL FACILITIES [70,550] A person will be a liable entity where the following conditions are met: a landfill facility is under the operational control of the person; the operational control exists for the whole of the eligible financial year or a part of the year; the facility passes the threshold test; and the total amount of covered emissions from the operation of the landfill facility has a CO2-e of a particular number of tonnes.29 A “landfill facility” is defined as “a facility for the disposal of solid waste as landfill.”30 A landfill that is closed for the acceptance of waste is still considered a landfill facility. Covered emissions from a landfill do not include legacy and exempt landfill emissions31 and solid waste emissions from landfill facilities closed after 1 July 2012.32 “Legacy emissions” (defined in s 32 of the Clean Energy Act 2011 (Cth)) are the GHG emissions emitted from the operation of a landfill facility that are attributable to waste accepted by the landfill facility before 1 July 2012. The general rule does not apply if the landfill facility was held by a designated joint venture,33 or if a liability transfer certificate was in force in relation to the landfill facility.34

Landfill facility’s threshold test [70,575] The threshold test is determined by the number of control days that the landfill facility was under operational control.35 [page 153]

Whole year control The threshold test for full year operational control is covered emissions, legacy emissions and exempt landfill emissions from the operation of the landfill having a CO2-e of not less than the “landfill facility’s threshold number.” The “landfill facility’s threshold number” is defined in Clean Energy Act 2011 (Cth) subs 23(9), as modified by the Clean Energy Regulations 2011 (Cth). The landfill facility’s threshold number is 25,000 tonnes CO2-e. A last minute change was agreed to the design of the threshold tests for landfills in the 23rd hour of the debate of the Clean Energy Bill 2011 (Cth). Originally, the threshold was to be set at two levels: 25,000 tonnes CO 2-e for large landfill facilities, and 10,000 tonnes CO2-e for certain landfill facilities located within a prescribed distance of large landfill facilities. As a result of this agreement, given effect to by promulgation in the Clean Energy Regulations 2011 (Cth), the threshold was reset to a single test of 25,000 tonnes CO2-e.

Part year control The threshold test for part year operational control requires covered emissions, legacy emissions and exempt landfill emissions from the operation of the landfill having a CO2-e of not less than the following formula:

Provisional emissions number [70,600] A liable entity’s provisional emissions number (PEN) is the total amount of covered emissions from the operation of the landfill facility (during the year or the control days) that has a carbon dioxide equivalence of a particular number of tonnes.36 The “NGER solid waste calculator”, and a user guide, to assist users to self assess the greenhouse gas emissions from landfill operations for the purposes of NGER reporting and potential liability under the Clean Energy Act 2011 (Cth) are accessible online at this website:

www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Forms-and-calculators/Pages/default.aspx Division 5.2 of the NGER Measurement Determination establishes three methods of calculation for landfill emissions. Method 1 allows a maximum efficiency rate for gas capture by the landfill facility of 75 per cent. Methods 2 and 3 each allow for a maximum efficiency rate of 100 per cent.37 Telephone assistance is available: 1300 553-542.

Eliminating double counting [70,625] If: an amount of a landfill facility’s covered emissions was attributable to the combustion of natural gas withdrawn from a gas supply pipeline for supply to the landfill facility by a natural gas supplier; and [page 154] the recipient of the gas did not quote its OTN in relation to that supply, then the amount of covered emissions attributable to the natural gas does not count towards the provisional emissions number of the person with operational control of the landfill facility. The amount of those covered emissions attributable to the natural gas does count towards the landfill facility’s threshold test.38 The operation of OTNs is discussed at [72,275]. If: an amount of the landfill facility’s covered emissions was attributable to the combustion of CNG;39 and that CNG was not manufactured at the landfill facility using natural gas that was supplied by a natural gas supplier to a person (who may be the person in operational control of the landfill facility) who quoted their OTN in relation to the supply of the natural gas, then the amount of covered emissions attributable to the compressed natural gas does not count towards the provisional emissions number of the person with operational control of the landfill facility (and the natural gas supplier has liability for these emissions).

The amount of those covered emissions attributable to the natural gas does count towards the threshold test.40 If: an amount of the landfill facility’s covered emissions was attributable to the non-transport combustion41 of LPG or LNG that was supplied by a gaseous fuel supplier to a recipient (who may be the person in operational control of the landfill facility); and the recipient did not quote their OTN in relation to the supply of the LPG or LNP; and the gaseous fuel supplier has a preliminary emissions number for the eligible financial year (under s 36B or s 36C) that is wholly or partly attributable to the import, manufacture or production of the LPG or LNP, then the amount of covered emissions attributable to the non-transport combustion of LPG or LNG does not count towards the provisional emissions number of the person with operational control of the landfill facility (and the gaseous fuel supplier has liability for these emissions). The amount of those covered emissions attributable to the LPG or LNG does count towards the threshold test.42 [page 155]

GENERAL RULES FOR LIABILITY OF PARTICIPANTS IN DESIGNATED JOINT VENTURES [70,650] Sections 21 and 24 of the Clean Energy Act 2011 (Cth) respectively set out liability rules for a participant in a designated joint venture that had: a non-landfill facility (s 21); or a landfill facility (s 24). A“joint venture” is defined as “an unincorporated enterprise carried on by 2 or more persons in common otherwise than in partnership.”43 A “participant” means any person who carries on a joint venture.44 Sections 21 and 24 should be read together with Div 5 of Pt 3, dealing more specifically with designated joint ventures. Division 5 is discussed at

[73,250].

Joint venture with non-landfill facility [70,675] A person will be a liable entity where the following conditions are met: a designated joint venture (JV) had a facility throughout, or for a number of control days in, an eligible financial year; a person was a participant in the JV (during the relevant time); the facility is not a landfill facility; the facility passes the threshold test; or the facility is a large gas consuming facility; and the total amount of covered emissions from the operation of the facility has a CO2-e of a particular number of tonnes.45 The circumstances in which a designated joint venture may be formed under the act are discussed in [73,300]. These rules do not apply if a liability transfer certificate was in force in relation to the facility.46

Joint venture facility threshold test [70,700] The threshold test is determined by the number of control days the facility is held by the designated JV.47

Whole year control The threshold test for full year operational control is covered emissions having a CO2-e of not less than 25,000 tonnes.

Part year control The threshold test for part year operational control requires covered emissions having a CO2-e of not less than the following formula:

[page 156]

Provisional emissions number of participant in joint venture [70,725] The liable person’s provisional emissions number (PEN) is the percentage of the particular number of tonnes of covered emissions from the operation of the facility of the designated JV, as determined by their participating percentage in the designated JV.48 “Participating percentage” is discussed in [73,525].

Eliminating double counting [70,750] If: an amount of the covered emissions of the designated joint venture’s facility was attributable to the combustion of natural gas withdrawn from a gas supply pipeline for supply to the facility by a natural gas supplier; and the recipient of the gas (who may be a participant in the designated joint venture) did not quote its OTN in relation to that supply, then the amount of covered emissions attributable to the natural gas does not count towards the covered emissions from the operation of the facility. The amount of those covered emissions attributable to the natural gas does count towards the threshold test.49 The operation of OTNs is discussed in [71,950]. If: an amount of covered emissions from the operation of the facility of the designated joint venture was attributable to the combustion of CNG;50 and that CNG was not manufactured at the facility using natural gas that was supplied by a natural gas supplier to a person (who may be a participant in the designated joint venture) who quoted their OTN in

relation to the supply of the natural gas, then the amount of covered emissions attributable to the compressed natural gas does not count towards the covered emissions from the operation of the facility (and the natural gas supplier has liability for these emissions). The amount of those covered emissions attributable to the natural gas does count towards the threshold test.51 If: an amount of covered emissions from the operation of the facility of a designated joint venture was attributable to the non-transport combustion52 of LPG or LNG that was supplied by a gaseous fuel supplier to a recipient (who may be a participant in the designated joint venture); and the recipient did not quote their OTN in relation to the supply of the LPG or LNP; and [page 157] the gaseous fuel supplier has a preliminary emissions number for the eligible financial year (under s 36B or s 36C) that is wholly or partly attributable to the import, manufacture or production of the LPG or LNP, then the amount of covered emissions attributable to the non-transport combustion of LPG or LNG does not count towards the covered emissions from the operation of the facility (and the gaseous fuel supplier has liability for these emissions). The amount of those covered emissions attributable to the LPG or LNG does count towards the threshold test.53

Joint venture with landfill facility [70,775] A person will be a liable entity where the following conditions are met: a designated JV had a landfill facility throughout, or for a number of control days in, an eligible financial year; a person was a participant in the JV (during the relevant time); the landfill facility passes the threshold test; and

the total amount of covered emissions from the operation of the landfill facility has a CO2-e of a particular number of tonnes.54 This rule does not apply if a liability transfer certificate was in force in relation to the landfill facility.55

Joint venture landfill facility’s threshold test [70,800] The threshold test is determined by the number of control days the landfill facility is held by the designated JV.56

Whole year control The threshold test for full year operational control is covered emissions, legacy emissions and exempt landfill emissions from the operation of the landfill having a CO2-e of not less than 25,000 tonnes.57

Part year control The threshold test for part year operational control requires covered emissions, legacy emissions and exempt landfill emissions from the operation of the landfill having a CO2-e of not less than the following formula:

[page 158]

Provisional emissions number of participant in landfill joint venture [70,825] The liable person’s provisional emissions number (PEN) is the percentage of the particular number of tonnes of covered emissions from the operation of the facility of the designated joint venture, as determined by their participating percentage in the designated joint venture.58 “Participating percentage” is discussed in [73,525].

Eliminating double counting

[70,850] If an amount of the covered emissions of the designated joint venture’s landfill facility was attributable to the combustion of natural gas withdrawn from a gas supply pipeline for supply to the landfill facility by a natural gas supplier; and the recipient of the gas (who may be a participant in the designated joint venture) did not quote its OTN in relation to that supply, then the amount of covered emissions attributable to the natural gas does not count towards the covered emissions from the operation of the landfill facility. The amount of those covered emissions attributable to the natural gas does count towards the landfill facility’s threshold test.59 The operation of OTNs is discussed in [72,275]. If: an amount of covered emissions from the operation of the landfill facility of the designated joint venture was attributable to the combustion of CNG;60 and that CNG was not manufactured at the landfill facility using natural gas that was supplied by a natural gas supplier to a person (who may be a participant in the designated joint venture) who quoted their OTN in relation to the supply of the natural gas, then the amount of covered emissions attributable to the compressed natural gas does not count towards the covered emissions from the operation of the landfill facility (and the natural gas supplier has liability for these emissions). The amount of those covered emissions attributable to the natural gas does count towards the threshold test.61 If: an amount of covered emissions from the operation of the facility of the designated joint venture was attributable to the non-transport combustion62 of LPG or LNG that was supplied by a gaseous fuel supplier to a recipient (who may be a participant in the designated joint venture); and the recipient did not quote their OTN in relation to the supply of the LPG or LNP; and [page 159]

the gaseous fuel supplier has a preliminary emissions number for the eligible financial year (under s 36B or s 36C) that is wholly or partly attributable to the import, manufacture or production of the LPG or LNP, then the amount of covered emissions attributable to the non-transport combustion of LPG or LNG does not count towards the covered emissions from the operation of the landfill facility (and the gaseous fuel supplier has liability for these emissions). The amount of those covered emissions attributable to the LPG or LNG does count towards the threshold test.63

GENERAL RULES FOR LIABILITY OF HOLDERS OF A LIABILITY TRANSFER CERTIFICATE [70,875] Sections 22 and 25 of the Clean Energy Act 2011 (Cth) respectively set out liability rules for holders of a liability transfer certificate (LTC) in relation to: a non-landfill facility (s 22); or a landfill facility (s 25). Sections 22 and 25 should be read together with Div 6 of Pt 3, dealing more specifically with LTCs. Division 6 is discussed in [73,700].

Liability transfer certificate for non-landfill facility [70,900] A person will be a liable entity where the following conditions are met: a person was the holder of a liability transfer certificate in relation to a facility throughout, or for a number of days (called “certificate days”) in, an eligible financial year; the facility is not a landfill facility; the facility passes the threshold test; or the facility is a large gas consuming facility; and the total amount of covered emissions from the operation of the facility

has a CO2-e of a particular number of tonnes.64

Facility threshold test for holder of a liability transfer certificate [70,925] The threshold test is determined by the number of days the person was the holder of the LTC in relation to the facility.65

Whole year control The threshold test where the person held the LTC for the full year is covered emissions having a CO2-e of not less than 25,000 tonnes.

Part year control The threshold test for the certificate days requires covered emissions having a CO2-e of not less than the following formula: [page 160]

Provisional emissions number of the holder of a liability transfer certificate [70,950] The LTC holder’s provisional emissions number (PEN) is the particular number of tonnes of covered emissions from the operation of the facility the subject of the LTC.66

Eliminating double counting [70,975] If, for the holder of a LTC: an amount of the covered emissions of the facility the subject of the LTC was attributable to the combustion of natural gas withdrawn from a gas supply pipeline for supply to the facility by a natural gas supplier; and

the recipient of the gas did not quote its OTN in relation to that supply, then the amount of covered emissions attributable to the natural gas does not count towards the covered emissions from the operation of the facility. The amount of those covered emissions attributable to the natural gas does count towards the threshold test.67 The operation of OTNs is discussed in [72,275]. If: the person was the holder of theLTC for the whole of the eligible financial year or a part of the year; and during the eligible financial year or that part of the year, an amount of covered emissions from the operation of the facility was attributable to the combustion of CNG;68 and that CNG was not manufactured at the facility using natural gas that was supplied by a natural gas supplier to a person (who may be the LTC holder) who quoted their OTN in relation to the supply of the natural gas, then the amount of covered emissions attributable to the compressed natural gas does not count towards the covered emissions from the operation of the facility (and the natural gas supplier has liability for these emissions). The amount of those covered emissions attributable to the natural gas does count towards the threshold test.69 If: the person was the holder of theLTC for the whole of the eligible financial year or a part of the year; and during the eligible financial year or that part of the year, an amount of covered emissions from the operation of the facility was attributable to the [page 161] non-transport combustion70 of LPG or LNG that was supplied by a gaseous fuel supplier to a recipient (who may be the LTC holder); and the recipient did not quote their OTN in relation to the supply of the LPG or LNP; and the gaseous fuel supplier has a preliminary emissions number for the

eligible financial year (under s 36B or s 36C) that is wholly or partly attributable to the import, manufacture or production of the LPG or LNP, then the amount of covered emissions attributable to the non-transport combustion of LPG or LNG does not count towards the covered emissions from the operation of the facility (and the gaseous fuel supplier has liability for these emissions). The amount of those covered emissions attributable to the LPG or LNG does count towards the threshold test.71

Liability transfer certificate for landfill facility [71,001] A person will be a liable entity where the following conditions are met: a person was the holder of a liability transfer certificate in relation to a landfill facility throughout, or for a number of certificate days in, an eligible financial year; the landfill facility passes the threshold test; and the total amount of covered emissions from the operation of the landfill facility has a CO2-e of a particular number of tonnes.72

Landfill facility’s threshold test for holder of a liability transfer certificate [71,025] The threshold test is determined by the number of days the landfill facility is subject to a LTC.73

Whole year control The threshold test for full year operational control is covered emissions, legacy emissions and exempt landfill emissions from the operation of the landfill having a CO2-e of not less than 25,000 tonnes.74

Part year control The threshold test for part year operational control requires covered

emissions, legacy emissions and exempt landfill emissions from the operation of the landfill having a CO2-e of not less than the following formula:

[page 162]

Provisional emissions number of the holder of a liability transfer certificate [71,050] The LTC holder’s provisional emissions number (PEN) is the particular number of tonnes of covered emissions from the operation of the facility the subject of the LTC.75

Eliminating double counting [71,075] If, for the holder of a LTC: an amount of the covered emissions of the landfill facility was attributable to the combustion of natural gas withdrawn from a gas supply pipeline for supply to the landfill facility by a natural gas supplier; and the recipient of the gas did not quote its OTN in relation to that supply, then the amount of covered emissions attributable to the natural gas does not count towards the covered emissions from the operation of the landfill facility. The amount of those covered emissions attributable to the natural gas does count towards the landfill facility’s threshold test.76 The operation of OTNs is discussed in [72,275]. If: the person was the holder of theLTC for the whole of the eligible financial year or a part of the year; and during the eligible financial year or that part of the year, an amount of covered emissions from the operation of the landfill facility was attributable to the combustion of CNG;77 and

that CNG was not manufactured at the landfill facility using natural gas that was suppliedbya natural gas suppliertoa person (who maybe theLTC holder) who quoted their OTN in relation to the supply of the natural gas, then the amount of covered emissions attributable to the compressed natural gas does not count towards the covered emissions from the operation of the landfill facility (and the natural gas supplier has liability for these emissions). The amount of those covered emissions attributable to the natural gas does count towards the threshold test.78 If: the person was the holder of theLTC for the whole of the eligible financial year or a part of the year; and during the eligible financial year or that part of the year, an amount of covered emissions from the operation of the landfill facility was attributable to the non-transport combustion79 of LPG or LNG that was supplied by a gaseous fuel supplier to a recipient (who may be the LTC holder); and [page 163] the recipient did not quote their OTN in relation to the supply of the LPG or LNP; and the gaseous fuel supplier has a preliminary emissions number for the eligible financial year (under s 36B or s 36C) that is wholly or partly attributable to the import, manufacture or production of the LPG or LNP, then the amount of covered emissions attributable to the non-transport combustion of LPG or LNG does not count towards the covered emissions from the operation of the landfill facility (and the gaseous fuel supplier has liability for these emissions). The amount of those covered emissions attributable to the LPG or LNG does count towards the threshold test.80

FACILITIES IN THE JOINT PETROLEUM DEVELOPMENT AREA AND GREATER SUNRISE UNIT AREA

[71,100] A person will be liable for covered emissions from the operation of a facility located in either the Joint Petroleum Development Area or the Greater Sunrise unit area, in the Timor Sea. The person’s provisional emissions number in relation to the facility will be reduced according to a prescribed percentage.81

Natural gas suppliers INTRODUCTION TO DIVISION 3 [71,125] Division 3 of Pt 3 of the Clean Energy Act 2011 (Cth) creates liability for a party involved in a transaction for the supply of natural gas in one of three ways: (1) upon the natural gas supplier who withdraws natural gas from a natural gas supply pipeline for supply to another person, where it may reasonably be expected that the natural gas is for that other person’s use; (2) upon the person who quotes an obligation transfer number (OTN), where the natural gas supplier withdraws natural gas from a natural gas supply pipeline for supply to the person who quotes their OTN and it may reasonably be expected that the natural gas is for the use of the person who quoted their OTN; (3) upon the person who quotes an OTN in circumstances which were not permitted or required, where the natural gas supplier withdraws natural gas from a natural gas supply pipeline for supply to the person who incorrectly quotes their OTN and it may reasonably be expected that the natural gas is for that person’s use. Relevantly, liability will arise if the potential GHG embodied in the amount of natural gas supplied has a netted-out CO2-e of at least 1 tonne.82 Liability under Div 3 is “upstream” for administrative ease. However, the system for quoting OTNs allows the OTN holder to assume any liability for potential greenhouse gas emissions embodied in the natural gas that the natural gas supplier would otherwise [page 164] be liable for.83 This system should result in a dual pricing structure for the supply of natural gas. Quoting an OTN allows the person being supplied to take direct financial responsibility for any emissions embodied in the natural

gas, instead of paying a higher price to the natural gas supplier (to cover the natural gas supplier for their cost of their emissions liability).84

Supplier of natural gas [71,150] A “natural gas supplier” is a person who supplies natural gas in the prescribed circumstances.85 Anatural gas supplier may be an individual, body corporate, trust, corporation, body politic or local governing body. A “gaseous fuel supplier” is a person who supplies LNG, LPG or natural gas in the prescribed circumstances.86

Natural gas [71,175] By definition,87“natural gas” is a substance that: is in a gaseous state at standard temperature and pressure; and consists of naturally occurring hydrocarbons, or a naturally occurring mixture of hydrocarbons and non-hydrocarbons; and consists mainly of methane; and is suitable for injection into a natural gas supply pipeline.

Supply [71,200] “Supply” means supply (including re-supply) by way of sale, exchange or gift.88 A supply must involve a transfer of beneficial ownership in the gas.89 The supply of natural gas occurs: at the point at which the gas is withdrawn from a natural gas supply pipeline;90 or if the regulations do not apply, and the supply involves physical delivery, when the gas is physically delivered.91 [page 165] The natural gas provisions are intended to apply only to the last supply of natural gas before it is used, and to apply in the same way regardless of

whether the user owns the natural gas.92 As a result, if personA provides an amount of natural gas for use by person B, and this does not involve a supply of the natural gas, then any use of the natural gas by person B is taken to be use by person A for the purposes of determining emissions liability.93

Withdrawal of natural gas [71,225] The natural gas supplier’s withdrawal of natural gas must take place in Australia. The withdrawal must occur from a natural gas supply pipeline for the purposes of use by the other person.94 Withdrawal of natural gas occurs when: the natural gas exits from a point on a pipeline at which the amount of natural gas supplied to a person for use will be ascertained by: — a natural gas supplier; — an agent of a natural gas supplier; or — a person otherwise acting in accordance with an agreement entered into with the natural gas supplier; or the natural gas is combusted in machinery or equipment used to heat or compress natural gas within a natural gas supply pipeline.95 The government explained that: In most circumstances, ascertaining the amount of gas supplied will involve measuring the gas that passes through a customer meter, however some other industry arrangements exist where the amount of natural gas supplied is ascertained by other methods.96

In order to prevent the imposition of double liability for emissions,97 withdrawal of natural gas does not occur if the natural gas goes: from the pipeline to an underground storage reservoir; or between two natural gas supply pipelines; or from a natural gas supply pipeline directly into the atmosphere.98

Natural gas supply pipeline [71,250] A “natural gas supply pipeline” excludes any pipeline that is:99

(a) anything upstream of a connection point or (if there is no connection point) an [page 166]

exit flange on a pipeline conveying natural gas from a specified gas processing plant;100 or

(b) a gathering system operated as part of an upstream producing operation; or (c) anything downstream of a point on a pipeline from which a person takes natural gas for use. The definition of natural gas supply pipeline is intended to be broadly consistent with how a “pipeline” is defined in the National Gas Law contained in the schedule to the National Gas (South Australia) Act 2008 (SA).101

Large gas consuming facility [71,275] Alarge gas consuming facility is defined by reference to each financial year commencing after 1 July 2010, each set as the base year for determining if a facility is a large gas consuming facility.102 If a facility passes the prescribed threshold test in a base year, then a facility will be a large gas consuming facility commencing from the period starting 1 July that occurs two years after the end of the base year (and continuing until ceasing to be a large gas consuming facility). A facility will pass the prescribed threshold test and be considered a large gas consuming facility if so much of the total amount of covered emissions from the operation of the facility during the financial year as is attributable to the combustion of natural gas has a CO2-e of not less than 25,000 tonnes.103

Ceasing to be a large gas consuming facility [71,300] A facility will be taken to cease to be a large gas consuming facility if an application is made to the regulator and the regulator approves this application.104 There are two possible applications, depending: (1) if the facility became a large gas consuming facility in a one-off financial year or

(2) if the facility produces diminishing levels of emissions.105

Application to cease after qualifying in one-off financial year [71,325] The operator of the facility may apply to cease classification as a large gas consuming facility if the facility became a large gas consuming facility in a one-off financial year. [page 167] This test requires that the facility: was not a large gas consuming facility in the two financial years before the one-off financial year; and is unlikely to be a large gas consuming facility in the two financial years following the one-off financial year.106 The application must be made by the operator of the facility at least 90 days before the facility will become a large gas consuming facility. The application must include prescribed information and documents (Box 71,325-1):107 Box 71,325-1 — Information to be supplied to cease being a large gas consuming facility The applicant’s identifying information The identifying information for the facility:108 — The name of the facility; — The facility’s street address (if any); — If the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken; — If the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable; — If the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is

located; — If the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility; — The industry sector to which the activities constituting the facility are attributable; and — The facility identification number for the facility (if the regulator has issued this unique number for the facility) The start and end date of the one-off financial year in which the facility will be a large gas consuming facility A statement confirming the quantity of covered emissions (number of tonnes CO2-e) from the operation of the facility that were attributable to the combustion of natural gas during the oneoff financial year and each of the two financial years before the one-off financial year; or A statement confirming the amount of natural gas combusted at the facility for the one-off financial year and each of the two financial years before the one-off financial year A statement of the amount of natural gas supplied for use at the facility in the one-off year and each of the two financial years before the one-off year. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied [page 168] A statement of the reason why the emissions from the facility that are attributable to the combustion of natural gas are likely to be less than 25,000 tonnes of CO2-e in the two financial years after the one-off financial year. The applicant must provide documentary evidence to support this. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied [71,350] The regulator may require further information from the applicant, and if the applicant fails to comply, the regulator may refuse to consider the

application.109

Decision on application to cease after qualifying in one-off financial year [71,375] The regulator may decide that the facility (immediately after becoming a large gas consuming facility) should cease to be treated as a large gas consuming facility, but only if satisfied that:110 the applicant provided the prescribed information and documents, and this information is correct. greenhouse gas emissions from the operation in the facility attributable to the combustion of natural gas were less than 25,000 tonnes CO2-e in the two financial years before the one-off financial year, and are likely to be less than 25,000 tonnes CO2-e in the two financial years after the one-off financial year. The regulator may consider previous applications requesting that the facility cease to be a large gas consuming facility.111 The regulator must take all reasonable steps to make a decision within 90 days after the application was made (or 90 days after the applicant provided further information required by the regulator), and inform the applicant of this decision in writing.112

Application to cease because of diminishing emissions [71,400] The operator of the facility may apply to cease to be a large gas consuming facility if the facility produces diminishing levels of emissions. This test requires that the greenhouse emissions from the operation of the facility: attributable to the combustion of natural gas for the financial year immediately preceding the financial year in which the application is made, were less than 25,000 tonnes CO2-e; and will be likely to be less than 25,000 tonnes CO2-e in the financial year in which the application is made and in the following financial year.113

[page 169] The application must include the following information and documents (Box 71,400-1):114 Box 71,400-1 — Information required if emissions are diminishing The applicant’s identifying information The identifying information for the facility:115 — The name of the facility; — The facility’s street address (if any); — If the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken; — If the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable; — If the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located; — If the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility; — The industry sector to which the activities constituting the facility are attributable; and — The facility identification number for the facility (if the regulator has issued this unique number for the facility) A statement confirming the quantity of covered emissions (number of tonnes CO2-e) from the operation of the facility that were attributable to the combustion of natural gas in each of the previous 3 financial years; or A statement from the applicant stating the amount of natural gas combusted at the facility in each of the previous 3 financial years A statement stating the amount of natural gas supplied for use at the facility in each of the previous 3 financial years. The applicant

must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied The reason why the emissions from the facility that are attributable to the combustion of natural gas are likely to be less than 25,000 tonnes of carbon dioxide equivalence in the current financial year and the following financial year. The applicant must provide documentary evidence to support this. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied If another person quoted an OTN under Clean Energy Act 2011 (Cth) s 55B(1) for the supply of natural gas for use at the facility, or is likely to be required to quote an OTN under s 55B(1) within 90 days after the application, then the other person would have a provisional emissions number under Clean Energy Act 2011 (Cth) s 35(3) in relation to the gas used at the facility because the facility ceased to be a large gas consuming facility. The applicant [page 170] must tell this other person about the application to cease treatment of the facility as a large gas consuming facility,116 and must provide the contact details (name, telephone number, email address and postal address) of the other person.117 [71,425] The regulator may require further information from the applicant, and if the applicant fails to comply, the regulator may refuse to consider the application.118

Decisions on application to cease because of diminishing emissions [71,450] The regulator may decide that the facility (immediately after becoming a large gas consuming facility) should cease to be treated as a large gas consuming facility, but only if satisfied that:119 the applicant provided the required information and documents, and this information is correct. greenhouse gas emissions from the operation in the facility attributable to the combustion of natural gas were less than 25,000 tonnes CO2-e in

the previous financial year, and are likely to be less than 25,000 tonnes CO2-e in the current financial year and the following financial year. The regulator must take all reasonable steps to make a decision within 90 days after the application was made (or 90 days after the applicant provided further information required by the regulator), and inform the applicant of this decision in writing.120 If another person has quoted, or is likely to be required to quote, an obligation transfer number (OTN) in relation to the facility, the regulator must also information the other person of this decision in writing.121

Potential greenhouse gas emissions [71,475] “Potential greenhouse gas emissions” has the same meaning as in the NGER Act. In the NGER Act, potential greenhouse gas emissions embodied in an amount of designated fuel has the meaning given by s 7B. Section 7B provides that the potential greenhouse gas emissions embodied in an amount of a particular kind of designated fuel is the amount of the greenhouse gas or gases that would be released into the atmosphere as a result of the combustion of the amount of the designated fuel. A designated fuel means natural gas, taxable fuel, liquefied natural gas, or liquefied petroleum gas.122 [page 171] [71,500] Section 7B of the NGER Act prescribes that the Minister may determine a default method and prescribed alternative method for determining the amount of GHG embodied in combustion of a designated fuel. The potential greenhouse gas emissions embodied in natural gas may be measured for the purposes of the Clean Energy Act 2011 (Cth) and the NGER Act using the default method based on national average estimates, or (in some circumstances) the prescribed alternative method based on Australian or equivalent standards for analysis.123

Default method [71,525] The default method defined by the Minister in the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth) (NGER Measurement Determination)124 is calculated using the following formula:125

E =Q × A where: E

is the amount of greenhouse gas that would be released into the atmosphere as a result of the combustion of an amount of natural gas, measured in CO2-e tonnes.

Q

is taken to be the amount of natural gas supplied using a natural gas supply pipeline by a person in a reporting year, measured in cubic metres (corrected to standard conditions) or gigajoules.

A

is the worked out using the following formula:

where: EC is the energy content factor, which: (a) for natural gas measured in gigajoules, is equal to 1; or

(b) for natural gas measured in cubic metres, is: (i)

39.3 × 10−3; or

(ii) estimated by analysis in accordance with ss 1.10D,

1.10E and 1.10F.

EFCO2ox,ec is the emission factor for CO2: 51.2. EFCH4 is the emission factor for CH4: 0.1. EFN2O is the emission factor for N2O: 0.03. [page 172]

Prescribed alternative method [71,550] A person may make a choice to use the prescribed alternative method, and must then use this instead of the default method, when:126 the person was a liable entity making a required report relating to their provisional emissions number for an eligible financial year under NGER Act 22A; the report was given before the end of four months after the end of the

eligible financial year; ascertaining the potential GHG embodied in an amount of natural gas is relevant to working out the person’s provisional emissions number for the eligible financial year; and the report contained a statement to the effect that the person has made a choice to use the prescribed alternative method to ascertain the potential greenhouse gas emissions. In the prescribed alternative method, the potential greenhouse gas emissions embodied in natural gas are calculated using the following formula:127

where E

is the potential greenhouse gas emissions embodied in an amount of natural gas, measured in CO2-e tonnes.

Q

is the amount of natural gas supplied using a natural gas supply pipeline by a person in a reporting year, measured in cubic metres (corrected to standard conditions) or gigajoules (estimated in accordance with the measurement requirements in Div 1.1A.3).

EC is the energy content factor, which: (a) for natural gas measured in gigajoules, is equal to 1: or (b) for natural gas measured in cubic metres, is: (i)

39.3 × 10−3; or

(ii) estimated by analysis in accordance with ss 1.10D, 1.10E and 1.10F. EFCH4 is the emission factor for CH4: 0.1. EFN20 is the emission factor for N2O: 0.03. EFCO2oxec is the carbon dioxide emission factor for natural gas supplied using a natural gas supply pipeline by a person in a reporting year, measured in kilograms CO2-e per gigajoule and calculated using the following steps: Step 1 Estimate EFCO2ox,kg in accordance with the following formula:

[page 173] where: EFCO2,ox,kg is the carbon dioxide emission factor for natural gas supplied using a natural gas supply pipeline by a person in a reporting year, incorporating the effects of a default oxidation factor expressed as kilograms of carbon dioxide per kilogram of natural gas. Σy

is sum for all component gas types.

moly%, for each component gas type(y)mentioned in the Table 71,5501, is that gas type’s share of: (a) 1 mole of natural gas supplied using a natural gas supply pipeline, expressed as a percentage; or (b) the total volume of natural gas supplied using a natural gas supply pipeline, expressed as a percentage. mwy, for each component gas type (y) mentioned in the Table 71,550-1, is the molecular weight of the component gas type(y), measured in kilograms per kilomole. V

is the volume of 1 kilomole of the gas at standard conditions, which is 23.6444 cubic metres.

dy,total is worked out using the following formula:

fy

for each component gas type (y) mentioned in the Table 71,550-1, is the number of carbon atoms in a molecule of the component gas type(y).

OFg is the oxidation factor 0.995 applicable to natural gas supplied using a natural gas supply pipeline. Step 2 Work out the emission factor from the combustion of natural gas EFCO2oxec supplied using a natural gas supply pipeline, expressed in kilograms of carbon dioxide per gigajoule, using information on the composition of each component gas type (y) mentioned in the Table

71,550-1 in accordance with the following formula:

where EFCO2,ox,kg is the carbon dioxide emission factor for natural gas supplied using a natural gas supply pipeline by a person in a reporting year, incorporating the effects of a default oxidation factor expressed as kilograms of a carbon dioxide per kilogram of natural gas, worked out under Step 1. EC is the energy content factor, measured in GJ/m3: (a) 39.3 × 0−3; or (b) estimated by analysis in accordance with sections 1.10D, 1.10E and 1.10F. [page 174] C

is the density of natural gas supplied using a natural gas supply pipeline, expressed in kilograms of natural gas per cubic metre, analysed in accordance with ISO 6976:1995 or an equivalent standard using the formula.

Σy

is sum for all component gas types.

moly%, for each component gas type (y) mentioned in the table is that gas type’s share of: (a) 1 mole of natural gas supplied using a natural gas supply pipeline, expressed as a percentage; of (b) the total volume of natural gas supplied using a natural gas supply pipeline, expressed as a percentage. mwy, for each component gas type(y), is the molecular weight of the component gas type(y)measured in kilograms per kilomole. V

is the volume of 1 kilomole of the gas at standard conditions, which is 23.6444 cubic metres. Table 71,550.1 Item

Component gas type (y)

Molecular WT (kg/kmole)

Number of carbon atoms in component molecules

1 2 3 4 5 6 7 8 9 10 11 12 13

Methane Ethane Propane Butane Pentane Carbon monoxide Hydrogen Hydrogen sulphide Oxygen Water Nitrogen Argon Carbon dioxide

16.043 30.070 44.097 58.123 72.150 28.016 2.016 34.082

1 2 3 4 5 1 0 0

31.999 18.015 28.013 39.948 44.010

0 0 0 0 1

The molecular weight and number of carbon atoms in a molecule of each component gas type(y)mentioned in column 2 of an item in the table is set out in columns 3 and 4, respectively, for the item. [71,575] Section 7C of the NGER Act makes the CO2-e of potential greenhouse gas emissions the same as the CO2-e of greenhouse gas emissions.

LIABLE ENTITY FOR THE SUPPLY OF NATURAL GAS [71,600] If a natural gas supplier has one or more preliminary emissions numbers for an eligible financial year, the natural gas supplier will be a liable entity for the eligible financial year.128 [page 175] The sum of the preliminary emissions number(s) (if any) of the natural gas supplier for the eligible financial year is the provisional emissions number of the natural gas supplier.129 The total of the final provisional emissions numbers of the natural gas supplier will be the emissions number for the eligible financial year (after rounding).130

Preliminary emissions number [71,625] A natural gas supplier has a preliminary emissions number (PEN) if, during an eligible financial year: the natural gas supplier supplies an amount of natural gas to another person (who does not quote an obligation transfer number (OTN) in relation to the supply); and it may reasonably be expected that the natural gas is wholly or partly for use by the other person; and the natural gas supplier’s withdrawal of natural gas takes place in Australia, from a natural gas supply pipeline for the purposes of use by the other person; and the potential greenhouse gas emissions embodied in this amount of natural gas have a carbon dioxide equivalence of a particular number of tonnes.131

Estimating amounts of natural gas supplied [71,650] The DCCEE continues to consult with industry in relation to the methods to be used to estimate the supply of natural gas. In April 2012, an Exposure Draftof the “National Greenhouse and Energy Reporting (Measurement) Amendment Determination 2012 (No)” proposed132 one of the following three permitted criteria for estimation must be applied:133 (1) (criterion A) the amount of natural gas, expressed in cubic metres or gigajoules, supplied using a natural gas supply pipeline by a person in a period of supply that starts and ends in the current reporting year, as evidenced by invoices. (2) (criterion AA) if an invoice relates to a period of supply: (i)

that starts in the previous reporting year and ends in the current reporting year; or

(ii) that starts in the current reporting year and ends in the following reporting year; using the following steps: Step 1 Identify the number of days within the period of supply to which the invoice relates that are in the current reporting year.

Step 2 Identify the total amount of natural gas supplied that is mentioned on the invoice. Step 3 Multiply the number of days identified under step 1 by the amount identified under step 2. [page 176] Step 4 Divide the result of step 3 by the total period of supply (measured in days) to which the invoice relates. Step 5 Add the amount worked out under step 4 to the amount identified using criterion A (3) (criterion AAA) (s 1.10J) the direct measurement of natural gas supplied using prescribed volumetric measurement appropriate for super-compressed and non-super-compressed natural gases and approved measuring equipment.

Volumetric measurement of natural gas [71,675] The volumetric measurement of all natural gases134 and supercompressed gases135 must be calculated according to the NGER Measurement Determination.

Standard and frequency of sampling and analysis [71,700] The NGER Measurement Determination specifies the standards for sampling natural gas supplied using a natural gas supply pipeline,136 and the frequency for analysing samples.137

Extended meaning of “use” [71,725] The provision of natural gas for use by another person where the provision does not involve a supply of natural gas results in the use of the natural gas by the other person being taken to be use by the person who provided the natural gas.138

Netted-out number [71,750] A natural gas supplier’s provisional emissions number for an eligible financial year will be reduced (but not below zero) by the total of any netted-

out numbers.139 The regulations may define how a supplier’s netted-out number is calculated.140 To date, no such regulations have been promulgated, so no reductions are possible.

LIABLE ENTITY IFA PERSON QUOTES THEIR OBLIGATION TRANSFER NUMBER [71,775] As the other person to whom a natural gas supplier supplies an amount of natural gas must reasonably be expected to use all or part of the natural gas, a natural gas supplier is not intended to be liable for supplying natural gas to a person that is a gas retailer. The government intends that the natural gas supplier will likely be liable for supplying natural gas to residential customers, business customers (eg office buildings or [page 177] businesses with gas heating), and pipeline operators that use the gas in compressors attached to the pipeline (unless the pipeline operator quotes an OTN).141 [71,800] Anatural gas supplier’s liability for emissions may be transferred to another person who quotes their obligation transfer number (OTN) in relation to the supply of natural gas. If, during an eligible financial year, a natural gas supplier supplies an amount of natural gas to another person who quotes an OTN in relation to the supply (the other person is called the OTN holder), then the OTN holder will have a preliminary emissions number, which determines their liability.142 The quotation of an OTN and the consequent transfer of liability is: mandatory, if the natural gas may reasonably be expected to be for use in the operation of a large gas consuming facility; voluntary, if by agreement between the parties. Table 71,800-1 summarises when a person may quote an OTN in relation to a supply of natural gas, whether the quotation is mandatory or optional, and whether the supplier’s acceptance of this quotation is mandatory or optional. Table 71,800-1 — Quotation and acceptance of obligation transfer numbers Quotation of the Acceptance of the quotation by

Situation

OTN by the OTN holderh

the natural gas supplierh

Large gas consuming facility — a facility that combusts natural gas with covered emissions that have a CO2-e of 25,000 tonnes or more in its operation during a financial year. Large user of natural gas — a person in operational control of two or more facilities (including a large gas consuming facility) who is being supplied natural gas at another facility under their operational control that is not a large gas consuming facility. Approved person — likely to have a large gas consuming facility during the particular financial year. Use of the supplied natural gas as feedstock. Use of the supplied natural gas in manufacturing compressed natural gas, liquefied natural gas or liquid petroleum gas.

Mandatory

Mandatory

Optional

Optional

Optional

Optional

Optional

Mandatory

Optional

Mandatory

[page 178]

Quoting an obligation transfer number for natural gas supply [71,825] The requirements in Div 3 in relation to the supply of natural gas for quotation of an OTN are that: it may reasonably be expected that the natural gas is wholly or partly for use by the OTN holder; the natural gas supplier’s withdrawal of natural gas takes place in Australia and the withdrawal takes place from a natural gas supply pipeline for the

purposes of use by the other person; and the potential greenhouse gas emissions embodied in the supplied amount of natural gas have a CO2-e of a particular number of tonnes. The natural gas supply requirements for quotation of an OTN must be read with Div4 of Pt 3, dealing with OTNs. The issue, quotation and acceptance of quotation of OTNs is discussed in [72,275].

OTN holder is the liable person [71,850] If the OTN holder has one or more preliminary emissions numbers for an eligible financial year, the OTN holder will be a liable entity for that year. The particular number of potential GHG in the amount of supplied natural gas is the OTN holder’s preliminary emissions number.143 The sum of the preliminary emissions number(s) (if any) of the OTN holder for the eligible financial year is the provisional emissions number of the OTN holder.144 The total of the final provisional emissions numbers of the OTN holder will be the emissions number for the eligible financial year (if at least one, after rounding).

Supply to a large gas consuming facility [71,875] If the natural gas supplier is supplying natural gas to the OTN holder and it may reasonably be expected that the natural gas will be for use in the operation of a large gas consuming facility, then the OTN holder must quote their OTN, or a civil penalty provision will apply.145 Because large gas consuming facilities are liable for their own emissions,146 the OTN holder’s preliminary emissions number is calculated using a formula that takes account of natural gas combusted by the large gas consuming facility. The result is a base amount of natural gas less than what was supplied:

[page 179]

Netted-out numbers of OTN holders [71,900] The OTN holder’s provisional emissions number may be reduced (but not below zero) by the total of any netted-out numbers.148 The OTN holder may have a netted-out number in six ways: Use of natural gas as feedstock or in such a way as to not emit any GHG. If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and during an eligible financial year uses a portion of that natural gas: — as feedstock (a substance that is converted by a chemical process into another substance that is not a greenhouse gas);149 or — in such a way as to not emit any greenhouses gases, the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.150 Use of natural gas for combustion at a facility (other than a large gas consuming facility). If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and — during an eligible financial year an amount of covered emissions from the operation of a facility (other than a large gas consuming facility) was attributable to the combustion of a portion of that natural gas; and — the covered emissions count for the purposes of determining a liable entity in Div 2 of Pt 3, the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.151 This prevents double counting of liability for emissions.152 Use of natural gas for combustion at a facility (other than a large gas consuming facility). If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and — during an eligible financial year an amount of covered emissions from the operation of a facility was attributable to the combustion of an amount of compressed natural gas (CNG) that was manufactured at the facility using a portion of that natural gas; and

— the covered emissions count for the purposes of determining a liable entity in Div 2 of Pt 3, the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.153 Use of natural gas to manufacture CNG, liquefied natural gas (LNG) or liquefied petroleum gas (LPG) where an excise duty is payable. [page 180] If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and — during an eligible financial year the OTN holder uses a portion of that natural gas to manufacture CNG, LNG or LPG, which is entered for home consumption; and — an excise duty is or was payable by the OTN holder or another person on this gas, the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.154 Emissions attributable to the combustion of CNG, LNG and LPG that have been subject to customs or excise duties are not covered emissions in the Clean Energy Act 2011 (Cth), unless brought within coverage under the Opt-in Scheme.155 Secondary supply of natural gas to another person. If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and during an eligible financial year the OTN holder supplies a portion of that natural gas to another person, the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.156 This prevents double counting of liability for emissions.157 Use of natural gas to manufacture CNG, LNG or LPG, where no excise duty is payable, and a transfer has occurred. If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and — during an eligible financial year the OTN holder uses a portion of that natural gas to manufacture CNG, LNG or LPG; and — this manufactured gas is transferred from storage at one place to storage at another place by the authority of a written permission for the movement of gas under Excise Act 1901 (Cth) s 39K(6)

(c), or a written permission for the removal of gas under Excise Act 1901 (Cth) s 61A; and — the netted-out number provision in s 35(7) of the Clean Energy Act 2011 (Cth) (the third type of netted-out number described above) does not apply, the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.158 Use of natural gas in the operation of a facility, without combustion. If the OTN holder quotes their OTN in relation to a supply of an amount of natural gas to them, and — during an eligible financial year an amount of covered emissions from the operation of the facility was attributable to the use (without combustion) of a portion of that natural gas; and [page 181] — that amount of covered emissions counts for the purposes of:





ss 20(1), 21(1), 22(1), 23(1), 24(1) or 25(1), and



s 35(2) (a natural gas supplier supplying natural gas to the OTN holder that may reasonably be expected to be for use in the operation of a large gas consuming facility) and s 35(6) (the second type of netted-out number described above) do not apply to that amount,

the potential GHG embodied in that portion of natural gas (CO2-e) is a netted-out number.159

LIABLE ENTITY IFA PERSON MISUSES THEIR OBLIGATION TRANSFER NUMBER [71,925] The OTN holder is made a liable entity if, during an eligible financial year, a natural gas supplier supplies (in accordance with the typical natural gas supply requirements) an amount of natural gas to the OTN holder who quotes an OTN in relation to that supply in circumstances where the OTN holder was not permitted or required by the act to quote their OTN. This approach is designed to protect the natural gas supplier from liability for GHG emissions embodied in the natural gas supply, in the face of an OTN holder’s error.

The GHG embodied in the natural gas supplied will be the OTN holder’s preliminary emissions number.160 The sum of the preliminary emissions number(s) (if any) of the OTN holder for the eligible financial year is the provisional emissions number of the OTN holder.161 The total of the final provisional emissions numbers of the OTN holder will be the emissions number for the eligible financial year (if at least one, after rounding).

Gaseous fuel suppliers INTRODUCTION TO DIVISION 3A [71,950] Division 3A of Pt 3 of the Clean Energy Act 2011 (Cth) deals with the liability of persons that import, manufacture or resell liquefied petroleum gas (LPG; also named “liquid petroleum gas” in the NGER Regulations) or liquefied natural gas (LNG) for non-transport use. Non-transport use is use that does not occur in an internal combustion engine in a motor vehicle or vessel.162 Persons are liable for the potential number of CO2-e tonnes of GHG emissions embodied in the LPG or LNG supplied, rather than the actual emissions produced when the LPG or LNG is combusted, because liability generally arises before the LPG or LNG is combusted and emissions are released into the atmosphere.163 The number of CO2-e tonnes of greenhouse gas embodied is a provisional emissions number of the person for the financial year. [page 182] Liability will arise if this netted-out number is at least 1 tonne.164 In future, the government may exempt some amounts of imported or manufactured LPG and LNP. There are currently no amounts exempted from liability under the Regulations. The government has stated, “It is intended that the regulations could, for instance, provide an exemption for fuel (typically LPG) which is packaged in small containers for specific applications which use small volumes of fuel (such as soldering). It would not be cost effective to require importers of these products to participate in the mechanism.”165

Gaseous fuel supplier [71,975] A gaseous fuel supplier is a person who supplies LNG, LPG or

natural gas in the prescribed circumstances.166 Agaseous fuel supplier may be an individual, body corporate, trust, corporation, body politic or local governing body. LNG is natural gas that is sourced from a process or vessel where the gas is in a liquid state.167 By definition,168 LPG is: liquid propane; or a liquid mixture of propane and butane; or a liquid mixture of propane and other hydrocarbons that consists mainly of propane; or a liquid mixture of propane, butane and other hydrocarbons that consists mainly of propane and butane. By definition,169 “natural gas” is a substance that: is in a gaseous state at standard temperature and pressure; and consists of naturally occurring hydrocarbons, or a naturally occurring mixture of hydrocarbons and non-hydrocarbons; and consists mainly of methane; and is suitable for injection into a natural gas supply pipeline.

Supply [72,001] “Supply” means supply (including re-supply) by way of sale, exchange or gift.170A supply must involve a transfer of beneficial ownership in the gaseous fuel.171 [page 183]

GENERAL RULES FOR LIABILITY FOR IMPORT OF LPG OR LNG FOR NONTRANSPORT USE [72,025] A person will be a liable entity where the following conditions are met:

an amount of LPG or LNG is imported into Australia; and that amount is entered for home consumption during an eligible financial year beginning on or after 1 July 2013; and customs duty is or was payable by a person on that amount; and the customs duty is remitted on the grounds that the LPG or LNG is for non-transport use; and that amount is not exempted from liability under the regulations; and the total amount of potential greenhouse gas emissions embodied in the LPG or LNG has a CO2-e of a particular number of tonnes.172

Provisional emissions number [72,050] A liable entity’s provisional emissions number is the total amount of potential greenhouse gas emissions embodied in the LPG or LNG that has a carbon dioxide equivalence of a particular number of tonnes.173

Netted-out numbers [72,075] The person’s provisional emissions number may be reduced (but not below zero) by the total of any netted-out numbers.174 The person may have a netted-out number if their provisional emissions number is attributable to the import of an amount of LPG or LNG, and during an eligible financial year, the person supplies a portion of that amount of LPG or LNG to another person who quotes their OTN in relation to the supply.175 The operation of OTNs is discussed in [72,275].

GENERAL RULES FOR LIABILITY FOR PRODUCTION OF LPG OR LNG FOR NONTRANSPORT USE [72,100] A person will be a liable entity where the following conditions are met: an amount of LPG or LNG is manufactured or produced into Australia; and that amount is entered for home consumption during an eligible

financial year beginning on or after 1 July 2013; and excise duty is or was payable by a person on that amount; and the customs duty is remitted on the grounds that the LPG or LNG is for non-transport use; and that amount is not exempted from liability under the regulations; and the total amount of potential greenhouse gas emissions embodied in the LPG or LNG has a CO2-e of a particular number of tonnes.176 [page 184]

Provisional emissions number [72,125] Aliable entity’s provisional emissions number (PEN) is the total amount of potential greenhouse gas emissions embodied in the LPG or LNG that has a carbon dioxide equivalence of a particular number of tonnes.177

Netted-out numbers [72,150] The person’s provisional emissions number may be reduced (but not below zero) by the total of any netted-out numbers.178 The person may have a netted-out number if their provisional emissions number is attributable to the manufacture or production of an amount of LPG or LNG, and during an eligible financial year, the person supplies a portion of that amount of LPG or LNG to another person who quotes their OTN in relation to the supply.179 The operation of OTNs is discussed in [72,275].

LIABLE ENTITY IFA PERSON QUOTES THEIR OBLIGATION TRANSFER NUMBER [72,175] A person’s liability for emissions attributable to the import, manufacture or production of LPG or LNG may be transferred to another person who quotes their obligation transfer number (OTN) in relation to the supply. If, during an eligible financial year, a person supplies an amount of LPG or LNG to another person who quotes an OTN in relation to the supply (the other person is called the OTN holder), then the OTN holder will have a

preliminary emissions number, which determines their liability.180 The Regulations will, before 1 July 2013, define when quotation of an OTN is mandatory or voluntary in relation to the supply of LPG or LNG.181 The requirements for quotation of an OTN must be read with Div 4 of Pt 3, dealing with OTNs. The operation of OTNs is discussed in [72,275].

OTN holder is the liable person [72,200] If the OTN holder has one or more preliminary emissions numbers for an eligible financial year, the OTN holder will be a liable entity for that year. The particular number of potential GHG emissions embodied in the amount of supplied LPG or LNG is the OTN holder’s preliminary emissions number.182 The sum of the preliminary emissions number(s) (if any) of the OTN holder for the eligible financial year is the provisional emissions number of the OTN holder.183 The total of the final provisional emissions numbers of the OTN holder will be the emissions number for the eligible financial year (if at least one, after rounding). [page 185]

Netted-out numbers of OTN holders [72,225] The OTN holder’s provisional emissions number may be reduced (but not below zero) by the total of any netted-out numbers.184 If the OTN holder’s provisional emissions number is attributable to the import, manufacture or production of an amount of LPG or LNG, and during an eligible financial year: an amount of covered emissions from the operation of a facility was attributable to the non-transport combustion185 of a portion of that amount of LPG or LNG; and the covered emissions count for the purposes of determining a liable entity in Div2 of Pt3, the potential GHG embodied in that portion of LPG or LNG is a netted-out number.186

LIABLE ENTITY IFA PERSON MISUSES THEIR OBLIGATION TRANSFER NUMBER [72,250] The OTN holder is made a liable entity if, during an eligible financial year, a person supplies an amount of LPG or LNG to the OTN holder who quotes an OTN in relation to that supply in circumstances where the OTN holder was not permitted or required by the act to quote their OTN. This approach is designed to protect the supplier from liability for GHG emissions embodied in the LPG or LNG supply, in the face of an OTN holder’s error. The particular number of potential GHG emissions embodied in the LPG or LNG supplied that is attributable to the import, manufacture or production will be the OTN holder’s preliminary emissions number.187 The sum of the preliminary emissions number(s) (if any) of the OTN holder for the eligible financial year is the provisional emissions number of the OTN holder.188 The total of the final provisional emissions numbers of the OTN holder will be the emissions number for the eligible financial year (if at least one, after rounding).

Obligation transfer numbers INTRODUCTION TO DIVISION 4 [72,275] Division 4 of Pt 3 deals with: the issue of OTNs; quotation of OTNs; acceptance of quotation of OTNs; how an OTN holder may withdraw their quotation; and the civil penalties for misuse of an OTN or the quotation of a bogus OTN. [page 186] Division 4 also deals with the online register of all current OTNs to be maintained by the regulator.

Issue of obligation transfer numbers [72,300] Once issued to a person, an OTN is not transferable.189 An OTN may be issued following a person’s application to the regulator, or on the regulator’s own initiative.190

Application to the regulator for an OTN [72,325] A person may apply to the regulator for an OTN.191 The application must be in writing, using a form approved in writing by the regulator. All applications must include the applicant’s identifying information, determined by the applicant’s status (which must be confirmed in a statement as an individual, body corporate, trust and so on)192 and prescribed information (Box 72,325-1).193 Box 72,325-1 — Information to accompany an application for an obligation transfer number Person Information Individual • the person’s name

Body corporate (not a foreign person)



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



telephone number



email address



residential address



postal address (if different).



the person’s name



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



head office postal address



details of at least one executive officer (or equivalent) of the body corporate (including the executive officer’s name, telephone number, email address and postal address) [page 187]

Body corporate (a foreign person)

Trust

Corporation sole



the person’s name



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



head office postal address



details of at least one executive officer (or equivalent) of the body corporate (including name, telephone number, email address and postal address)



the name of any Australian agent through which the person conducts business



the person’s name



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



head office postal address



details of each trustee (including name, telephone number, email address and postal address)

Body politic

Local governing body

Body established under a Commonwealth, State or Territory law



the person’s name



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



head office postal address



the name and address of the individual who makes up the corporation sole



the person’s name



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



head office postal address



details of at least one officeholder (including name, telephone number, email address and postal address)



the person’s name



the person’s trading name



identifying details (ABN, ACN, ARBN or trading name and street address)



head office postal address



details of at least one officeholder (including name, telephone number, email address and postal address)



the nation of the establishing legislation



the date the body was

established •

whether the body is a Commonwealth, State or Territory body. [page 188]

[72,350] The applicant must make a statement indicating which of four categories are likely to require or permit the applicant to quote an OTN.194 Box 72,350-1 details the categories and information and documents required to be supplied by an applicant for an OTN. Box 72,350-1 — Statement of category permitting quotation of an OTN Category Required information and documents Large gas consuming • the identifying information for the facility:196 facility195 — the name of the facility; — the facility’s street address (if any) — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or Territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline acility, the state or Territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility — the industry sector to which the activities constituting the facility are attributable — the facility identification number for the facility (if the regulator has issued this unique number for the facility) • for a facility of a mandatory designated joint

venture — the name of the person nominated as having operational control of the facility under NGER Act s 11AA(5) or s 11B(5) • for any other facility — the name of the person who has operational control of the facility [page 189] • if the applicant is not the person with operational control, then the applicant must provide that contact details (name, telephone number, email address and postal address) of the person who has operational control of the facility or who is nominated as having operational control of the facility of a mandatory designated joint venture, a statement describing the applicant’s relationship to that other person, and a statement describing the applicant’s relationship to the facility • the financial year in which the facility first passed the threshold test in Clean Energy Act 2011 (Cth) s 55A(3), which resulted in the facility becoming a large gas consuming facility. This must be stated in a statutory declaration • a statement confirming the quantity of covered emissions (as a number of tonnes of carbon dioxide equivalence) from the operation of the facility that were attributable to the combustion of natural gas during that financial year, or a statement confirming the amount of natural gas combusted at that facility during that financial year. This must be stated in a statutory declaration • the date from which the applicant expects to be required to quote an OTN in relation to the facility • a statement that the applicant will likely be supplied with natural gas by a natural gas supplier in the 12 month period after the application is made • a statement that the applicant will likely use this supply of natural gas in the operation of the large gas

consuming facility, or will likely provide (but not supply, according to the Clean Energy Act 2011 (Cth)) the natural gas to another person for use in the operation of the facility. In the latter case, the applicant must provide the other person’s name and contact details, and a statement describing the applicant’s relationship to the other person. The applicant may provide the other person’s identifying details (ABN, ACN, ARBN or trading name and street address) • a statement that the applicant is currently supplied natural gas for use at the facility; or a statement that explains the reason that the applicant expects to start being supplied natural gas for use at the facility in the 12 month period after the application is made. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied [page 190] • a statement indicating the eligible financial year to which the application relates • the identifying information for the facility:198 — the name of the facility; — the facility’s street address (if any); — if the facility is not a transport • facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken Large user of natural gas197

— if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site

facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility — the industry sector to which the activities constituting the facility are attributable; and — the facility identification number for the facility (if the regulator has issued this unique number for the facility) a statement that, in the specified eligible financial year: — the facility will likely be under the operational control of the applicant; — the applicant will likely be supplied natural gas by a natural gas supplier; — the natural gas will likely be for use in the operation of the facility; and — emissions from the combustion of natural gas at the facility will likely be at least 25,000 tonnes CO2-e or • a statement that, in the specified eligible financial year: — the facility will likely be under the operational control of another person; — the applicant will likely be supplied natural gas by a natural gas supplier; [page 191] — the applicant will likely provide (but not supply, according to the Clean Energy Act 2011 (Cth)) a portion of the natural gas to the other person for use in the operation of the facility; — the natural gas will likely be for use in the operation of the facility; and — emissions from the combustion of natural gas at the facility will likely be at least 25,000 tonnes CO2-e.

• the applicant must provide the other person’s contact details (name, telephone number, email address and postal address) and a statement describing the applicant’s relationship to that other person • a statement of the reason why the emissions from the facility attributable to the combustion of natural gas are likely to be at least 25,000 tonnes CO2-e in the specified eligible financial year. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied • a statement that the applicant is currently supplied natural gas for use at the facility; or • a statement that the applicant is not currently supplied natural gas for use at the facility, and the reason why the applicant expects to start being supplied natural gas for use at the facility in the 12 month period after the application is made. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied • a description of the chemical process in which natural gas will be used as feedstock, including the relevant amount of all inputs and outputs • the date from which the applicant expects to be Use of natural gas as permitted to quote an OTN in relation to the natural feedstock199 gas that will be used as a feedstock at the facility, business premises or other location • a statement that the applicant will be supplied with natural gas by a natural gas supplier in the 12 month period after the application is made [page 192] • a statement that the applicant will likely use this supply of natural gas as a feedstock at the facility, business premises or other location, or will likely

provide (but not supply, according to the Clean Energy Act 2011 (Cth)) the natural gas to another person who will use a portion as a feedstock at the facility, business premises or other location. In the latter case, the applicant must provide the other person’s name and contact details, and a statement describing the applicant’s relationship to the other person • a statement that the applicant is currently supplied natural gas for use as a feedstock at the facility, business premises or other location, or a statement that explaining the reason that the applicant expects to start being supplied natural gas for this use at the facility, business premises or other location in the 12 month period after the application is made. The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied • if the natural gas will be used at a facility that is in existence at the time of the application:200 • The identifying information for the facility:201 — the name of the facility; — the facility’s street address (if any); — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the

activities constituting the facility — the industry sector to which the activities constituting the facility are attributable and [page 193] — the facility identification number for the facility (if the regulator has issued this unique number for the facility) • for a facility of a mandatory designated joint venture — the name of the person nominated as having operational control of the facility under NGER Act s 11AA(5) or s 11B(5). • for any other facility — the name of the person who has operational control of the facility • if the applicant is not the person with operational control, then the applicant must provide that contact details (name, telephone number, email address and postal address) of the person who has operational control of the facility or who is nominated as having operational control of the facility of a mandatory designated joint venture, a statement describing the applicant’s relationship to that other person, and a statement describing the applicant’s relationship to the facility • if the natural gas will be used at a facility that is not in existence at the time of the application:202 • the identifying information for the facility:203 — the name of the facility; — the facility’s street address (if any) — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable

— if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility — the industry sector to which the activities constituting the facility are attributable and — the facility identification number for the facility (if the regulator has issued this unique number for the facility) [page 194] • for a proposed facility of a mandatory designated joint venture — the name of the person likely to be nominated as having operational control of the facility under NGER Act s 11AA(5) or s 11B(5) • for any other proposed facility — the name of the person likely to have operational control of the facility • if the applicant is not the person with operational control, then the applicant must provide that contact details (name, telephone number, email address and postal address) of the person likely to have operational control of the facility or who is nominated as having operational control of the facility of a mandatory designated joint venture, a statement describing the applicant’s relationship to that other person, and a statement describing the applicant’s relationship to the proposed facility • if the natural gas will be used at a business premises or other location this is not a facility or proposed facility:204 • name of the business premises or location (or a description of the business premises or location, if

not named) • the street address of the business premises or location (if any) • the latitude and longitude of the business premises or location Use of natural gas to manufacture compressed natural gas, liquefied natural gas or liquefied petroleum gas205

• the date from which the applicant expects to be permitted to quote an OTN in relation to the natural gas that will be used to manufacture compressed natural gas, liquefied natural gas or liquefied petroleum gas • a statement that the applicant will likely be supplied with natural gas by a natural gas supplier in the 12 month period after the application is made [page 195] • a statement that the applicant will likely use a portion of this supply of natural gas to manufacture compressed natural gas, liquefied natural gas or liquefied petroleum gas at the facility, business premises or other location, or will likely provide (but not supply, according to the Clean Energy Act 2011 (Cth)) the natural gas to another person who will use a portion to manufacture compressed natural gas, liquefied natural gas or liquid petroleum gas at the facility, business premises or other location. In the latter case, the applicant must provide the other person’s name and contact details, and a statement describing the applicant’s relationship to the other person • a statement that the applicant is currently supplied natural gas for use in the manufacture of compressed natural gas, liquefied natural gas or liquefied petroleum gas at the facility, business premises or other location, or a statement that explaining the reason that the applicant expects to start being supplied natural gas for this use at the facility, business premises or other location in the 12 month period after the application is made. The applicant

must provide documentary evidence of these matters • if the natural gas will be used at a facility that is in existence at the time of the application:206 • the identifying information for the facility:207 — the name of the facility; — the facility’s street address (if any) — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility [page 196] — the industry sector to which the activities constituting the facility are attributable and — the facility identification number for the facility (if the regulator has issued this unique number for the facility) • for a facility of a mandatory designated joint venture — the name of the person nominated as having operational control of the facility under NGER Act s 11AA(5) or s 11B(5) • for any other facility — the name of the person who has operational control of the facility • if the applicant is not the person with operational

control, then the applicant must provide that contact details (name, telephone number, email address and postal address) of the person who has operational control of the facility or who is nominated as having operational control of the facility of a mandatory designated joint venture, a statement describing the applicant’s relationship to that other person, and a statement describing the applicant’s relationship to the facility • if the natural gas will be used at a facility that is not in existence at the time of the application:208 • the identifying information for the facility:209 — the name of the facility; — the facility’s street address (if any) — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility — the industry sector to which the activities constituting the facility are attributable; and [page 197] — the facility identification number for the facility (if the regulator has issued this unique number for the facility).

• for a proposed facility of a mandatory designated joint venture — the name of the person likely to be nominated as having operational control of the facility under NGER Act s 11AA(5) or s 11B(5) • for any other proposed facility — the name of the person likely to have operational control of the facility • if the applicant is not the person with operational control, then the applicant must provide that contact details (name, telephone number, email address and postal address) of the person likely to have operational control of the facility or who is nominated as having operational control of the facility of a mandatory designated joint venture, a statement describing the applicant’s relationship to that other person, and a statement describing the applicant’s relationship to the proposed facility • if the natural gas will be used at a business premises or other location this is not a facility or proposed facility:210 — name of the business premises or location (or a description of the business premises or location, if not named) — the street address of the business premises or location (if any) — the latitude and longitude of the business premises or location. Although each category requires particular information, if the applicant falls within two or more categories, information required for one category only need be provided.211 [72,375] The form to apply for an OTN is available online at: www.cleanenergyregulator.gov.au/Carbon-Pricing-Mechanism/Formsandcalculators/Pages/default.aspx. Before starting the application process it is advisable to have all the necessary information on hand (including ABN, other identifying details, and addresses).

Telephone assistance is available: 1300 553-542. When completed, the online form must be: printed; and signed by the appropriate person: — if an individual, the applicant; — for a body corporate, the executive officer whose details are provided in the application; [page 198] — for a trust, a trustee whose details are provided in the application; — for a body politic or local governing body, the officeholder whose details are provided in the application; — for a corporation sole, a person authorised to act on behalf of the corporation sole, and posted by the due date to the regulator Clean Energy Regulator GPO Box 621 CANBERRA ACT 2601 or scanned and emailed to [email protected]

the

regulator

at

The application must be accompanied by the fee (if any) prescribed in the regulations. [72,400] The regulator may require further information from the applicant, and if the applicant fails to comply, the regulator may refuse to consider the application.212

Decision on application for an OTN [72,425] When considering an application for an OTN, the regulator: must be satisfied that the applicant is likely to be permitted or required to quote their OTN in relation to the supply of natural gas, LPG or

LNG to the applicant;213 must carry out an applicable identification procedure regarding the applicant; must review the applicant’s identifying information and be satisfied that this information is complete and correct.214 The regulator may either issue an OTN to the applicant, or refuse the application. A refusal decision must be given to the applicant by written notice.215

Time for decision on application [72,450] The regulator must take all reasonable steps to ensure that the decision on the application is made within 90 days after the application was made (or 90 days after the applicant provided further information required by the regulator).216

Review of decision on application [72,475] The regulator’s decision to refuse to issue an OTN is a reviewable decision.217 [page 199]

Issue of an OTN on the regulator’s own initiative [72,500] The regulator may, on its own initiative, issue an OTN to a person by giving written notice.218 Before issuing an OTN to a person, the regulator must be satisfied that the person is likely to be permitted or required to quote their OTN in relation to the supply of natural gas, LPG or LNG to the person, and must carry out an applicable identification procedure regarding the person.219 The regulator may refer to emissions data reported under the NGER Act in order to determine persons that are likely to need an OTN.220

SURRENDERING OR CANCELLING AN OTN [72,575] An OTN holder may surrender the OTN with the regulator’s written

consent.221 The regulator may refuse to allow surrender by giving the OTN holder written notice.222 The regulator’s decision to refuse to allow the surrender of an OTN is a reviewable decision.223 [72,600] The regulator may cancel an OTN by giving the OTN holder written notice.224 The regulator must be satisfied that: the OTN holder is unlikely to be permitted or required to quote their OTN in relation to the supply of natural gas to the person; or the person has breached the Clean Energy Act 2011 (Cth) or an associated provision; or the person holding an OTN has ceased to exist.225 The regulator’s decision to cancel an OTN is a reviewable decision.226

Publication and notification [72,625] The regulator must publish a list of cancelled or surrendered OTNs on the regulator’s website, noting the time when cancellation or surrender took effect.227 The regulator will also email all natural gas suppliers a notification. Cancelled and surrendered OTNs must be removed from the OTN Register.228 [page 200]

Grace period for surrender and cancellation [72,650] If a gaseous fuel supplier has accepted the quotation of an OTN that is cancelled or surrendered, a default grace period of 28 days after the cancellation or surrender of the OTN is provided in which a single supply or a class of supplies will be considered to have effect as if the recipient of the supply had held an OTN and quoted the OTN in relation to the supply.229 The gaseous fuel supplier and recipient may agree a shorter period. The following example from the Revised EM for the Clean Energy Bill 2011 (Cth) illustrates:

Example 1.17 Cancellation of an OTN and grace period for OTN quotation From 1 July 2012, NatGas makes weekly supplies of natural gas under an OTN quotation to Davidson Ltd. Davidson Ltd has previously quoted its OTN and advised NatGas in writing that it intends to use the natural gas as a feedstock. Davidson Ltd is liable for emissions from its use of the gas. The Regulator discovers that Davidson Ltd is not permitted to quote an OTN, as the company is combusting all of the natural gas rather than using it as a feedstock. The Regulator cancels Davidson Ltd’s OTN on 1 August 2012. The Regulator removes Davidson Ltd’s entry on the OTN Register and lists the OTN and the time of cancellation on its website. The Regulator sends an email to all natural gas suppliers that are listed on the OTN Register, notifying the suppliers of the cancellation and the time of its effect. Davidson Ltd and NatGas agree that the grace period before liability reverts to NatGas will be 21 days, rather than the default period of 28 days. During these 21 days, NatGas suppliers gas to Davidson Ltd with embodied emissions of 1000 tonnes of C02-e. Davidson Ltd remains liable for emissions resulting from its use of this gas. After this time, NatGas is liable for emissions embodied in the natural gas it supplies to Davidson Ltd.

Revised Explanatory Memorandum, 91 The grace period is intended to allow time for the natural gas supplier to read the OTN holder’s meter and begin a new billing period (if supply to the OTN holder will continue).230

QUOTING AN OBLIGATION TRANSFER NUMBER [72,675] In order for the OTN holder to assume any liability incurred for emissions embodied in an amount of natural gas, LPG or LNG supplied,231 the OTN holder must make a quotation statement to the natural gas or gaseous fuel supplier in connection with [page 201] a single supply of natural gas, LPG or LNG, or in connection with a class of supplies that includes the particular supply being made.232 The OTN holder must make the OTN quotation statement in writing — the

quotation may be in a contract, order or similar document (which may be electronic).233 The OTN quotation statement must include: the words “quotation of OTN [123456]”; the OTN holder’s name; and the OTN holder’s ABN (if any).234

Quoting an incorrect OTN [72,700] If the OTN holder has purported to quote an OTN, but quotes an incorrect number due to an honest mistake, then the regulator may determine in writing that it is reasonable to validate the quotation. If the regulator validates the quotation, the OTN holder will be treated as if they had quoted their correct OTN. The regulator must give a copy of its written determination to the OTN holder and the gaseous fuel supplier.235

ACCEPTING OR REFUSING TO ACCEPT THE QUOTATION OF AN OBLIGATION TRANSFER NUMBER [72,725] A natural gas or gaseous fuel supplier may accept the OTN holder’s quotation of an OTN by giving notice that includes: the words “acceptance of quotation of OTN [123456]”; the OTN holder’s name; the OTN holder’s ABN (if any); a description of the supply; the supplier’s name; and the supplier’s ABN (if any).236 This notice may be included in a contract, order or similar document (which may be electronic).237 [72,750] If a natural gas or gaseous fuel supplier does not accept the quotation of an OTN, the Clean Energy Act 2011 (Cth) applies as if the OTN holder had not made a quotation in relation to the supply.238

MANDATORY QUOTATION OF OTN Large gas consuming facility [72,775] An OTN holder must quote an OTN in relation to the supply of natural gas: that may be reasonably expected to be used in the operation of a large gas consuming facility; and [page 202] where the natural gas is withdrawn in Australia from a natural gas supply pipeline for the purposes of this use.239 Section 55B aims to ensure that the operator of the large gas consuming facility is solely liable for emissions associated with the facility’s combustion of natural gas. The OTN holder must give the natural gas supplier written notice of their intention to quote an OTN at least 28 days before first quoting an OTN to the supplier. The OTN holder and the supplier may agree to a shorter notice period.240 Section 55B is only intended to apply to the last supply of natural gas before it is used, and will apply in the same way regardless of whether the user owns the natural gas.241 As a result, if person A provides an amount of natural gas for use by person B, and this does not involve a supply of the natural gas, then any use of the natural gas by person B is taken to be use by personA for the purposes of determining emissions liability.242

Civil penalty provision [72,800] The OTN holder will be in breach of a civil penalty provision by failing to comply with mandatory quotation of an OTN required by s 55B of the Clean Energy Act 2011 (Cth).243 The maximum penalty for each contravention is 10,000 penalty units ($1,100,000) for a body corporate, and 2000 penalty units ($220,000) for an individual.244 If a person makes a false or misleading declaration to another person that they are making a mandatory quotation in relation to s 55B, this is an offence with a maximum penalty of 12 months imprisonment.245

Acceptance of OTN when quotation is mandatory [72,825] The natural gas or gaseous fuel supplier must accept the OTN holder’s quotation by giving written notice to the OTN holder.246 Thereafter, the OTN holder becomes liable for the potential greenhouse gas emissions embodied in the natural gas/gaseous fuel that is supplied.

VOLUNTARY QUOTATION OF OTN [72,850] Where the natural gas is not being supplied to the OTN holder for use in a large gas consuming facility, the OTN holder may quote an OTN to a natural gas supplier and assume liability for emissions in three specified circumstances: if a large user of natural gas or an approved person; if using the natural gas as feedstock; if using the natural gas to manufacture CNG, LNG or LPG. [page 203] Although the quotation is a voluntary action taken by the OTN holder, for each circumstance, it should be noted whether the natural gas supplier is required to accept the quotation, or has discretion about whether or not to accept. As with mandatory quotation, each of these circumstances is only intended to apply to the last supply of natural gas before it is used, and to apply in the same way regardless of whether the user owns the natural gas.247Asa result,if person A provides an amount of natural gas for use by person B, and this does not involve a supply of the natural gas, then any use of the natural gas by person B is taken to be use by person A for the purposes of determining emissions liability.248

Large user of natural gas or approved person [72,875] If, during an eligible financial year, a natural gas supplier supplies an amount of natural gas to the OTN holder, and: it may reasonably be expected that the natural gas is wholly or partly for use by the OTN holder;

the natural gas supplier’s withdrawal of natural gas takes place in Australia and the withdrawal is from a natural gas supply pipeline for the purposes of use by the OTN holder, then the OTN holder may quote an OTN in relation to that supply, provided that:249 the OTN holder is required to quote an OTN in relation to the supply of gas for use in the operation of a large gas consuming facility;250 or the OTN holder is a person approved by the regulator for a particular eligible financial year.251 If the OTN holder quotes an OTN to the gaseous fuel supplier, the gaseous fuel supplier may accept the quotation by giving written notice to the OTN holder. The gaseous fuel supplier is not required to accept the quotation of the OTN.252 If the OTN holder operates a large gas consuming facility, in addition to operating other facilities, allowing the OTN holder to quote an OTN in relation to supply of gas for use in these other facilities simplifies the OTN holder’s billing arrangements (although the OTN holder must still manage mechanism obligations for all natural gas supplied).253 [73,001] An OTN holder may apply in writing to the regulator be a person approved by the regulator for a particular eligible financial year. The application must be in the form approved in writing by the regulator, and accompanied by the required information and documents.254 The regulator may, by giving written notice to the applicant, declare that the OTN holder is an approved person, provided that the regulator must be satisfied that: [page 204] the OTN holder operates an eligible facility that is likely to have covered emissions attributable to the combustion of natural gas with a CO2-e of 25,000 tonnes or more during the particular eligible financial year (ie likely to become a large gas consuming facility);255 an eligible facility will be under the OTN holder’s operational control, or under another person’s operational control if the OTN holder provides (but does not “supply”)256 natural gas to the other person for use in operating their facility.257

An entity with operational control of a facility that is expected to qualify as a large gas consuming facility (for example, a new or expanded facility) may seek approval to quote an OTN.258 The regulator may refuse the application by giving the OTN holder written notice.259 Such refusal is a reviewable decision.260

Use of natural gas as feedstock [73,025] If, during an eligible financial year, in relation to the supply by a natural gas supplier of an amount of natural gas to an OTN holder, it is intended that the OTN holder will use a portion of that natural gas as feedstock (a substance that is converted by a chemical process into another substance that is not a greenhouse gas)261 and: it may reasonably be expected that the natural gas is wholly or partly for use by the OTN holder; the natural gas supplier’s withdrawal of natural gas takes place in Australia; and the withdrawal is from a natural gas supply pipeline for the purposes of use by the OTN holder, then the OTN holder may quote an OTN in relation to the supply. If the OTN holder chooses to quote an OTN, the natural gas supplier must accept the OTN holder’s quotation by giving written notice to the OTN holder.262 The notice of acceptance of the OTN must set out: the words “acceptance of quotation of OTN [123456]”; the OTN holder’s name; the OTN holder’s ABN (if any); a description of the supply; the supplier’s name, and the supplier’s ABN (if any).263 The OTN holder is liable for the potential greenhouse gas emissions embodied in the natural gas that is supplied.

The OTN holder must give the natural gas supplier written notice of their intention to [page 205] quote an OTN, at least 28 days before first quoting an OTN to this supplier. The OTN holder and the supplier may agree to a shorter notice period,264 but breach of the notice requirement is a civil penalty provision.265 The maximum penalty for each contravention is 10,000 penalty units ($1,100,000) for a body corporate, and 2000 penalty units ($220,000) for an individual.266 If a person makes a false or misleading declaration to another person that they are making a quotation in relation to use of natural gas as feedstock, this is an offence with a maximum penalty of 12 months imprisonment.267

Use of natural gas in manufacturing compressed natural gas, liquefied natural gas or liquefied petroleum gas [73,050] If, during an eligible financial year, a gaseous fuel supplier supplies an amount of natural gas to an OTN holder, and: it may reasonably be expected that the natural gas is wholly or partly for use by the OTN holder; the gaseous fuel supplier’s withdrawal of natural gas takes place in Australia; the withdrawal is from a natural gas supply pipeline for the purposes of use by the OTN holder; and the natural gas is to be used, in the course of carrying on a business, to manufacture CNG, LNG or LPG then the OTN holder may quote an OTN in relation to the supply. If the OTN holder chooses to quote an OTN, the natural gas or gaseous fuel supplier must accept the OTN holder’s quotation by giving written notice to the OTN holder.268 The OTN holder becomes liable for the potential greenhouse gas emissions embodied in the natural gas that is supplied. The OTN holder does not pay the carbon price twice, because they will not be liable under the Clean Energy Act 2011 (Cth) for emissions produced in the manufacturing process (these gases are instead subject to customs or excise duties (an “equivalent carbon

price”)).269 The OTN holder must give the gaseous fuel supplier written notice of their intention to quote an OTN, at least 28 days before first quoting an OTN to this supplier. The OTN holder and the supplier may agree to a shorter notice period,270 but failure to notify is a civil penalty provision.271 The maximum penalty for each contravention is 10,000 penalty units ($1,100,000) for a body corporate, and 2000 penalty units ($220,000) for an individual.272 [page 206] If a person makes a false or misleading declaration to another person that they are making a quotation in relation to use of natural gas in manufacturing compressed natural gas, LNG or LPG, this is an offence with a maximum penalty of 12 months imprisonment.273

WITHDRAWING THE QUOTATION OF AN OTN [73,075] If: the OTN holder has already made a quotation of the OTN to the supplier, and ceases to be permitted or required to quote an OTN in relation to a single supply or class of supplies of natural gas, LPG or LNG, then the OTN holder may withdraw this quotation by giving written notice to the supplier.274 No action by the gaseous fuel supplier is required; the OTN holder has already made a quotation of an OTN to the supplier in relation to a single supply or class of supplies of natural gas, LPG or LNG, and the supplier was not required by the Clean Energy Act 2011 (Cth) to accept this quotation, then the OTN holder may withdraw this quotation (if the supplier also agrees) by giving written notice to the supplier.275 If the OTN holder withdraws their quotation before the relevant supply has occurred, the Clean Energy Act works as if the OTN holder had not quoted the OTN to the gaseous fuel supplier.276 If the OTN holder makes a quotation of the OTN to a gaseous fuel supplier, and the OTN has been cancelled or surrendered, then the quotation is taken to have been withdrawn at the time when the cancellation or surrender took effect.277

MISUSE OF AN OTN

[73,100] An OTN holder must not quote an OTN in relation to the supply of natural gas, LPG or LNG unless they are permitted or required to do so by the Clean Energy Act 2011 (Cth).278 A person must not: aid, abet, counsel or procure any such contravention; induce (by threats or promises or otherwise) any such contravention; be in any way (directly or indirectly) knowingly concerned in or party to any such contravention; or conspire with others to effect any such contravention.279 These are civil penalty provisions.280 The maximum penalty for each contravention is 10,000 penalty units ($1,100,000) for a body corporate, and 2000 penalty units ($220,000) for an individual.281 [page 207]

Effect of misuse on gaseous fuel supplier [73,125] If the OTN holder quotes an OTN in relation to the supply of natural gas, LPG or LNG, and: breaches any provision not permitting the quotation; and a supplier who supplied the natural gas accepted the quotation, then the breach does not affect the supply transaction’s validity. Div2 of Pt3 (other than the civil penalty provisions, and s 36) has effect as if the quotation had been authorised under the Act.282

QUOTATION OF A BOGUS OTN [73,150] A person must not purport to quote a number as their OTN in relation to the supply of natural gas, LPG or LNG if the number is not their OTN.283 A person must not: aid, abet, counsel or procure any such contravention; induce (by threats or promises or otherwise) any such contravention;

be in any way (directly or indirectly) knowingly concerned in or party to any such contravention; or conspire with others to effect any such contravention.284 These are civil penalty provisions.285 The maximum penalty for each contravention is 2000 penalty units ($220,000) for an individual, and for a body corporate, the greater of 10,000 penalty units ($1,100,000) or three times the total value of the benefits obtained by one or more persons that are reasonably attributable to the contravention.286 [73,175] A person must not supply natural gas, LPG or LNG to another person (the recipient) if the recipient purports to quote a number as their OTN in relation to the supply, and the OTN Register does not show that the number is the recipient’s OTN.287 The supplier of natural gas, LPG or LNG has a continuing obligation to confirm that an OTN appears on the OTN Register on each individual occasion that a supply is made to a recipient.288 A person must not: aid, abet, counsel or procure any such contravention; induce (by threats or promises or otherwise) any such contravention be in any way (directly or indirectly) knowingly concerned in or party to any such contravention; or conspire with others to effect any such contravention.289 [page 208] These are civil penalty provisions.290 The maximum penalty for each contravention is 500 penalty units ($55,000) for a body corporate, and 100 penalty units ($11,000) for an individual.291

OTN REGISTER [73,200] The regulator will maintain an electronic (online) “OTN Register” which will contain details of all current OTNs and a voluntary list of gaseous fuel including natural gas suppliers.292 The OTN Register will include an entry for each issued OTN. The entry for the OTN will reveal the OTN holder’s: name;

last known address; ABN (if any).293 Surrendered or cancelled OTNs will not appear in the OTN Registry.294 The OTN holder must notify the regulator in writing within 28 days of any change to their name or address, or a civil penalty may apply.295 Breach of this obligation is a civil liability penalty. The maximum penalty for each contravention is 500 penalty units ($55,000) for a body corporate, and 100 penalty units ($11,000) for an individual.296 The regulator will update the OTN Registry to reflect any changes. The regulator must, as soon as practicable after making an entry in the OTN Registry of the issue of an OTN, changing the details of the OTN holder or removing an entry, inform any listed gaseous fuel suppliers in writing.297

Voluntary inclusion of natural gas suppliers [73,225] Anatural gas supplier may request to be included on the list of gaseous fuel suppliers in the OTN Register.298 The government expects this list to offer two benefits to businesses that supply or purchase gaseous fuel: (1) OTN holders (users of gaseous fuel) will be able to find gaseous fuel suppliers that may be willing to accept quotation of their OTN. (2) listed suppliers will have reduced compliance costs as the regulator will provide current information to them about current OTNs.299 A gaseous fuel supplier’s entry on the list in the OTN Register will reveal the supplier’s: name; last known address; [page 209] telephone number; website; ABN (if any); and any conditions that the supplier has regarding its willingness to accept quotation of OTNs in circumstances when making a quotation is not

mandatory.300 The gaseous fuel supplier must notify the regulator in writing within 28 days of any change to their name or address, or a civil penalty may apply.301 The maximum penalty for each contravention is 500 penalty units ($55,000) for a body corporate, and 100 penalty units ($11,000) for an individual.302 A gaseous fuel supplier may request that the regulator removes their entry from the list in the OTN Registry.303 The regulator may supply certified copies of the OTN Register, and may charge a fee.304

Joint ventures [73,250] The Clean Energy Act 2011 (Cth) recognizes designated joint ventures as a special ownership structure for facilities, and imposes a separate form of liability. The aim of Div 5 is to allow for more efficient allocation of the costs of GHG emissions among joint venture participants.

INTRODUCTION TO DIVISION 5 [73,275] Section 21 (for a non-landfill facility) or s 24 (for a landfill facility) of the Clean Energy Act 2011 (Cth) deems a person who is a participant in a designated joint venture a liable entity for an eligible financial year.305 The general meaning of a joint venture is an unincorporated enterprise carried on by two or more persons in common otherwise than in partnership.306 A partnership exists between persons carrying on a business in common with a view to profit.307 In contrast to an unincorporated joint venture, an incorporated joint venture constitutes a person as a body corporate. The participants in an incorporated joint venture own shares in the body corporate.308 The body corporate owns the facility and (generally) is the person with operational control, and hence liability for emissions. [page 210] In an unincorporated joint venture, it is the participants in the unincorporated joint venture that own the facility.309

There are two forms of designated joint venture for the Clean Energy Act 2011 (Cth): (1) a mandatory designated joint venture; and (2) a declared designated joint venture.310 A mandatory designated joint venture arises automatically when the joint venture meets stated criteria. Participants in a joint venture may elect to apply to become a declared designated joint venture if the joint venture meets stated criteria. The participants in the designated joint venture must apply to the regulator for a “participating percentage determination” which allocates proportionate liability for emissions to each participant.311 Participating percentage determinations are discussed in [73,525]. The participating percentage determination may also be used to allocate free carbon units to participants in a designated joint venture that has a facility that is a coal-fired electricity generation complex,312 or if an emissionsintensive trade-exposed activity is carried on at the facility.313

MANDATORY DESIGNATED JOINT VENTURE [73,300] A “mandatory designated joint venture” arises automatically if:314 the joint venture has a facility; and the participants are parties to an agreement dealing with the facility; and two or more persons have the authority to introduce and implement operating, health and safety, and/or environmental policies (ie two or more persons could establish operational control of the facility);315 and no particular person has the greatest authority to introduce and implement operating or environmental policies; and no corporation or non-group entity has been declared by the regulator to have operational control of the facility.316 [page 211] The Revised EM to the Clean Energy Bill 2011 (Cth) gives the following example of a mandatory designated joint venture.

Revised Explanatory Memorandum, 61 A mandatory designated joint venture may exist in relatively uncommon situations, such as where a joint venture management committee comprising of representatives from the various participants has operational control of a facility, rather than a single entity having control.317 A management committee typically decides on policies concerning joint venture activities by majority or unanimous vote,318 which would include the operating, health and safety, and environmental policies relevant to establishing that a mandatory designated joint venture exists. However, if one participant has control over the management committee through majority representation, and may effectively introduce and pass these policies without agreement from some or all of the other participants’ representatives,319 the joint venture would not be a mandatory designated joint venture. Significant uncertainty about the status of a joint venture may also arise if the [page 212] participants’ voting power changes, and this has the effect of giving one participant the power of operational control or removing this power.320 Alternatively, an operator may be appointed to run the facility without

being granted operational control by the joint venture participants. The operator may, for example, be required to implement decisions made by the management committee. If the operator is not also a participant in the joint venture, then the operator will not incur any liability for the facility’s greenhouse gas emissions. The participants will be required to nominate one of them (a non-foreign participant, if present) to assume operational control of the joint venture facility for the purposes of reporting greenhouse gas emissions under the NGER Act.321 This will not affect the mandatory designated joint venture’s status under the Clean Energy Act 2011 (Cth).

Notification of mandatory designated joint venture [73,325] The participants must jointly notify the regulator in writing that they are participants in a mandatory designated joint venture and of the facility: by 31 July 2012, if the mandatory designated joint venture is in existence on 1 July 2012 and it may reasonably be expected that if the joint venture had instead been a company, it would be a liable entity from 1 July 2012; within 30 days of the coming into existence of a mandatory designated joint venture (after 1 July 2012), if it may reasonably be expected that if the joint venture had instead been a company, it would be a liable entity for the eligible financial year in which the JV formed, or the following financial year; or within 30 days of a facility becoming a facility of a mandatory designated joint venture (after 1 July 2012), if it may reasonably be expected that if the joint venture had instead been a company, it would be a liable entity for the eligible financial year in which the facility became a facility of the mandatory designated joint venture, or the following financial year. The notification to the regulator must be accompanied by an application for a participating percentage determination for the joint venture in relation to the facility.322 The participants must notify the regulator that a mandatory designated joint venture ceases to exist, within 30 days of cessation of the joint venture.323 The notification requirements are civil penalty provisions.324 The maximum penalty for each contravention is 10,000 penalty units ($1,100,000) for a body corporate, and 2000 penalty units ($220,000) for an individual.325

DECLARED DESIGNATED JOINT VENTURE [73,350] A declared designated joint venture is declared to exist by the regulator.326 [page 213]

Joint venture declaration test [73,375] To be eligible for a declared designated joint venture declaration, a joint venture must pass the joint venture declaration test. All elements of the joint venture declaration test must be passed:327 (a) the joint venture has the facility; and (b) the participants in the joint venture are parties to an agreement that deals with the facility; and (c) the facility is operated exclusively for the joint venture by a person (who may be a participant in the joint venture); and (d) none of the participants in the joint venture is an individual; and (e) the joint venture is not a mandatory designated joint venture. A joint venture in which two or more persons could introduce and implement operating or environmental policies, but one person has greater authority to do so, cannot be a mandatory designated joint venture, but may satisfy the joint venture declaration test.328Adesignated joint venture may also include arrangements where one of the participants is the facility’s operator, or where one or more participants is a foreign person329 or where a single operator has operational control over the joint venture’s facility.330 The person who operates the facility exclusively for the joint venture is deemed to be the “relevant operator” of the facility.331

Deciding whether to apply to become a declared designated joint venture [73,400] If a joint venture is likely to pass the joint venture declaration test, then to be eligible to apply to become a declared designated joint venture, the participants and operator must agree to apply for a declaration.332 The application to be a declared designated joint venture is a voluntary decision by the parties to shiftliability from the operator to the joint venture

participants.333 If the operator is not also a participant in the joint venture, then the operator will avoid liability for the facility’s emissions.334 This outcome is consistent with the default position in a mining joint venture, where the operator, who is not also a participant, is not liable for any losses sustained or [page 214] liabilities incurred in connection with the joint venture (except as a result of the operator’s fraud, gross negligence or willful misconduct).335 The government expects that participants who have the option to apply for status as a declared designated joint venture would likely choose to do so given the economic efficiency benefits. The proportional liability approach is intended to allow individual joint venture participants to manage their emissions liabilities more efficiently than the facility’s operator otherwise could, if the operator had sole liability.336 For example, a corporation may be a participant in several joint ventures where facilities incur liability under the Clean Energy Act 2011 (Cth), and may also operate other facilities in its own right, and therefore will need to purchase sufficient carbon units to cover its total emissions liability in an eligible financial year. The corporation may be able to manage its liability by adopting sophisticated trading strategies to purchase carbon units, particularly in the flexible price period (after 1 July 2015), whereas smaller operators may lack this capability.

Application to become a declared designated joint venture [73,425] The participants may (with written consent from the facility’s relevant operator) jointly apply to the regulator for a declaration to become a declared designated joint venture, if the joint venture declaration test is passed.337 The participants may be required to verify statements contained in their application by making statutory declarations.338 The joint application must: be in writing; use a form approved in writing by the regulator; be accompanied by the consent of the relevant operator to the making of the application; and

must contained specified information and documents.339 The regulator may require further information from the applicants, and if the applicants fail to comply, the regulator may refuse to consider the application.340 The application must include the identifying information for each participant (applicant) and for the person who has operational control over the facility.341 The requirements for this information are determined by the applicant’s status (which must be confirmed in a statement) (Box 73,4251).342 [page 215] Box 73,425-1 — Information to accompany application for declared designated joint venture Person Information the person’s name the person’s trading name

Individual

identifying details (ABN, ACN, ARBN or trading name and street address) telephone number email address residential address postal address (if different).

the person’s name the person’s trading name identifying details (ABN, ACN, ARBN or trading name and street address) Body corporate (not a foreign person)

head office postal address details of at least one executive officer (or equivalent) of the body corporate (including the

executive officer’s name, telephone number, email address and postal address)

the person’s name the person’s trading name identifying details (ABN, ACN, ARBN or trading name and street address) head office postal address Body corporate (a foreign person)

details of at least one executive officer (or equivalent) of the body corporate (including name, telephone number, email address and postal address) the name of any Australian agent through which the person conducts business

the person’s name the person’s trading name

Trust

identifying details (ABN, ACN, ARBN or trading name and street address) head office postal address details of each trustee (including name, telephone number, email address and postal address)

the person’s name the person’s trading name identifying

details

(ABN,

Corporation sole

ACN, ARBN or trading name and street address) head office postal address the name and address of the individual who makes up the corporation sole [page 216] the person’s name the person’s trading name

Body politic

identifying details (ABN, ACN, ARBN or trading name and street address) head office postal address details of at least one officeholder (including name, telephone number, email address and postal address)

the person’s name the person’s trading name

Local governing body

identifying details (ABN, ACN, ARBN or trading name and street address) head office postal address details of at least one officeholder (including name, telephone number, email address and postal address)

the nation of the establishing legislation the date the body was

Body established under a Commonwealth, state or territory law

established whether the body is a Commonwealth, state or territory body

The application must include the facility’s identifying information:343 the name of the facility; the facility’s street address (if any); if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken; if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable; if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located; if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility; the industry sector to which the activities constituting the facility are attributable; and the facility identification number for the facility (if the regulator has issued this unique number for the facility). The application must also be accompanied by all of the following statements: the joint venture has a facility; the applicants are parties to an agreement that deals with the facility; none of the applicants is an individual; the operator operates the facility exclusively for the joint venture; and [page 217] the joint venture is not a mandatory designated joint venture.344 The applicant must provide documents or a statutory declaration (if the

regulator consents) to verify the statement supplied.345 the applicants have, and are likely to continue to have, the capacity, access to information and financial resources necessary for the applicants to comply with their obligations under the Clean Energy Act 2011 (Cth) and the associated provisions if the declaration is made.346 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied.347 a statement: — whether any of the applicants has previously been subject to obligations under the Clean Energy Act 2011 (Cth) or the associated provisions and; if so — whether the applicant has been convicted of an offence against the Clean Energy Act 2011 (Cth) or the associated provisions; or — whether the applicant has previously been liable, or is currently liable, to pay a late payment penalty and, if so, the amount of penalty payable and the financial year when the penalty became payable.348 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied.349 the joint venture is an unincorporated enterprise carried on by 2 or more persons in common otherwise than in partnership.350 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied.351 if the applicants want the declaration to start on a different day from the day when the declaration is made, a statement by the applicant specifying the start day of the declaration, and the operator’s written consent for the declaration to start on that day.352

Decision regarding declared designated joint venture [73,450] In order to make a declaration for a declared designated joint venture, the regulator must be satisfied that:353 the joint venture passes the joint venture declaration test in relation the facility; the applicants have and are likely to continue to have the capacity,

access to information and financial resources necessary to comply with the obligations under the Clean Energy Act 2011 (Cth). There is no guidance about what level of financial resources the regulator will consider to be sufficient for a participant to comply; [page 218] the participants have a satisfactory record (if any) of complying with these obligations; and no liability transfer certificate exists in relation to the facility.354 The regulator must take all reasonable steps to ensure that a decision is made within 90 days of receiving the application or any further information that was required from the applicants.355 If the regulator refuses to make declaration, they must inform the applicants by giving written notice.356 The regulator’s decision to refuse to make a declaration, or to revoke a declaration, is a reviewable decision.357

Timing of declaration [73,475] The first determination that is made comes into force on the same day that the regulator recognises the existence of a declared designated joint venture.358 A declaration may be forward dated to take effect later in the same financial year or the next financial year, or backdated to take effect earlier in the same financial year, if the applicants and relevant operator all consent.359 A declaration remains in force indefinitely.360 However, the declaration may be revoked at the participants’ request, if the joint venture declaration test is no longer passed, or if a participant fails to pay a unit shortfall charge.361 The participants must notify the regulator when a declared designated joint venture ceases to exist, to avoid breaching a civil penalty provision.362 The maximum penalty for contravention is 10,000 penalty units ($1,100,000) for a body corporate, and 2000 penalty units ($220,000) for an individual.363

When a new declaration is be required [73,500] The regulator will be required to make a new declaration of a

declared designated joint venture when existing participants leave or new participants enter the joint venture.364 The need to seek new declarations may be particularly relevant to the resources sector, where participants that terminate their involvement in joint ventures often retain claw [page 219] back rights under contract, which allow them to buy equity or other interests in the project at a later date in certain circumstances.365

ALLOCATION OF LIABILITY IN A JOINT VENTURE — PARTICIPATING PERCENTAGE DETERMINATION [73,525] Each person who is a participant in a designated joint venture must be given a participating percentage that represents their share of responsibility (out of 100 per cent)366 for a facility’s emissions. A person’s provisional emissions number includes their participating percentage of the particular number of CO2-e tonnes of covered emissions from a joint venture’s facility’s operation.367 Participants with a joint venture facility that engages in an activity to which the Jobs and Competitiveness Program or engages in coal-fired electricity generation may also be eligible to obtain free carbon units in shares representing their respective participating percentages.368

Application for a participating percentage determination [73,550] Participants may jointly apply to the regulator, in writing and using an approved form, to seek a participating percentage determination regarding their facility.369 The application must be made contemporaneously with notification of a mandatory designated joint venture or the application for a declaration of a declared designated joint venture. Participants may request that the regulator express their participating percentages in a formula, based on their respective interests in the facility’s economic benefits.370

The use of a formula approach removes the need for participants to seek a replacement determination whenever these interests change. A formula may be particularly relevant if the joint venture agreement allows for changing distribution of outputs among the participants at different stages of a project occurring at a facility. However, it is unclear whether a change in percentages among existing participants takes effect for a whole financial year, or whether multiple percentages may apply for different segments of a year to reflect changes.371 Participants must consider appropriate timing related to participating percentage determinations. The regulator determines participating percentages for each participant [page 220] as a way of accurately reflecting the economic benefits that they receive from the joint venture, as well as minimising the risk of avoidance of liability.372 For example, as noted in [73,475], the first determination that is made comes into force on the same day that the regulator recognises the existence of a declared designated joint venture.373 For mandatory designated joint ventures, and subsequent determinations regarding declared designated joint ventures, the forward dating or backdating of the determination’s time of commencement (if the applicants and the relevant operator (if any) all agree)374 allows for participants’ emissions liability to accurately represent their interests in the joint venture if a change occurs.375 The application must be accompanied by the prescribed documents and information (Box 73,550-1).376 The information and documents must be accompanied by either verifying documents (eg a copy of the joint venture agreement), or (with the regulator’s consent) a statutory declaration that verifies the information.377 Box 73,550-1 — Information to accompany application for participating percentage The participating percentage that is proposed for each applicant, or the proposed way of calculating the participating percentage for each applicant.378 A statement about whether the joint venture is to operate using a share of goods basis (each applicant has a share of the goods extracted, produced or manufactured in relation to the operation of the facility), a share of services basis (each applicant has a share of access to services in relation to the operation of the facility), or

another basis that is outlined.379 If a share of goods basis, or share of services basis, is to be used then the applicants must explain how the goods or services are to be shared. If the goods or services are not of the same type, then the applicants must explain the monetary value of the goods or services, and how this value is calculated.380 If another basis is used, then the applicants must explain how the economic benefits from the facility are to be shared among the participants.381 [73,575] An application that relates to a mandatory designated joint venture must also include:382 the identifying information for each applicant; [page 221] the identifying information for the facility; a statement that the joint venture has a facility; a statement that the applicants are parties to an agreement that deals with the facility; a statement that the joint venture is an unincorporated enterprise carried on by two or more persons in common otherwise than in partnership; a statement that two or more persons in the joint venture are able to establish operational control of the facility (which is a requirement for any mandatory designated joint venture to arise); a statement that no particular person in the joint venture has the greatest authority to introduce and implement operating or environmental policies; a statement that no corporation or non-group entity has been declared by the regulator to have operational control of the facility.383

How the regulator makes a participating percentage determination [73,600] The regulator determines an appropriate participating percentage for each participant upon receiving an application.384 Alternatively, the regulator may make a determination on their own

initiative, after consulting the participants.385 The regulator makes a participating percentage determination based on one of three possible criteria: (1) If each joint venture participant has a share of the goods extracted, produced or manufactured in connection with the facility’s operation, the participating percentages must reflect these shares.386 (2) If the joint venture participants do not have such shares, and instead each participant has a share of access to services in connection with the facility’s operation, the participating percentages must reflect these shares.387 (3) If the joint venture participants do not have any of the above shares, the regulator must comply with relevant rules set out in regulations (which have not yet been promulgated).388 The regulator will apply the most suitable criteria to make a determination, unless satisfied that another apportionment would equally or better represent the way in which participants share the facility’s economic benefits.389 It is possible that regulations recognise that a determination should be made according to each participant’s responsibility for greenhouse gas emissions, rather than the economic benefits they derive from a joint venture facility.390 [page 222] The determination may be specified as a static number, or as a formula.391 The regulator’s determination remains in force indefinitely,392 unless the participants apply for and are granted a replacement determination.393 The regulator’s decision to make a participating percentage declaration (either following an application or on the regulator’s own initiative) is a reviewable decision.394

Changes to a designated joint venture — Replacement participating percentage determination [73,625] The participants may apply to the regulator at any time for a replacement participating percentage determination, which varies the existing determination.395 Participants must repeat the application process and await a fresh determination by the regulator.

The replacement determination is intended to ensure allow for changes of interest in a joint venture throughout different stages of a project.396 Participants may seek a replacement determination when, for example, the existing determination is no longer considered to be appropriate, existing participants leave the joint venture, or new participants enter.397

SHOULD AN UNINCORPORATED JOINT VENTURE BECOME A DESIGNATED JOINT VENTURE OR ALLOCATE LIABILITY USING A LIABILITY TRANSFER CERTIFICATE? [73,650] Where an unincorporated joint venture is not a designated joint venture (in circumstances where it is not by its nature a mandatory designated joint venture, and has not been granted status as a declared designated joint venture), the person who is in operational control of the facility (the operator) retains liability.398 It is possible to transfer liability to a second person using a liability transfer certificate (LTC).399 This second person must: have financial control of the facility; not be an individual; not be a foreign person; and not be a member of the same corporate group as the operator.400 [page 223] In a joint venture, the second person has financial control if they share the economic benefits from the facility with the other participants, and no other participant’s share exceeds that of the second person.401 If these requirements are met, the second person may apply for a LTC.402 Although LTCs are intended to allow a person with influence over a facility’s emissions to accept liability from the operator,403 and provide an alternative liability arrangement for joint ventures, it is unclear why just one participant would voluntarily assume full liability for a joint venture facility’s emissions,404 and why the operator would consent, given that they must provide a statutory guarantee for payment of any unit shortfall charge by the second person who holds the LTC.405 Obtaining declared designated joint venture status potentially remains a

more suitable option for participants wishing to accept liability from the facility’s operator.

Consequences of revocation of declaration as declared designated joint venture [73,675] If the regulator revokes a declaration after a declared designated joint venture participant fails to pay a unit shortfall charge for more than three months,406 the effect will be that full liability reverts back to the operator as the person in operational control of the facility.

Liability transfer certificates INTRODUCTION TO DIVISION 6 [73,700] A liability transfer certificate (LTC) allows the person who has operational control of a facility (the “relevant operator”) to transfer liability for the facility’s emissions to another party (the “LTC holder”). A person may apply to the regulator to be issued with a LTC when prescribed requirements are met. There are two types of LTCs: 1)

a corporate group transfer of liability from the relevant operator to another company that holds the LTC. The relevant operator and the other company must be members of the same corporate group. The LTC holder and the controlling corporation of the corporate group may agree to transfer liability for NGER Act reporting in relation to the facility to the LTC holder.

2)

a financial control transfer of liability from the person with operational control of a facility to another person who has financial control of the facility and holds the LTC. The LTC holder must assume liability for NGER Act reporting in relation to the facility. [page 224]

The relevant operator of the facility (for a corporate group transfer) or the LTC holder’s controlling corporation, if any (for a financial control transfer), must guarantee the payment of any unit shortfall charge or late payment penalty by the LTC holder.407 This guarantee prevents the LTC being used to

avoid emission liabilities.408 A liability transfer certificate may not be transferred by the LTC holder.409 The LTC remains in force indefinitely, unless the LTC holder is permitted by the regulator to surrender the LTC, or the regulator cancels the LTC. In addition to assuming liability for a facility’s emissions, the LTC holder may be eligible to receive free carbon units if the facility is a coal-fired electricity generation complex,410 or if an emissions-intensive trade-exposed activity is carried on at the facility.411

TRANSFER OF LIABILITYTO ANOTHER MEMBER OF A CORPORATE GROUP [73,725] Liability under Pt 3 of the Clean Energy Act 2011 (Cth) may be transferred from the member of a corporate group with operational control of a facility to another member of the same group using a LTC, provided that the company that will incur liability under the LTC must pass the corporate group transfer test in relation to the facility. The member of the group that holds the LTC and the group’s controlling corporation may also agree that this member will assume liability for reporting on the facility’s greenhouse gas emissions, energy production and energy consumption pursuant to the NGER Act.412 This is a voluntary transfer of reporting liability and is not required to occur after a LTC has been issued. [page 225] The Revised EM to the Clean Energy Bill 2011 (Cth) gives the following example of the corporate group liability transfer:

Revised Explanatory Memorandum, 68 [page 226]

Corporate group transfer test [73,750] In order to pass the corporate group transfer test: the company to whom liability is to be transferred must be:

— a member of a controlling corporation’s group; — be registered as a company under the Corporations Act 2001 (Cth) Pt 2A.2; and the facility must be under the operational control of another member of the controlling corporation’s group.413 A“controlling corporation” is a constitutional corporation (a foreign corporation or a trading or financial corporation formed within the limits of Australia) that does not have a holding company incorporated in Australia.414 A controlling corporation’s group consists of:415 the controlling corporation; and any of the controlling corporation’s subsidiaries, if the controlling corporation is incorporated in Australia and the subsidiary is not also the subsidiary of another body corporate outside the group.416 A body corporate is a subsidiary if: the controlling corporation controls the composition of its board; or the controlling corporation is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the body corporate; or the controlling corporation holds more than one-half of the issued share capital of the body corporate (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or the body corporate is a subsidiary of a subsidiary of the controlling corporation.417

Application for a LTC by another member of a corporate group [73,775] A company that passes the corporate group transfer test may apply to the regulator for aLTC in relation to the facility, as long as they have written consent to do so from the member of the group with operational control of the facility (the relevant operator).418 The application must be in writing, using a form approved in writing by the regulator, and be accompanied by prescribed information and documents

(Box 73,775-1):419 [page 227] Box 73,775-1 — Information to accompany an application for an intergroup LTC A written statement by the relevant operator, declaring that the relevant operator: — is a member of the controlling corporation’s group; — has operational control of the facility; and — consents to the making of the application for a LTC The identifying information of: — the applicant company; — the relevant operator; and — the controlling corporation of the corporate group420 The requirements for this information are determined by the party’s status (which must be confirmed in a statement) as one of the following types of persons:421 — Individual — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), telephone number, email address, residential address, and postal address (if different) — Body corporate (not a foreign person) — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one executive officer (or equivalent) of the body corporate (name, telephone number, email address and postal address) — Body corporate (a foreign person) — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, details of at least one executive officer (or equivalent) of the body corporate (name, telephone number, email address and postal address), and the name of any Australian agent through which the person conducts business — Trust — the person’s name and trading name, identifying

details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of each trustee (name, telephone number, email address and postal address) — Corporation sole — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and the name and address of the individual who makes up the corporation sole — Body politic — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one officeholder (name, telephone number, email address and postal address) [page 228] — Local governing body — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one officeholder (name, telephone number, email address and postal address) — Local governing body — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one officeholder (name, telephone number, email address and postal address) — In addition, if the person is a body established under a Commonwealth, state or territory law, the identifying information must include the nation of the establishing legislation, the date the body was established and whether the body is a Commonwealth, state or territory body The identifying information for the facility:422 — the name of the facility — the facility’s street address (if any) — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or

territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility — the industry sector to which the activities constituting the facility are attributable — the facility identification number for the facility (if the regulator has issued this eunique number for the facility) A statement confirming that the applicant is a company that is a member of the controlling corporation’s group of which the relevant operator is a member, and the applicant is a company that is registered under Corporations Act 2001 (Cth) Pt 2A.2.423 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied424 [page 229] A statement, signed by the relevant operator, confirming that the facility is under the operational control of the relevant operator.425 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied426 A statement that the applicant has, and is likely to continue to have, the capacity, access to information and financial resources necessary to comply with their obligations under the Clean Energy Act 2011 (Cth) and the associated provisions if the LTC is issued.427 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied428 If the applicant wants the LTC declaration to take effect on a day other than when the declaration is made, a statement by the applicant specifying this day, and the relevant operator’s written consent for the LTC to start on this day429 The relevant operator’s written acknowledgement that, under s 138 of the Clean Energy Act 2011 (Cth), they guarantee the applicant company’s payment of any unit shortfall charge or late payment

penalty430 Clean Energy Act 2011 (Cth), they guarantee the applicant company’s payment of any unit shortfall charge or late payment penalty430 [73,800] The regulator may give written notice to the applicant requiring further information, and may refuse to consider the application if the applicant breaches this requirement.431

Regulator’s decision to issue a LTC to another member of a corporate group [73,825] After considering an application, the regulator may issue the applicant company with a LTC in relation to the facility.432 In order to issue a LTC, the regulator must be satisfied that:433 the applicant passes the corporate group transfer test in relation the facility; the applicant has and is likely to continue to have the capacity, access to information and financial resources necessary to comply with obligations under the Clean Energy Act 2011 (Cth)if a LTC is issued (there is no guidance about what level of financial resources the regulator will consider to be sufficient for a company to comply); and [page 230] no mandatory designated joint venture or declared designated joint venture exists in relation to the facility.434

Timeframe for decision on the issue of a LTC [73,850] The regulator must take all reasonable steps to ensure that a decision is made within 90 days of receiving the application or any further information that was required from the applicant.435 If the regulator refuses to issue a LTC, they must inform the applicant by giving written notice.436 The regulator’s decision to refuse to issue a LTC is a reviewable decision.437

TRANSFER OF LIABILITY TO A PERSON WHO HAS FINANCIAL CONTROL OF A FACILITY [73,875] Liability may be transferred from the person with operational control of a facility to another person who has financial control of the facility using a LTC. If such a LTCis issued, the person who has financial control over the facility will also assume liability for reporting on the facility’s greenhouse gas emissions, energy production and energy consumption pursuant to the NGER Act.438 The person that will incur liability under the LTC must pass the financial control transfer test in relation to the facility.

Financial control transfer test [73,900] The person who may apply for a LTC (the controller) passes the financial control transfer test in relation to a facility if:439 the facility is under the operational control of another person (the operator); the controller has financial control over the facility; the controller is not an individual;440 the controller is not a foreign person;441 and if the controller is a member of a controlling corporation’s group, the operator is not a member of the same group. [73,925] Section 92 of the Clean Energy Act 2011 (Cth) specifies when the controller has financial control over the facility (see Table 73,925-1). [page 231] Table 73,925-1 — Circumstances when a controller has financial control of a facility Under a contract between the operator and the controller, the operator operates the facility on behalf of the controller

Under a contract between the operator and the controller and one or

more other persons, the operator operates the facility on behalf of the controller and these other persons

The controller is able to control the trading or financial relationships of the operator in relation to the facility

The controller has the economic benefits from the facility

The controller is a participant in a joint venture (an unincorporated enterprise carried on by two or more persons in common otherwise than in partnership),442 and there is one other participant in the joint venture, and the controller’s share in the economic benefits from the facility equals or exceeds the other participant’s share

The controller is a participant in a joint venture, and there are two or more other participants in the joint venture, and the controller shares the economic benefits from the facility with the other participants, and no other participant’s share exceeds the controller’s share

The controller is a partner in a partnership (a partnership exists between persons carrying on a business in common with a view to profit),443 and there is one other participant in the joint venture, and the controller’s share in the economic benefits from the facility equals or exceeds the other partner’s share

The controller is a partner in a partnership, and there are two or more other partners, and the controller shares the economic benefits from the facility with the other partners, and no other partner’s share exceeds the controller’s share

The controller is able to direct or sell the output of the facility

Application for a LTC by a person who has financial control of a facility [73,950] A person that passes the financial control transfer test may apply to the regulator for a LTC in relation to the facility, as long as they have written consent to do so from: the person with operational control of the facility (the relevant operator); or the relevant operator’s controlling corporation if they are a member of a group.444 If the applicant is a member of group, they must also have the controlling corporation’s written consent to apply for a LTC.445 [page 232] The application must be in writing, using a form approved in writing by the regulator, and be accompanied by prescribed information and documents (Box 73,950-1).446 Box 73,950-1 — Information to accompany an application for financial control LTC Written consent to the making of the application from the relevant operator or the relevant operator’s controlling corporation if they are a member of a group447 If the applicant is a member of group, written consent to the making of the application from the controlling corporation of the group448 The identifying information of: — the applicant — the relevant operator, and — the controlling corporation of the corporate groups of the applicant and/or the operation (if either the applicant or the operator is a member of a group).449 The requirements for this information are determined by the party’s status (which must be confirmed in a statement) as one of the following types of persons:450 — individual — the person’s name and trading name, identifying

details (ABN, ACN, ARBN or trading name and street address), telephone number, email address, residential address, and postal address (if different) — body corporate (not a foreign person) — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one executive officer (or equivalent) of the body corporate (name, telephone number, email address and postal address) — body corporate (a foreign person) — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, details of at least one executive officer (or equivalent) of the body corporate (name, telephone number, email address and postal address), and the name of any Australian agent through which the person conducts business — trust — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of each trustee (name, telephone number, email address and postal address) — corporation sole — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and the name and address of the individual who makes up the corporation sole [page 233] — body politic — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one officeholder (name, telephone number, email address and postal address) — local governing body — the person’s name and trading name, identifying details (ABN, ACN, ARBN or trading name and street address), head office postal address, and details of at least one officeholder (name, telephone number, email address and postal address) — in addition, if the person is a body established under a

Commonwealth, state or territory law, the identifying information must include the nation of the establishing legislation, the date the body was established, and whether the body is a Commonwealth, state or territory body The identifying information for the facility:451 — the name of the facility — the facility’s street address (if any) — if the facility is not a transport facility or a network or pipeline facility, the latitude and longitude of the site where the activities constituting the facility are undertaken — if the facility is not a network or pipeline facility, the state or territory to which the activities constituting the facility are attributable — if the facility is a network or pipeline facility, the state or territory (may be more than one) in which the facility is located — if the facility is a transport facility or a network or pipeline facility, and is not a single site facility, and does not have a street address, a brief description of the facility’s location, and the activities constituting the facility — the industry sector to which the activities constituting the facility are attributable — the facility identification number for the facility (if the regulator has issued this unique number for the facility). A statement that the facility is under the relevant operator’s operational control, and the applicant had financial control over the facility (specifying the reason from Clean Energy Act 2011 (Cth) s 92(1) that the applicant has financial control), and the applicant is not an individual or a foreign person, and if the applicant is a member of a group then the relevant operator is not also a member of this group.452 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied453 A statement that the applicant has, and is likely to continue to have, the capacity, access to information and financial resources necessary to comply with their obligations under the Clean Energy Act 2011 (Cth) and the

[page 234] associated provisions if the LTC is issued.454 The applicant must provide documents or a statutory declaration (if the regulator consents) to verify the statement supplied455 If the applicant wants the LTC declaration to take effect on a day other than when the declaration is made, a statement by the applicant specifying this day, and the written consent of the relevant operator (or their controlling corporation, if any) and the applicant’s controlling corporation (if any) for the LTC to start on this day456 The written consent of the controlling corporations of the applicant and the relevant operator (if any) to the making of the application457 The written acknowledgement of the applicant’s controlling corporation (if any) that, under ss 138(2)(a)–(b) of the Clean Energy Act 2011 (Cth), the corporation guarantees the applicant’s payment of any unit shortfall charge or late payment penalty458 The prescribed information and documents must be accompanied by either verifying documents, or (with the regulator’s consent) a statutory declaration that verifies the information.459 [73,975] The regulator may give written notice to the applicant requiring further information, and may refuse to consider the application if the applicant breaches this requirement.460

Regulator’s decision to issue a LTC to a person who has financial control of a facility [74,001] After considering an application, the regulator may issue the applicant company with a LTC in relation to the facility.461 In order to issue a LTC, the regulator must be satisfied that:462 the applicant passes the financial control transfer test in relation the facility; the applicant has and is likely to continue to have the capacity, access to information and financial resources necessary to comply with obligations under the Clean EnergyAct2011 (Cth)ifaLTCis issued (thereisno guidance about what level of financial resources the

regulator will consider to be sufficient for a company to comply); and no mandatory designated joint venture or declared designated joint venture exists in relation to the facility.463 [page 235]

Timeframe for decision on the issue of a LTC [74,025] The regulator must take all reasonable steps to ensure that a decision is made within 90 days of receiving the application or any further information that was required from the applicant.464 If the regulator refuses to issue a LTC, the regulator must inform the applicant by giving written notice.465 The regulator’s decision to refuse to issue a LTC is a reviewable decision.466

DURATION OF A LIABILITY TRANSFER CERTIFICATE [74,050] A LTC comes into force on the day specified in the certificate,467 and remains in force indefinitely unless surrendered or cancelled.468 The LTC start date may be different than the day when the regulator issued the LTC. The start date may be an earlier day in the same financial year,469 or a later day in the same financial year or the next financial year.470 In order to have an LTC start on a different start date, all the following parties must consent: the applicant; the person in operational control of the facility (or their controlling corporation, if any, in the case of a financial control transfer), and the controlling corporation of the applicant (if any, in the case of a financial control transfer).471

SURRENDER OF A LIABILITY TRANSFER CERTIFICATE [74,075] A person that holds a LTC in relation to a facility may, with the

regulator’s written consent, surrender the LTC.472 A surrender of an LTC takes effect when the regulator gives its consent.473 In order to give this consent, the regulator must be satisfied that:474 the person in operational control of the facility (or their controlling corporation, if any, in the case of a financial control transfer) has agreed to the surrender of the LTC, and the LTC has been in force for at least 4 years; or the LTC has been in force for less than 4 years but there are special circumstances that warrant consenting to the surrender of the LTC. [page 236] If the regulator refuses to consent to the surrender of a LTC,the regulator must inform the applicant by giving written notice.475 Refusal of consent to surrender of a LTC is a reviewable decision.476

CANCELLATION OF A LIABILITY TRANSFER CERTIFICATE [74,100] The regulator must cancel a LTC held by a person in relation to a facility when prescribed circumstances are present. The regulator must cancel a LTC issued to a company that is another member of a corporate group if:477 the company no longer passes the corporate group transfer test in relation to the facility; the company is no longer a member of the controlling corporation’s group; the person who has operational control of the facility is no longer a member of the controlling corporation’s group; an amount of unit shortfall charge payable by the company remains unpaid more than 30 days after it became due for payment; or the company has become an externally-administered body corporate.478 The regulator must cancel a LTC issued to a person who has financial control of a facility if:479

the person no longer passes the financial control transfer test in relation to the facility; a controlling corporation of the person consented to the making of the LTC application, but the person is no longer a member of the corporate group; an amount of unit shortfall charge payable by the company remains unpaid more than 30 days after it became due for payment; or the company has become an externally-administered body corporate.480 The regulator must inform the person who has operational control of the facility of this cancellation by giving written notice,481 as this person will resume liability for the facility’s emissions in the absence of a LTC. The regulator’s decision to cancel a LTC is a reviewable decision.482 [page 237]

Opt-in Scheme [74,125] The Clean Energy Act 2011 (Cth) allows for the establishment of an Opt-in Scheme for persons who use a large amount of designated fuels and who wish to manage their emissions liability by voluntarily becoming liable entities under the Clean Energy Act 2011 (Cth), in lieu of paying an equivalent carbon price under the fuel tax or excise systems.483 Emissions attributable to the combustion of liquid petroleum fuel, liquid petroleum gas, liquefied natural gas and compressed natural gas484 that have been subject to customs or excise duties are not covered emissions in the Clean Energy Act 2011 (Cth).485 Opting in to the Clean Energy Act 2011 (Cth) may enable the affected persons to more efficiently manage their emissions liability by trading carbon units.486 The regulator will administer the Opt-in Scheme. The regulator will work together with the Australian Tax Office and the Australian Customs Service, who administer the fuel tax and excise systems, by, for example, informing these agencies of any declarations made under the Opt-in Scheme.487 Liquid petroleum fuel, liquid petroleum gas, liquefied natural gas and compressed natural gas are now covered under the Clean Energy Act 2011 (Cth) as noted above. The Minister must take all reasonable steps to promulgate any necessary regulations by 15 December 2012.488

The regulations will, among other things, further specify: the types of fuels that will be covered by the scheme; eligibility criteria for opting in; timing requirements for opting in and opting out; and reporting and record-keeping requirements.489 Aviation fuels will be covered by the Opt-in Scheme.490 1 Clean Energy Act 2011 (Cth) s 134 and Clean Energy (Unit Shortfall Charge — General) Act 2011 (Cth). 2 Clean Energy Act 2011 (Cth) s 5. 3 Black’s Law Dictionary (8th ed). 4 Pharmaceutical Society v London & Provincial Supply Association Ltd (1880) 5 App Cas 857, per Lord Blackburn at 869. 5 Black’s Law Dictionary (8th ed). 6 Black’s Law Dictionary (8th ed). 7 See [50,975]. 8 Black’s Law Dictionary (8th ed). 9 Clean Energy Act 2011 (Cth) s 5. 10 Clean Energy Act 2011 (Cth) ss 5, 118. 11 Clean Energy Act 2011 (Cth) ss 125, 128, 129 or 133. 12 Clean Energy Act 2011 (Cth) s 126(4). 13 Clean Energy Act 2011 (Cth) s 5. 14 Clean Energy Act 2011 (Cth) ss 26–28. See also Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 264 [11.15]–[11.16]. 15 Clean Energy Act 2011 (Cth) s 21(9). 16 Clean Energy Act 2011 (Cth) s 20. 17 Clean Energy Act 2011 (Cth) s 20(6). 18 Clean Energy Act 2011 (Cth) s 20(7). 19 Clean Energy Act 2011 (Cth) s 20(1). 20 Clean Energy Act 2011 (Cth) s 20(4)–(5). 21 Clean Energy Act 2011 (Cth) s 29. 22 Regulations may specify another number in lieu of 25,000 tonnes as the threshold number. No regulations have been promulgated for s 55A.

23 Clean Energy Act 2011 (Cth) s 20(2). 24 Clean Energy Act 2011 (Cth) s 20(8)–(11). 25 Compressed natural gas (CNG) is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; National Greenhouse and Energy Reporting Regulations 2008 (Cth) (NGER Reporting Regulations) reg 1.03. 26 Clean Energy Act 2011 (Cth) s 20(10)–(11). 27 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 28 Clean Energy Act 2011 (Cth) s 20(12)–(13). 29 Clean Energy Act 2011 (Cth) s 23. 30 Clean Energy Act 2011 (Cth) s 5. 31 The concept of “exempt landfill emissions” (defined in s 32A of the Clean Energy Act 2011 (Cth)) is now otiose. 32 Clean Energy Act 2011 (Cth) s 30(9), (9A) and (10). 33 Clean Energy Act 2011 (Cth) s 23(6). 34 Clean Energy Act 2011 (Cth) s 23(7). 35 Clean Energy Act 2011 (Cth) s 23(4)–(5). 36 Clean Energy Act 2011 (Cth) s 23(2). 37 Clean Energy Regulator, Solid Waste Disposal on Land User Guide V2.2 (2012) 15. 38 Clean Energy Act 2011 (Cth) s 23(8)–(9). 39 Compressed natural gas is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 40 Clean Energy Act 2011 (Cth) s 23(9A)–(9B). 41 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 42 Clean Energy Act 2011 (Cth) s 23(9C)–(9D). 43 NGER Act s 7. 44 Clean Energy Act 2011 (Cth) s 5. 45 Clean Energy Act 2011 (Cth) s 21. 46 Clean Energy Act 2011 (Cth) s 21(6). 47 Clean Energy Act 2011 (Cth) s 21(4)–(5). 48 Clean Energy Act 2011 (Cth) s 21(2). 49 Clean Energy Act 2011 (Cth) s 21(7)–(8).

50 Compressed natural gas is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 51 Clean Energy Act 2011 (Cth) s 21(8A)–(8B). 52 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 53 Clean Energy Act 2011 (Cth) s 21(8C)–(8D). 54 Clean Energy Act 2011 (Cth) s 24. 55 Clean Energy Act 2011 (Cth) s 24(6). 56 Clean Energy Act 2011 (Cth) s 24(4)–(5). 57 Clean Energy Act 2011 (Cth) s 24(9), as modified by the Clean Energy Regulations 2011 (Cth). 58 Clean Energy Act 2011 (Cth) s 24(2). 59 Clean Energy Act 2011 (Cth) s 24(7)–(8). 60 Compressed natural gas is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 61 Clean Energy Act 2011 (Cth) s 24(8A)–(8B). 62 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 63 Clean Energy Act 2011 (Cth) s 24(8C)–(8D). 64 Clean Energy Act 2011 (Cth) s 22. 65 Clean Energy Act 2011 (Cth) s 22(4)–(5). 66 Clean Energy Act 2011 (Cth) s 22(2). 67 Clean Energy Act 2011 (Cth) s 22(6)–(7). 68 Compressed natural gas is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 69 Clean Energy Act 2011 (Cth) s 22(8)–(9). 70 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 71 Clean Energy Act 2011 (Cth) s 22(10)–(11). 72 Clean Energy Act 2011 (Cth) s 25. 73 Clean Energy Act 2011 (Cth) s 25(4)–(5). 74 Clean Energy Act 2011 (Cth) s 25(8), as modified by the Clean Energy Regulations 2011 (Cth). 75 Clean Energy Act 2011 (Cth) s 25(2). 76 Clean Energy Act 2011 (Cth) s 25(6)–(7).

77 Compressed natural gas is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 78 Clean Energy Act 2011 (Cth) s 25(7A)–(7B). 79 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 80 Clean Energy Act 2011 (Cth) s 22(10)–(11). 81 Clean Energy Act 2011 (Cth) ss 26–28. See also Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 264 [11.15]–[11.16]. 82 Clean Energy Act 2011 (Cth) s 118(3).Any amount from 0 to 0.5 tonnes inclusiveis rounded down to zero,and any amount over 0.5 tonnes is rounded up to 1 tonne. 83 Clean Energy Act 2011 (Cth) ss 35–36; Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) 46 [1.10]. 84 Baker & McKenzie, Australia’s Clean Energy Legislative Package: A Guide for Business (Carbon Market Institute, Melbourne, 2011) 23. 85 Baker & McKenzie, Australia’s Clean Energy Legislative Package: A Guide for Business (Carbon Market Institute, Melbourne, 2011) 23. 86 Clean Energy Act 2011 (Cth) s 5. 87 Clean Energy Act 2011 (Cth) s 5; NGER Act s 7; NGER Reporting Regulations reg 1.03. 88 Clean Energy Act 2011 (Cth) s 5. 89 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) 79 [1.137]; Grant Anderson, “What Natural Gas Suppliers and Users Need to Know About the Carbon Pricing Scheme” (2011) 26(1) Australian Environment Review 266, 267. 90 Clean Energy Act 2011 (Cth) s 6; Clean Energy Regulations 2011 (Cth) reg 1.10. 91 Clean Energy Act 2011 (Cth) s 6. 92 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 79 [1.138]. 93 Clean Energy Act 2011 (Cth) s 36A. 94 Clean Energy Act 2011 (Cth) s 33(1). 95 Clean Energy Act 2011 (Cth) s 5; Clean Energy Regulations 2011 (Cth) reg 1.9(1). 96 Explanatory Statement, Clean Energy Amendment Regulation 2012 (No 2) (Cth) 13. 97 Explanatory Statement, Clean Energy Amendment Regulation 2012 (No 2) (Cth) 14. 98 Clean Energy Regulations 2011 (Cth) reg 1.9(2). 99 Clean Energy Regulations 2011 (Cth) reg 1.8. 100 The list of specified gas processing plants is contained in Sch 2 of the Clean Energy Regulations 2011 (Cth), which names all relevant connection points and exit flanges. 101 Explanatory Statement, Clean Energy Amendment Regulation 2012 (No 2) (Cth) 13.

102 Clean Energy Act 2011 (Cth) ss 5, 55A. 103 Regulations may specify another number in lieu of 25,000 tonnes as the threshold number. No regulations have been promulgated for s 55A of the Clean Energy Act 2011 (Cth). 104 Clean Energy Act 2011 (Cth) s 55A(2); Clean Energy Regulations 2011 (Cth) reg 3.11. 105 Clean Energy Regulations 2011 (Cth) reg 3.11. 106 Clean Energy Regulations 2011 (Cth) reg 3.12(1)–(2). 107 Clean Energy Regulations 2011 (Cth) reg 3.12(3)–(5). 108 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations regs 4.04A(2)(a)–(h), (5). 109 Clean Energy Regulations 2011 (Cth) reg 3.17. 110 Clean Energy Regulations 2011 (Cth) reg 3.13(2), (4). 111 Clean Energy Regulations 2011 (Cth) reg 3.13(3). 112 Clean Energy Regulations 2011 (Cth) reg 3.13(5)–(6). 113 Clean Energy Regulations 2011 (Cth) reg 3.14(1). 114 Clean Energy Regulations 2011 (Cth) reg 3.14(2)–(3). 115 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 116 Clean Energy Regulations 2011 (Cth) reg 3.15. 117 Clean Energy Regulations 2011 (Cth) reg 3.14(3)(b). 118 Clean Energy Regulations 2011 (Cth) reg 3.17. 119 Clean Energy Regulations 2011 (Cth) reg 3.16(2)–(3). 120 Clean Energy Regulations 2011 (Cth) reg 3.16(4)–(5). 121 Clean Energy Regulations 2011 (Cth) reg 3.16(7). 122 Clean Energy Act 2011 (Cth) s 5. 123 NGER Act s 7B; National Greenhouse and Energy Reporting (Measurement) Determination 2008 (Cth) (NGER Measurement Determination) reg 1.4(3). 124 NGER Act s 7B(2). 125 NGER Measurement Determination reg 1.10B. 126 NGER Act s 7B(3)–(4). 127 NGER Measurement Determination regs 1.10C–1.10F. 128 Clean Energy Act 2011 (Cth) s 33(2)(b). 129 Clean Energy Act 2011 (Cth) s 33(2)(a). 130 Clean Energy Act 2011 (Cth) s 118(3).

131 Clean Energy Act 2011 (Cth) s 33(1). 132 Proposed new NGER Measurement Determination reg 1.10G. 133 Proposed new NGER Measurement Determination regs 1.10H–1.10Q. 134 NGER Measurement Determination reg 2.32. 135 NGER Measurement Determination reg 2.33. 136 NGER Measurement Determination regs 1.10D–1.10E. 137 NGER Measurement Determination reg 1.10F. 138 Clean Energy Act 2011 (Cth) s 36A. 139 Clean Energy Act 2011 (Cth) s 33(3). 140 Clean Energy Act 2011 (Cth) s 33(4). 141 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 79 [1.135]–[1.136]. 142 Clean Energy Act 2011 (Cth) s 35(1). 143 Clean Energy Act 2011 (Cth) s 35(1). 144 Clean Energy Act 2011 (Cth) s 35(3). 145 Clean Energy Act 2011 (Cth) ss 35(2)(a), 55B. 146 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 75 [1.130]. 147 Clean Energy Act 2011 (Cth) s 35(2). 148 Clean Energy Act 2011 (Cth) s 35(4). 149 Clean Energy Act 2011 (Cth) s 5. 150 Clean Energy Act 2011 (Cth) s 35(5). 151 Clean Energy Act 2011 (Cth) s 35(6). 152 Baker & McKenzie, Australia’s Clean Energy Legislative Package: A Guide for Business (Carbon Market Institute, Melbourne, 2011) 23. 153 Clean Energy Act 2011 (Cth) s 35(6A). 154 Clean Energy Act 2011 (Cth) s 35(7). 155 Clean Energy Act 2011 (Cth) s 30(2). 156 Clean Energy Act 2011 (Cth) s 35(8). 157 Baker & McKenzie, Australia’s Clean Energy Legislative Package: A Guide for Business (Carbon Market Institute, Melbourne, 2011) 23. 158 Clean Energy Act 2011 (Cth) s 35(9); Clean Energy Regulations 2011 (Cth) reg 3.5. 159 Clean Energy Act 2011 (Cth) s 35(9); Clean Energy Regulations 2011 (Cth) reg 3.5. 160 Clean Energy Act 2011 (Cth) s 36(1).

161 Clean Energy Act 2011 (Cth) s 36(2). 162 Clean Energy Act 2011 (Cth) s 5 (definition of “non–transport combustion”); Explanatory Memorandum, Clean Energy Legislation Amendment Bill 2012 (Cth) at 40 [2.30]. 163 Explanatory Memorandum, Clean Energy Legislation Amendment Bill 2012 (Cth) at 39 [2.23]. 164 Clean Energy Act 2011 (Cth) s 118(3). Any amount from 0 to 0.5 tonnes inclusive is rounded down to zero, and any amount over 0.5 tonnes is rounded up to 1 tonne. 165 Explanatory Memorandum, Clean Energy Legislation Amendment Bill 2012 (Cth) at 41 [2.31] and 41 [2.33]. 166 Clean Energy Act 2011 (Cth) s 5. 167 Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 168 Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03; Excise Tariff Act 1921 (Cth) s 3(1). 169 Clean Energy Act 2011 (Cth) s 5. 170 Clean Energy Act 2011 (Cth) s 5. 171 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 79 [1.137]; Grant Anderson, “What Natural Gas Suppliers and Users Need to Know About the Carbon Pricing Scheme” (2011) 26(1) Australian Environment Review 266, 267. 172 Clean Energy Act 2011 (Cth) s 368. 173 Clean Energy Act 2011 (Cth) s 36B(2). 174 Clean Energy Act 2011 (Cth) s 36B(4). 175 Clean Energy Act 2011 (Cth) s 36B(5). 176 Clean Energy Act 2011 (Cth) s 36C. 177 Clean Energy Act 2011 (Cth) s 36C(2). 178 Clean Energy Act 2011 (Cth) s 36C(4). 179 Clean Energy Act 2011 (Cth) s 36C(5). 180 Clean Energy Act 2011 (Cth) s 36D(1). 181 Clean Energy Act 2011 (Cth) ss 58AA–58AB. 182 Clean Energy Act 2011 (Cth) s 36D(1). 183 Clean Energy Act 2011 (Cth) s 36D(2). 184 Clean Energy Act 2011 (Cth) s 36D(3). 185 Combustion that does not occur in an internal combustion engine in a motor vehicle or vessel: Clean Energy Act 2011 (Cth) s 5. 186 Clean Energy Act 2011 (Cth) s 36D(4). 187 Clean Energy Act 2011 (Cth) s 36E(1). 188 Clean Energy Act 2011 (Cth) s 36E(2).

189 Clean Energy Act 2011 (Cth) s 44. 190 Clean Energy Act 2011 (Cth) s 37. 191 Clean Energy Act 2011 (Cth) s 38(1). 192 Clean Energy Regulations 2011 (Cth) reg 1.3. 193 Clean Energy Act 2011 (Cth) s 38(2); Clean Energy Regulations 2011 (Cth) reg 3.6. 194 Clean Energy Regulations 2011 (Cth) reg 3.6(2)(b). 195 Clean Energy Regulations 2011 (Cth) reg 3.7. 196 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 197 Clean Energy Regulations 2011 (Cth) reg 3.19. 198 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 199 Clean Energy Regulations 2011 (Cth) reg 3.8. 200 Clean Energy Regulations 2011 (Cth) reg 3.10(1). 201 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 202 Clean Energy Regulations 2011 (Cth) reg 3.10(2). 203 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 204 Clean Energy Regulations 2011 (Cth) reg 3.10(3). 205 Clean Energy Regulations 2011 (Cth) reg 3.9. 206 Clean Energy Regulations 2011 (Cth) reg 3.10(1). 207 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 208 Clean Energy Regulations 2011 (Cth) reg 3.10(2). 209 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 210 Clean Energy Regulations 2011 (Cth) reg 3.10(3). 211 Clean Energy Regulations 2011 (Cth) reg 3.6(3)–(4). 212 Clean Energy Act 2011 (Cth) s 39. 213 Clean Energy Act 2011 (Cth) s 40(3). 214 Clean Energy Act 2011 (Cth) ss 5, 40(3); Clean Energy Regulations 2011 (Cth) reg 1.4. 215 Clean Energy Act 2011 (Cth) s 40(2), (5). 216 Clean Energy Act 2011 (Cth) s 40(4).

217 Clean Energy Act 2011 (Cth) s 281. See Chapter 7. 218 Clean Energy Act 2011 (Cth) s 41(2). 219 Clean Energy Act 2011 (Cth) ss 5, 41(1). 220 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 90 [1.171]. 221 Clean Energy Act 2011 (Cth) s 42(2). 222 Clean Energy Act 2011 (Cth) s 42(4). 223 Clean Energy Act 2011 (Cth) s 281. 224 Clean Energy Act 2011 (Cth) s 43(1). 225 Clean Energy Act 2011 (Cth) s 43(2)–(3). 226 Clean Energy Act 2011 (Cth) s 281. 227 Clean Energy Act 2011 (Cth) s 43A. 228 Clean Energy Act 2011 (Cth) s 45(7). 229 Clean Energy Act 2011 (Cth) ss 54, 55. 230 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 95 [1.201]. 231 Clean Energy Act 2011 (Cth) ss 35–36, 36D. 232 Clean Energy Act 2011 (Cth) s 48(1)(a), (3). 233 Clean Energy Act 2011 (Cth) s 48(2). 234 Clean Energy Act 2011 (Cth) s 48(1)(b)–(c). 235 Clean Energy Act 2011 (Cth) s 53. 236 Clean Energy Act 2011 (Cth) ss 59(5) (for a single supply of natural gas, LPG or LNG), 60(5) (for a class of supplies). 237 Clean Energy Act 2011 (Cth) ss 59(6) (for a single supply of natural gas, LPG or LNG), 60(6) (for a class of supplies). 238 Clean Energy Act 2011 (Cth) ss 59(7) (for a single supply of natural gas, LPG or LNG), 60(7) (for a class of supplies). 239 Clean Energy Act 2011 (Cth) s 55B(1). 240 Clean Energy Act 2011 (Cth) s 55B(2). 241 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 79 [1.138]. 242 Clean Energy Act 2011 (Cth) s 58A. 243 Clean Energy Act 2011 (Cth) s 55B(3). 244 Clean Energy Act 2011 (Cth) s 252(4)(c), (6)(b); Crimes Act 1914 (Cth) s 4AA. 245 Clean Energy Act 2011 (Cth) s 62. 246 Clean Energy Act 2011 (Cth) ss 59(4) (for a single supply of natural gas, LPG or LNG), 60(4) (for a

class of supplies). 247 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 79 [1.138]. 248 Clean Energy Act 2011 (Cth) s 58A. 249 Clean Energy Act 2011 (Cth) s 56(1). 250 Clean Energy Act 2011 (Cth) s 56(1)(e)(ii). 251 Clean Energy Act 2011 (Cth) s 56(1)(e)(i). 252 Clean Energy Act 2011 (Cth) ss 59(2) (for a single supply of natural gas, LPG or LNG), 60(2) (for a class of supplies). 253 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 85 [1.153]. 254 Clean Energy Act 2011 (Cth) s 56(3). See Boxes 72,325–1 and 72,350–1. 255 Clean Energy Act 2011 (Cth) s 56(6). 256 Clean Energy Act 2011 (Cth) s 5. 257 Clean Energy Act 2011 (Cth) s 56(6A). 258 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 86 [1.155]. 259 Clean Energy Act 2011 (Cth) s 56(7). 260 Clean Energy Act 2011 (Cth) s 281. 261 Clean Energy Act 2011 (Cth) s 5. 262 Clean Energy Act 2011 (Cth) ss 59(3) (for a single supply of natural gas, LPG or LNG), 60(3) (for a class of supplies). 263 Clean Energy Act 2011 (Cth) ss 59(5) (for a single supply of natural gas, LPG or LNG), 60(5) (for a class of supplies). 264 Clean Energy Act 2011 (Cth) s 57(2). 265 Clean Energy Act 2011 (Cth) s 57(3). 266 Clean Energy Act 2011 (Cth) s 252(4)(c), (6)(b); Crimes Act 1914 (Cth) s 4AA. 267 Clean Energy Act 2011 (Cth) s 62. 268 Clean Energy Act 2011 (Cth) ss 59(3) (for a single supply of natural gas, LPG or LNG), 60(3) (for a class of supplies). 269 Clean Energy Act 2011 (Cth) ss 30(2), 35(7); Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 87 [1.159]. 270 Clean Energy Act 2011 (Cth) s 58(2). 271 Clean Energy Act 2011 (Cth) s 58(3). 272 Clean Energy Act 2011 (Cth) s 252(4)(c), (6)(b); Crimes Act 1914 (Cth) s 4AA. 273 Clean Energy Act 2011 (Cth) s 62. 274 Clean Energy Act 2011 (Cth) s 51.

275 Clean Energy Act 2011 (Cth) s 52. 276 Clean Energy Act 2011 (Cth) s 49. 277 Clean Energy Act 2011 (Cth) s 50. 278 Clean Energy Act 2011 (Cth) s 63(1). 279 Clean Energy Act 2011 (Cth) s 63(2). 280 Clean Energy Act 2011 (Cth) s 63(3). 281 Clean Energy Act 2011 (Cth) s 252(4)(c), (6)(b); Crimes Act 1914 (Cth) s 4AA. 282 Clean Energy Act 2011 (Cth) s 63(4). 283 Clean Energy Act 2011 (Cth) s 64(1). 284 Clean Energy Act 2011 (Cth) s 64(2). 285 Clean Energy Act 2011 (Cth) s 64(5). 286 Clean Energy Act 2011 (Cth) s 252(4)(a), (5), (6)(b); Crimes Act 1914 (Cth) s 4AA. 287 Clean Energy Act 2011 (Cth) s 64(3). 288 Law Council of Australia, Submission No 151 to Department of Climate Change and Energy Efficiency, Clean Energy Legislative Package Public Consultations, 22 August 2011, 5 [2.4(c)]. 289 Clean Energy Act 2011 (Cth) s 64(4). 290 Clean Energy Act 2011 (Cth) s 64(5). 291 Clean Energy Act 2011 (Cth) s 252(4)(b), (6)(a); Crimes Act 1914 (Cth) s 4AA. 292 Clean Energy Act 2011 (Cth) s 45(1)–(4), (8). 293 Clean Energy Act 2011 (Cth) s 45(4)–(5). 294 Clean Energy Act 2011 (Cth) s 45(7). 295 Clean Energy Act 2011 (Cth) s 47(1), (3). 296 Clean Energy Act 2011 (Cth) s 252(4)(b), (6)(a); Crimes Act 1914 (Cth) s 4AA. 297 Clean Energy Act 2011 (Cth) s 45(13). 298 Clean Energy Act 2011 (Cth) s 45(9). 299 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) 92 [1.182]. 300 Clean Energy Act 2011 (Cth) s 45(10). 301 Clean Energy Act 2011 (Cth) s 47(2)–(3). 302 Clean Energy Act 2011 (Cth) s 252(4)(b), (6)(a); Crimes Act 1914 (Cth) s 4AA. 303 Clean Energy Act 2011 (Cth) s 45(12). 304 Clean Energy Act 2011 (Cth) s 46. 305 Clean Energy Act 2011 (Cth) s 21(1), (3).

306 Clean Energy Act 2011 (Cth) s 5. 307 Partnership Act 1892 (NSW) s 1(1); Partnership Act 1958 (Vic) s 5(1); Partnership Act 1891 (Qld) s 5(1); Partnership Act 1895 (WA) s 7(1); Partnership Act 1891 (SA) s 1(1); Partnership Act 1891 (Tas) s 6(1); Partnership Act 1997 (NT) s 5(1); Partnership Act 1963 (ACT) s 6(1). 308 Clean Energy Act 2011 (Cth) s 5. 309 Liability arises under Clean Energy Act 2011 (Cth) ss 20, 23 (for a landfill facility). See Amanda Seaton, Joint Ventures under the Clean Energy Package (7 October 2011) Johnson Winter & Slattery, at 1: www.jws.com.au. 310 Clean Energy Act 2011 (Cth) s 5. 311 Clean Energy Act 2011 (Cth) s 74. 312 Clean Energy Act 2011 (Cth) s 161(7). 313 Clean Energy Regulations 2011 (Cth) Sch 1 item 505. 314 Clean Energy Act 2011 (Cth) s 65. 315 NGER Act s 11(1)(a). 316 NGER Act ss 55, 55A. See [71,875]. 317 Grant Anderson, Focus: Carbon Pricing Scheme Legislation Introduced (16 September 2011) Allens Arthur Robinson, “Unincorporated joint ventures”: www.aar.com.au. 318 See eg, AMPLA Ltd, Model Mining Joint Venture Agreement Approved Version 1 (1 March 2010) 18 [5.5(c)] at www.ampla.org. 319 See eg, LexisNexis, Australian Encyclopaedia of Forms & Precedents (at December 2007) 30 Joint Ventures, 30.5 Production Agreement [6(5)(d)], which allows each committee member one vote for each one percentage point of its participant’s interest. Decisions are made by simple majority: [6(5)(c)]. 320 Law Council of Australia, Submission No 151 to Department of Climate Change and Energy Efficiency, Clean Energy Legislative Package Public Consultations, 22 August 2011, 6–7 [2.5(a)(ii)], www.climatechange.gov.au. 321 NGER Act s 11B. 322 Clean Energy Act 2011 (Cth) ss 66(5), 74. 323 Clean Energy Act 2011 (Cth) s 66(4). 324 Clean Energy Act 2011 (Cth) s 66(1)–(3). 325 Clean Energy Act 2011 (Cth) s 252(4)(c), (6)(b); Crimes Act 1914 (Cth) s 4AA. 326 Clean Energy Act 2011 (Cth) s 70(2). 327 Clean Energy Act 2011 (Cth) s 67. 328 Amanda Seaton, Joint Ventures under the Clean Energy Package (7 October 2011) Johnson Winter & Slattery, 1–2, www.jws.com.au. 329 Tony Hill et al, Clean Energy Package introduced to Parliament (15 September 2011) Blake Dawson, “Unincorporated joint ventures”, www.ashurst.com. 330 Grant Anderson, Focus: Carbon Pricing Scheme Legislation Introduced (16 September 2011)

Allens Arthur Robinson, “Unincorporated joint ventures”, www.aar.com.au. 331 Clean Energy Act 2011 (Cth) s 67A. 332 Clean Energy Act 2011 (Cth) s 68(2)–(3). 333 Martijn Wilder, Paul Curnow, and Andrew Beatty, Australian Government’s Proposed Carbon Pricing Mechanism: A Guide to the Clean Energy Bills (28 September 2011) Baker & McKenzie, at 7: www.bakermckenzie.com. 334 Clean Energy Act 2011 (Cth) s 20(6). 335 See eg, AMPLA Ltd, Model Mining Joint Venture Agreement Approved Version 1 (1 March 2010) 20 [6.5(a)], www.ampla.org. 336 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) 49 [1.19]. 337 Clean Energy Act 2011 (Cth) s 68(2)–(3). 338 Clean Energy Act 2011 (Cth) s 68(5). The LCA identified the problem that it may be impractical to require participants to make statutory declarations about details of operational control over a facility in unqualified terms if matters of judgment are involved: Law Council of Australia, Submission No 151 to Department of Climate Change and Energy Efficiency, Clean Energy Legislative Package Public Consultations, 22 August 2011, 7 [2.5(b)(iii)], http://climatechange.gov.au. 339 Clean Energy Act 2011 (Cth) s 68(4); Clean Energy Regulations 2011 (Cth) reg 3.20(1). 340 Clean Energy Act 2011 (Cth) s 69. 341 Clean Energy Regulations 2011 (Cth) reg 3.20(2)(a). 342 Clean Energy Regulations 2011 (Cth) reg 1.3. 343 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 344 Clean Energy Regulations 2011 (Cth) reg 3.20(2)(c). 345 Clean Energy Regulations 2011 (Cth) reg 3.20(3). 346 Clean Energy Regulations 2011 (Cth) reg 3.20(2)(d). 347 Clean Energy Regulations 2011 (Cth) reg 3.20(3). 348 Clean Energy Regulations 2011 (Cth) reg 3.20(2)(e). 349 Clean Energy Regulations 2011 (Cth) reg 3.20(3). 350 Clean Energy Regulations 2011 (Cth) reg 3.20(2)(f). 351 Clean Energy Regulations 2011 (Cth) reg 3.20(3). 352 Clean Energy Regulations 2011 (Cth) reg 3.20(2)(g). 353 Clean Energy Act 2011 (Cth) s 70(2)–(3). 354 Clean Energy Regulations 2011 (Cth) reg 3.21(2). 355 Clean Energy Act 2011 (Cth) s 70(4). 356 Clean Energy Act 2011 (Cth) s 70(5).

357 Clean Energy Act 2011 (Cth) s 281. 358 Clean Energy Act 2011 (Cth) s 78(6). 359 Clean Energy Act 2011 (Cth) s 71(2)–(3). 360 Clean Energy Act 2011 (Cth) s 71(4). 361 Clean Energy Act 2011 (Cth) s 72(2)–(4). 362 Clean Energy Act 2011 (Cth) s 71A. 363 Clean Energy Act 2011 (Cth) s 252(4)(c), (6)(b); Crimes Act 1914 (Cth) s 4AA. 364 Grant Anderson and Fergus Green, Client Update: Carbon Pricing Scheme Becomes Law — What to do Next (11 November 2011) Allens Arthur Robinson, “Liable entities”, www.aar.com.au. 365 Barry Irwin and Ewan Vickery, “A Discussion of Selected Aspects of Clawbacks in Australian Mining Joint Ventures” [2006] AMPLA Yearbook 310, 310, 312–3. 366 Clean Energy Act 2011 (Cth) s 76(4). 367 Clean Energy Act 2011 (Cth) ss 21(2), 24(2) (for a landfill facility). 368 Clean Energy Act 2011 (Cth) s 161(2)–(3), (7). 369 Clean Energy Act 2011 (Cth) s 74. 370 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 66 [1.90]. 371 Law Council of Australia, Submission No 151 to Department of Climate Change and Energy Efficiency, Clean Energy Legislative Package Public Consultations, 22 August 2011, 9 [2.5(c)(ii)], www.climatechange.gov.au. 372 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 66 [1.93]. 373 Clean Energy Act 2011 (Cth) s 78(6). 374 Clean Energy Act 2011 (Cth) s 78A(3)–(4). 375 Revised Explanatory Memorandum, Clean Energy Bill 2011(Cth) at 66 [1.93]; Grant Anderson and Fergus Green, Client Update: Carbon Pricing Scheme Becomes Law — What to do Next (11 November 2011) Allens Arthur Robinson, “Liable entities”, www.aar.com.au. 376 Clean Energy Act 2011 (Cth) s 74(3)(c); Clean Energy Regulations 2011 (Cth) reg 3.22(1). 377 Clean Energy Regulations 2011 (Cth) reg 3.22(3). 378 Clean Energy Regulations 2011 (Cth) reg 3.22(2)(a). 379 Clean Energy Regulations 2011 (Cth) regs 3.22(2)(b), (5). 380 Clean Energy Regulations 2011 (Cth) reg 3.22(2)(c). 381 Clean Energy Regulations 2011 (Cth) reg 3.22(2)(d). 382 Clean Energy Regulations 2011 (Cth) reg 3.22(2)(e). 383 This power to make a declaration exists under the NGER Act ss 55, 55A. 384 Clean Energy Act 2011 (Cth) s 76.

385 Clean Energy Act 2011 (Cth) s 77. 386 Clean Energy Act 2011 (Cth) s 78(2). 387 Clean Energy Act 2011 (Cth) s 78(4). 388 Clean Energy Act 2011 (Cth) s 78(6). 389 Clean Energy Act 2011 (Cth) s 78(3), (5), (7). 390 See the following submissions to the Department of Climate Change and Energy Efficiency, Clean Energy Legislative Package Public Consultations, 22 August 2011, http://climatechange.gov.au: Santos Limited, Submission No 216, 8; Chevron Australia Pty Ltd, Submission No 63, 6; Chamber of Minerals and Energy of Western Australia Inc, Submission No 59, 11. 391 Clean Energy Act 2011 (Cth) ss 76(3), 77(2). 392 Clean Energy Act 2011 (Cth) s 78A(5). See s 78A(1)–(4) regarding the start day of a determination. 393 Clean Energy Act 2011 (Cth) s 79; Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 66 [1.89]. 394 Clean Energy Act 2011 (Cth) s 281. 395 Clean Energy Act 2011 (Cth) s 79. 396 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 66 [1.89]. 397 Grant Anderson and Fergus Green, Client Update: Carbon Pricing Scheme Becomes Law — What to do Next (11 November 2011) Allens Arthur Robinson, “Liable entities”, www.aar.com.au. 398 Clean Energy Act 2011 (Cth) s 20. 399 Clean Energy Act 2011 (Cth) s 20(7). 400 Clean Energy Act 2011 (Cth) s 84. 401 Clean Energy Act 2011 (Cth) s 92(1)(e)–(f). 402 See Clean Energy Act 2011 (Cth) ss 85–90. 403 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) 69 [1.99]. 404 Law Council of Australia, Submission No 151 to Department of Climate Change and Energy Efficiency, Clean Energy Legislative Package Public Consultations, 22 August 2011, at 4 [2.3(a)(i)], http://climatechange.gov.au. 405 Clean Energy Act 2011 (Cth) s 138. 406 Clean Energy Act 2011 (Cth) s 72(4). 407 Clean Energy Act 2011 (Cth) s 138. 408 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 67 [1.98]. 409 Clean Energy Act 2011 (Cth) s 91. 410 Clean Energy Act 2011 (Cth) s 161(6). 411 Clean Energy Regulations 2011 (Cth) Sch 1 item 506. 412 NGER Act ss 22X–22XA.

413 Clean Energy Act 2011 (Cth) s 80. 414 Clean Energy Act 2011 (Cth) s 5; NGER Act s 7; Constitution s 51(xx). 415 Clean Energy Act 2011 (Cth) s 5; NGER Act ss 7, 8(1). 416 NGER Act s 8(3). 417 Corporations Act 2001 (Cth) s 46. 418 Clean Energy Act 2011 (Cth) s 81(1)–(3). 419 Clean Energy Act 2011 (Cth) s 81(4). 420 Clean Energy Regulations 2011 (Cth) reg 3.23(2)(a). 421 Clean Energy Regulations 2011 (Cth) reg 1.3.op 422 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 423 Clean Energy Regulations 2011 (Cth) reg 3.23(2)(c). 424 Clean Energy Regulations 2011 (Cth) reg 3.23(3). 425 Clean Energy Regulations 2011 (Cth) reg 3.23(2)(d). 426 Clean Energy Regulations 2011 (Cth) reg 3.23(3). 427 Clean Energy Regulations 2011 (Cth) reg 3.23(2)(e). 428 Clean Energy Regulations 2011 (Cth) reg 3.23(3). 429 Clean Energy Regulations 2011 (Cth) reg 3.23(2)(f). 430 Clean Energy Regulations 2011 (Cth) reg 3.23(2)(h). 431 Clean Energy Act 2011 (Cth) s 82. 432 Clean Energy Act 2011 (Cth) s 83(2). 433 Clean Energy Act 2011 (Cth) s 83(3). 434 Clean Energy Regulations 2011 (Cth) reg 3.25. 435 Clean Energy Act 2011 (Cth) s 83(4). 436 Clean Energy Act 2011 (Cth) s 83(5). 437 Clean Energy Act 2011 (Cth) s 281. 438 NGER Act ss 22E–22F. 439 Clean Energy Act 2011 (Cth) s 84. 440 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 69 [1.100]. 441 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 69 [1.100]. This prevents avoidance of liability by overseas persons that may be difficult to enforce. 442 Clean Energy Act 2011 (Cth) s 5.

443 Partnership Act 1892 (NSW) s 1(1); Partnership Act 1958 (Vic) s 5(1); Partnership Act 1891 (Qld) s 5(1); Partnership Act 1895 (WA) s 7(1); Partnership Act 1891 (SA) s 1(1); Partnership Act 1891 (Tas) s 6(1); Partnership Act 1997 (NT) s 5(1); Partnership Act 1963 (ACT) s 6(1). 444 Clean Energy Act 2011 (Cth) s 85(1)–(3). 445 Clean Energy Act 2011 (Cth) s 85(4). 446 Clean Energy Act 2011 (Cth) s 85(5). 447 Clean Energy Act 2011 (Cth) s 85(5)(c)(i)–(ii). 448 Clean Energy Act 2011 (Cth) s 85(5)(c)(iii). 449 Clean Energy Regulations 2011 (Cth) reg 3.24(2)(a). 450 Clean Energy Regulations 2011 (Cth) reg 1.3. 451 Clean Energy Regulations 2011 (Cth) reg 1.3; NGER Reporting Regulations reg 4.04A(2)(a)–(h), (5). 452 Clean Energy Regulations 2011 (Cth) reg 3.24(2)(c). 453 Clean Energy Regulations 2011 (Cth) reg 3.24(3). 454 Clean Energy Regulations 2011 (Cth) reg 3.24(2)(d). 455 Clean Energy Regulations 2011 (Cth) reg 3.24(3). 456 Clean Energy Regulations 2011 (Cth) reg 3.24(2)(e). 457 Clean Energy Regulations 2011 (Cth) reg 3.24(2)(f)(i)–(ii). 458 Clean Energy Regulations 2011 (Cth) reg 3.24(2)(f)(iii). 459 Clean Energy Regulations 2011 (Cth) reg 3.24(3). 460 Clean Energy Act 2011 (Cth) s 86. 461 Clean Energy Act 2011 (Cth) s 87(2). 462 Clean Energy Act 2011 (Cth) s 83(3). 463 Clean Energy Regulations 2011 (Cth) reg 3.25. 464 Clean Energy Act 2011 (Cth) s 87(4). 465 Clean Energy Act 2011 (Cth) s 87(5). 466 Clean Energy Act 2011 (Cth) s 281. 467 Clean Energy Act 2011 (Cth) s 88(1). 468 Clean Energy Act 2011 (Cth) s 88(4)–(5). 469 Clean Energy Act 2011 (Cth) s 88(2)(a). 470 Clean Energy Act 2011 (Cth) s 88(3)(a). 471 Clean Energy Act 2011 (Cth) s 88(2)(b), (3)(b). 472 Clean Energy Act 2011 (Cth) s 89(2).

473 Clean Energy Act 2011 (Cth) s 89(3). 474 Clean Energy Act 2011 (Cth) s 89(4). 475 Clean Energy Act 2011 (Cth) s 89(5). 476 Clean Energy Act 2011 (Cth) s 281. 477 Clean Energy Act 2011 (Cth) s 90(2)(a). 478 An externally–administered body corporate is a body corporate that either:

is being wound up; has property in respect of which a receiver or a receiver and manager has been appointed and is acting; is under administration; has executed a deed of company arrangement that has not yet terminated; or has entered into a compromise or arrangement with another person under administration that has not concluded. Clean Energy Act 2011 (Cth) s 5; Corporations Act 2001 (Cth) s 9. 479 Clean Energy Act 2011 (Cth) s 90(2)(b). 480 Clean Energy Act 2011 (Cth) s 5; Corporations Act 2001 (Cth) s 9. 481 Clean Energy Act 2011 (Cth) s 90(3). 482 Clean Energy Act 2011 (Cth) s 281. 483 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) 32, 98 [1.216]. 484 Compressed natural gas is defined as natural gas that is used for vehicles that are modified to use this type of gas, and stored in high pressure fuel cylinders prior to use: Clean Energy Act 2011 (Cth) s 5; NGER Reporting Regulations reg 1.03. 485 Clean Energy Act 2011 (Cth) s 30(2). 486 Baker & McKenzie, Australia’s Clean Energy Legislative Package: A Guide for Business (Carbon Market Institute, Melbourne, 2011) at 27, 32. 487 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 98 [1.217]; Clean Energy Act 2011 (Cth) s 92G. 488 Clean Energy Act 2011 (Cth) s 92A(6). 489 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 98 [1.219]; Clean Energy Act 2011 (Cth) ss 92C–92D. 490 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at 98 [1.218].

[page 239]

Chapter 4 Emissions Units Introduction [90,001] Emissions units and offset credits are designed to be traded as commodities, acting as the currency of emissions trading schemes. Each emissions unit represents the right to emit 1 t CO2-e of defined greenhouse gases (GHG) and each offset credit represents 1 t CO2-e of defined GHG emissions reduced. Eligible emissions units are the currency of the Australian carbon pricing mechanism. Eligible emissions units are: carbon units; Australian carbon credit units (ACCUs); and eligible international emissions units (EIEUs). The regulator issues carbon units and ACCUs. Carbon units are issued in accordance with the Clean Energy Act 2011 (Cth).1 ACCUs are issued in accordance with the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth).2 Eligible international emissions units are offset credits which include: Certified Emissions Reduction units (CERs) issued from Clean Development Mechanism (CDM) projects (except non-qualifying CERs) under art 12 of the Kyoto Protocol;3 Emissions Reduction Units (ERUs) issued from Joint Implementation (JI) projects under art 6 of the Kyoto Protocol; and Removal units (RMUs) arising under the Kyoto Protocol.

The gateway to any legal dealing in eligible emissions units is the holding of an account in the Australian National Registry of Emissions Units (the Registry). This chapter studies the rules for, and attributes of, ownership inherent in eligible emissions units.

Sources of law [90,025] The primary laws dealing with eligible emissions units discussed in this chapter are: Australian National Registry of Emissions Units Act 2011 (Cth); [page 240] — Australian National Registry of Emissions Units Regulations 2011 (Cth), as amended up to: — Australian National Registry of Emissions Units Amendment Regulation 2012 (No 1) (Cth); — Australian National Registry of Emissions Units Amendment Regulation 2012 (No 2) (Cth); Clean Energy Act 2011 (Cth), as amended up to Clean Energy Legislation Amendment Act 2012 (Cth); and — Clean Energy Regulations 2011 (Cth), as amended up to: — Clean Energy Amendment Regulation 2012 (No 1) (Cth); — Clean Energy Amendment Regulation 2012 (No 2) (Cth); — Clean Energy Amendment Regulation 2012 (No 3) (Cth); — Clean Energy Amendment Regulation 2012 (No 4) (Cth); Clean Energy Act (Consequential Amendments) Act 2011 (Cth); Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth); Clean Energy (Charges — Excise) Act 2011 (Cth); Clean Energy (Charges — Customs) Act 2011 (Cth); Clean Energy (Unit Issue Charge — Fixed Charge) Act 2011 (Cth); Clean Energy (Unit Shortfall Charge — Auctions) Act 2011 (Cth); Clean Energy (Unit Shortfall Charge — General) Act 2011 (Cth);

Clean Energy (International Unit Surrender Charge) Act 2011 (Cth). The primary international laws dealing with eligible international emissions units discussed in this chapter are: United Nations Framework Convention on Climate Change (UNFCCC); Kyoto Protocol to the UNFCCC; Marrakesh Accords.

The Australian National Registry of Emissions Units [90,050] The Registry is an electronic register originally established under the Commonwealth’s executive power and continued in existence by the Australian National Registry of Emissions Units Act 2011 (Cth) (ANREU Act).4 The Registry is kept by the regulator. The purposes of the Registry are two-fold: (1) it will be the Registry for carbon units, ACCUs and prescribed international units and (2) it will be Australia’s national registry for Kyoto units. Australia was required to have a national registry for Kyoto units in order to satisfy Australia’s commitments under the Kyoto Protocol and to “ensure accurate accounting of the issuance, holding, transfer, acquisition, cancellation, retirement and carry-over of emissions units under the Kyoto Protocol”.5 In 2008 the Registry was linked to the [page 241] Kyoto unit registry systems comprising the Clean Development Mechanism (CDM) registry and the International Transactions Log (ITL), and the network of registries in other countries.6 An advantage of combining the Kyoto Protocol and domestic registry functions in one registry is that it should avoid duplication in account opening and operating procedures, and hence keep implementation and transaction costs lower.7

REGISTRY ACCOUNTS [90,075] The ANREU Act provides for regulations to empower the regulator to open an account or accounts within the Registry in the name of a particular person.8 Holding a Registry account is a necessary prerequisite for any transaction involving legal title to carbon units and ACCUs, including acquisition (by issue or transfer), surrender, cancellation and disposition by law, transfer or will. Prior to the enactment of the ANREU Act in 2011, the opening and holding of a Registry account created a contract between the account holder and the regulator, enshrining the registry’s terms and conditions.9 The ANREU Act prescribes that the Australian National Registry of Emissions Units Regulations 2011 (Cth) (ANREU Regulations)10 may make provision for account opening and: (a) requests to open Registry accounts; (b) the approval by the regulator of a form for such a request; (c) information that must accompany such a request; (d) the fee (if any) that must accompany such a request; (e) verification by statutory declaration of statements in such a request; (f)

empowering the regulator:

(i)

to require a person who makes such a request to give the regulator further information in connection with such a request;

(ii) if the person breaches the requirement — to refuse to consider the request, or to refuse to take any action, or any further action, in relation to the request.11 The ANREU Regulations may also make provision for: identification procedures that must be carried out by the regulator before opening a Registry account; specifying a transaction limit; identifying Registry accounts that are subject to a transaction limit; and prohibiting the issuing or transferring of emissions units into a Registry account if so doing would breach a transaction limit for that account.

[page 242]

OPENING A REGISTRY ACCOUNT [90,100] A Registry account may only be opened by the regulator in response to a request to the regulator in the approved form.12 Regulation 9(1) of the ANREU Regulations provides: A person may request the regulator to open a Registry account in the person’s name. A Registry account will only be “open” if opened in accordance with the ANREU Regulations.13 The term “person” is not defined in the ANREU Regulations. However, “person” is defined in s 4 of the ANREU Act and in the same terms as person is defined in s 5 of the Clean Energy Act 2011 (Cth): Person means any of the following: (a) an individual; (b) a body corporate; (c) a trust; (d) a corporation sole; (e) a body politic; (f)

a local governing body.

As noted in [70,075], ss 2C(1) and (2) of the Acts Interpretation Act 1901 (Cth) expands the meaning of “person” in Commonwealth Acts. The absence of a definition of “person” in the ANREU Regulations should not limit its meaning. Indeed, logically, any entity that fit within the span of the defined persons in the ANREU Act should be able to open a Registry account.

Authorised representative [90,125] If the person applying for a Registry account is not an individual, the person must nominate an authorised representative.14 An individual may nominate an authorised representative.15

Form for application [90,150] The forms for application for a Registry account — for an individual, company and trustee of a trust — are available by downloading from the regulator’s website: www.cleanenergyregulator.gov.au/ANREU/opening-anANREUaccount/Pages/default.aspx. When completed, the application form together with certified copies of supporting documentation, declaration regarding status against the specified “fit and proper person” criteria, and a completed National Police Check (NPC) consent form for individuals or a company, as appropriate, must be sent to: Clean Energy Regulator Attention: Australian National Registry of Emissions Units GPO Box 621 Canberra ACT 2600 [page 243] The application form and accompanying documents must be completed in English.16 Identification documents included in the application will not be returned by the regulator. Accordingly, applicants are required to send certified copies of documents rather than originals. The ANREU Regulations provide that a certified copy is a copy of a document that has been certified as a true copy by an approved person who is in Australia.17 If the person is not in Australia at the time the document is provided, then the certified copy must be a copy of the document that has been certified as a true copy by an Australian embassy, Australian High Commission, Australian consulate (who is not an honorary consul) or a competent authority under the Convention Abolishing the Requirement for Legalisation for Foreign Public Documents.18

Regulator’s power to open a Registry account [90,175] The regulator must open a Registry account only if: (1) the regulator is satisfied of the identity of the person in whose name the account is to be opened, having regard to the required identification evidence [90,250]–[90,300]; and

(2) the regulator has considered whether the person is a fit and proper person, having regard to the fit and proper person criteria [90,350], and: (a) the regulator is either satisfied or not satisfied that: (i)

the person meets the criteria if the person is a liable entity; or

(ii) the person is eligible to be issued free carbon units under: (1) the Jobs and Competitiveness Program in Sch 1 to the Clean Energy Regulations 2011 (Cth); or (2) Pt 8 of the Clean Energy Act 2011 (Cth); or (b) the regulator is satisfied that the person meets the fit and proper person criteria; and (3) the regulator is satisfied that the request for an account made on behalf of an entity is made by an authorised individual with sufficient authority to act on behalf of the entity.19 [90,200] Each Registry account will be identified by a unique number (the account number).20 [page 244]

Information to be included in application to open a Registry account [90,225] Box 90,225-1 details the information to be included in a request to open a Registry account. Box 90,225-1 — Required information for application to open a Registry account21 the applicant’s full name, address and contact details; the applicant’s status as either an individual (including an individual who is a sole trader), a body corporate, a corporation sole, a body politic, a local governing body or a trust; Australian Business Number (ABN), Australian Company Number (ACN), Australian Registered Business Number (ARBN), Goods and Services Tax (GST) registration number, Indigenous Corporation Number (ICN) or other unique number;

business name and trading name (if different); the address of the person’s principal place of business; if the applicant is an individual (including an individual who is a sole trader): — date of birth; — residential address; — (if the individual is known by another name) any other name; — gender; — (if a sole trader) a list of each jurisdiction in which the individual trades; — documentary proof of identity; — (if applicable) documentary proof of identity of each authorised representative; — (if required) documentary proof of identity of any other person associated with the individual; if the applicant is a body corporate: — for each executive officer (being any director, chief executive officer, chief financial officer and secretary of the body corporate): — full name; and — date of birth; — a description of the type of incorporation; — a list of each jurisdiction in which the body operates; — the name and address of any beneficial owner of the body corporate,22 if the body corporate is a proprietary or private company (other than a publicly listed company in Australia, a wholly owned subsidiary of a publicly listed company in Australia and any company licensed and subject to regulatory oversight by a Commonwealth statutory regulator); [page 245] if the applicant is a body corporate that is incorporated outside

Australia or is an authority of a foreign country, the name of any Australian agent through which the body operates; if the person is a trust: — for each trustee: — full name; and — address, — a description of the type of trust; — the jurisdictions in which the trust operates; — for each trustee who is an individual: — date of birth; — residential address; — (if the individual is known by another name) any other name; — gender; — (if a sole trader) a list of each jurisdiction in which the individual trades; — for each trustee that is a body corporate: — for each executive officer (being any director, chief executive officer, chief financial officer and secretary of the body corporate): — full name; and — date of birth; — a description of the type of incorporation; — a list of each jurisdiction in which the body operates; — for each beneficiary of the trust (other than a trust which is a government superannuation fund and any trust registered and subject to regulatory oversight by a Commonwealth statutory regulator): — full name; — address; and — details about the class of beneficiary (if relevant); if the applicant is a corporation sole, the full name, date of birth and

address of the individual constituting the corporation sole; if the applicant is an incorporated association or an incorporated cooperative but has no registered address or principal place of business, the full name and address of that body’s public officer or secretary if there is no public officer or president or treasurer if there is no public officer or secretary; for each authorised representative of the applicant, the authorised representative’s full name, address and contact details, date of birth, residential address, any other name (if the individual is known by another name) and gender.

Proving identity [90,250] An applicant for a Registry account must prove identity and as applicable, the identity of the authorised representative(s). Documentary proof submitted to the regulator must be current, and if the regulator [page 246] asks to see the original document, a person must provide the original document, otherwise a person must provide a certified copy of the original document.23

Individuals [90,275] Australian citizens or individuals ordinarily resident in Australia requesting the opening of a Registry account must give the regulator three identifying documents from the list of category A and B documents in Box 90,275-1. At least one of the documents must be from category A. Box 90,275-1 — Identity documents for Australians24 Category A documents A birth certificate issued by a state or territory; A current passport issued by the Commonwealth; A citizenship certificate issued by the Commonwealth, or documentary evidence that the individual has been registered by the Commonwealth as an Australian citizen by descent;

A passport or similar document issued for the purpose of international travel, that: — contains a photograph and the signature of the individual in whose name the document is issued; and — is issued by a foreign government, the United Nations or an agency of the United Nations; and — has evidence of the individual’s immigration status in Australia. Category B documents A driver’s licence or a learner’s permit, issued under a law of a state or territory, that includes: — a photograph of the individual and the individual’s signature; and — a street address that is the same as the address stated in the request; A Medicare card; A notice issued within the previous 3 months to the individual by a local government body or utilities provider, which: — contains the individual’s name; and — contains the individual’s street address; and — records the provision of services by the local government body or utilities provider to that address or the individual. An Australian firearms licence issued under a law of a state or territory that includes: — the individual’s signature; and — a photograph of the individual; and — a street address that is the same as the address stated in the request. [page 247] A secondary school or tertiary education student identification card that:

— includes a photograph of the individual; and — was issued by an education authority that has been accredited by the Commonwealth, a state or territory government. An individual will be considered to be ordinarily resident in Australia if, at the particular time: the individual is in Australia and has permission to remain in Australia indefinitely; the individual is not in Australia but has a right to re-enter Australia and, on re-entry, to be granted permission to remain in Australia indefinitely; the individual is in Australia and has a special category visa under s 32 of the Migration Act 1958 (Cth); or the individual is not in Australia, but is a New Zealand citizen, holds a New Zealand passport and, on re-entry to Australia, would have the right to be granted a special category visa under s 32 of the Migration Act 1958 (Cth) and the individual was in Australia for 200 or more days in the 12 months immediately preceding that time.25 Special provision is made for identifying an individual who is an Aboriginal person or a Torres Strait Islander who is unable to meet the above requirements.26 [90,300] Foreign persons requesting the opening of a Registry account must give the regulator three identifying documents from the list of category A and B documents in Box 90,300-1. At least one of the documents must be from category A. Box 90,300-1 — Identity documents for foreign persons27 Category A documents A passport or similar document issued for the purpose of international travel, that: — contains a photograph and the signature of the individual in whose name the document is issued; and — is issued by a foreign government, the United Nations or an agency of the United Nations. A birth certificate issued by a foreign government, the United

Nations or an agency of the United Nations; A national identity card issued for the purpose of identification, that: — contains a photograph and the signature of the individual in whose name the document is issued; and — is issued by a foreign government, the United Nations or an agency of the United Nations. [page 248] Category B documents A document issued by a foreign government that identifies the individual; A marriage certificate issued by a foreign government; A driver’s licence issued by a foreign government for the purpose of driving a vehicle that contains: — a photograph of the individual in whose name the licence is issued; and — a street address that is the same as the address stated in the request.

Entities [90,325] Entities requesting the opening of a Registry account in the entity’s name (including any trustee of a trust that is a body corporate) must be accompanied by the entity’s certificate of incorporation or relevant registration certificate. Box 90,325-1 details the identity documents accepted for each type of entity. Box 90,325-1 — Identity documents for entities28 Entity

Identity documents the certificate of the entity’s incorporation (if any); the certificate of the entity’s registration (if any) with ASIC; if the entity is not registered in Australia — the

Body corporate

certificate of the entity’s registration (if any) with a registry established under a foreign law; if there is no certificate of the entity’s incorporation or of the entity’s registration — a document with similar effect. the certificate of the entity’s incorporation (if any); the certificate of the entity’s registration (if any) with ASIC;

Body corporate that is an incorporated association or a registered cooperative

if the entity is not registered in Australia — the certificate of the entity’s registration (if any) with a registry established under a foreign law; if there is no certificate of the entity’s incorporation or of the entity’s registration — a document with similar effect; other documentary evidence that the entity exists. [page 249]

Entity

Identity documents the certificate of the entity’s incorporation (if any); the certificate of the entity’s registration (if any) with ASIC;

Local governing body

if the entity is not registered in Australia — the certificate of the entity’s registration (if any) with a registry established under a foreign law; if there is no certificate of the entity’s incorporation or of the entity’s registration — a document with similar effect; documentary evidence that the entity is a local governing body. the certificate of the entity’s incorporation (if

any); the certificate of the entity’s registration (if any) with ASIC; if the entity is not registered in Australia — the certificate of the entity’s registration (if any) with a registry established under a foreign law; if there is no certificate of the entity’s incorporation or of the entity’s registration — a document with similar effect; other documentary evidence that the entity exists or is a local governing body (as applicable); Body corporate that does not have an ABN

the following documentary evidence of the identity of executive officers: — if the body corporate is a private company, incorporated association or registered co-operative (whether or not a foreign entity): — if that entity has at least 3 executive officers — 3 executive officers; or — if that entity has one or 2 executive officers — those officers; — if the body corporate is a foreign company that is a public company, documentary evidence of the identity of an executive officer who is not the same person the entity nominates to be an authorised representative. [page 250]

Entity

Identity documents if there is a trust deed — the deed, or an extract of the deed that identifies the trustees and beneficiaries (or classes of beneficiary);

Trust

if there is no trust deed, a document with similar effect to a trust deed or the certificate of registration as a trust (if any); documentary evidence of the identity of each trustee who is an individual; for each trustee that is a body corporate — the documentary evidence mentioned above that is relevant to the kind of body corporate.

Fit and proper person criteria [90,350] The fit and proper person criteria for recognition are set out in s 64 of the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (and when promulgated, regulations made under that section). Table 90,350-1 sets out the matters specified in s 64 of the CFI Act that the regulator must have regard when determining if an applicant is a fit and proper person. Table 90,350-1 — Fit and proper person criteria29 Whether the applicant has been convicted of an offence against a law of the Commonwealth, a state or a territory, where the offence relates to dishonest conduct; Whether the applicant has been convicted of an offence against a law of the Commonwealth, a state or a territory, where the offence relates to the conduct of a business; Whether the applicant has been convicted of an offence against ss 136.1, 137.1 or 137.2 of the Criminal Code 1995 (Cth); Whether an order has been made against the applicant under s 76 of the Competition and Consumer Act 2010 (Cth); Whether an order has been made against the applicant under s 224 of Sch 2 to the Competition and Consumer Act 2010 (Cth), as that section applies as a law of the Commonwealth, a state or a territory; Whether the applicant has breached the CFI Act or the associated provisions; Whether the applicant has breached the ANREU Act or ANREU Regulations;

Whether the applicant has breached the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) or regulations under the NGER Act; If the applicant is a body corporate — whether an executive officer of the body corporate has been convicted of an offence against a law of the Commonwealth, a state or a territory, where the offence relates to dishonest conduct; [page 251] If the applicant is a body corporate — whether an executive officer of the body corporate has been convicted of an offence against a law of the Commonwealth, a state or a territory, where the offence relates to the conduct of a business; If the applicant is a body corporate — whether an executive officer of the body corporate has been convicted of an offence against ss 136.1, 137.1 or 137.2 of the Criminal Code 1995 (Cth); If the applicant is a body corporate—whether an order has been made against an executive officer of the body corporate under s 76 of the Competition and Consumer Act 2010 (Cth); If the applicant is a body corporate—whether an order has been made against an executive officer of the body corporate under s 224 of Sch 2 to the Competition and Consumer Act 2010 (Cth), as that section applies as a law of the Commonwealth, a state or a territory; If the applicant is a body corporate — whether an executive officer of the body corporate has breached the CFI Act or the associated provisions; If the applicant is a body corporate — whether an executive officer of the body corporate has breached the ANREU Act or ANREU Regulations; If the applicant is a body corporate — whether an executive officer of the body corporate has breached the NGER Act or regulations under the NGER Act; If the applicant is an individual — the regulator is satisfied that the applicant is not an insolvent under administration; If the applicant is a body corporate — the regulator is satisfied that the applicant is not an externally-administered body corporate;

Such other matters (if any) as the regulator considers relevant; If the Regulations specify one or more other eligibility requirements, the regulator is satisfied that those requirements are met. Establishing identity does not discern the purpose for which a Registry account is sought to be opened (for example, whether eligible emissions units will be held for surrender, cancellation or for sale). Establishing identity does not, of itself, act as a deterrent to any person that may wish to engage in behavior in the carbon markets that is not in the interests of a fair and orderly carbon market, or in the interests of liable entities.

ENTRIES IN REGISTRY ACCOUNTS [90,375] The ANREU Act supports and must be read with the Clean Energy Act 2011 (Cth) and the CFI Act. A carbon unit is issued to a person by making an entry for the unit in a Registry account kept by the person, provided the entry is made in accordance with the Clean Energy Act 2011 (Cth).30 All other entries about carbon units must be made in accordance with the Clean Energy Act 2011 (Cth). An ACCU is issued to a person by making an entry for the unit in the person’s Registry account, the account number of which is specified in the certificate of [page 252] entitlement issued under s 11(1) of the CFI Act, provided the entry is made in accordance with the CFI Act.31 All other entries about ACCUs must be made in accordance with the CFI Act. Any entries for a Kyoto unit32 and a non-Kyoto international emissions units33 are made in accordance with the ANREU Act.

Eligible emissions units [90,400] Eligible emissions units in the Australian carbon pricing mechanism are:34 (1) carbon units; (2) Australian carbon credit units (ACCUs); and (3) eligible international emissions units (EIEUs).

A person will “hold” an eligible emissions unit if the person is the registered holder of the unit.35 The registered holder of an eligible emissions unit is the person in whose Registry account there is an entry for the unit.36

CARBON UNITS [90,425] Australian carbon units will be issued by the regulator.37 Original issues of carbon units is discussed in [90,575]. Carbon units are deemed to be personal property.38 A carbon unit exists until it is surrendered. Surrender of carbon units is discussed in [91,200]. A carbon unit may be surrendered to the regulator only once.39 The right to release 1 t CO2-e GHG into the atmosphere in Australia is inherent in every carbon unit, and will be liberated by surrender. Thus, when surrendered, an eligible emissions unit covers the emission for the entity surrendering the eligible emissions unit of 1 t CO2-e scope 1 covered GHG emissions in Australia, in the relevant period to which the surrender relates.40 An owner of a carbon unit, recognised as the holder of the carbon unit in a Registry account, may legally: hold the carbon unit until surrender; cancel the carbon unit; surrender the carbon unit; or transfer the carbon unit. [page 253] The Commonwealth is liable to pay a reasonable amount of compensation to a person if the operation of the Clean Energy Act 2011 (Cth) or the regulations results in an acquisition of property from the person otherwise than on just terms.41 Ownership of a carbon unit is not tied to any obligation by the holder of the carbon unit to reduce GHG emissions, at any time or in any place. Ownership of a carbon unit is not tied to any obligation to use the carbon unit to acquit emissions of the holder, at any time or in any place. A person holding a carbon unit need not necessarily be the beneficial owner

of the carbon unit. The Clean Energy Act 2011 (Cth) does not affect the creation of equitable dealings in relation to the carbon unit, nor does it affect any dealings with or the enforcement of equitable interests in the carbon unit.42 A carbon unit is defined as a financial product for the Corporations Act 2001 (Cth)43 and any dealing in relation to a carbon unit is a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). The price of carbon units in the fixed charge period from 1 July 2012 to 30 June 2015 will be fixed, starting at $23, rising to $24.15 from 1 July 2013 and rising to $25.40 from 1 July 2014. From 1 July 2015, the price of carbon units will be subject to a price floor and ceiling for three years until 30 June 2018. The floor (lowest) price for carbon units will be $15 (rising by four per cent in real terms), and the ceiling (highest) price will be $20 higher than the international price in 2015–2016 (rising by five per cent in real terms.

AUSTRALIAN CARBON CREDIT UNITS [90,450] Australian carbon credit units (ACCUs) are defined in the CFI Act to mean a unit that is issued under s 147 of the CFI Act.44 There are two types of ACCUs: Kyoto ACCU; and non-Kyoto ACCU. Kyoto ACCUs will be eligible for surrender under the Clean Energy Act 2011 (Cth),45 but subject to a surrender limit in the fixed charge period.46 Non-Kyoto ACCUs will generally not be eligible for surrender. Surrender of eligible ACCUs is discussed in [91,375]. [page 254]

Kyoto ACCUs [90,475] Kyoto ACCUs are defined in the CFI Act as an Australian carbon credit unit that has attributes specified in a legislative instrument made by the Minister for the purposes of the definition47 — this legislative instrument is the Carbon Credits (Carbon Farming Initiative) — Kyoto Australian Carbon

Credit Unit Specification 2011 (Cth). The following attributes are specified for Kyoto ACCUs:48s the ACCU is issued in respect of an eligible Kyoto project; the reporting period in respect of which the ACCU is issued ends on or before the Kyoto abatement deadline; and the ACCU is identified as a Kyoto ACCU within the registry. The reporting period for an eligible offsets project is the period that is expressed in the offsets report about the project to be the reporting period for the project.49 The Kyoto abatement deadline is 31 December 2012.50 Kyoto offset projects are specified under the Carbon Credits (Carbon Farming Initiative) Regulations 2011 (Cth) (CC (CFI) Regulations) as:51 reforestation projects; the protection of native forest from deforestation; the establishment of vegetation on land that was subject to deforestation, by: — seeding; or — planting; or — human-induced regeneration by means of: — the exclusion of livestock; — the management of the timing and the extent of grazing; — the management, in a humane manner, of feral animals; — the management of plants that are not native to the project area; or — the cessation of mechanical or chemical destruction, or suppression, of regrowth.

Non-Kyoto ACCUs [90,500] Non-Kyoto ACCUs are issued if the relevant offsets project52 is an eligible non-Kyoto project, or if the reporting period ends after the Kyoto abatement deadline.53 The Regulations may also specify a non-Kyoto

ACCU.54 [page 255]

ELIGIBLE INTERNATIONAL EMISSIONS UNITS [90,525] An “eligible international emissions unit” (EIEU) is defined in the Clean Energy Act 2011 (Cth) to have the same meaning as in the ANREU Act.55 In the ANREU Act, an EIEU is defined as:56 a CER (other than a temporary CER or a long-term CER); an ERU; a RMU; a prescribed unit issued in accordance with the Kyoto rules (whether within or outside Australia); and a non-Kyoto international emissions unit. The characteristics of CERs, ERUs and RMUs are discussed in chapter 1.57 EIEUs may not be surrendered during the fixed charge period under the Clean Energy Act 2011 (Cth).58 During the first five years of the flexible charge period from 1 July 2015, EIEUs may be surrendered by a liable entity (in place of carbon units), subject to a potential international unit surrender charge. If the number of EIEUs surrendered exceeds 50 per cent of an entity’s emissions number in any eligible financial year, the excess will be treated as surrendered in the following eligible financial year.59 Surrender of EIEUs is discussed in [91,450].

Limitation to EIEUs [90,550] Regulations may prohibit the surrender of specified eligible international emissions units.60 The Minister is directed to have regard to the following matters if making a recommendation to the Governor-General about such regulations: … (a) Australia’s international objectives; and (b) Australia’s international obligations (including obligations under

international climate change agreements); and (c) the environmental integrity of this Act and the associated provisions; and (d) any relevant report given to the minister by the Climate Change Authority under Pt 22; and (e) the extent to which eligible international emissions units may be surrendered, accepted or used for the purposes of: (i)

the Climate Change Response Act 2002 of New Zealand; or

(ii) the European Union emissions trading scheme; and (f)

such other matters (if any) as the minister considers relevant.61…

These matters relate to the international objectives and environmental integrity of the Clean Energy Act 2011 (Cth) and the associated provisions, and are designed to give the Minister flexibility to adjust the Australian carbon pricing mechanism according to international developments. [page 256] The Revised Explanatory Memorandum to the Clean Energy Bill 2011 (Cth) notes that “environmental integrity” is not expressly defined.62 In July 2011 the Australian government announced an intention to make regulations which would ban the surrender of CERs that arose from: nuclear projects; the destruction of trifluoromethane (HFC-23); the destruction of nitrous oxide from adipic acid plants; and large-scale hydro-electric projects not consistent with criteria adopted by the European Union (based on guidelines of the World Commission on Dams).63 Australia’s approach follows the EU which will ban CERs from these project types in the European Union Emission Trading System (EU ETS) from 1 January 2013.64

Original issues of carbon units [90,575] The regulator will issue carbon units on behalf of the Commonwealth.65 Each carbon unit will be identified by a unique identification number,66 and

will have a particular vintage year corresponding to an eligible financial year.67 Original issues of carbon units with a particular vintage year may be issued at any time up to 1 February in the year following the vintage year.68 The processes of original issues of carbon units will comprise the primary market for carbon units. There are three methods for obtaining carbon units:69 (i)

by paying a fixed charge;

(ii) by auction conducted by the regulator; or (iii) for free under the Jobs and Competitiveness Program or Coal-fired Electricity Generation Assistance Program. At the conclusion of the relevant process, the regulator issues carbon units by making an entry in the person’s Registry account, consisting of the identification number of the carbon unit.70 The regulator may not issue carbon units to a person unless they have a Registry account.71

FIXED CHARGE CARBON UNITS [90,600] The regulator may issue carbon units for a fixed charge during: the fixed charge years, 1 July 2012 to 30 June 2015, and [page 257] the first three flexible charge years, 1 July 2015 to 30 June 2018, subject to a price ceiling to be determined in Regulations.72 Fixed charge units may only be issued to a liable entity with a Registry account.73

The amount of the fixed charge [90,625] The Clean Energy Act 2011 (Cth) fixes the charge for fixed charge carbon unit vintages, as follows:74 Table 90,625-1 — Fixed charges for carbon units Vintage year Fixed charge 2013 (period from 1 July 2012 to 30 June $23.00 2013)

2014 (period from 1 July 2013 to 30 June 2014) 2015 (period from 1 July 2014 to 30 June 2015) 2016 (period from 1 July 2015 to 30 June 2016) 2017 (period from 1 July 2016 to 30 June 2017) 2018 (period from 1 July 2017 to 30 June 2018)

$24.15 $25.40 as prescribed in regulations V 2016 x 1.07625 V 2017 x 1.07625

Issue period for fixed charge units [90,650] The issue period for fixed charge carbon units is limited, as follows: Table 90,650-1 — Issue periods for fixed charge carbon units Issue period Vintage year 1 April 2013 to 15 June 2013 2013 1 July 2013 * to 1 February 2014 2013 1 April 2014 to 15 June 2014 2014 1 July 2014 * to 1 February 2015 2014 1 April 2015 to 15 June 2015 1 July 2015 * to 1 February 2016 1 July 2015 * to 1 February 2017

2015 2015 2016

1 July 2016 * to 1 February 2018 1 July 2017 * to 1 February 2019

2017 2018

The issue period will vary for each liable entity.

The issue period starts from the beginning of the “emissions number publication time” which is defined as the time the regulator publishes the liable entity’s emissions number in the Liable Entities Public Information Database (LEPID) after receiving the liable entity’s annual report under the NGER Act.75 [page 258]

Application for fixed charged units

[90,675] An application for the issue of fixed charge carbon units must be: made to the regulator in writing and in the form approved by the regulator; made during the issue period;76 and accompanied by the payment for the fixed charge carbon units applied for.

Limitation of fixed charge carbon units [90,700] The Clean Energy Act 2011 (Cth) limits the number of fixed charge carbon units that each liable entity may acquire from the regulator. The application for fixed charge carbon units made in the issue period that runs from 1 April until 15 June must not request more carbon units than calculated by using the formula:77 Total of the interim emissions numbers of the person for the vintage year



Total number of eligible emissions units surrendered by the person in relation to the vintage year

The application for fixed charge carbon units made in the issue period that runs until 1 February must not request more carbon units than calculated by using the formula:78 Person’s emissions number for the vintage year



Total number of eligible emissions units surrendered by the person in relation to the vintage year

Issuing fixed charge carbon units [90,725] So soon as practicable after a liable entity has: applied for a specified number of carbon units with a particular vintage year; and tendered the total amount of charges payable for, or imposed on, the units the regulator must issue the number of carbon units of that vintage to the liable entity.79

The liable entity is liable to pay the charge for the carbon units issued. The charge equals the number of carbon units issued multiplied by the per unit charge.80 The charge is a debt due to the Commonwealth and may be recovered by the Commonwealth in a court of competent jurisdiction.81

Special attributes of fixed charge carbon units [90,750] A fixed charge carbon unit may not be transferred or relinquished.82 Fixed charge carbon units will be deemed to be automatically surrendered.83 Surrender of fixed charge carbon units is discussed in [91,250]. [page 259]

AUCTION OF CARBON UNITS [90,775] The regulator may issue carbon units as a result of an auction.84 In the flexible charge period the number of carbon units issued for compliance years will be limited by a cap. Save for free and fixed price carbon units, it is intended that 2016 and later vintage carbon units will be issued via auctions. The government argues that: the primary policy objectives of the auction are to promote allocative efficiency and efficient price discovery. Auctions will also raise revenue that can be used for other policy objectives, such as providing assistance to households and businesses.85 The government anticipates holding advance auctions of flexible charge period carbon units with the first auction for 2016 vintage carbon units to be held as early as 2014.

Issuing carbon units as the result of an auction [90,800] The regulator is not permitted to issue carbon units to a person as a result of an auction unless:86 the person has tendered the total amount of charges payable for, or imposed on, the issue of the units; or

both: — the person has lodged a deposit that relates to the total amount of charges payable for, or imposed on, the issue of the units; and — the person has tendered the balance of the total amount of the charges. A person is liable to pay a charge for the issue of the carbon units if they are issued following an auction.87 The amount of the charge will be equal to the amount the person indicated or declared during the auction the person would be willing to pay for the issue of that number of carbon units multiplied by the auction charge in accordance with the auction rules.88

Minimum auction charge [90,825] In the period from 1 July 2015 to 30 June 2018, the amount of the charge per carbon unit payable for the issue of a carbon unit as a result of an auction will be subject to a minimum (floor) that must be declared to be paid by a bidder, if regulations are in place under the Clean Energy (International Unit Surrender Charge) Act 2011 (Cth). Table 90,825-1 sets out the floor price for the first three years of the flexible charge period. Table 90,825-1 — Floor price for auction charge Vintage year Minimum charge 2016 (period from 1 July 2015 to 30 June 2016) $15.00 2017 (period from 1 July 2016 to 30 June 2017) $16.00 [page 260] 2018 (period from 1 July 2017 to 30 June 2018)

$17.05

Limit on issue of carbon units at auction [90,850] No more than 15 million carbon units with a particular vintage year may be issued as a result of auctions that were conducted by the regulator during a financial year beginning more than 12 months before the start of the vintage year or during the first six months of the financial year before the vintage year if there are no regulations in effect that declare the carbon pollution cap, and the carbon pollution cap number, for the vintage year.89

The total number of carbon units with a particular vintage year and free carbon units with the same vintage year must equal the carbon pollution cap number for that vintage year.90

Auction rules [90,875] The policies, procedures and rules for auctioning carbon units by the regulator will be determined by the Minister by legislative instrument.91 That legislative instrument may deal with any or all of the following matters:92 the types of auction; the timing of auctions; advertising of auctions; participants in auctions; fees for participants in auctions; proxy bidding; representatives of participants in auctions; the minimum number of carbon units to which a bid may relate; variation of bids; the total number of carbon units with a particular vintage year that are to be offered at a particular auction; limits on the total number of carbon units with a particular vintage year that may be acquired by a person as a result of a particular auction; limits on the total number of carbon units with a particular vintage year that may be acquired by the members of a controlling corporation’s group as a result of a particular auction; reserve prices (if any); deposits (if any) to be lodged by participants in auctions; the refund or forfeiture of such deposits; guarantees (if any) to be given in respect of payment obligations that are incurred by participants in auctions; securities (if any) to be lodged in respect of payment obligations that are incurred by participants in auctions; and

timing and methods of payment of charges. [page 261] A position paper released by the Department of Climate Change and Energy Efficiency (DCCEE) 3 February 2012 discussed the proposed design features to be included in the auction legislative instrument.93 However, the regulator will still be empowered to conduct auctions of carbon units even if there is no determination under the legislative instrument.94 [90,900] The auction format is expected to be a sequential ascending clock auction. In an ascending clock auction, the auction charge paid per carbon unit will be the same for all successful bidders. Chart 90,900-1 depicts the steps in an ascending clock auction.

Chart 90,900-1 — Steps in an ascending clock auction The ascending clock auction commences with the regulator announcing (setting) the [page 262] (reserve) current bid. Bidders nominate the number of carbon units they are prepared to purchase at that price. If demand exceeds supply, the regulator

raises the price in the next round and bidders resubmit their bids. Bidders may decrease, but not increase, their bid quantities in each successive bidding round. Bidders who withdraw during any round of the auction cannot re-join the auction later. The auction process continues until the number of carbon units offered in the auction is equal to or greater than demand for those units. At this point, the auction clears and successful bidders pay the price from the previous round. [90,925] Participation in auctions is proposed to be open to any person who holds a Registry account. Persons wishing to participate in auctions will need to register with the regulator as a participant. Participants must show they meet competency and collateral requirements for participating in the ascending clock auction, in real time, as determined by the regulator, including undertaking training specified by the regulator. [90,950] Up to eight auctions of vintage carbon units will be held for each eligible financial year: three advance auctions; four auctions in the current eligible financial year; and at least one auction before the 1 February true-up deadline. Table 90,950-1 — Carbon unit auction schedule (indicative only)95

15m refers to a 15 million unit limit for auctions without a pollution cap in place.

The number of 2015–16 vintage units available for auction in 2014–15 will be 1/8 of the total vintage allocation plus the excess units that were unable to be auctioned in 2013–14 due to the 15 million unit limit. The number of 2016–17 vintage units available for auction in 2014–15 will be 1/8 of the total vintage allocation plus the excess of units that were unable to be auctioned in 2013–14 due the 15 million unit limit. [page 263] [90,975] In order to promote open and transparent auctions, which are efficient and effective, and free of manipulation and collusion, the position paper proposes: the regulator being responsible for conducting and monitoring the auction of carbon units, enabling the regulator to observe, through the auction process itself, the actions of participants directly; limits on the total number of carbon units with a particular vintage year that may be acquired by a person or members of a corporate group as a result of a particular auction;96 limiting the maximum parcel of carbon units that can be purchased by any one bidder in any one auction to 25 per cent of all carbon units on offer in the auction; the ability in the regulator to disqualify a person from participating in the auctions,97 and in exercising such a power, to have regard to a person’s compliance record and other matters specified in the determination or as the regulator considers relevant;98 empowering the regulator to address misconduct in the auction scheme through the auction determination; replicating the prohibitions against misconduct in Pt 7.10 of the Corporations Act 2001 (Cth); if a participant breaches its contract with the regulator by engaging in misconduct, the regulator would have the power to terminate the contract, meaning the participant would not receive the carbon units under the contract; and requiring applicants to lodge some form of acceptable collateral, financial guarantee or cash deposit that would ensure that bidders would be able to pay for the units they buy at auction.

Floor price and ceiling price for carbon units in flexible charge period [91,000] The price of carbon units in the first three years of the flexible charge period, from 1 July 2015 to 30 June 2018, will be subject to a price floor and a price ceiling.99 The floor (lowest) price for carbon units will be $15 (rising by four per cent in real terms). The ceiling (highest) price will be $20 higher than the international price in 2015–2016 (rising by five per cent in real terms). From 1 July 2018, the price for carbon units is intended to be wholly market determined. However, in 2017 the Climate Change Authority will conduct a review of the carbon unit price floor and ceiling arrangements. Price floor arrangements in place for the first three years of the flexible charge period may also include a reserve price in auctions as an administrative mechanism aimed at improving the speed and efficiency of the auction. A reserve price would be the lowest price that carbon units would be sold at the auction. The DCCEE position paper on auctions suggests that any reserve price for an auction should be set at a level below the [page 264] expected market clearing price for the auction, but greater than zero. However, for the vintage years 2016, 2017 and 2018, the reserve price will be at least the floor price for that vintage (respectively, $15, $16 and $17.05).100

Benchmark average auction charge [91,025] The benchmark average auction charge (BAAC) is an amount that will be used to calculate: the unit shortfall charge in a flexible charge year;101 the administrative penalty for a failure to comply with relinquishment requirements;102 and the manufacture and import levies for synthetic GHGs.103 The BAAC is defined as the highest of the following two calculations:104 1. the average auction charge for the entire financial year:

2. the average auction charge for the final auction where the units auctioned have the same vintage as the year of auctioning:

The BAAC will be calculated and published by the regulator after the end of each financial year.105

FREE CARBON UNITS [91,050] A free carbon unit is a carbon unit issued free of charge.106 The regulator will issue free carbon units in accordance with two assistance programs legislated within Pts 7 and 8 of the Clean Energy Act 2011 (Cth): the Jobs and Competitiveness Program (JCP); and the Coal-fired Electricity Generation Assistance Program. The assistance provided by free carbon units is intended to be transitional only. [page 265]

Jobs and Competitiveness Program [91,075] The Jobs and Competitiveness Program (JCP) will provide free carbon units to liable entities carrying on emission-intensive trade exposed (EITE) activities in Australia during an eligible financial year to assist them meet their emissions number surrender target under the Clean Energy Act 2011 (Cth).107 The JCP is formulated in regulations:108 Pt 7 and Sch 1 to the Clean Energy Regulations 2011 (Cth) set out the JCP. 43 EITE activities have been defined under the JCP.109 The Appendix lists the activity definitions for EITE activities.

Coal-fired Electricity Generation Assistance

Program [91,100] Free carbon units will be issued to highly emissions-intensive coalfired electricity generation facilities within the Energy Security Fund to assist them meet their emissions number surrender target under the Clean Energy Act 2011 (Cth).110 Part 8 of the Clean Energy Act 2011 (Cth) outlines transitional assistance for highly emissions-intensive electricity generation and the rules for applying for a certificate of eligibility. The object of the Pt 8 assistance is to: help generators that face sizable losses in the value of their assets; and support investor confidence, and underpin the investment in generation assets that is required to ensure that Australia’s future energy security needs are met.111

Special rules for free carbon units [91,125] Free carbon units have special attributes, including: a limited ability to be traded (because they are not acquired for a fixed charge); the ability to be sold back to the government; and cancellation if not used.

Surrender or cancellation [91,150] Free carbon units with a fixed charge vintage year must only be surrendered for an eligible financial year that is the same as that particular vintage year.112 If a free carbon unit has not been surrendered by the end of 1 February in the eligible financial year after the vintage year of the carbon unit, the regulator must cancel the free carbon unit and remove the entry for the unit from the person’s Registry account.113 [page 266] Free carbon units are deemed cancelled where they have been relinquished.114

Buy-back of free carbon units [91,175] Free carbon units may be monetised by selling them to the regulator. Between the start of 1 September of a fixed charge year and the end of 1 February in the following fixed charge year, a liable entity may request by an electronic notice sent to the regulator that the regulator cancel and buy-back free carbon units with a fixed charge vintage year.115 The buy-back amount is calculated by using the following formula: Fixed charge x Factor specified in the regulations x Number of units The “fixed charge” is the appropriate charge fixed for fixed charge carbon units in the period 1 July 2012 to 30 June 2015.116 The “factor specified in the regulations” depends upon the date the request for buy-back is received by the regulator. Table 91,175-1 sets out the buy-back factor. Table 91,175-1 — Buy back factor117

[page 267]

Surrendering eligible emissions units [91,200] Part 6 of the Clean Energy Act 2011 (Cth) deals with the surrender of eligible emissions units. The surrender of eligible emissions units is done by transmitting an electronic notice to the regulator118 specifying: the eligible emissions unit(s) being surrendered; the eligible financial year to which the surrender relates; and the Registry account number(s) that include the entry (or entries) for the eligible emissions unit(s) being surrendered.119 No obligations are imposed on liable entities to surrender eligible emissions units. Once an eligible emissions unit is surrendered, the unit is cancelled and the regulator must remove the relevant entry from the person’s Registry account.120 The Registry must also record the surrender notice. If a unit shortfall occurs because a liable entity has not surrendered enough eligible emissions units to equal its emissions number for the eligible financial year, a liable entity will be exposed to a unit shortfall penalty charge. The timing of the surrender is critical to calculation of any unit shortfall charge and also for the applicable income tax treatment. Chapter 5 discusses unit shortfalls, unit shortfall penalties and income tax treatment.

TIMING RULES FOR SURRENDER [91,225] The surrender of eligible emissions units may not be future dated. The eligible financial year specified in the surrender notice must be a financial year earlier than the year in which the electronic notice is transmitted or the same financial year.121

Automatic surrender of fixed charge carbon units [91,250] Fixed price carbon units are deemed to be surrendered immediately

after they are issued122 and in accordance with the electronic notice requirements.123 The government included this automatic surrender as an additional safeguard to prevent liable entities from acquiring a surplus of fixed charge carbon units.124

Surrender deadline in fixed price period [91,275] A provisional surrender of eligible emissions units must be made before the end of 15 June in the eligible financial year (ending 30 June 2013, 30 June 2014 and 30 June 2015) in order to avoid a provisional unit shortfall charge. The provisional surrender is equal to 75 per cent of the previous years provisional emissions number, or a self assessed estimate of emissions that must be greater than 75 per cent of the emissions for the current year. [page 268] A final surrender of eligible emissions units equal to the liable entity’s emissions number for the eligible financial year must be made before the end of 1 February in the following financial year in order to avoid a final unit shortfall charge for the fixed charge period.

Surrender deadline in flexible price period [91,300] A liable entity must surrender eligible emissions units equal to its emissions number in an eligible financial year by 1 February in the following financial year in order to avoid a unit shortfall charge.

SURRENDERING CARBON UNITS [91,325] A carbon unit of a particular vintage year may only be surrendered if: the eligible financial year in respect of which the carbon units are surrendered is the same as the vintage year; the vintage year is earlier than the eligible financial year; or (in the case of borrowing) the vintage year is the next year immediately following the eligible financial year125 and the electronic surrender notice is transmitted after the emissions number publication time for

that eligible financial year.126 After a person surrenders a carbon unit, the carbon unit is cancelled and the regulator must remove the entry for the unit from the person’s Registry account.127

Surrendering free carbon units [91,350] Surrendering free carbon units Carbon units that were issued free under Pts 7 and 8 of the Clean Energy Act 2011 (Cth) may only be surrendered for an eligible financial year in the fixed charge period if that year corresponds to their vintage year.128

SURRENDERING ELIGIBLE AUSTRALIAN CARBON CREDIT UNITS [91,375] Australian carbon credit units (ACCUs) eligible for surrender under the Clean Energy Act 2011 (Cth) are: a Kyoto ACCU; a non-Kyoto ACCU (within the meaning of the CFI Act) issued in relation to an eligible offsets project for a reporting period where: — if it were assumed that the reporting period had ended before 31 December 2012, a Kyoto ACCU would have been issued in relation to the project for the reporting period instead of the non-Kyoto ACCU; and — the non-Kyoto ACCU is not of a kind specified in the Regulations; and an ACCU of a kind specified in the Regulations. [page 269] The Kyoto ACCUs must exist in a person’s Registry account in order to be surrendered. A surrender notice will not be effective if it refers to Kyoto ACCUs promised to come into existence in the future. After a person surrenders a Kyoto ACCU, the unit is cancelled and the regulator must remove the entry for the Kyoto ACCU from the person’s Registry account.129

Quantity limitation to surrender of ACCUs in fixed charge period [91,400] In the calculation of provisional unit shortfalls and final unit shortfalls in the fixed charge period from 1 July 2012 to 30 June 2015, a limit is placed on the quantity of eligible ACCUs recognised in the compliance period. If the number of eligible ACCUs surrendered exceeds: the person’s interim emissions number or the person’s emissions number for the relevant eligible financial year, where 50 per cent of the person’s emissions number or interim emissions number is attributable to landfill facilities; or a five per cent surrender limit then the excess: is deemed not to have been surrendered in the current compliance period; and is instead deemed to have been surrendered in the next relevant period (15 June to 1 February, or 1 February to 15 June, as the case may be). At 15 June, five per cent is calculated on the interim emissions number.130 At 1 February, five per cent is calculated on the emissions number of the person for the eligible financial year, adjusted for the number of ACCUs surrendered by 15 June.131

Surrendering Kyoto ACCUs in flexible charge period [91,425] There is no quantity limit to the surrender of eligible ACCUs by a liable entity after 1 July 2015.132

SURRENDERING ELIGIBLE INTERNATIONAL EMISSIONS UNITS [91,450] Eligible international emissions units (EIEUs) eligible for surrender under the Clean Energy Act 2011 (Cth) are: a CER (other than a temporary CER or a long-term CER); an ERU;

a RMU; a prescribed unit issued in accordance with the Kyoto rules; or a non-Kyoto international emissions unit. [page 270]

No surrender of EIEUs in fixed charge period [91,475] A liable entity may not surrender EIEUs during the fixed charge period.133

Quantity limitation to surrender of EIEUs in flexible charge period [91,500] After 1 July 2015, a liable entity may surrender EIEUs, subject to a surrender limit that operates until 30 June 2020.134 The calculation of unit shortfalls in the first five years of the flexible charge period imposes the limit on the quantity of eligible EIEUs recognised in the compliance period. If the number of eligible international emissions units surrendered by a liable entity exceeds 50 per cent of the emissions number for the relevant eligible financial year, then the excess: is deemed not to have been surrendered in the current compliance period; and is instead deemed to have been surrendered in the next relevant period. A surrender of EIEUs that would amount to a breach of regulations made pursuant to s 123 of the Clean Energy Act 2011 (Cth) will result in any excess surrender number being reduced.135

INTERNATIONAL UNIT SURRENDER CHARGE [91,525] From 1 July 2015 to 30 June 2018 an nternational unit surrender charge will be imposed on the surrender of EIEUs.136 Regulations will set the precise amount of the charge for each eligible financial year, and may make provision for the charge to vary depending upon the type of EIEU.137

However, the Clean Energy (International Unit Surrender Charge) Act 2011 (Cth) establishes maximums for the international unit surrender charge, as follows:138 Table 91,525-1 — Maximum international unit surrender charge Vintage year

Fixed charge

2016 (period from 1 July 2015 to 30 June 2016) 2017 (period from 1 July 2016 to 30 June 2017) 2018 (period from 1 July 2017 to 30 June 2018)

$15.00 $16.00 $17.05

The DCCEE released a discussion paper 22 December 2011 titled “Price floor for Australia’s carbon pricing mechanism: Implementing a surrender charge for international units”139 outlining four options to achieve the establishment of the international unit surrender charge: Option 1 — the charge would be based on the difference between the floor price and the actual price paid; [page 271] Option 2—the charge would be based on the difference between the floor price and an observed price at the time of the transaction (which may not necessarily accord with the time of physical acquisition); Option 3—the charge would be based on the difference between the floor price and the observed price at the time of surrender; or Option 4 — the charge would be based on the market value at the time the EIEU is surrendered, with the option for liable entities to undertake to surrender units in the future. The discussion paper suggested that a time-cost of money discount may also be appropriate.

Borrowing carbon units [91,550] A carbon unit may be surrendered in relation to an eligible financial year if that financial year immediately precedes the vintage year of the carbon unit.140 For example, a 2018 vintage carbon unit (issued in the period between 1 July 2017 and 1 February 2019) may be surrendered by a liable entity to cover their emissions number for the 2017 eligible financial year (the period

from 1 July 2016 to 30 June 2017). The electronic surrender notice must be transmitted after the emissions number publication time for the 2017 eligible financial year, which would be a time after 1 July 2017.141 However, as the true-up deadline for the 2017 eligible financial year is 1 February 2018, 2018 vintage carbon units issued after 1 February 2018 would not be able to be surrendered, because the surrender notice must be done before 1 February 2018, and accordingly it would not be able to specify a Registry account number containing those carbon units. Borrowing of fixed charge carbon units will not be possible in the fixed charge period from 1 July 2012 to 30 June 2015 because those carbon units will be automatically surrendered. Borrowing of free carbon units will not be possible, because free carbon units of a particular vintage must be surrendered for the same eligible financial year as the vintage year. In the calculation of unit shortfalls in the flexible charge period from 1 July 2015, a limit is placed on the quantity of borrowed carbon units recognised in the compliance period. If the number of carbon units surrendered by the liable entity from the vintage year that next follows the eligible financial year exceeds five per cent of the emissions number of the liable entity for the eligible financial year, then the excess: is deemed not to have been surrendered in the eligible financial year; and is instead deemed to have been surrendered in the next relevant period.142 A unit shortfall penalty will arise for over-borrowing carbon units.

Cancelling emissions units [91,575] The act of cancelling an emissions unit is executed with the regulator removing the emissions unit from the Registry account of a person. Cancellation is distinguished from surrendering an emissions unit. [page 272] Cancellation is also distinguished from relinquishment. The Clean Energy Act 2011 (Cth) makes specific provision for the voluntary relinquishment of

carbon units. Voluntary relinquishment is discussed in [91,900]. Free carbon units not surrendered by the end of 1 February in the eligible financial year after the vintage year of the carbon unit will be cancelled by the regulator and the entry for the unit removed from Registry accounts.143 Free carbon units will be deemed cancelled where they have been relinquished.144 If a person is the registered holder of Kyoto units or prescribed international units, the person may by electronic notice transmitted to the regulator request that the regulator transfer any or all of those units to a voluntary cancellation account.145 If a person is the registered holder of ACCUs, the person may by electronic notice transmitted to the regulator request the regulator to cancel any or all of those units.146

Transfer of emissions units [91,600] The Registry records and recognises only the legal holder of emissions units. The Registry will deal only with entries to the legal transfer of title to emissions units. For transfers of legal title, both transferor and transferee must have a Registry account. There are five generic transfer scenarios: (1) a person transfers units to another person’s account within the Registry;147 (2) a person transfers units between two or more accounts held by the person within the Registry;148 (3) a person transfers units out of a Registry account held by the person to a foreign account held by another person;149 (4) a person transfers units out of a Registry account held by the person into a foreign account held by the person;150 (5) a person transfers units from a foreign account held by the person or another person into a Registry account held by the person.151

TRANSFER MECHANICS

[91,625] A change in ownership of the legal title in a carbon unit will be recognised only when completed within the Registry in accordance with the Clean Energy Act 2011 (Cth) and the ANREU Act, by removal of the carbon unit from the transferor’s Registry account and entry of the same carbon unit into the transferee’s Registry account.152 If there is an entry for a carbon unit or a Kyoto unit in a foreign account, a transfer of the unit(s) from the foreign account to a Registry account consists of the removal of [page 273] the carbon unit or Kyoto unit from the foreign account and the making of an entry for the carbon unit or Kyoto unit in the Registry account.153 A change in ownership of the legal title in an ACCU will be recognised only when completed within the Registry in accordance with the CFI Act and the ANREU Act, by removal of the ACCU from the transferor’s Registry account and entry of the same ACCU into the transferee’s Registry account.154 A change in ownership of the legal title in an EIEU will be recognised only when completed within the Registry in accordance with the ANREU Act, by removal of the EIEU from the transferor’s Registry account and entry of the same EIEU into the transferee’s Registry account.155

Transmission by assignment [91,650] Legal transfer of an emissions unit is not determined solely by the contract between the transferor and transferee. To complete the legal transfer:156 the transferor must transmit an electronic notice to the regulator, instructing the regulator to transfer the unit(s) from a nominated account number in the relevant Registry account kept by the transferor to a nominated account number in the relevant Registry account kept by the transferee (or the transferor, as the case requires); and the regulator must comply with the instruction. The regulator must refuse to comply with an instruction to transfer Kyoto units, including an instruction to transfer them out of a Registry account to a foreign account, or into a Registry account from a foreign account, if the regulator is satisfied that giving effect to the instruction would relevantly

breach regulations pursuant to ss 39, 41 and 44 of the CFI Act (prescribing Kyoto rules, commitment period reserve and Commonwealth Registry accounts).157

Transmission by operation of law [91,675] Where a transfer does not occur by assignment, emissions units may also be transferred by operation of law.158 The recipient of the emissions units (transferee) must within 90 days of the transmission give the regulator a written and signed declaration of transmission and the following:159 [page 274] Box 91,675-1 — Evidence to accompany a declaration of transmission the identification numbers of the carbon units; a brief description of the circumstances that resulted in the transmission; the names and addresses of the transferor and transferee; the account number of the transferor’s Registry account; if the transferee has a Registry account — the account number of the transferee’s Registry account; if the transferee does already have a Registry account — a request to open a Registry account; a certified copy of a document that shows that the title of the emissions unit(s) has been transferred to the transferee (eg a certified copy of a court order) as evidence of the transmission. The transmission will only take effect after the regulator transfers the unit(s). If the Commonwealth is the transferee, the Minister must provide the declaration of transfer and required evidence.

Transferee has an existing Registry account [91,700] If the transferee has an existing Registry account, there is only a requirement to complete a declaration of transmission.

The regulator must transfer the unit from the transferor’s account to the transferee’s account as soon as practicable after receiving the declaration of transmission.160

Transferee does not have an existing Registry Account [91,725] If the transferee does not have an existing Registry account, the transferee must submit both the declaration of transmission as well as a request under s 10(1) of the ANREU Act to open a Registry account in the transferee’s name.161 The regulator may open a Registry account in the name of the transferee in accordance with the ANREU Regulations and as soon as practicable after opening the Registry account transfer the unit(s) from the transferor’s account to the transferee’s account.162

DEFERRAL OF TRANSFERS [91,750] There are three circumstances in which the regulator is empowered to defer giving effect to or modify a transfer instruction to transfer emissions units to or from a Registry account kept in the name of a person: (1) protecting Registry integrity; (2) indefinite refusal; and (3) imposing conditions on transfer. A deferral of a transfer transaction resulting from the exercise of the regulator’s discretion is not an excuse for failure to surrender eligible emissions units in accordance with the provisions of Pt 6 of the Clean Energy Act 2011 (Cth). [page 275] A liable entity may be exposed to a unit shortfall penalty if a unit shortfall arises as a result of not being able to transfer eligible emissions units (needed for surrender) due to actions outside the control of the liable entity, such as a refusal or delay in transfer or the imposition of a condition on a Registry account initiated by the regulator.

Five business days delay [91,800] If the regulator is satisfied that it is prudent to defer a transfer

instruction in order to: ensure the integrity of the Registry; prevent, mitigate or minimise abuse of the Registry; or prevent, mitigate or minimise criminal activity involving the Registry the regulator may defer giving effect to a transfer instruction for a period not exceeding five business days after the day on which the instruction was received.163 The regulator is not required to give any prior notice of such deferral.164

Indefinite refusal [91,825] If the regulator is satisfied that it is prudent to defer a transfer instruction in order to: ensure the integrity of the Registry; prevent, mitigate or minimise abuse of the Registry; or prevent, mitigate or minimise criminal activity involving the Registry the regulator may indefinitely refuse to give effect to the transfer instruction, provided that the regulator gives notice of such refusal to the person submitting the transfer instruction.165 The regulator is not required to give any prior notice of such deferral166 but the regulator must give written notice as soon as practicable after the transfer instruction is refused167 and invite the person to request the regulator to cease to refuse to give effect to the instruction.168 A request to the regulator must be in writing in the approved form and set out the reasons for the request.169 Upon such request, the regulator must take all reasonable steps within seven days of the request (or the receipt of information if the regulator has requested information) to make a decision to cease to refuse or to continue to refuse to give effect to the transfer instruction.170

Imposing conditions on transfer [91,850] If the regulator is satisfied that it is prudent in order to:

ensure the integrity of the Registry; prevent, mitigate or minimise abuse of the Registry; or [page 276] prevent, mitigate or minimise criminal activity involving the Registry the regulator, either on its own motion, or upon request by written instrument, may impose conditions prohibiting, restricting or limiting the transfer of units to or from the Registry account or otherwise restricting or limiting the operation of the Registry account for a specified period.171 The regulator must give a copy of the instrument to the account holder as soon as practicable after the instrument is made.

Relinquishment of carbon units [91,875] Carbon units may be relinquished: voluntarily;172 if required under the Jobs and Competitiveness Program;173 or if ordered by a court arising out of a conviction for an offence under ss 134.1 to 137.3 of the Criminal Code 1995 (Cth), where the issue of carbon units is directly or indirectly attributable to the commission of the offence.174

RELINQUISHMENT MECHANICS [91,900] A person who is the registered holder of carbon unit may relinquish any or all of those units by submitting an electronic notice to the regulator.175 Box 91,900-1 sets out the information to be included in a relinquishment notice. Box 91,900-1 — Information required in a relinquishment notice details of the carbon unit(s) that are being relinquished; specify the account number(s) of the person’s Registry account(s) in which there is an entry or entries for the carbon unit; specify the Jobs and Competitiveness Program requirement to which the relinquishment relates if the relinquishment is in order to comply

with a requirement under the Jobs and Competitiveness Program specify the court order to which the relinquishment relates if the relinquishment is in order to comply with a court order for a conviction for fraudulent conduct.176 [page 277]

RELINQUISHMENT FOR FRAUDULENT CONDUCT [91,925] Part 10 of the Clean Energy Act 2011 (Cth) empowers a court, upon application by the Director of Public Prosecutions or the regulator, to order a person convicted of an offence relating to fraudulent conduct to relinquish carbon units where the issue of the units is attributable to the commission of the offence. The court order may specify a specific number of carbon units to be relinquished (not exceeding the number fraudulently acquired) and a time frame for so doing.177 A failure by a convicted person to comply with the order to relinquish carbon units is subject to a prescribed amount of administrative penalty applied to the number of units required to be relinquished.178

RELINQUISHMENT UNDER THE JOBS AND COMPETITIVENESS PROGRAM [91,950] Under the Jobs and Competitiveness Program (JCP) free carbon units will be provided before or at the start of a financial year to entities undertaking emissions-intensive trade-exposed (EITE) activities. However, if a facility closes or planned production ceases or if there is an equipment closure during the financial year, the free carbon units will be required to be relinquished, for otherwise the liable entity would receive an unfair benefit or windfall.179 [91,975] Relinquishment of carbon units under the JCP is dealt with in the Clean Energy Regulations 2011 (Cth).180 If free carbon units have been issued to a person in accordance with the JCP and any of the following apply: a “specified event” happens; a “specified circumstance” comes into existence; or the regulator is satisfied about a specified matter

then the person is required to relinquish carbon units ascertained in accordance with the JCP Regulations.181 The specified events and circumstances include: closure of equipment; a negative allocation of carbon units; an incorrect allocation of carbon units by the regulator. Non-compliance with a relinquishment notice under the JCP is subject to a prescribed amount of administrative penalty applied to the number of units required to be relinquished.182

WHAT HAPPENS TO CARBON UNITS AFTER RELINQUISHMENT? [92,000] If a carbon unit is relinquished during a fixed charge year, then the carbon unit will be cancelled and the regulator must remove the entry from the person’s Registry account.183 If a carbon unit is relinquished during a flexible charge year, the regulator must [page 278] transfer the carbon unit from the person’s Registry account into the Commonwealth’s relinquished units account.184 After transfer to this account, the property in the carbon unit rests with the Commonwealth.185

NON-COMPLIANCE WITH A RELINQUISHMENT NOTICE [92,025] If a person is required to relinquish a particular amount of carbon units by a particular date (compliance deadline) and fails to do so, the person will be liable to pay the Commonwealth an administrative penalty for noncompliance, calculated using the following formula: 186 Number of units required to be relinquished

x

Prescribed amount for the financial year in which the compliance deadline occurs

The “prescribed amount for the financial year in which the compliance deadline occurs” is set out in Table 92,025-1.

Table 92,025-1 — Prescribed penalty amount for failure to relinquish187 Time period Requirement arises before the end of 31 July 2013 Requirement arises before the end of 31 July 2014 Requirement arises before the end of 31 July 2015 Any other case

Prescribed amount $46.00 $48.30 $50.80 Amount prescribed in Regulations or 200 per cent of BAAC in the previous financial year

The penalty for non-compliance is due and payable within 30 days of the compliance deadline.188 If the penalty remains unpaid after its due date, a late payment penalty of 20 per cent per annum accrues.189 The penalty is not tax deductible.190

Title in emissions units [92,050] The theory and design of emissions trading schemes requires emissions units to be created as a fungible commodity with assigned property rights, so that they may be traded among liable entities and other economic agents. [page 279] The government asserts that: Transparent and secure property rights over and legal interests in carbon units will promote confidence in the integrity of the units and reduce uncertainty for their holders, and further promote confidence in the development of the market for carbon units.191

EMISSIONS UNITS AS PERSONAL PROPERTY [92,075] Carbon units, ACCUs and Kyoto units are made personal property.192 Emissions units are personal property for the purposes of: the Bankruptcy Act 1966 (Cth);

the Personal Property Securities Act 2009 (Cth); the Proceeds of Crime Act 2002 (Cth); and the laws of wills, intestacy and deceased estates. Emissions units are a financial product for the Corporations Act 2001 (Cth) and Australian Securities and Investment Commission Act 2001 (Cth). As noted in [91,600ff] emissions units may be assigned, gifted by will and devolved by operation of law, in accordance with the transmission provisions in the Acts.

INDEFEASIBILITY OF TITLE [92,100] The Clean Energy Act 2011 (Cth) makes the registered holder of a carbon unit the legal owner of the carbon unit.193 The CFI Act makes the registered holder of an ACCU the legal owner of the ACCU.194 The Clean Energy Act 2011 (Cth) and the CFI Act provide that the registered holder of the emissions unit may deal with the unit as its legal owner and give a good discharge for any consideration for any such dealing. Although title is indefeasible, such indefeasibility will only protect a person who deals with the registered holder of the unit as a purchaser in good faith for value and without notice of any defect in the title of the registered holder.195 A defect in title might arise and purchaser may not be protected if: a carbon unit was transferred by the registered holder in error and sold on by an unintended recipient before the error is detected; a carbon unit was transferred fraudulently, such as if evidence of a transmission by operation of law was false; or there is unauthorised access to a Registry account.196

Equitable interests [92,125] In order to avoid doubt, the Acts expressly state that the rules for legal [page 280]

ownership and transmission do not affect the creation or enforcement of, and any dealings with, equitable interests in relation to emissions units.197 Registration of equitable interests [92,150] Regulations may make provision for or in relation to the registration of equitable interests in carbon units and ACCUs, such as mortgages or charges.198 However, such registration regulations would not apply to equitable interests that are “security interests” within the meaning of the Personal Property Securities Act 2009 (Cth) (PPSA) where the PPSA applies to such interests.199

Security interests [92,175] Security interests The PPSA applies to security interests in carbon units and ACCUs (because they are expressly declared personal property). Carbon units and ACCUs will be considered to be an “investment instrument” for the purposes of the PPSA (because they are financial products). The process that must be followed for perfecting security interests under the PPSA will apply to carbon units and ACCUs. Security may be perfected either by registration or control.200

Dealing with emissions units [92,200] As noted, emissions units are: personal property;201 financial products for the Corporations Act 2001 (Cth)202 and Australian Securities and Investment Commission Act 2001 (Cth);203 and a designated service under the Anti-Money Laundering and CounterTerrorism Financing Act 2006 (Cth).204

AUSTRALIAN FINANCIAL SERVICES LICENCE [92,225] Any person who provides a financial service or financial product

dealing with emissions units will in most cases be required: to hold an Australian Financial Service Licence (AFSL); and to adhere to “know-your-client” (KYC) rules. A person who carries on a financial services business in Australia must hold an AFSL authorising the provision of the financial services, unless exempted under the Corporations Act 2001 (Cth) or Corporations Regulations 2001 (Cth).205 [page 281] A person will be deemed to have provided a financial service if they: provide financial product advice; deal in a financial product; make a market for a financial product; provide other financial products associated with emissions units by: — operating a registered managed investment scheme; — providing a custodial or depository service; — providing a traditional trustee company service.206 In Regulatory Guide 236 (RG 236), published 9 March 2012, the Australian Securities and Investment Commission (ASIC) advises that persons dealing in, making a market for, aggregating and providing advice in relation to carbon units, ACCUs and EIEUs will be required to: hold an AFSL with the appropriate financial services and financial product authorisations from ASIC; produce a financial services guide (FSG) where applicable (this requirement is removed for carbon units); direct clients to read the statements published on the website of the regulator which provide a description of the relevant type of emissions unit. All AFSLs for dealing in eligible emissions units will be subject to conditions ordinarily imposed on AFSLs by reg 7.6.04 of the Corporations Regulations 2001 (Cth) as well as Pro Forma 209 Australian financial services licences conditions (PF 209).

Entities that trade futures and options over emissions units in the financial markets on behalf of clients must hold an AFSL. [92,250] If a person is merely bidding in auctions, then the requirement for an AFSL will be exempted. An exemption will also apply to liable entities dealing in regulated emissions units for the purposes of managing their financial risk in relation to the surrendering, cancelling or relinquishing of regulated emissions units, and to liable entities dealing in regulated emissions units on behalf of a related or associated entity for the same purpose. A financial intermediary that acquires and disposes of carbon units on its own account will not be dealing. The operation of commodity trading desks of liable entities (and their related and associated entities) will be sanctioned without a financial services licence, provided that the market dealings do not make a market for the carbon units, EIEUs or derivatives, and the purpose of trading is to manage price risks in eligible emissions units (carbon units, ACCUs, or EIEUs) in relation to their surrender, cancellation or relinquishment.

SPECIAL DEALINGS IN EMISSIONS UNITS [92,275] Corporations Act 2001 (Cth) market integrity rules potentially apply to dealings in emissions units and interests in emissions units by brokers in licensed financial markets.

Short selling [92,300] Short selling The Corporations Act 2001 (Cth) permits limited short selling of certain securities and financial products (called s 1020B products), and bans “naked short selling”. [page 282] Generally, a person must only sell s 1020B products if at the time of the sale (which includes the time of the offer to sell) the seller has a presently exercisable and unconditional right to vest the products in the buyer, meaning that the seller must already own the products (or own them subject only to payment and/or transfer conditions). Eligible emissions units are not listed s 1020B products.

Wash trades [92,325] A wash trade occurs in futures market transactions where one “client” takes both positions in the one transaction. Brokers are not permitted to affect any futures market transaction where the account on behalf of which the broker enters into the futures market transaction is the same on both sides of the transaction.207

Corners [92,350] ASIC may suspend dealings and intervene in the market (this is realtime intervention) if it believes that one person is, or two or more persons acting in concert are, attempting to corner the market.208 A corner occurs where a level of control of a quoted product has been acquired such that the quoted product cannot be obtained for delivery on existing contracts except at prices, or on terms arbitrarily dictated by the holder(s) of the quoted product which are unfair, harsh, or unconscionable.

Dealings on own account [92,375] Brokers must deal209 fairly and in due turn with clients’ orders, and between client orders and order on own account. An order for emissions units would be to the account of a broker (as opposed to a client) where the emissions units would be beneficially owned by the broker. An order for a derivatives market product would only be to the account of a broker if the order was entered on its behalf. The registration of an equity security in the name of a broker is prohibited if the broker is not the beneficial owner of the equity security.210 The application of this rule to emissions units means that brokers should not hold emissions units (ie be the registered holder of the unit in a Registry account) unless the beneficial owner of the emissions units.

Manipulative trading [92,400] The Corporations Act 2001 (Cth) and market integrity rules outlaw market misconduct and other prohibited conduct, such as: manipulation of the price for trading in financial products on a financial

market operated in Australia; [page 283] engaging in false or misleading appearances of active trading or creating an artificial price for trading in financial products; engaging in fictitious transactions which result in the price for trading in financial products on a financial market being maintained, inflated or depressed; engaging in dishonest conduct in relation to a financial product or financial service; and insider trading of specified products. Brokers are prohibited from making a bid or offer, or dealing in any cash products and derivatives products either as principal or on account of any other person with the intention of creating a false or misleading appearance.211

Monopoly conduct [92,425] Anti-competitive conduct in Australia is addressed by the Competition and Consumer Act 2010 (Cth). There is no rule in the Clean Energy Act 2011 (Cth) preventing monopoly conduct in carbon units. The Competition and Consumer Act 2010 (Cth) makes provision for arresting monopolistic and market-making conduct, where a corporation makes a contract or arrangement, or arrives at an understanding, and a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect of substantially lessening competition.212

Suspending a Registry account [92,450] The regulator, on its own initiative or upon the written request of a person, may suspend the Registry account of a person for a specified period, if the regulator is satisfied that it is prudent to: ensure the integrity of the Registry; prevent, mitigate or minimise abuse of the Registry; or

prevent, mitigate or minimise criminal activity involving the registry.213 If an account is suspended the regulator cannot give effect to any instruction to transfer units to or from the Registry account or issue any emissions units into the Registry account.214 A relinquishment notice does not have effect during an account suspension. The regulator is not required to give any prior notice of suspension215 but the regulator must give notice of the suspension to the person (in a suspension instrument) as soon as practicable after the suspension.216 The regulator must invite the person to request the regulator to revoke the suspension instrument.217 [page 284] A request to the regulator must be in writing in the approved form and set out the reasons for the request.218 Upon such request, the regulator must take all reasonable steps within seven days of the request (or the receipt of information if the regulator has requested information) to make a decision to revoke or to continue the suspension instrument.219

[page 285]

Appendix — Activity definitions for Jobs and Competitiveness Program [92,475] Sch 1 Pt 3 Div

2

3

Activity

Description

The production of glass containers is the physical and chemical transformation of silica (silicon Production of dioxide (SiO2)) and other raw and glass recycled materials (such as cullet) to containers produce blown or pressed glass containers, by controlled melting and forming in a contiguous process. The production of bulk flat glass is the physical and chemical transformation of silica (silicon dioxide (SiO2)) and other raw and Production of bulk flat glass recycled materials (such as cullet) to produce bulk flat glass products, including wired glass and patterned glass, by controlled melting and forming in a contiguous process.

Intensity

Moderate

High

The production of methanol is the chemical transformation of one or more of the following: (a) hydrocarbons; 4

Production of methanol

(b) hydrogen feedstocks; (c) carbon feedstocks; (d) oxygen feedstocks; to produce liquid methanol (CH3OH) in which the concentration of

High

methanol is at least 98%.

5

The production of carbon black is the chemical transformation of gaseous or liquid hydrocarbons to produce a Production of colloidal carbon material (below carbon black 1000nm in at least one dimension) in the form of spheres or of fused aggregates of the spheres.

6

The production of white titanium dioxide (TiO) pigment is the Production of chemical transformation of one or white more of the following: titanium (a) rutile (TiO2); dioxide (TiO2) (b) synthetic rutile (TiO2); pigment (c) ilmenite (FeTiO3);

High

Moderate

[page 286] (d) leucoxene; (e) titanium slag that has an iron (Fe) concentration of at least 7%; to produce white titanium dioxide (TiO2) pigment conforming with ATSM classification D476-00 and with an iron (Fe) concentration of no more than 0.5%.

7

The production of silicon is the chemical transformation of silica (silicon dioxide (SiO2)) to produce Production of silicon (Si) with a concentration of silicon of at least 98.0%, conducted silicon in accordance with the following overall chemical equation: SiO2(s) + 2C(s) → Si(s) + 2CO(g) Smelting zinc is the chemical

High

transformation of either or both of:

8

Smelting zinc

(a) concentrated mineralised zinc compounds; and (b) zinc-bearing materials;

High

secondary

to produce zinc metal (Zn) with a concentration of zinc of at least 99.95%. The integrated production of lead and zinc is the chemical transformation of either or both of: (a) concentrated mineralised lead compounds with or without additional lead bearing secondary materials; and

9

Integrated production of lead and zinc

(b) concentrated mineralised zinc compounds with or without additional zinc bearing secondary materials to produce:

Moderate

(1) lead metal (Pb) with a concentration of lead of at least 99.97%; and (2) zinc in fume (Zn) with a concentration of zinc of at least 60%.

10

Aluminium smelting

Aluminium smelting is the physical and chemical transformation of alumina (aluminium oxide (Al2O3)) into aluminium metal (Al) of saleable quality.

High

[page 287] Alumina refining is the physical and chemical transformation of bauxite (which is an ore containing

11

12

Alumina refining

mineralised aluminium compounds) into alumina (aluminium oxide (Al 2 O3)) with a concentration of aluminium oxide of at least 95%.

The production of high purity ethanol is the chemical transformation of fermentable sugars (such as C6H12O6, C5H10O5, C12H22O11 or Production of C18H32O16) to ethanol (C2H5OH) high purity and subsequent purification process ethanol to obtain a solution of high purity ethanol where the concentration of ethanol (C2H5OH) is at least 95% with respect to volume. The production of magnesia is the chemical and physical transformation of magnesite (magnesium carbonate (MgCO3)) into one or more of the following magnesia products:

High

Moderate

(a) caustic calcined magnesia that: (i)

has a concentration of magnesium oxide (MgO) of at least 75%; and

(ii) is burned between 650°C and 1200°C; (b) deadburned magnesia that: 13

Production of magnesia

(i)

has a concentration of magnesium oxide (MgO) of at least 85%; and

(ii) has grain density of 2.85 g/cm3 to 3.45 g/cm3; and (iii) is burned between 1300°C and 2200°C; (c) electrofused magnesia that:

High

(i)

has a concentration of magnesium oxide (MgO) of at least 90%; and

(ii) has grain density of greater than 3.45 g/cm3; and (iii) is fused at temperatures higher than 2750°C. [page 288] The manufacture of newsprint is the physical or chemical transformation, through an integrated process, of any or all of woodchips, sawdust, wood pulp and recovered paper into rolls of uncoated newsprint that: 14

Manufacture of newsprint

(a) has a grammage range of 30 g/m2 to 80 g/m2; and

High

(b) has a moisture content in the range of 6% to 11%; and (c) is generally usable for newspaper products. Dry pulp manufacturing is the physical or chemical transformation of any or all of wood chips, sawdust, wood pulp and recovered paper into either or both of rolls and bales of dry pulp that: 15

Dry pulp manufacturing

(a) has a moisture content in the range of 4% to 14%; and (b) is generally useable in either or both of: (i)

paper manufacturing; and

(ii) the production of sanitary products (such as a fluff pulp layer in sanitary

High

products). Cartonboard manufacturing is the physical or chemical transformation of any or all of wood chips, sawdust, wood pulp and recovered paper into rolls of cartonboard that: (a) has a grammage range of 150 g/m2 to 500 g/m2; and 16

Cartonboard manufacturing

(b) has a moisture content in the range of 4% to 11%; and

High

(c) is coated; and (d) is generally useable as cartonboard product such as coated kraftliner, coated multiply and other coated paperboard. [page 289] Packaging and industrial paper manufacturing is the physical or chemical transformation of any or all of wood chips, sawdust, wood pulp and recovered paper into rolls of packaging and industrial paper that: (a) is produced from wholly or partially unbleached input fibre; and

17

Packaging and industrial paper manufacturing

(b) has a grammage range of 30 g/m2 to 500 g/m2; and (c) has a moisture content in the range of 4% to 11%; and (d) is uncoated; and (e) is generally useable as a packaging or industrial paper, including products such as kraftliner, recycled or

High

multiply liner, medium, sack and bag paper, wrapping paper, plasterboard liner, horticultural paper and building paper. Printing and writing paper manufacturing is the physical or chemical transformation of any or all of wood chips, sawdust, wood pulp and recovered paper into rolls of coated or uncoated printing and writing paper that: (a) is produced from 100% bleached or brightened input fibre; and

18

Printing and writing paper manufacturing

(b) has a grammage range of 42 g/m2 to 350 g/m2; and (c) has a moisture content in the range of 4% to 11%; and

High

(d) is generally useable as a printing and writing paper product, including products such as offset paper, copy paper, laser printing paper, magazine paper, filing card paper, manilla, book printing paper, envelope paper, forms paper, scholastic paper, cheque paper and security paper. [page 290] Tissue paper manufacturing is the physical or chemical transformation of any or all of wood chips, sawdust, wood pulp and recovered paper into rolls of uncoated tissue paper that: (a) has a grammage range of 13

19

Tissue paper manufacturing

g/m2 to 75g/m2; and

Moderate

(b) has a moisture content in the range of 4% to 11%; and (c) is generally useable in sanitary products such as facial tissue, paper towel, bathroom tissue and napkins. Integrated iron and steel manufacturing is the chemical and physical transformation of iron ore into crude carbon steel products and hot-rolled carbon steel products involving all of the following processes: (a) the chemical and physical transformation of iron ore into agglomerated iron ore, such as iron ore sinter or iron ore pellets; (b) the carbonisation of coal (principally coking coal) into coke oven coke;

20

Integrated iron and steel manufacturing

(c) the chemical and physical transformation of either or both of limestone and dolomite, into lime (including burnt lime and burnt dolomite); (d) the chemical and physical transformation of iron ore feed, including agglomerated iron ore, into molten iron which includes the reduction of oxides of iron using carbon as the predominant reducing agent; (e) the chemical and physical transformation of molten iron

High

and cold ferrous feed, such as pig iron, flat iron and ferrous scrap, into one or more of the following: (i)

continuously cast carbon steel products;

(ii) ingots of carbon steel; [page 291] (iii) hot-rolled carbon steel products, which commenced hot-rolling at a temperature higher than 800°C provided that the maximum percentage of cold ferrous feed transformed into one or more of the above items as a proportion of molten iron and cold ferrous feed, must not be greater than 30% over the previous financial year for the facility (or be likely to be greater than 30% over the financial year of application for assistance). Integrated iron and steel manufacturing may also include the physical transformation of continuously cast carbon steel products into hot-rolled carbon steel products which commence hotrolling at a temperature higher than 800°C if the continuously cast carbon steel products are produced at any other facility that conducts: (a) the activity of integrated iron and steel manufacturing; or (b) the activity of manufacture of carbon steel from cold ferrous

feed. The manufacture of carbon steel from cold ferrous feed is the physical and chemical transformation of cold ferrous feed (such as ferrous scrap, pig iron and flat iron) by heating and melting into liquid steel and the subsequent casting of the liquid steel to produce one or more of the following: (a) continuously cast carbon steel products; 21

Manufacture of carbon steel from cold ferrous feed

(b) ingots of carbon steel; (c) hot-rolled carbon steel products, which commenced hot-rolling at a temperature higher than 800°C.

High

The manufacture of carbon steel from cold ferrous feed may also include the physical transformation of continuously cast carbon steel products into hot-rolled carbon steel products which commenced hotrolling at a temperature higher than 800°C where the continuously cast carbon steel products are produced at any other facility that conducts: [page 292] (a) the activity of integrated iron and steel manufacturing; or (b) the activity of manufacture of carbon steel from cold ferrous feed. Petroleum refining is the chemical and physical transformation of stabilised crude petroleum oil, which

may be supplemented with one or more of condensate, tallow, vegetable oil, eligible petroleum feedstocks or other petroleum feedstocks, to produce a range of refined petroleum products through the following processes: (a) the distillation of stabilised crude petroleum oil, condensate, tallow, vegetable oil and other petroleum feedstocks; (b) the adjustment of the molecular weight and structure of hydrocarbons (such as that which occurs through catalytic or hydrocracking, steam or catalytic reforming, polymerisation, isomerisation or alkylation);

22

Petroleum refining

(c) the blending of products from distillation and adjustment of molecular weight and structure to produce Australian and international standard diesel, jet fuel and unleaded petrol; (d) the production of 2 or more of the following refinery products saleable in Australian or international markets: (i)

hydrogen;

(ii) ethane; (iii) propane; (iv) refinery grade propylene; (v) polymer grade propylene;

High

(vi) liquefied petroleum gas; (vii) butane; (viii)naphtha; (ix) aviation gasoline; (x) before oxygenate blend; (xi) kerosene; (xii) heating oil; (xiii)solvents; [page 293] (xiv) lubricant base stocks; (xv) leaded petrol; (xvi) waxes; (xvii) bitumen. In order for the activity of petroleum refining to be considered to take place in the financial year to which the application relates, both of the following must apply: (a) each of the processes mentioned in paragraphs (1) (a) to (d) are conducted within the financial year to which the application relates for the facility; (b) the combined volume of diesel, jet fuel, unleaded petrol, lubricant base stocks and bitumen at 15°C and 1 atmosphere produced from stabilised crude petroleum oil, condensate, tall ow, vegetable oil and eligible petroleum feedstocks is at least 75% of the total

kilolitres of stabilised crude petroleum oil, condensate, tallow, vegetable oil and eligible petroleum feedstocks used within the previous financial year for the facility (or is likely to be at least 75% of those feedstocks within the financial year to which the application relates)

23

The production of ethene (ethylene) is the chemical transformation of Production of hydrocarbons to produce ethene ethane (ethylene (C2H4)) that has a (ethylene) concentration of ethene (ethylene (C2H4)) of at least 99%.

24

The production of polyethylene is the chemical transformation of ethene Production of (ethylene (C H )) to produce 2 4 polyethylene polyethylene with a standard density of at least 0.910 g/cm3

High

Moderate

[page 294]

25

The production of synthetic rutile is the chemical transformation of ilmenite ore (ore containing FeTiO3) through the reduction of iron oxides in order to increase the titanium Production of dioxide (TiO2) concentration to produce synthetic rutile that: synthetic rutile (a) has a titanium dioxide (TiO ) 2

concentration of at least 88% but less than 95.5%; and (b) has an iron (Fe) concentration greater than 0.5%. The production of manganese is any of the following:

High

the physical and chemical (a) transformation of manganese (Mn) ore into manganese sinter (Mn3O4) that has a concentration of manganese of at least 40%;

26

Production of manganese

(b) the physical and chemical transformation of either or both of manganese ore and manganese sinter into either or both of the following: (i)

High

ferromanganese alloy that has a concentration of manganese of at least 67%;

(ii) silicomanganese alloy that has a concentration of: (A) manganese of at least 60%; and (B) silicon (Si) of at least 12%. The production of clinker is the physical and chemical transformation of: (a) either or both of calcium carbonate compounds (limestone (CaCO3)) and other calcium carbonate (CaCO3) feedstocks; and 27

Production of clinker

(b) any of the following: (i)

clay;

(ii) clay mixed with one or more feedstocks that contain one or more of the following: (A) silicon dioxide (SiO2); (B) iron (Fe);

High

[page 295] (C) aluminium oxide (alumina (Al2O3)); (iii) one or more feedstocks that, when combined, contain all of the following: (A) silicon dioxide (SiO2); (B) iron (Fe); (C) aluminium oxide (alumina (Al2O3));

28

29

that are fused together at a temperature higher than 1000°C into Portland cement clinker having a concentration of calcium silicates of at least 60%, a concentration of magnesium oxide (MgO) of not more than 4.5% and useable in the making of Portland cement. The production of lime is the physical and chemical transformation, through the calcining process, of calcium and magnesium Production of sources (such as calcium carbonate (CaCO3) and magnesium carbonate lime (MgCO3)) into lime that has a concentration of either or both of calcium oxide (CaO) and magnesium oxide (MgO) of at least 60%. The production of fused alumina is the physical transformation of alumina (aluminium oxide (Al2O3)) by heating it to its fusion point to produce fused alumina that: Production of (a) has an alpha alumina fused alumina crystalline structure; and

High

High

(b)

has a concentration of aluminium oxide of at least 99.0%.

The production of copper is either or both of the following:

30

Production of copper

(a) the physical and chemical transformation of concentrated mineralised copper compounds (copper sulphide concentrates and copper electrolyte solution) into either or both of the following: (i)

High

copper cathode that has a concentration of copper greater than 99.90%; [page 296]

(ii) copper anode that has a concentration of copper: (A) of at least 99.00%; and (B) of not more than 99.90%; (b) the physical and chemical transformation of copper anode into copper cathode that has a concentration of copper greater than 99.90% where the copper anode: (i)

has a concentration of copper:

(A) of at least 99.00%; and (B) of not more than 99.90%; and (ii) was not produced as part of the transformation into copper cathode

The production of carbamide (urea (CO(NH2)2)) is the chemical transformation of carbon dioxide (CO2) and anhydrous ammonia (NH3) to produce carbamide solution (urea (CO(NH2)2(aq))) that: (a) has a concentration of carbamide (urea (CO(NH2)2)) of at least 80%; and

31

Production of carbamide (urea)

(b) is subsequently used to produce either or both of: (i)

carbamide solutions (urea (CO(NH2)2(aq)); and

Moderate

(ii) granulated, prilled or other solid forms of carbamide (urea (CO(NH2)2(s))) of saleable quality; conducted in accordance with the following overall chemical equations: 2NH3(l) + CO2(g) → H2NCOONH4(aq) H2NCOONH4(aq) → H2NCONH2(aq) + H2O(l) [page 297] The production of sodium carbonate (soda ash) and sodium bicarbonate is the chemical and physical transformation of calcium carbonate (CaCO3), sodium chloride (salt (NaCl)), ammonia (NH3) and carbon bearing materials (such as coke) into one or more of the following:

32

Production of sodium carbonate (soda ash)

(a) light sodium carbonate (light soda ash (Na2CO3)) which has a concentration of sodium carbonate (soda ash (Na2CO3)) of at least 98.0%;

High

and sodium bicarbonate

(b) dense sodium carbonate (dense soda ash (Na2CO3)) which has a concentration of sodium carbonate (soda ash (Na2CO3)) of at least 97.5%; (c) refined sodium bicarbonate (NaHCO3) which has a concentration of sodium bicarbonate (NaHCO3) of at least 95.0%.

33

34

The production of ammonium nitrate is the chemical transformation of Production of anhydrous ammonia (NH3) to ammonium ammonium nitrate solution (NH nitrate 4NO3(aq)) that has a concentration of ammonium nitrate (NH4NO3) of 60% or more. The production of ammonia is the chemical transformation of hydrocarbons (or other hydrogen Production of feedstock) to hydrogen (H2) that is subsequently reacted with nitrogen ammonia (N2) to produce anhydrous ammonia (NH3) that has a concentration of ammonia (NH3) of at least 98%.

High

High

The production of iron ore pellets is the physical and chemical transformation of iron ore to produce iron ore pellets that are for the production of steel and that have: (a) a concentration of iron (Fe) of at least 63%; and 35

Production of iron ore pellets

(b) a concentration of alumina (aluminium oxide (Al2O3) of no more than 2%; and (c) a concentration of silicon

Moderate

dioxide (silica (SiO2)) of no more than 7%; and (d) an average diameter of between 9 and 16 millimetres. [page 298]

36

37

The production of liquefied natural gas is the physical transformation of Production of natural gas (in a gaseous state) into liquefied liquefied natural gas (in a liquid natural gas state) that has a concentration of methane (CH4) of at least 70%. The production of magnetite concentrate is the physical transformation of magnetite ore (ore containing Fe3O4 that has a key property of ferrimagnetism) to produce saleable magnetite (Fe3O4) Production of concentrate that: magnetite (a) has a concentration of iron concentrate (Fe) of at least 60% on a dry weight basis; and

Moderate

Moderate

(b) has a particle size of less than 75 microns for at least 80% of the concentrate. The production of glass beads is the physical and chemical transformation of either or both of the following: (a) recycled materials (such as cullet); (b) all of the following: (i) 38

Production of glass beads

silicon silica);

dioxide

(SiO2,

(ii) sodium carbonate (Na2CO3, soda ash); (iii) any other raw materials;

High

through a crushing, sieving and firing process into saleable, solid, spherical glass beads where the refractive index is at least 1.50 and the size is smaller than 2 millimetres.

39

The production of sodium silicate glass is the physical and chemical transformation of silicon dioxide Production of (SiO2, silica) and sodium carbonate (Na2CO3, soda ash) into saleable sodium silicate glass sodium silicate glass where the concentration of sodium silicate (Na2SiO3) is at least 99% with respect to mass.

High

[page 299]

40

41

The production of polymer grade propene (C3H6, polymer grade propylene) is the physical Production of transformation of hydrocarbons that polymer have a concentration of propene grade propene (C3H6, propylene) between 45% and (polymer 85% with respect to mass (inclusive) grade propylene) to polymer grade propene (polymer grade propylene) that has a concentration of propene (propylene) of at least 98% with respect to mass. The production of rolled aluminium is the chemical and physical transformation of either or both of primary aluminium metal and Production of secondary aluminium metal with alloying metals into coiled rolled aluminium aluminium sheet of saleable quality with a concentration of aluminium of at least 90% with respect to mass, and with a thickness no more than 6 millimetres. The production of chlorine gas and

High

High

42

43

Production of chlorine gas and sodium hydroxide (caustic soda) solution

Production of fused zirconia

sodium hydroxide solution (caustic soda solution (NaOH(aq))) is the chemical transformation of sodium chloride solution (NaCl(aq)) brine to chlorine (Cl2(1,g)) and sodium hydroxide solution (caustic soda solution (NaOH(aq))) that has a concentration of sodium hydroxide (NaOH) of at least 14%. The production of fused zirconia is the physical and chemical transformation of zircon (ZrSiO4) by:

High

(a) he removal of silica (silicon dioxide (SiO2)) using a reductant such as carbon; and (b) heating the zircon to its fusion point; to produce fused zirconia (zirconium dioxide (ZrO2)) that has a concentration of zirconium dioxide (ZrO2) of at least 96%

Moderate

1 Clean Energy Act 2011 (Cth) s 94. 2 Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) s 11. 3 Kyoto Protocol opened for signature 16 March 1998, UN Doc FCCC/CP/1997/7/Add 1 December 10, 1997 (entered into force 16 February 2005). 4 Australian National Registry of Emissions Units Act 2011 (Cth) (ANREU Act) s 9(1). 5 Explanatory Memorandum, ANREU Act, at 3, 5. 6 ANREU Act s 9(4); Explanatory Memorandum, ANREU Act, 5. 7 Explanatory Memorandum, ANREU Act, at 3. 8 ANREU Act s 10–11. An account kept in the name of a person is the person’s Registry account. 9 Department of Climate Change, “Application Pack (for individuals) Australian National Registry of Emissions www.climatechange.gov.au/government/initiatives/~/media/publications/international/anreuindividual_pack-pdf.ashx.

Units”,

10 ANREU Act s 10(1). The Australian National Registry of Emissions Units Regulations 2011 (Cth)

(ANREU Regulations) commenced 1 December 2011 (promulgated 7 December 2011). 11 ANREU Act s 10(6). 12 ANREU Regulations regs 9(1), (3) and 13(1). 13 ANREU Act s 4 (definition of “open”). 14 ANREU Regulations reg 9(2)(a). 15 ANREU Regulations reg 9(2)(b). 16 ANREU Regulations reg 16. If any documentation is not in English, a person must provide an English translation of the document that has been prepared and certified as a true copy of the original document by a translation service accredited by the National Accreditation Authority for Translators and Interpreters Limited. 17 ANREU Regulations reg 3. An approved person is any one of the following:

(i)

a bank, building society or credit union officer with 5 or more continuous years service;

(ii) a commissioner for declarations; (iii) a judge of a court; (iv) a justice of the peace; (v) a legal practitioner; (vi) a medical practitioner; (vii) a minister of religion registered under Subdivision A of Division 1 of Part IV of the Marriage Act 1961 (Cth); (viii)a police officer; (ix) a sheriff or a sheriff’s officer. 18 ANREU Regulations reg 3. 19 ANREU Regulations reg 13. 20 ANREU Act s 10(4). 21 ANREU Regulations regs 9(4), 14, 15, 16, 18, 19, 21, 22 and Sch 1. 22 Regulation 10(5) of the ANREU Regulations defines a beneficial owner of a company as an individual who owns more than 25 per cent of the issued capital in the company, through one or more shareholdings. 23 ANREU Regulations reg 14(2). 24 ANREU Regulations Sch 1. 25 ANREU Regulations reg 5. 26 ANREU Regulations reg 19. 27 ANREU Regulations Sch 2

28 ANREU Regulations regs 21–22. 29 Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) s 64(3). 30 Clean Energy Act 2011 (Cth) s 98(1) and ANREU Act s 17(4). 31 CFI Act s 11(6) and ANREU Act s 17(1). 32 ANREU Act ss 17(2), 30. 33 ANREU Act ss 17(3), 49. 34 Clean Energy Act 2011 (Cth) s 5. 35 Clean Energy Act 2011 (Cth) s 5, CFI Act s 5, ANREU Act s 4. 36 Clean Energy Act 2011 (Cth) s 5, CFI Act s 5, ANREU Act s 4. 37 Clean Energy Act 2011 (Cth) s 98(1). 38 Clean Energy Act 2011 (Cth) s 103. 39 Clean Energy Act 2011 (Cth) s 122(10). The regulator must cancel the surrendered carbon unit and remove the entry for the unit from the person’s Registry account. 40 Clean Energy Act 2011 (Cth) s 122(2) and Pt 6, Div 3. 41 Clean Energy Act 2011 (Cth) s 308(1), Constitution s 51(xxxi). Carbon units acquired through fraud on the Commonwealth may be ordered by a court to be relinquished: Clean Energy Act 2011 (Cth) Pt 11. 42 Clean Energy Act 2011 (Cth) s 110(1). 43 Corporations Act 2001 (Cth) s 764A(1)(k), Australian Securities and Investment Commission Act 2001 (Cth) subs 12BAB(1)(g), Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 6(2)(baa), (d). 44 Clean Energy Act 2011 (Cth) s 5; CFI Act ss 5, 147. 45 The regulator must cancel the surrendered Kyoto Australian carbon credit unit and remove the entry for the unit from the person’s Registry account: Clean Energy Act 2011 (Cth) s 122(12). 46 Clean Energy Act 2011 (Cth) ss 125(7), 128(7). 47 CFI Act s 5. 48 Carbon Credits (Carbon Farming Initiative) — Kyoto Australian Carbon Credit Unit Specification 2011 (Cth) s 3. Kyoto ACCUs may be exchanged for other internationally recognised Kyoto units and exported overseas: Explanatory Statement, Carbon Credits (Carbon Farming Initiative) Regulations 2011 (Cth) (CC(CFI) Regulations) 7. 49 CFI Act s 76. 50 CFI Act s 5, CC(CFI) Regulations reg 1.5. 51 CC (CFI) Regulations reg 3.35. 52 CFI Act s 27(2)(a)–(b). An eligible offsets project is either an eligible Kyoto or non-Kyoto offset project. 53 CFI Act s 5; the Kyoto abatement deadline is specified in the regulations as 31 December 2012.

54 CFI Act s 5. 55 Clean Energy Act 2011 (Cth) s 5. 56 ANREU Act s 4. 57 The regulator is also required to publish a “concise description of the characteristics” of CERs, ERUs and RMUs: ANREU Act s 61. 58 Clean Energy Act 2011 (Cth) s 122(8). 59 Clean Energy Act 2011 (Cth) s 133(7). 60 Clean Energy Act 2011 (Cth) s 23. 61 Clean Energy Act 2011 (Cth) s 123(2). 62 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.105]. 63 Australian Government, “Securing a Clean Energy Future: the Australian government’s climate change plan” (Policy, Australian Government, 10 July 2012) Table 8, 107; see also Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.108]. 64 Baker & Mckenzie, “Australia’s Clean Energy Legislative Package: A guide for business” (Report, Carbon Market Institute, 2011), 46. 65 Clean Energy Act 2011 (Cth) s 94. 66 Clean Energy Act 2011 (Cth) s 95. 67 Clean Energy Act 2011 (Cth) s 96. The vintage year will be included in the identification number. 68 Clean Energy Act 2011 (Cth) s 97. 69 Clean Energy Act 2011 (Cth) s 99. 70 Clean Energy Act 2011 (Cth) s 98. 71 Clean Energy Act 2011 (Cth) s 98(3). 72 Clean Energy Act 2011 (Cth) s 100(1). 73 Clean Energy Act 2011 (Cth) s 100(1). 74 Clean Energy Act 2011 (Cth) s 100(1). The Minister must take all reasonable steps to promulgate regulations setting the vintage 2016 price before 31 May 2014, but no later than 1 June 2015: Clean Energy Act 2011 (Cth) s 100(14), (15). 75 Clean Energy Act 2011 (Cth) ss 5, 185(2). 76 Clean Energy Act 2011 (Cth) s 100(2), (5). 77 Clean Energy Act 2011 (Cth) s 100(3). 78 Clean Energy Act 2011 (Cth) s 100(4). 79 Clean Energy Act 2011 (Cth) s 100(6). 80 Clean Energy Act 2011 (Cth) s 100(10), (12). 81 Clean Energy Act 2011 (Cth) s 100(13).

82 Clean Energy Act 2011 (Cth) s 100(8). 83 Clean Energy Act 2011 (Cth) s 100(7). 84 Clean Energy Act 2011 (Cth) s 111(1). 85 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.61]. 86 Clean Energy Act 2011 (Cth) s 111(2). 87 Clean Energy Act 2011 (Cth) s 111(3). 88 Clean Energy Act 2011 (Cth) s 111(5). 89 Clean Energy Act 2011 (Cth) s 101. 90 Clean Energy Act 2011 (Cth) s 102. 91 Clean Energy Act 2011 (Cth) s 113(1). 92 Clean Energy Act 2011 (Cth) s 113(2). 93 Australian Government, “Auctions: Position paper on the legislative instrument for auctioning carbon units in Australia’s carbon pricing mechanism” (Policy paper, Australian Government, Department of Climate Change and Energy Efficiency, 3 February 2012), available at: www.climatechange.gov.au/government/submissions/auctioning-carbonunits/~/media/submissions/auctioning-carbon-units/auctioncarbon-credits-position-paper-pdf.pdf. Submissions in relation to the auction position paper closed 24 February 2012. 94 Clean Energy Act 2011 (Cth) s 113(9). 95 Source: Table 1, Australian Government, “Auctions: Position paper on the legislative instrument for auctioning carbon units in Australia’s carbon pricing mechanism” (Policy paper, Australian Government, Department of Climate Change and Energy Efficiency, 3 February 2012) 10. 96 Clean Energy Act 2011 (Cth) s 113(2)(k). See [90,825]. 97 Clean Energy Act 2011 (Cth) s 113(6). 98 Clean Energy Act 2011 (Cth) s 113(6)(b). 99 Clean Energy Act 2011 (Cth) s 111(5). 100 Australian Government, “Auctions: Position paper on the legislative instrument for auctioning carbon units in Australia’s carbon pricing mechanism” (Policy paper, Australian Government, Department of Climate Change and Energy Efficiency, 3 February 2012) 15. 101 Clean Energy (Unit Shortfall Charge — General) Act 2011 (Cth). 102 Clean Energy Act 2011 (Cth) ss 212, 213. 103 Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Act 2011 (Cth); Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Act 2011 (Cth). 104 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.75]. 105 Clean Energy Act 2011 (Cth) s 114(4). 106 Clean Energy Act 2011 (Cth) s 5. 107 The government estimates the Jobs and Competitiveness Program will deliver assistance of

approximately $9.2 billion between 1 July 2012 to 30 June 2015: Australian Government, “Securing a Clean Energy Future: the Australian government’s climate change plan” (Policy, Australian Government, 10 July 2012) 51. 108 Clean Energy Act 2011 (Cth) s 145. 109 As at 30 June 2012, although up to a further 20 EITE activities may emerge. 110 Assistance to highly emissions-intensive coal-fired generators will equal 41,705,000 free carbon units annually from 2013–14 to 2016–17: Clean Energy Act 2011 (Cth) s 161; Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [6.5]. 111 Clean Energy Act 2011 (Cth) s 159. 112 Clean Energy Act 2011 (Cth) s 112(7). 113 Clean Energy Act 2011 (Cth) s 115. 114 Clean Energy Act 2011 (Cth) s 210(3); Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.90]. 115 Clean Energy Act 2011 (Cth) s 116. 116 Clean Energy Act 2011 (Cth) s 101(1). 117 Clean Energy Regulations 2011 (Cth) reg 4.10. 118 Clean Energy Act 2011 (Cth) s 122(1). 119 Clean Energy Act 2011 (Cth) s 122(2). 120 Clean Energy Act 2011 (Cth) s 122(10)–(12). 121 Clean Energy Act 2011 (Cth) s 122(3). 122 Clean Energy Act 2011 (Cth) s 100(7)(a). 123 Clean Energy Act 2011 (Cth) ss 100(7)(c), 122(1). 124 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.57]. 125 Clean Energy Act 2011 (Cth) s 122(4). 126 Clean Energy Act 2011 (Cth) s 122(5). 127 Clean Energy Act 2011 (Cth) s 122(10). 128 Clean Energy Act 2011 (Cth) s 122(7). 129 Clean Energy Act 2011 (Cth) s 122(12). 130 Clean Energy Act 2011 (Cth) s 125(7)(b)(ii). 131 Clean Energy Act 2011 (Cth) s 128(7)(b)(ii), 128(8). 132 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.18]. 133 Clean Energy Act 2011 (Cth) s 122(8). 134 Clean Energy Act 2011 (Cth) s 133(7). 135 Clean Energy Act 2011 (Cth) s 133(8). No regulations have as yet been promulgated for s 123.

136 Clean Energy (International Unit Surrender Charge) Act 2011 (Cth) s 8(1). 137 Clean Energy (International Unit Surrender Charge) Act 2011 (Cth) s 8(3). 138 Clean Energy (International Unit Surrender Charge) Act 2011 (Cth) s 8(4). 139 Australian Government, “Price floor for Australia’s carbon pricing mechanism: Implementing a surrender charge for international units” (Policy, Australian Government, Department of Climate Change and Energy Efficiency, 22 December 2011). Submissions closed 9 February 2012. 140 Clean Energy Act 2011 (Cth) s 122(4). 141 Clean Energy Act 2011 (Cth) s 122(5). 142 Clean Energy Act 2011 (Cth) s 133(6). 143 Clean Energy Act 2011 (Cth) s 115. 144 Clean Energy Act 2011 (Cth) s 210(3); Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.90]. 145 ANREU Act ss 65, 66. 146 CFI Act s 173. 147 Clean Energy Act 2011 (Cth) s 104(1)(a); CFI Act s 151(a); ANREU Act s 33(1)(a). 148 Clean Energy Act 2011 (Cth) s 104(1)(b); CFI Act s 151(b); ANREU Act s 33(1)(b). 149 Clean Energy Act 2011 (Cth) s 104(1)(c); CFI Act s 151(c); ANREU Act s 33(1)(c). 150 Clean Energy Act 2011 (Cth) s 104(1)(d); CFI Act s 151(d); ANREU Act s 33(1)(d). 151 Clean Energy Act 2011 (Cth) s 104(2); ANREU Act s 33(2). 152 Clean Energy Act 2011 (Cth) s 104. 153 Clean Energy Act 2011 (Cth) s 104(2); ANREU Act s 33(2). 154 CFI Act s 151. 155 ANREU Act s 33. 156 Clean Energy Act 2011 (Cth) s 105(1); CFI Act s 152; ANREU Act s 34. 157 CFI Act ss 34(3), 35(3), 36(1). 158 Clean Energy Act 2011 (Cth) s 106(1), CFI Act s 153; ANREU Act s 47. This may occur, for example, if emissions units are transferred from a deceased’s estate: Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.42]. 159 Clean Energy Act 2011 (Cth) s 106(3); Clean Energy Regulations 2011 (Cth) reg 4.5, CFI Act s 153(3); CC (CFI) Regulations reg 11.1; ANREU Act s 47; ANREU Regulations reg 49. 160 Clean Energy Act 2011 (Cth) s 106(9); CFI Act s 153(7); ANREU Act s 47(7). 161 Clean Energy Act 2011 (Cth) s 106(5); CFI Act s 153(4); ANREU Act s 47(4). 162 Clean Energy Act 2011 (Cth) s 106(10); CFI Act s 153(8); ANREU Act s 47(8) 163 ANREU Act s 28A(2).

164 ANREU Act s 28A(3). 165 ANREU Act s 28B(2). 166 ANREU Act s 28B(7). 167 ANREU Act s 28B(3). 168 ANREU Act s 28B(4). 169 ANREU Act s 28B(5). 170 ANREU Act s 28B(6)–(9). 171 ANREU Act s 28C. 172 Clean Energy Act 2011 (Cth) s 210. 173 Clean Energy Act 2011 (Cth) s 211. 174 Clean Energy Act 2011 (Cth) Pt 10. 175 Clean Energy Act 2011 (Cth) s 210(1). 176 Clean Energy Act 2011 (Cth) s 210(2). 177 Clean Energy Act 2011 (Cth) s 208(2). 178 Clean Energy Act 2011 (Cth) ss 208(3), 212(2). 179 Revised Explanatory Memorandum, Clean Energy Bill 2011(Cth) at [4.80], [5.34]. 180 Clean Energy Act 2011 (Cth) s 146; Clean Energy Regulations 2011 (Cth) Pt 13. 181 Clean Energy Regulations 2011 (Cth) reg 1301. 182 Clean Energy Act 2011 (Cth) s 212(1). 183 Clean Energy Act 2011 (Cth) s 201(3). 184 Clean Energy Act 2011 (Cth) s 201(4). 185 Clean Energy Act 2011 (Cth) s 201(4)(d). 186 Clean Energy Act 2011 (Cth) s 212(2). 187 Clean Energy Act 2011 (Cth) s 212(2). 188 Clean Energy Act 2011 (Cth) s 212(4). 189 Clean Energy Act 2011 (Cth) s 213(1). Regulations may specify a lower rate. 190 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [4.84]. The penalty is not unlike a unit shortfall. Unit shortfalls, penalties and tax treatment are discussed in Chapter 5. 191 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [3.35]. 192 Clean Energy Act 2011 (Cth) s 103; CFI Act s 150; ANREU Act s 45. 193 Clean Energy Act 2011 (Cth) s 103A. 194 CFI Act s 150A.

195 Clean Energy Act 2011 (Cth) s 103A(2); CFI Act s 150A(2). 196 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) [3.34] Example 3.1 Defects in title. 197 Clean Energy Act 2011 (Cth) s 110; CFI Act s 158; ANREU Act s 46. 198 Clean Energy Act 2011 (Cth) s 109A; CFI Act s 157A. 199 Clean Energy Act 2011 (Cth) s 109A(2); CFI Act s 157A(2). 200 Personal Property Securities Act 2009 (Cth) s 21. Perfection of a security interest by control would require the financier (or a third party on its behalf) to be registered as the legal owner of the emissions unit. 201 Clean Energy Act 2011 (Cth) s 103; CFI Act s 150; ANREU Act s 45. 202 Corporations Act 2001 (Cth) s 764A(1)(k). 203 Australian Securities and Investment Commission Act 2001 (Cth) s 12BAB(1)(g). 204 Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 6(2)(baa), (d). 205 Corporations Act 2001 (Cth) s 911A. 206 Corporations Act 2001 (Cth) s 766A. 207 ASX Market Integrity Rules. 208 Corporations Act 2001 (Cth) s 798J. 209 Corporations Act 2001 (Cth) s 766C. 210 ASX Market Integrity Rules r 5.10. 211 Corporations Act 2001 (Cth) Pt 7.10; ASX Market Integrity Rules r 5.7. 212 Competition and Consumer Act 2010 (Cth) s 45(2). 213 ANREU Act s 28D(2)–(4). 214 ANREU Act s 28D(5). 215 ANREU Act s 28D(10). 216 ANREU Act s 28D(6). 217 ANREU Act s 28D(7). 218 ANREU Act s 28D(8). 219 ANREU Act s 28D(11)–(14).

[page 301]

Chapter 5 Special Topics Introduction [110,001] Professor Ross Garnaut recommended in the Final Report of the Garnaut Climate Change Review that the design of an emissions trading scheme in Australia should be governed by five key principles, number three being “simplicity of rules”.1 Simplicity in his view “requires that rules for the scheme should be easily explained and implemented”.2 Perhaps, it is too soon to judge if the clean energy future laws package, comprising more than 25 Acts and Regulations, and running to thousands of pages, meets this test. Indeed, the risk is higher that uncertainty inevitably will defeat simplicity. Uncertainty exists, and will continue, because the clean energy future laws are new and complex, because they are spread across so many acts and regulations, and because there is so much reliance on delegated law making and the exercise of significant powers and discretions vested in the regulator. The topics of special interest dealt with in this chapter have been selected on account of the uniqueness of the legislative approach, or on account of the breath of regulator intervention they allow, or on account of their significance to the operation of the carbon pricing mechanism. Each of them highlights an aspect of uncertainty. Special topics covered in this chapter are: anti-avoidance; audit; Constitutional foundation; liability of executive officers; information disclosure; international linking;

record keeping; taxation; unit surrender shortfalls and units shortfall charge; and unit surrender surplus. [page 302]

Anti-avoidance [110,025] Section 29 of the Clean Energy Act 2011 (Cth) enshrines an antiavoidance rule. The regulator is empowered to make a determination to cancel the benefit of the 25,000t CO2-e (or pro-rated) scope 1 covered greenhouse gas emissions threshold for a facility in a scheme with the sole or dominant purpose of obtaining the benefit of the threshold. The consequence of the elimination of the emissions threshold by the application of the anti-avoidance provision is that a person will become a liable entity if the person meets all of the applicable tests in Pt 3 of the Clean Energy Act 2011 (Cth).

TESTS [110,050] The power to make the s 29 anti-avoidance determination arises if: (a) at any time after 15 December 2008, one or more persons entered into, commenced to carry out, or carried out, a scheme; and (b) having regard to the following: (i)

the manner in which the scheme was entered into or carried out;

(ii) the form and substance of the scheme; (iii) the time when the scheme was entered into and the length of the period during which the scheme was carried out; (iv) the result in relation to the operation of this Act that, but for this section, would be achieved by the scheme; (v) whether the scheme involves increasing the number of facilities without achieving any significant reductions in the

total amount of covered emissions from the operation of the facilities; (vi) whether the scheme involves establishing a particular number of facilities (instead of a lesser number of facilities) without achieving any significant reductions in the total amount of covered emissions from the operation of the facilities; it would be concluded that the person, or any of the persons, who entered into, commenced to carry out, or carried out, the scheme did so for the sole or dominant purpose of enabling a person to obtain the benefit of one or more threshold provisions in relation to a facility (the relevant facility) for an eligible financial year.

Scheme [110,075] “Scheme” is very broadly defined, and may include a scheme within a scheme.3 Section 29 makes it immaterial whether the person who obtains the benefit of the threshold (ie a controlling corporation, liable entity, the holder of a LTC, or nominated joint venturer) is the person, or one of the persons, who participated in the scheme.4 [page 303]

Purpose [110,100] The sole purpose of the scheme (or, if there are multiple purposes of a scheme, the dominant purpose of the scheme) must be to obtain the benefit of a threshold. A sole or dominant purpose implies a purpose more than an incidental purpose. However, it should not be so readily assumed that s 29 is narrow in application. In particular it has a retrospective scope, applying to any arrangement or scheme with the requisite purpose entered into or carried out after 15 December 2008. The power of the regulator to make the threshold cancellation determination is circumscribed by the six factors (i) to (vi) in s 29, and subject to taking into account irrelevant considerations and failing to take into account relevant considerations.

The anti-avoidance provision of the Clean Energy Act 2011 (Cth) is drafted in a similar way to the anti-avoidance provision Pt IVA of the Income Tax Assessment Act 1936 (Cth) (ITAA36), including reproducing the requirement to have regard to enumerated factors, as Pt IVA includes a requirement to have regard to eight factors in s 177D.5 In the course of considering the correctness of anti-avoidance determinations made by the Commissioner of Taxation in the application of Pt IVA, courts have concluded that the s 177D factors to which the Commissioner of Taxation must have regard in making the Pt IVA determination require an objective determination of the anti-avoidance purpose.6 If in s 29 of the Clean Energy Act 2011 (Cth) the sole or dominant purpose should be objectively determined, then subjective intention and statements of intention by liable entities and professional advisors would not be wholly conclusive of purpose; however the purpose of a professional advisor in a scheme may be attributed.7 [page 304]

SECTION 29 FACTORS [110,125] Conduct that results in a person actually reducing covered emissions is consistent with the objects of the Clean Energy Act 2011 (Cth).8 The six factors in s 29 ought to be read as consistent with and subject to, the objects of the Clean Energy Act 2011 (Cth). The better interpretation of the phrase “having regard to the following” in the opening line of s 29(b) is that it means “having regard to all of the following” thereby making the consideration of the six factors in s 29 cumulative, and exclusive. Factors (iv), (v) and (vi) relevantly point consideration to an increase in facilities without significant reduction of covered emissions, thereby implying that it would not be a trigger for a s 29 determination if a scheme results in total elimination of covered emissions (for example, if a facility were removed from Australia). A scheme which results in a significant reduction in covered emissions, irrespective of its impact on the number of facilities, may also not be within the scope of the regulator’s determination powers. If it were the case however that the regulator needs only have regard to any of the six factors in s 29, then factor (vi) would bring within the regulator’s

threshold cancellation power, a scheme which results in no increase in the number of facilities with only a minor, rather than significant, reduction in covered emissions. An objective assessment of the s 29 factors would allow for the application of a counter-factual in testing the sole or dominant purpose of a scheme. Thus s 29 should not be triggered if a scheme would result in an emissions reduction below the threshold of 25,000t CO2-e, but such a scheme was consistent with the carrying out of a commercial plan (for example, the introduction of a new technology, or a reduction in machinery working hours on account of changed economic circumstances). A wide remit for s 29 also may be read down by a court. For example, in Protean (Holdings) Ltd v Environment Protection Authority [1977] VR 51; (1977) 40 LGRA 189, Gillard J said of an unfettered discretion of the Victorian Environment Protection Agency (EPA) to issue a licence to discharge waste to air under the Environment Protection Act 1970 (Vic): Although it may be readily conceded that the purposes and objects of this Act are praiseworthy, the means adopted to achieve them seem to be quite authoritarian, if not draconian in character. The penalties are harsh … Because of these features, I am of the opinion that the legislature must be taken to have intended that although the statutory provisions of this Act might appear to confer powers upon the subordinate bodies, which would enable them to invade or erode the existing rights and privileges of the individual, either of a personal or proprietary character, such provisions if at all ambiguous should be strictly construed in favour of the subject.9

PUBLICATION OF AVOIDANCE DETERMINATION [110,150] Publication of avoidance determination The regulator must publish a copy of its s 29 determination on its website. A s 29 anti-avoidance determination cannot extend to any non-liable entity that operates in a sector not covered by the Clean Energy Act 2011 (Cth), for example, financial intermediaries. [page 305]

Audit

[110,175] Greenhouse and energy audits are an essential component of the regulator’s powers to enforce compliance and are extensively provided for in Subdiv G of Div 4 of Pt 6 of the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act). Audits under the NGER Act comprise: mandatory pre-submission audits; compliance audits undertaken where non-compliance is suspected; and compliance audits undertaken as part of monitoring general compliance within a broader risk minimisation framework.

SOURCES OF LAW [110,200] Rules for greenhouse and energy audits discussed in this chapter are sourced from: National Greenhouse and Energy Reporting Act 2007 (Cth): — ss 73, 73A, 74, 74A, 74AA, 74B, 74C, 75, and 75A; — National Greenhouse and Determination 2009 (Cth);

Energy

Reporting

(Audit)

— Auditor Registration Instrument 2010 (Cth); Australian auditing standards.

PRE-SUBMISSION AUDIT [110,225] A liable entity whose emissions number for the eligible financial year exceeds 125,000t CO2-e scope 1 covered GHG emissions10 must appoint a greenhouse and energy audit team leader and arrange for the audit team leader to carry out an audit of the annual report of the liable entity for the eligible financial year before it is submitted to the regulator under s 22A of the NGER Act.11 The audit team leader must audit: the s 22A report; such other matters (if any) relating to the s 22A report as are specified in the regulations; and

the liable entity’s compliance with the record-keeping requirements in s 22B in relation to the eligible financial year.12 Regulations promulgated for s 74AA of the NGER Act may specify the type of audit to be carried out, the matters to be covered in the audit and the form and content of the audit report.13 As part of the audit engagement the audit team leader must: give the liable entity a written report setting out the results of the audit; and [page 306] give the regulator a copy of the audit report in the manner specified in the regulations and on the day on which the s 22A report is provided to the regulator.14 Failure to comply with the pre-submission audit incurs a civil penalty for an individual of 200 penalty units ($22,000) and for corporations and others, 1000 penalty units ($110,000).15

COMPLIANCE AUDIT — SUSPECTED NONCOMPLIANCE [110,250] Generally, in order to initiate a compliance audit of a registered corporation, liable entity or any other person, the regulator must have reasonable grounds to suspect that the registered corporation, liable entity or any other person required to provide information to the regulator has contravened, is contravening, or is proposing to contravene, the NGER Act or the regulations.16 If such reasonable grounds exist, then the regulator initiates the compliance audit process by giving written notice to the corporation, liable entity or the person (as the case may be). The notice will specify: the type of audit to be carried out; the matters to be covered by the audit; and the form and contents of the audit report and require the corporation, liable entity or the person (as the case may be) to: appoint a registered greenhouse and energy auditor as an audit team

leader, who must be: — if permitted, an auditor of choice; or — if the regulator specifies a registered greenhouse and energy auditor in the notice, the auditor specified by the regulator; or — if the regulator specifies more than one registered greenhouse and energy auditor in the notice, any one of those auditors; and arrange for the audit team leader to carry out an audit on one or more aspects of compliance with the NGER Act or the regulations; and arrange for the audit team leader to give a written report setting out the results of the audit; and give the regulator a copy of the audit report on or before the day specified in the notice.17 Failure to comply with the compliance audit incurs a civil penalty for an individual of 200 penalty units ($22,000) and for corporations and others, 1000 penalty units ($110,000).18 [page 307]

COMPLIANCE AUDIT — GENERAL [110,275] The regulator may appoint a registered greenhouse and energy auditor as an audit team leader to carry out an audit of compliance with one or more aspects of the NGER Act or regulations by a registered corporation, non-group entity, responsible member or any other person required to provide information to the regulator.19 The regulator must at a reasonable time before the audit is to be undertaken give written notice of its decision to appoint an audit team leader to audit compliance. The notice must specify: the audit team leader; the period within which the audit is to be undertaken; the type of audit to be carried out; and the matters to be covered by the audit.20 Failure to comply with the compliance audit: under s 74, incurs a civil penalty for a corporation of 250 penalty

units ($27,500);21 under s 74A, incurs a civil penalty for an individual of 50 penalty units ($5500) and for a corporation, 250 penalty units ($27,500);22 and under s 74C, incurs a civil penalty for an individual of 200 penalty units ($22,000) and for corporations and others, 1000 penalty units ($110,000).23

CONDUCT OF AUDITS [110,300] The Minister is empowered to promulgate mandatory requirements to be met by registered greenhouse and energy auditors in preparing for and carrying out greenhouse and energy audits and preparing their audit reports.24 The legislative instrument specifying these requirements is the National Greenhouse and Energy Reporting (Audit) Determination 2009 (Cth) (NGER Audit Determination). The NGER Audit Determination also sets out the different requirements for different types of audit and different types of audit reports. There are two types of greenhouse and energy audit: an assurance engagement; and a verification engagement.

Assurance engagement [110,325] The purpose of an assurance engagement is to provide the audit team leader’s independent opinion as to the reliability, accuracy and completeness of the matter being audited. In an assurance engagement, the audit team leader uses professional judgment in preparing for and carrying out the audit in order to provide the independent opinion about the matter being audited and the assurance engagement report. There are two kinds of assurance engagement: [page 308] a reasonable assurance engagement; and

a limited assurance engagement. A reasonable assurance engagement is “an assurance engagement in which the audit team leader gives an opinion, expressed as a reasonable assurance conclusion, if appropriate in the circumstances of the engagement”.25 A limited assurance engagement is “an assurance engagement in which the audit team leader gives an opinion, expressed as a limited assurance conclusion, if appropriate in the circumstances of the engagement”.26

Verification engagement [110,350] The purpose of a verification engagement is to verify the matter being audited. In a verification engagement, the audit team leader carries out specified procedures for the purposes of verifying the matter being audited but does not provide any opinion as to the reliability, accuracy and completeness of the matter being audited.

GREENHOUSE AND ENERGY AUDITORS [110,375] Greenhouse and energy auditors perform critical functions that underpin public and regulator confidence in the accuracy of measurement and reporting of emissions of greenhouse gases and energy consumption and production. Registration as a greenhouse and energy audit team leader requires auditors to meet stringent standards.

Assistance and facilities for auditors [110,400] The audit team leader and any audit team members must be provided with all reasonable facilities and assistance necessary for the effective exercise of the audit team leader’s duties.27 Failure to provide facilities and assistance incurs a civil penalty for an individual of 50 penalty units ($5500) and for corporations and others, 250 penalty units ($27,500).28

Audit team

[110,425] The audit team leader is a registered greenhouse and energy auditor appointed to carry out a greenhouse and energy audit.29 An audit team consists of the audit team leader and audit team members.30 As audit team member is any person assisting the audit team leader to carry out the greenhouse and energy audit.31 [page 309]

Auditor registration [110,450] To be registered, auditors must meet requirements as to: qualifications; status as a fit and proper person; and knowledge and experience. Part 6 of the National Greenhouse and Energy Reporting Regulations 2008 (Cth) (NGER Reporting Regulations) specify standards that must be met by registered greenhouse and energy auditors to maintain registration. The Auditor Registration Instrument 2010 also sets out the ways in which the requirements of the regulations in relation to auditing knowledge and experience may be met.

Register of auditors [110,475] The regulator is required to keep a register of greenhouse and energy auditors.32 The register is available on the regulator’s website at: www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/NGER-reporters/Auditing-obligations/Register-Greenhouse-and-Energy-Auditors/Pages/default.aspx The register of greenhouse and energy auditors contains the following information in relation to an individual who is registered:

Box 110,475-1 — Information about registered auditors in the register of auditors33

name; registration number; date of registration; whether registered as a Category 1, 2 or 3 auditor; if registered as a Category 1 auditor, the type of Category 1 auditor; contact details: telephone number, email address and postal address; name of employer; if the individual is self-employed through a company, name of the company; address where the individual practices as a registered greenhouse and energy auditor; if the individual has previously had his or her registration suspended or been deregistered, details of the suspension or deregistration; any other information relevant to the person’s registration. [page 310]

Constitutional foundation [110,500] The Australian government’s powers to make laws are prescribed by the heads of power enumerated in s 51 of the Australian Constitution. There are no direct Federal legislative powers in the Constitution in relation to the environment. However, the power to regulate in respect of environmental matters derives from a number of powers in s 51, namely: (i) the trade and commerce power, (ii) taxation, (xx) corporations, (xxix) the external affairs power and (xxxix) the incidentals power. In the Tasmanian Dams case34 the High Court of Australia upheld Federal legislation that gave effect to Australia’s obligations under a series of international treaties to which Australia is a signatory. The Australian government has placed the domestic clean energy future laws package firmly within an international response to climate change and Australia’s binding international commitment to reduce national GHG

emissions to 108 per cent of 1990 levels in the first commitment period under the Kyoto Protocol, 1 January 2008 to 31 December 2012. The objects of the Clean Energy Act 2011 (Cth) specified in s 3 include: giving effect to Australia’s international obligations; supporting the development of an effective global response to climate change, consistent with Australia’s national interest; and taking flexible and cost-effective action that helps Australia meet a long-term target of reducing net greenhouse gas emissions to 80 per cent below 2000 levels by 2050. The Clean Energy Act 2011 (Cth) draws its core constitutional validity from reliance on the external affairs power in s 51(xxix) of the Constitution.

IS THE CHARGE FOR CARBON UNITS A TAX? [110,525] Section 55 of the Constitution provides that laws of the Federal Parliament imposing taxation may only deal with one subject matter — taxation. A tax is a compulsory exaction of money by a public authority for public purposes, not amounting to a payment for services rendered or a charge for the acquisition of property.35 A tax is distinguishable from a penalty.36 The charge payable for the issue of carbon units does not fit the conception of a tax. A carbon unit may only be issued by the regulator: as the result of an auction conducted by the regulator; or for a fixed charge; or free under the Jobs and Competitiveness Program; or [page 311] free under the coal-fired electricity generation assistance program.37 In the fixed charge period, 1 July 2012 to 30 June 2015, the process38 for acquiring carbon units for a fixed charge requires a liable entity to apply in writing to the regulator for the issue of a number of carbon units (which may not exceed the emissions number for the compliance year, less carbon units

already surrendered). If the regulator accepts the application, and the liable entity has tendered the charge payable per carbon unit to the regulator,39 then the regulator will issue the carbon units to the liable entity. The liable entity acquires the carbon unit, but only for an instant, because the Clean Energy Act 2011 (Cth) deems the liable entity to have surrendered it automatically. Section 100(7) of the Clean Energy Act 2011 (Cth) provides that if a fixed charge carbon unit is issued, then: (a) immediately after the issue of the unit, the person is taken to have surrendered the unit; and (b) the person is taken to have done so by electronic notice transmitted to the regulator under subsection 122(1); and (c) the notice is taken to have: (i)

specified the unit; and

(ii) specified the vintage year of the unit as the eligible financial year to which the surrender relates; and (iii) specified the account number of the person’s Registry account in which there is an entry for the unit that is being surrendered.

Section 100 of the Clean Energy Act 2011 (Cth) continues: (10) If a carbon unit is issued to a person in accordance with this section, the person is liable to pay a charge for the issue of the unit. (11) Subsection (10) has effect only so far as it is not a law imposing taxation within the meaning of section 55 of the Constitution.

In the flexible charge period, it is intended that carbon units will be issued as a result of auctions held by the regulator. Section 111 of the Clean Energy Act 2011 (Cth) provides for the issue of carbon units as a result of an auction. The process for acquiring carbon units at auction is yet to be promulgated, however as noted in chapter four, participation in auctions will be voluntary. Section 111 of the Clean Energy Act 2011 (Cth) provides: (3) If a carbon unit is issued to a person as a result of an auction, the person is liable to pay a charge for the issue of the unit. (4) Subsection (3) has effect only so far as it is not a law imposing taxation within the meaning of section 55 of the Constitution.

Since a liable entity is under no obligation under the Clean Energy Act 2011 (Cth) to apply to the regulator for carbon units, because, for example, the liable entity could take action to abate its emissions, or could obtain carbon units on the secondary market, it is difficult to conceive how the charge payable by liable entities for the acquisition of carbon units fits the description of a compulsory exaction.

[page 312] A liable entity will voluntarily apply for fixed charge carbon units and will voluntarily participate in an auction. When the liable entity pays for and is issued carbon units by the regulator (even if only for an instant in the fixed charge period), the charge payable by liable entities is for the acquisition of property. The High Court of Australia has determined that a fee payable for a licence which conferred the right to fish for abalone is not a tax (nor an excise) because it was the “price exacted by the public, through its laws, for the appropriation of a limited public natural resource”.40 Brennan J considered that the abalone licence was “a charge for the acquisition of a right akin to property”.41 The same approach could be applied to the acquisition of carbon units. It would be noted that the Clean Energy Act 2011 (Cth) prescribes the carbon unit as personal property.42 If the charge for carbon units is not a tax, the Clean Energy Act 2011 (Cth) will not offend s 55 of the Constitution. The government however has taken a “belts and braces” approach to constitutional validity. If the charge for carbon units (and the unit shortfall charge) was considered a tax, then the Clean Energy Act 2011 (Cth) provides that the charge (and unit shortfall charge) is not levied under the Clean Energy Act 2011 (Cth): instead, it is levied, as appropriate, under one of the following Acts: The Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth); Clean Energy (Unit Issue Charge-Fixed Charge) Act 2011 (Cth); Clean Energy (Unit Issue Charge-Auctions) Act 2011 (Cth); Clean Energy (Charges-Excise) Act 2011 (Cth); Clean Energy (Charges-Customs) Act 2011 (Cth); or Clean Energy (International Unit Surrender Charge) Act 2011 (Cth).

Liability of executive officers [110,550] The NGER Act and Clean Energy Act 2011 (Cth) each seek to improve the compliance performance of liable entities and controlling corporations by exposing executive officers of a body corporate to pecuniary penalty: NGER Act s 47; Clean Energy Act 2011 (Cth) s 248.

An “executive officer” is: (a) a director of the body corporate; or (b) the chief executive officer (however described) of the body corporate; or (c) the chief financial officer (however described) of the body corporate; or (d) the secretary of the body corporate.43 The heavy onus on executive officers and the chief carbon officer (COO) to ensure accurate compliance with the Acts and Regulations is reinforced by the ability of the regulator to obtain information supported by statutory declaration sworn by the executive officer and COO. [page 313] Section 47 of NGER Act and s 248 of the Clean Energy Act 2011 (Cth) use identical language to define the liability of executive officers. Relevantly, they provide that if: a body corporate contravenes a civil penalty provision; and an executive officer of the body corporate knew that, or was reckless or negligent as to whether, the contravention would occur; and the officer was in a position to influence the conduct of the body corporate in relation to the contravention; and the officer failed to take all reasonable steps to prevent the contravention then the executive officer also commits a contravention. Any recklessness or negligence of the executive officer is to be tested objectively. The Acts provide that: the executive officer is reckless as to whether the contravention would occur if the officer is aware of a substantial risk that the contravention would occur and having regard to the circumstances known to the executive officer, it is unjustifiable to take the risk;44 the executive officer is negligent as to whether the contravention would occur if the officer’s conduct involves such a great falling short of the standard of care that a reasonable person would exercise in the circumstances and such a high risk that the contravention would occur that the conduct merits the imposition of a pecuniary

penalty.45

PECUNIARY PENALTY [110,575] The pecuniary penalty for a contravention by an executive officer is 2000 penalty units (currently $220,000).46 However, the pecuniary penalty for an executive officer for a contravention of the NGER Act cannot be more than the pecuniary penalty the court could order a body corporate to pay for contravening the relevant civil penalty provision.47

DEFENCE [110,600] The internal culture and systems of an organisation will be relevant in determining whether the executive officer exercised reasonable diligence to prevent a contravention by the body corporate. In determining liability, a court is directed to have regard to what action (if any) the executive officer took (to the extent that the action is relevant to the contravention) directed towards ensuring that: the body corporate arranges regular professional assessments of the body corporate’s compliance; the body corporate implements any appropriate recommendations arising from such an assessment; and the body corporate’s employees, agents and contractors have a reasonable knowledge and understanding of the requirements for compliance; and [page 314] what action (if any) the executive officer took when he or she became aware that the body corporate was contravening the Acts or the Regulations.48

Information disclosure [110,625] The clean energy future laws package intends that emissions activities and dealings in eligible emissions units be fully transparent.49 The Corporations Act 2001 (Cth) also imposes obligations on companies to

disclose information which may include environmental concerns.

PUBLICATION OF EMISSIONS AND ENERGY DATA [110,650] The information about scope 1 and scope 2 emissions, and energy consumption, provided in an annual report by a registered person to the regulator must be published by the regulator on a website by 28 February in the following compliance year, unless a request for non-publication is made.50 Information for previous compliance years is available at: www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Publication-of-NGER-data/Pages/default.aspx The regulator may also disclose the information it receives to the states and territories, to other government departments for statistical purposes and for facilitating review of Australia’s compliance with international obligations relating to reporting of greenhouse gas emissions and the production and consumption of energy.51

Non-disclosure [110,675] A request may be made to the regulator not to disclose information on the basis that it reveals or is capable of revealing trade secrets, or any other matter of commercial value that would be destroyed or diminished if disclosed, about a specific facility, technology or corporate initiative.52 A non-disclosure request may be made by: a registered corporation; a liable entity; a person required to report under s 20 of the NGER Act; a responsible member of a corporate group; or the holder of a LTC in relation to a facility. The request to the regulator for non-disclosure must be made in writing in the approved form, identify the person or corporation and the information that is requested not to be published. [page 315]

LIABLE ENTITIES PUBLIC INFORMATION DATABASE [110,700] Parts 9 and 12 of the Clean Energy Act 2011 (Cth) and Pt 5 of the Australian National Registry of Emissions Units Act 2011 (Cth) deal with disclosure of information. [110,725] The regulator must keep an electronic database called the Liable Entities Public Information Database (LEPID).53 LEPID is available for inspection on the regulator’s website: www.cleanenergyregulator.gov.au/Carbon-Pricing-Mechanism/Publicinformation-databases/Pages/default.aspx The regulator is also required to publish information relevant to the Registry on its website.54 The regulator must enter the following information into LEPID or publish the information on its website and keep it up-to-date:

Box 110,725-1 — Publicly available information the name of an entity that is a liable entity for an eligible financial year;55 the name of an entity that is likely to be a liable entity;56 the name and last known address of each person that has a Registry account;57 the emissions number of each liable entity for the eligible financial year (to be entered as soon as practicable after reporting under the NGER Act, or an assessment is made by the regulator);58 an estimate of the total of emissions numbers of all liable entities;59 an estimate of any unit shortfall of a person, and potential unit shortfall charge (including details of any assessment of unit shortfall) and unpaid unit shortfall charge;60 the total number of specified Kyoto units in Registry accounts;61 the amount of unpaid administrative charge for failing to relinquish carbon units if required under the Jobs and

Competitiveness Program (JCP);62 the number and breakdown of eligible emissions units surrendered;63 the number and breakdown of eligible emissions units relinquished (voluntarily cancelled) by liable and non-liable entities under the Clean Energy Act 2011 (Cth) including under the JCP, the number and breakdown of the transfer of Kyoto units to a voluntary cancellation account, and the cancellation of prescribed international units;64 [page 316] the per unit charges for the issue of carbon units, and the number and breakdown by vintage of carbon units issued, in each auction;65 the six monthly average auction charge for carbon units (May and November) (disregarding issues of future vintage years);66 the total number of fixed charge carbon units issued by vintage (to be published as soon as practicable after 15 February (in the year after the compliance year));67 the name of each entity that receives free carbon units, and the total number and vintage of free carbon units issued to that person;68 details by entity and by quarter for each activity that is an JCP activity;69 details of carbon units that are banked or borrowed;70 totals of emissions numbers for all liable entities, and total shortfalls.71 [110,750] The regulator is required to publish a concise description of the characteristics of carbon units, Kyoto units and ACCUs.72 [110,775] Controlling corporations and non-group entities must notify the regulator of significant holdings (and changes to significant holdings) of carbon units of a particular vintage.73 The notification must be made within five days of obtaining or ceasing a significant holding or any change in a significant holding.74 The notification

must be in writing and inform the regulator of the relevant event and also provide the information set out in Box 110,775-1.

Box 110,775-1 — Information about significant holdings the name and address of the controlling corporation or non-group entity; if applicable, the name and address of each member of a corporate group with a significant holding; the total number of carbon units of the vintage year held after the event; and any other information specified in regulations.75 A significant holding of carbon units with a particular vintage is a holding of 10 per cent or more of the total number of carbon units with that vintage year, referenced from the carbon pollution cap number for that vintage year.76 [page 317] The regulator must publish the name and address of the entity and the significant holding percentage on its website.77 [110,800] Generally, the publication of information in LEPID or on the regulator’s website only illuminates details of emissions activities and holdings of eligible emissions units of liable entities. Publication will not extend to emissions activities and dealings in eligible emissions units of nonliable entities, unless the regulator forms the view, on reasonable grounds, that a non-liable entity is likely to be a liable entity. A pre-requisite for reasonable grounds would include sector coverage, reporting under the NGER Act, and the existence of an anti-avoidance determination made by the regulator under s 29 of the Clean Energy Act 2011 (Cth). Financial intermediaries will not be revealed in LEPID. LEPID will also not reveal secondary and derivatives markets information. The transparency mandated for dealings in eligible emission units in the primary market is not mandated for dealings that occur in secondary and derivatives markets.

DISCLOSURE REQUIREMENTS OF THE CORPORATIONS ACT 2001 (CTH)

[110,825] Corporate law transparency in stakeholder accountability, directors’ duties and financial statement disclosure may also encompass environmental law disclosures.78 Sections 180–184 of the Corporations Act 2001 (Cth) set the fundamental requirements for directors of companies: to act in good faith in the best interests of the corporation, and for a proper purpose, to exercise care and diligence, and to act without abuse of their position. In giving a wide operation to these provisions, the High Court of Australia in the case of Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483; 42 ALJR 123; BC6800800, observed that: Directors in whom are vested the right and the duty of deciding where the company’s interests lie and how they are to be served may be concerned with a wide range of practical considerations, and their judgment, if exercised in good faith and not for irrelevant purposes, is not open to review in the courts … (at 493).

However, the Canadian Supreme Court suggested in the case of People’s Department Stores Inc v Wise (2004) 49 BLR (3d) 165; 4 CBR (5th) 215; 2004 SCC 68; 244 DLR (4th) 564 that: in determining whether [directors] are acting with a view to the best interests of a corporation it may be legitimate, given all the circumstances of a given case, for the board of directors to consider, inter alia, the interests of shareholders, employees, suppliers, creditors, consumers, governments and the environment (at [42]).

[110,850] Sections 299 and 299A of the Corporations Act 2001 (Cth) set out key information that companies and directors must include in the annual report to shareholders (and hence indirectly, to stakeholders). Reporting must include non-financial risks (such as environmental issues) and environmental concerns that may impact on a company’s performance or strategies. Section 299(1)(f) provides that a directors’ report must include information about a [page 318] company’s environmental performance in regard to environmental regulations where the company is subject to a particular and significant environmental regulation. Section 299A requires listed companies to include in their directors’ reports any information that their shareholders would reasonably require to make an informed assessment about the company’s performance, including its operations, financial outcomes and future strategies and potential future performance. Section 249D of the Corporations Act 2001 (Cth) also empowers shareholders who are concerned, for example, about their company’s impact

on the environment to call an extraordinary general meeting (where 100 or more shareholders agree) whereby resolutions preventing certain action can be put to the shareholders for approval.79

ASX LISTING RULES [110,875] For listed companies, Australian Stock Exchange (ASX) Listing Rule80 4.10.17 parallels the minimum requirement to include a review of operations and activities in the annual report. Continuous ASX announcements and annual disclosure of material environmental information is required where there is a connection between environmental performance and financial performance, for example, reflected in a material expense for the acquisition of eligible emissions units or liability for unit shortfall charge. ASX Listing Rules Guidance Note 10 (explaining the disclosure requirements under Listing Rule 4.10.17) suggests: to meet information needs of its shareholders, … and an increasing array of other stakeholders (“uers”), a company should explain its past performance and provide information which will increase understanding of its future directions. This will be facilitated by providing useful financial and non-financial information and analysis…. A contemporary Review should contain an analysis of industry wide and company specific financial and non-financial information that is relevant to an assessment of the company’s performance and prospects.

Principles 3 and 7 of the “Corporate Governance Principles and Recommendations” (2nd edition) of the ASX Corporate Governance Council also promote the disclosure of environmental matters. The Council describes corporate governance as: “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations”. It encompasses the mechanisms by which companies, and those in control, are held to account. Corporate governance influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimised.

Principle 3 specifies the need for integrity, from the Board to senior management and those who can influence a company’s strategy and financial performance. The integrity principle enshrines responsible and ethical decision-making which takes into account not only legal obligations but also the interests of stakeholders. Principle 7 deals with the recognition and management of risk. It assigns responsibilities for managing “material business risk” to directors collectively at the Board level: [page 319] The board should require management to design and implement the risk management and internal

control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively…. A company should consider all material business risks. These risks may include but are not limited to: operational, environmental, sustainability, compliance, strategic, ethical conduct, reputation or brand, technological, product or service quality, human capital, financial reporting and market-related risks.

International linking BACKGROUND [110,900] Australia’s carbon pricing mechanism is designed ultimately to directly link to other emissions trading schemes. The inclusion from 1 July 2015 of eligible international emissions units (EIEUs) as eligible emissions units in the carbon pricing mechanism directly links the Australian carbon pricing mechanism to the Kyoto Protocol mechanisms, and also indirectly links Australia to other emissions trading schemes. Any direct linking will also not commence until after the commencement of the flexible charge period, 1 July 2015. One of the main reasons for international linking is to lower the cost of compliance. International linking exposes the Australian carbon market to the international price of carbon, which is set by the global supply and demand for EIEUs. As 1t CO2-e emissions reduction accredited under a recognised scheme anywhere in the world is technically equivalent to 1t CO2-e emissions reductions in Australia, international linking enables Australian entities to source the lowest cost of abatement, and therefore the lowest cost of compliance. Linking is conditioned by two major features — a limit on the number of EIEUs that may be surrendered in any compliance year and the potential imposition of an international unit surrender charge.

IMPORTING [110,925] Eligible international emissions units may be imported into an Australian Registry account at any time. An EIEU is defined as:81 a CER (other than a temporary CER or a long-term CER);

an ERU; a RMU; a prescribed unit issued in accordance with the Kyoto rules (whether within or outside Australia); and a non-Kyoto international emissions unit. EIEUs are discussed in [32,275]ff and [90,525]–[90,550]. Importation is a taxable event. Taxation is discussed in [111,250].

EXPORTING [110,950] The export of carbon units will not be allowed in the fixed price period. Exports of carbon units may be allowed from 1 July 2015, where a bilateral linking agreement with another country is in place. [page 320]

LIMITATIONS TO LINKING [110,975] The integrity of the Australian carbon market will depend in part upon the stringency of tests for allowing the Australian carbon pricing mechanism to link with other emission trading schemes. Accordingly, it is proposed that the Australia will only permit linking with international emissions units and emissions trading schemes that are deemed to be credible.

Limitations to EIEUs [111,000] Limitations to EIEUs are discussed in [90,550]. The Climate Change Authority is mandated to recommend which international emissions units should be accepted in Australia and which should be prohibited. The policy behind a flexible list of eligible international emissions units which can be disallowed for surrender is to ensure the environmental integrity of the Australian carbon pricing mechanism and consistency with Australia’s international obligations. The Climate Change Authority is mandated to recommend which international emissions units should be accepted in Australia and which should be prohibited. The policy behind a flexible list of eligible international

emissions units which can be disallowed for surrender is to ensure the environmental integrity of the Australian carbon pricing mechanism and consistency with Australia’s international obligations.

Limitations to emissions trading schemes [111,025] Bilateral links with other emissions trading schemes will be required to meet the following criteria: an internationally acceptable level of mitigation commitment; adequate and comparable monitoring, reporting, verification, compliance and enforcement mechanisms; and compatibility in design and market rules. The New Zealand Emissions Trading Scheme (NZ ETS) and the European Union Emissions Trading System (EU ETS) are the most obvious and uncontroversial schemes for linking with the Australian carbon pricing mechanism. High-level ministerial negotiations on linking are ongoing. Table 111,025-1 summarises the public announcements to 30 April 2012.

Table 111,025-1 — Linking negotiations New Zealand Negotiations to link the carbon price mechanism are most advanced with New Zealand. In late 2011 the Commonwealth and New Zealand Governments established the Australia-New Zealand Carbon Pricing Officials Group (CPOG) to work towards linking the carbon price mechanism to the NZ ETS. The CPOG is jointly chaired by the Department of Climate Change and Energy Efficiency and the Ministry for the Environment. Linking is expected to commence on 1 July 2015, at the start of the carbon price mechanism’s flexible pricing period.82 [page 321] European Union Negotiations are also active to link the carbon price mechanism to the EU ETS. In March 2012 the Hon Greg Combet MP, and the European Commissioner for Climate Action, Ms Connie Hedegaard, confirmed

efforts to link the Australian and European emissions trading schemes.83 These talks were a part of the Australia-Europe Senior Officials Talks on Climate Change, which were established in late 2011. Korea In April 2012 the Australia-Republic of Korea Senior Officials Talks on Climate Change and Green Growth were confirmed to commence in the second half of 2012.84

INTERNATIONAL UNIT SURRENDER CHARGE [111,050] The charge imposed on the surrender of international units by the Clean Energy (International Unit Surrender Charge) Act 2011 (Cth) is discussed in [91,525].

Record-keeping The record-keeping requirements are viewed as necessary to support: compliance obligations; inspectors and auditors in carrying out and completing their roles and responsibilities; and the operation of the carbon pricing mechanism.85 Records and copies of records will be required to be retained for 5 years.

SOURCES OF LAW [111,100] Record-keeping rules are sourced in: National Greenhouse and Energy Reporting Act 2007 (Cth): — ss 22, 22B, 22C, 22F, 22H, and 22XA; National Greenhouse and Energy Reporting Regulations 2008 (Cth): — Div 4.8; Clean Energy Act 2011 (Cth): — ss 92D, 148, 151, 227, and 228; and

Clean Energy Regulations 2011 (Cth): — Pt 14. [page 322]

COMPLIANCE WITH RECORD-KEEPING REQUIREMENTS [111,125] A person subject to the record-keeping requirements must comply with the requirements.86 Failure to comply with record-keeping requirements is a strict liability offence and attracts a maximum civil penalty of: 10,000 penalty units ($1,100,000) for a body corporate; and 2000 penalty units ($220,000) for an individual.87 It is also a contravention for any person to: aid, abet, counsel or procure a contravention; induce, whether by threats or promises or otherwise, a contravention; be in any way, knowingly concerned in, or party to, a contravention; conspire with others to effect a contravention.88

RECORD-KEEPING REQUIREMENTS — GENERAL [111,150] Record-keeping requirements are set out in the Acts and Regulations. The general record-keeping requirements for the Clean Energy Act 2011 (Cth) and the associated provisions are delegated to the Regulations.89 Any record of specified information required to be made by the Regulations: must be retained for five years after making the record; and must be retained together with a copy of the record; and for certain applications to the regulator, must be retained together with every source document.90

Source documents are originals of documents copied and given to the regulator and documents that verify information given to the regulator in connection with any application.91

RECORD-KEEPING REQUIREMENTS — APPLICATIONS TO THE REGULATOR [111,175] Record-keeping requirements apply for applications made to the regulator: for an obligation transfer number (OTN); to be an approved person under s 56 of the Clean Energy Act 2011 (Cth); for declaration of a joint venture; for a participating percentage determination in relation to a joint venture; for a liability transfer certificate (LTC) for a corporate group or for financial control.92 A person must make a record of every source document relevant to the application and keep a copy of the application and every source document for five years. [page 323]

RECORD-KEEPING REQUIREMENTS — REPORTS SUBMITTED TO THE REGULATOR [111,200] Record-keeping obligations under the NGER Act attach to: registered corporations (NGER Act s 22); the responsible member of a controlling corporation’s group (NGER Act s 22XA); liable entities (NGER Act ss 22B and 22C); holders of liability transfer certificates (NGER Act s 22F); and holders of reporting transfer certificates (NGER Act s 22H). Records must be kept of activities that:

allow the person or entity to report accurately under the NGER Act; and enable the regulator to ascertain whether the person or entity has complied with its obligations under the NGER Act; and comply with the requirements of the regulations. The Clean Energy Regulations require the records to be kept in a form that is easily and quickly accessible for audit and inspection.93 The records must be kept for five years.94

RECORD-KEEPING REQUIREMENTS — OTNS [111,225] The Clean Energy Act 2011 (Cth) separately details the recordkeeping obligations for gaseous fuel and natural gas suppliers and recipients.95 Record-keeping obligations are imposed if a supplier supplies an amount of designated fuel (natural gas, liquefied petroleum gas (LPG) or liquefied natural gas (LNG)) to another person (the recipient) and the recipient quotes the recipient’s OTN in relation to the supply.96 Where a recipient quotes its OTN: the statement by which the quotation was made and a copy of that statement must be kept by the natural gas supplier or gaseous fuel supplier regardless of whether the supplier accepts the quotation (and passes the liability to the recipient) or rejects the quotation in order to retain liability;97 and a copy of the statement by which the OTN quotation was made must be kept by the recipient.98 The records must be retained for a period of five years.99 A contravention of the record-keeping requirements by natural gas suppliers, gaseous fuel suppliers and recipients may attract civil liability penalty. [page 324]

Taxation

[111,250] As a general rule, the compliance year for taxation laws is the income year, 1 July to 30 June. The income year for taxation purposes, 1 July to 30 June 20X0, corresponds with the same period for the current eligible financial year for compliance purposes under the NGER Act and the Clean Energy Act 2011 (Cth), 1 July to 30 June 20X0. The auction or sale of eligible emissions units is a supply of a property right. For the acquiring entity, properly characterised, the acquisition is akin to any input into the productive process, especially if the unit is surrendered. However, the timing of surrender of eligible emissions units affects their income tax treatment. The ability to surrender eligible emissions units up to 1 February in the compliance year after the current eligible financial year (ie up to 1 February in 20X1) means that surrender of eligible emissions units for the current eligible financial year (20X0) may occur in a subsequent income year for taxation purposes (20X1).

GOODS AND SERVICES TAX [111,275] Transactions in eligible emissions units will not be subject to goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cth). A supply of an eligible emissions unit is GSTfree.100 Dealings in derivatives in eligible emission units will be input taxed as a financial supply.101

INCOME TAXATION [111,300] The Clean Energy (Consequential Amendments) Act 2011 (Cth) relevantly amended the Income Tax Assessment Act 1997 (Cth) (ITAA97) to bring all the income tax rules for the Clean Energy Act 2011 (Cth) into one location in Div 420 of the ITAA97, operative from 1 July 2012. The policy aim of the Federal rules for the income taxation (including capital gains (CGT)) treatment of eligible emissions units is to ensure that taxation treatment does not distort GHG emissions reduction decisions or strategies, on account of a particular taxation consequence.102 This policy is reflected in s 420-5 of the ITAA97: The purpose of income tax accounting for registered emissions units is to produce the same tax treatment, irrespective of your purpose in acquiring or holding the registered emissions units. There

are 4 key features: (1) You bring your gross expenditure and gross proceeds to account, not your net profits and losses on disposal of a registered emissions unit. (2) The gross expenditure is deductible. (3) The gross proceeds are assessable income.

[page 325] (4) You must bring to account any difference between the value of your registered emissions units held at the start and at the end of the income year. This is done in such a way that: (a) any increase in value is included in assessable income; and (b) any decrease in value is a deduction.

A “taxpayer” (most often referred to in the ITAA97 as “you”) is an individual, company or entity that is liable to pay income tax assessed on “taxable income” for an income year.103 State and territory governments are not subject to Commonwealth income tax.104 Local governing bodies are not subject to Commonwealth income tax.105

Sources of law [111,325] Rules for charges and income taxation are sourced in: Clean Energy (Excise Tariff Legislation Amendment) Act 2011 (Cth); Clean Energy (Fuel Tax Legislation Amendment) Act 2011 (Cth); Clean Energy (Income Tax Rates Amendments) Act 2011 (Cth); Clean Energy (Charges-Customs) Act 2011 (Cth); Clean Energy (Charges-Excise) Act 2011 (Cth); Clean Energy (Unit Issue Charge-Auctions) Act 2011 (Cth); Clean Energy (Unit Issue Charge-Fixed Charge) Act 2011 (Cth); Clean Energy (International Unit Surrender Charge) Act 2011 (Cth); Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth); Income Tax Assessment Act 1936 (Cth); and Income Tax Assessment Act 1997 (Cth). The income tax rules apply to “registered emissions units”. Registered

emissions units are carbon units, Kyoto units (EIEUs), prescribed international units and Australian carbon credit units (ACCUs) entered in a Registry account.106 For income tax purposes, a taxpayer (you) will hold a registered emissions unit if there is an entry for the registered emissions unit in the taxpayer’s Registry account.107 However, if the entity (nominee entity) that holds the registered emissions unit in the Registry account in fact holds the unit as nominee for another entity, then for income tax purposes the other entity will be taken to hold the unit in place of the nominee entity.108

Acquisition and disposal of registered emissions units [111,350] Income tax treatment will be determined by beneficial ownership of eligible emissions units. A taxpayer’s taxable income for an income year is computed by deducting “allowable deductions” from “assessable income”.109 Section 420-65 provides that Div 420 is an [page 326] exclusive code for determining allowable deduction for expenditure and s 420-70 provides that Div 420 is an exclusive code for determining assessable income. Any capital gain or loss made on registered emissions units, or a right to receive free carbon units or ACCUs is disregarded for CGT purposes.110 A registered emissions unit is not trading stock.111

Acquiring registered emissions units [111,375] A taxpayer may deduct expenditure to the extent that it is incurred in becoming the holder of a registered emissions unit.112 Expenditure incurred in becoming the holder of a registered emissions unit is not deductible under any other provision of the ITAA97.113 Section 8-1 of the ITAA97 is a general deduction provision which provides that in the computation of the allowable deductions of a taxpayer, losses or outgoings of a taxpayer incurred in earning income or necessarily incurred in

carrying on a business will be an allowable deduction against assessable income, unless of capital or of a capital or private nature or incurred in earning exempt income. Section 8-1 may apply to losses or outgoings in relation to registered emissions units only to the extent that they are not expenditure incurred in becoming the holder of a registered emissions unit.114 The time, manner and form of acquisition of registered emissions units (including free carbon units) by liable entities—whether acquired in the carbon markets (the secondary market), or acquired from the regulator (the primary market) — generally will impact income tax treatment. The payment by a taxpayer, being a liable entity, of: the charge for carbon units to be issued by the regulator: — for a fixed charge; or — as a result of successfully bidding in an auction; and the agreed purchase price for registered emissions units acquired from a transferor is expenditure incurred in acquiring the registered emissions units and will be deductible under s 420-15(1). The expenditure deductible will be the amount of the consideration paid for the registered emissions units (ie the fixed charge or auction clearing price x number of carbon units issued or an agreed purchase price). Interest costs associated with borrowings to acquire registered emissions units ought to be meet the description of expenditure incurred in becoming the holder of the registered emissions units and therefore should be deductible under s 420-15(1). Alternatively, interest costs should be deductible under s 81. [111,400] The deduction is available in the income year in which the taxpayer starts to hold the registered emissions units.115 The deduction for the expenditure will be properly referrable to the income year of [page 327] registration of the registered emissions units, which may not be the year of agreement to acquire the registered emissions units or the year in which payment was made for the units. If the emissions unit acquired and registered in the income year 20X0 is surrendered by 30 June 20X0, which is the same eligible financial year for

compliance under the Clean Energy Act 2011 (Cth), the deduction is claimed in 20X0. However, if registered emissions units are not surrendered in the same income year as they are registered (meaning that they are banked, and held as an asset on balance sheet at the end of the income year), a rolling balance method applies to defer the allowable deduction by adding back into the calculation of taxable income the value of the registered emissions units held as at balance date. The rolling balance method is discussed in [111,700]. [111,425] For the fixed charge years, the provisional surrender deadline of 15 June falls inside the income year for taxation purposes, but the final surrender deadline of 1 February in the next eligible financial year falls into a later income year for taxation purposes. Fixed charge carbon units may only be issued by the regulator after the liable entity pays the fixed charge to the regulator. Fixed charge carbon units will be issued by the regulator in two windows: from 1 April to 15 June in the three fixed charge years to 30 June 2015, and from 1 July to 1 February in the next compliance year after the current eligible financial year, for eligible financial years 2013 to 2018.116 [111,450] If a taxpayer knows or expects by 30 June 20X0 (ie before the end of the income year) that it will need to spend $Z to acquire sufficient eligible emissions units so as to avoid a unit shortfall charge, but does not make the payment of $Z until the income year 20X1, will the taxpayer be able to deduct the amount of $Z in the 20X0 income year under s 420-15(1) as expenditure incurred in becoming the holder of a registered emissions unit or under s 8-1 as a loss or outgoing incurred in earning its assessable income for the income year 20XO? The expression “expenditure incurred” can be distinguished from the expression “loss or outgoing incurred”. The High Court of Australia has considered the tests for deductibility under s 8-1 (and its predecessor, s 51(1) in the Income Tax Assessment Act 1936 (Cth) (ITAA36)) on many occasions. In the case of New Zealand Flax Investments Pty Ltd v Federal Commissioner of Taxation,117 which concerned the deductibility under s 51(1) of interest payments payable in the future, Dixon J said: To come within [the] provision there must be a loss or outgoing actually incurred. “Incurred” does not mean only defrayed, discharged, or borne, but rather it includes encountered, run into, or fallen upon. It is unsafe to attempt exhaustive definitions of a conception intended to have such a various or multifarious application. But it does not include a loss or expenditure which is no more than impending, threatened, or expected. (at 207).

[page 328] An outgoing may be “incurred”, but not “discharged” in the relevant year of income.118 In Federal Commissioner of Taxation v James Flood Pty Ltd119 Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ said of the s 51(1) test for deductibility: The word “outgoing” might suggest that there must be an actual disbursement. But partly because such an interpretation would produce very strange and anomalous results, and partly because of the use of the word “incurred”, the provision has been interpreted to cover outgoings to which the taxpayer is definitively committed in the year of income although there has been no actual disbursement. (at 506, emphasis added)

The court went on to say “outgoings” could only have been “incurred” if “in the course of gaining or producing the assessable income or carrying on the business, the taxpayer has completely subjected” itself to them.120 This reflects the language of Justice Dixon in the New Zealand Flax case — the loss or outgoing must be actually incurred and must be more than impending, threatened or expected. It might be possible to say that a taxpayer has completely subjected itself to an outgoing if it had entered into a binding contract to acquire eligible emissions units. In order to be recognised as the holder of the eligible emissions units and surrender them, however, there must be an entry for those eligible emissions units in a Registry account of the taxpayer. Upon completion of the contract, and registration, the taxpayer will hold registered emissions units — at this point, the taxpayer will have incurred expenditure in becoming the registered holder. It will be doubtful therefore whether a taxpayer who is a liable entity will be entitled to claim a deduction in the income year 20X0: under s 420-15(1) of the ITAA97, because there is no actual expenditure incurred, and no registered emissions units held before 30 June 20X0; and under s 8-1 of the ITAA97 for the amount expected, or required, to be paid, for eligible emissions units, because if the taxpayer would only completely subject itself to the loss or outgoing if there was a binding contract for eligible emissions units, s 420-65(2) prohibits expenditure incurred to any extent in becoming the registered holder of a registered emissions unit from being taken into account in working an amount that can be deducted under any other provision of the ITAA97, including s 8-1.

Exceptions to deduction rule [111,475] Expenditure incurred in becoming the holder of free carbon units under the Jobs and Competitiveness Program or the Coal-fired Electricity Generation Program is not deductible under s 420-15.121 Expenditure incurred in becoming the holder of ACCUs is not deductible under s 420-15 unless the expenditure was incurred in preparing or lodging an application for [page 329] a certificate of entitlement under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) or an offsets report under the CFI Act.122 Subsections 420-65(3) and (4) except the application of the exclusivity rules to the above types of expenditure, specifically in relation to subss 42065(1) and (2), but also by necessary implication, within s 420-15. A further limitation to deduction requires the assumption that the registered emissions unit would be sold to someone else immediately after starting to hold it. A deduction will not be allowed under s 420-15 if, based on that assumption, the proceeds of sale of the registered emissions units would not be included in assessable income.123

Surrendering registered emissions units [111,500] In order to avoid a unit shortfall charge, liable entities will be required by the appropriate surrender deadline to surrender to the regulator enough eligible emissions units to equal their covered GHG emissions.124 The act of surrender is distinguished from relinquishment and transfer. When eligible emissions units are surrendered to the regulator (who will cancel them) all rights in those units evaporate, and they will no longer be held. The application of the rolling balance method to registered emissions units held at 30 June of the income year (ie deferring surrender of registered emissions units into a later income year) (discussed in [111,700]) also defers the point in time at which an income tax deduction is obtained for the acquisition of the registered emissions units.

Disposal of registered emissions units

[111,525] Eligible emissions units (other than fixed charge carbon units) may be sold into the market, or by private treaty. The proceeds of sales of registered emissions units (including free carbon units) will be Australian sourced assessable income under s 420-25(1) (or alternatively, s 6-5(1)) of ITAA97 in the income year in which the units cease to be held.125 It is necessary to bring the gross proceeds to account as assessable income,126 not the profit on sale (which is the excess of sales proceeds over the purchase price).127 [111,550] An amount a taxpayer is entitled to receive upon ceasing to hold a registered emissions unit is not to be included in assessable income under any other provision of the ITAA97 other than Div 420.128 [111,575] If a taxpayer who is the holder of a registered emissions unit has obtained a deduction for expenditure in becoming the registered holder of the unit, and the taxpayer ceases to hold the unit in circumstances where the cessation is neither in [page 330] gaining or producing assessable income or in carrying on a business for that purpose (which includes dying), or the cessation occurs in non-arm’s length circumstances, then the amount of the deduction obtained must be included in the assessable income of the taxpayer in the year of income of cessation.129 If the unit is transferred to another person in these circumstances, the transferor must advise the transferee that the transferee will be deemed to have paid the amount included in the assessable income of the transferor.130 [111,600] If a registered emissions unit devolves upon a person’s death to their legal personal representative, then the legal personal representative will be deemed to have bought the unit for the amount included in the deceased assessable income. If subsequently, the unit passes to a beneficiary in the deceased estate, no gain arises to the legal personal representative, but the beneficiary is treated as having bought the unit for the amount included in the deceased assessable income.131 If a registered emissions unit devolves upon a person’s death directly to a beneficiary in their estate, then the beneficiary will be deemed to have bought the unit for the amount included in the deceased assessable income.132

Acquisition and disposal of offset credits

[111,625] Division 420 of the ITAA97 does not prescribe the taxation treatment of dealings in offset credits, such as voluntary emissions reduction units (VERs) recognised under the National Carbon Offset Standard.133 However, the application of the core rules (in ss 6-5 and 8-1 of the ITAA97) should result in the acquisition, surrender and sale of offset credits being taxed in the same manner as registered emissions units.

Importing carbon units, ACCUs and international emissions units [111,650] The importation of carbon units, ACCUs and international emissions units may trigger a taxing point for a transaction which is purely mechanical, and which may result in an unfunded tax liability, or unrealised tax loss. The importation of ACCUs and international emissions units into a Registry account in Australia may be a taxable CGT event. CGT event K1 happens if: a carbon unit, ACCU or international emissions unit is transferred from a taxpayer’s foreign account to the taxpayer’s Registry account; a carbon unit, ACCU or international emissions unit is transferred from a taxpayer’s foreign account to a nominee’s Registry account; a carbon unit, ACCU or international emissions unit is transferred from a nominee’s foreign account to the taxpayer’s Registry account; or [page 331] a carbon unit, ACCU or international emissions unit is transferred from a nominee’s foreign account to a nominee’s Registry account;134 and just before the transfer the unit was not trading stock or a revenue asset, and as a result of the transfer the taxpayer starts holding the unit as a registered emissions unit. A capital gain (or loss) happens at the time that the taxpayer starts holding the unit as a registered emissions unit.135 The taxpayer will be treated as having sold the unit for its market value to someone else just before the transfer and then immediately to have bought it back for the same amount.

The capital gain/loss is the difference between the transferred unit’s market value at the transfer time less the cost to the taxpayer of acquiring the unit.136 A capital gain arises if market value is higher than cost. If just before the transfer, the unit was trading stock or a revenue asset, the taxpayer will be treated as having sold the unit for its cost to someone else and then immediately to have bought it back for the same amount.137 If an international unit surrender charge is imposed on the importation of Kyoto units and prescribed international emissions units, the charge is deductible in the income year in which it is paid.138

Exporting carbon units, ACCUs and international emissions units [111,675] Exporting carbon units, ACCUs and international emissions units from a Registry account to a foreign account or a nominee’s foreign account is treated as a deemed sale of the unit for market value to someone else and then the immediate reacquisition for the same amount.139

Banking registered emissions units [111,700] A registered emissions unit may be held as an asset on balance sheet at 30 June of the income year because an entity decides to bank (hoard) the unit. When registered emissions units are banked at the end of the income year, the entity will be required to use a rolling balance method to compare the opening and closing values of the registered emissions units.140 The increase in the closing value of the registered emissions units is included in assessable income.141 If the closing value has declined, a deduction is available.142

Opening and closing value [111,725] The opening value of a registered emissions unit in 20X1 is the same amount at which it was accounted under Div 420 at the end of the 20X0 income year.143

Valuation methods [111,750] The closing value of a registered emissions unit may be calculated

using: the first-in first out (FIFO) cost method; [page 332] the actual cost method; or the market value method.144 The choice of valuation method is a non-revokable choice that must be made before the income tax return is lodged for the first year that registered emissions units are held at the end of the income year.145 The choice is fixed until the 2015 income year. A change of method may be elected in and after the 2016 income year if the same method had been applied for the four most recent income years.146 However, it is not possible to change from the FIFO method to the actual cost method.147 Using FIFO or mark-to-market might give rise to a gain or loss, depending on the comparative price of the registered emissions unit at balance date. Any gain or loss of course is unrealised at balance date. [111,775] No deduction is allowed for registered emissions units n hand at 30 June 20X0, earmarked for surrender and actually surrendered at the following 1 February surrender deadline. This is a timing mismatch that entities will need to manage. [111,800] The exemption of gains on disposal of registered emissions units from the capital gains (CGT) regime ensures that a person who bought eligible emissions units to hold as a long term asset cannot claim the CGT discount on any gain made upon their subsequent disposal.

Borrowing carbon units [111,825] The borrowing of a carbon unit will not normally be included in the assessable income of an entity, or an allowable deduction — it is a transaction on capital account.

Taxation treatment of free carbon units [111,850] Entities may receive a free allocation of carbon units under the Jobs and Competitiveness Program (JCP) or the Coal-fired Electricity Generation Assistance Program.

The issue of free carbon units is not assessable income.148 If freely allocated carbon units are surrendered by 30 June in the year of acquisition, no taxation consequences arise. Free carbon units of a particular vintage within the fixed charge period that are not surrendered by 1 February in the following vintage year are cancelled at 1 February.149 Free carbon units held at 30 June of the income year are subject to the rolling balance valuation methodology, with modification: free carbon units issued under the JCP may be valued at zero at 30 June in the first income year of issue;150 [page 333] free carbon units issued under the JCP banked beyond 1 February in the financial year after the vintage year and other free carbon units may, by election, be valued at cost (deemed to be market value at date of issue)151 or market value.

Non-arm’s length dealings [111,875] If the transferor and the transferee in dealings in registered emissions units did not deal with each other at arm’s length, or are associates, and the consideration for the dealing is not the market value of the registered emissions units, then: the transferee will be deemed to have paid market value for the units;152 and the transferor will be deemed to have received the market value for the units.153

Deductibility of unit shortfall charge [111,900] If a liable entity does not surrender enough eligible emissions units to equal scope 1 CO2-e GHG emissions (the emissions number) in the compliance period, the liable entity will have a unit shortfall and face a unit shortfall charge. The unit shortfall charge is not deductible for income tax purposes: s 26-18 of the ITAA1997.

Interface with other income tax incentives [111,925] A number of “environmentally friendly” incentives are provided via the taxation laws, for example, accelerated deduction for investments in carbon forest sinks, environment remediation, primary production activity and capital works write-offs. Division 420 of the ITAA97 does not inhibit the taxation treatment of environmental expenditures by taxpayers under other parts of the taxation laws.

STAMP DUTY [111,950] Laws for levying stamp duty on dutiable transactions are made by state and territory governments. By agreement among the states and territories, dealings in eligible emissions units should not be subject to state taxation. [page 334]

Unit surrender shortfalls and unit shortfall charge [111,975] A penalty for non-compliance will be imposed on liable entities if they fail by the surrender deadline to surrender sufficient eligible emissions units to equal their emissions number for the eligible financial year. The appendix reproduces flowchart diagrams from the Explanatory Memorandum describing the surrender processes in the Clean Energy Act 2011 (Cth).

UNIT SHORTFALLS [112,000] Unit shortfalls are defined in ss 125, 128, 129 and 133 of the Clean Energy Act 2011 (Cth).

Fixed charge years

Provisional unit shortfall [112,025] A provisional unit shortfall arises for a liable entity if the number of eligible emissions units surrendered by the liable entity by 15 June is less than the liable entity’s total interim emissions number for the relevant eligible financial year.154 The amount of the shortfall (if a positive number) is the provisional unit shortfall, rounded to the nearest whole number.155 There will be no exposure to a provisional unit shortfall (because there is no interim emissions number for the relevant eligible financial year) if a person (other than a natural gas supplier or gaseous fuel supplier): was not required to provide a report under the NGER Act for the previous eligible financial year; had covered emissions of less than 35,000 tonnes in the previous eligible financial year; or is reasonably expected to have covered emissions of less than 35,000 tonnes in the current eligible financial year.156

Limitation to surrender of Kyoto ACCUs [112,050] For the purposes of calculating the amount of the provisional unit shortfall, if Kyoto ACCUs have been surrendered in the period to 15 June, but the number of Kyoto ACCUs exceeds five per cent of the interim emissions number, then the excess is [page 335] deemed not to have been surrendered in the period to 15 June. Instead, the excess will be deemed to be surrendered in the next period — 15 June to 1 February.157

Estimation error unit shortfall [112,075] If, relying on s 126(4) of the Clean Energy Act 2011 (Cth), a liable entity provides the regulator an estimate of its interim emissions number that is not based on the previous year’s report under the NGER Act, then that estimate will be subject to an estimation error calculation that may give rise to an estimation error unit shortfall. An estimation error occurs if 75 per cent of the liable entity’s actual

provisional emissions number for the relevant eligible financial year is more than the estimate of the interim emissions number provided to the regulator.158 The estimation error unit shortfall is the under-estimation error.159

Final unit shortfall [112,100] A final unit shortfall may arise for a liable entity for a relevant eligible financial year based on a true-up at the 1 February final surrender deadline. The final unit shortfall for a liable entity is calculated by starting with the liable entity’s emissions number and then subtracting: the number of eligible emissions units surrendered after 15 June and before 1 February; the number of units that needed to be surrendered to comply with the provisional surrender obligation and to avoid having a provisional unit shortfall; and the surplus and estimation error adjustment (if any).160 The amount of the shortfall (if a positive number) is the final unit shortfall, rounded to the nearest whole number.161

Limitation to surrender of Kyoto ACCUs [112,125] For the purposes of calculating the amount of the final unit shortfall, if Kyoto ACCUs have been surrendered in the period from 15 June to 1 February (including any excess carried over from an earlier period), but the number of Kyoto ACCUs exceeds five per cent of the emissions number less the number of Kyoto ACCUs surrendered by 15 June, then the excess is deemed not to have been surrendered in the period to 1 February. Instead, the excess will be deemed to be surrendered in the next period 15 June to 1 February.162

Flexible charge years Unit shortfall [112,150] A unit shortfall may arise for a liable entity for a relevant eligible

financial year based on the true-up at the 1 February surrender deadline. The unit shortfall for a liable entity is calculated by starting with the liable entity’s emissions number and then subtracting: [page 336] the number of eligible emissions units surrendered before 1 February; and the final surplus surrender number.163 The amount of the shortfall is the unit shortfall, rounded to the nearest whole number.164 The concept of unit surrender surplus is discussed in [112,575].

Limitation to surrender of borrowed carbon units [112,175] For the purposes of calculating the amount of the unit shortfall, if carbon units of the next vintage after the eligible financial year have been surrendered, but the number of those borrowed carbon units exceeds five per cent of the emissions number, then the excess is deemed not to have been borrowed and surrendered in the period. Instead, the excess will be deemed to be surrendered in the next compliance period.165

Limitation to surrender of EIEUs [112,200] For the purposes of calculating the amount of the unit shortfall, if EIEUs have been surrendered, but the number of EIEUs exceeds 50 per cent of the emissions number, then the excess is deemed not to have been surrendered in the period. Instead, the excess will be deemed to be surrendered in the next period.166

UNIT SHORTFALL CHARGE [112,225] Unit shortfall charge is imposed by the Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth). If a person has a unit shortfall for a financial year, charge is imposed on the unit shortfall.167 The unit shortfall charge is payable by the person. The charge is payable within five business days of the applicable surrender

deadline 15 June or 1 February.168

Charge formula [112,250] The amount of unit shortfall charge imposed on a unit shortfall is:169 Number of units in the unit shortfall × Prescribed amount for the financial year [page 337]

Amount of charge [112,275] Separate unit shortfall charges are prescribed for fixed charge years and for flexible charge years.

Fixed charge period unit shortfall charge [112,300] The unit shortfall charge in a fixed charge year is 130 per cent of the relevant per unit charge for the issue of a carbon unit with a vintage year of that fixed charge year:

Table 112,300-1 — Fixed period unit shortfall charge Vintage year 2013 2014 2015

Per unit fixed charge $23.00 $24.15 $25.40

Unit shortfall charge $29.90 $31.40 $33.02

Flexible charge period unit shortfall charge [112,325] The unit shortfall charge in a flexible charge year is: 200 per cent of the benchmark average auction charge (BAAC) for the previous financial year; or an amount specified in the regulations (which cannot be less than 130 per cent of the BAAC or more than 200 per cent of the BAAC).170

LATE PAYMENT PENALTY [112,350] Failure to pay the unit shortfall penalty within five days of the relevant unit surrender deadline will result in a debt to the Commonwealth, which will also accrue interest at the rate of 20 per cent per annum.171

DEFAULT ASSESSMENT [112,375] The regulator is empowered to make a default assessment of unit shortfall and unit shortfall charge: Clean Energy Act 2011 (Cth) s 141. The only requirement to trigger a default assessment is that the Regulator must have reasonable grounds to believe that a person is a liable entity for an eligible financial year and has a unit shortfall for the eligible financial year.172 There is no time limitation for the exercise of the s 141 default assessment power, including a power to amend a default assessment.173 If the regulator is satisfied there are reasonable grounds to believe that a person is a liable entity for an eligible financial year and has a unit shortfall for that year, then the regulator may make an assessment of: [page 338] the unit shortfall; and/or the unit shortfall charge payable on the unit shortfall.174 The regulator must give written notice of a default assessment and any amendment of the assessment to the person. A person may request the regulator to amend a default assessment.175 The regulator must notify the person who applied for the amendment if the regulator decides to refuse to amend the default assessment.176

Review of default assessment [112,400] Section 141(9) of the Clean Energy Act 2011 (Cth) provides that a notice of default assessment (including a notice of amendment of a default assessment) is an instrument of an advisory character. However: the making of the default assessment;

the decision to amend a default assessment; and the decision not to amend a default assessment are defined as reviewable decisions.177 Reviews and appeals are discussed in Ch 7.

REMISSION [112,425] Liable entities carry significant financial risks in self-assessing under the Clean Energy Act 2011 (Cth), including facing unit shortfall charges and other penalties for breaches of civil liability provisions, which pay no regard to the fact that the whole process of measurement and reporting of covered GHG emissions is an estimation process. The regulator is given some power to remit unit shortfall charge, and other penalties, but the circumstances and basis for remission are intolerably narrow.178

Remit of the estimation error unit shortfall charge [112,450] The Regulator may, upon written application or upon its own initiative, remit the whole or a part of an amount of unit shortfall charge imposed on an estimation error unit shortfall.179 The power to remit the estimation error unit shortfall charge requires the regulator to [page 339] be satisfied that there are circumstances that make it fair and reasonable to remit some of the charge amount or the entire charge amount.180 In deciding whether to remit the whole or a part of an amount of estimation error unit shortfall charge, the regulator must have regard to the following matters: (a) whether the person took reasonable steps to avoid having the unit shortfall; (b) the extent to which the unit shortfall is attributable to an increase in emissions that could not reasonably have been foreseen by the person when the person gave the regulator an estimate under s 126(4); (c) whether the person has had a unit shortfall under s 129 for a previous eligible financial year;

(d) such other matters (if any) as the regulator considers relevant.181 The regulator must notify the person who applied for the remission if the regulator decides to refuse to remit the estimation error unit shortfall charge.182 A decision refusing to remit the estimation error unit shortfall charge is a reviewable decision.183

Remit of unit shortfall charge [112,475] The regulator has a very limited discretion to remit the unit shortfall charge. Upon written application for remission of unit shortfall charge made to the regulator by a liable entity, the regulator may remit an amount of the unit shortfall charge imposed on a unit shortfall.184 The power to remit the unit shortfall charge requires the regulator to be satisfied that: the number specified in the report by a liable entity under s 22A of the NGER Act for an eligible financial year as the person’s emissions number for the eligible financial year is: — incorrect; and — less than the person’s emissions number for the eligible financial year; the person voluntarily disclosed to the regulator that the number specified in the report is incorrect, and such disclosure was made after 1 February next following the eligible financial year; and the disclosure was made before any relevant investigative action was taken; and there is a unit shortfall for the eligible financial year.185 [112,500] “Relevant investigative action” is exhaustively defined. Table 112,500-1 sets out relevant investigative actions.

Table 112,500-1 — Relevant investigative action for remission of unit shortfall charge

the regulator gives the person a notice under Subdiv G of Div 4 of Pt 6 of the NGER Act (a notice of a greenhouse and energy audit); [page 340] an inspector enters premises under Pt 15 of the Clean Energy Act 2011 (Cth) for the purpose of determining whether the person complied with Clean Energy Act 2011 (Cth) or the associated provisions or substantiating information provided by the person under Clean Energy Act 2011 (Cth) or the associated provisions; an authorised officer enters premises under Div 4 of Pt 6 of the NGER Act for the purpose of determining whether the person complied with NGER Act; the regulator gives the person a notice under s 221 of the Clean Energy Act 2011 (Cth) because the regulator believes on reasonable grounds that the person has information or a document that is relevant to the operation of Clean Energy Act 2011 (Cth) or the associated provisions in relation to the person; the regulator gives the person a notice under s 71 of the NGER Act because the regulator believes on reasonable grounds that the person has information or a document that is relevant to the operation of the NGER Act in relation to the person. [112,525] Provided the request for remission and the disclosure has occurred before relevant investigative action, the regulator may remit a part of the unit shortfall charge if the regulator is satisfied that it would be fair and reasonable to remit that part, having regard to: the circumstances that resulted in the incorrect number being specified in the report; and whether the person took reasonable precautions, and exercised due diligence, to avoid the incorrect number being specified in the report; and such other matters (if any) as the regulator considers relevant.186 The amount of the remission of the unit shortfall charge is limited. The regulator cannot remit the unit shortfall charge by more than an amount that would result in the remaining charge being less than:

for a fixed charge year: number of units in the unit shortfall × fixed charge for the eligible financial year for a flexible charge year: number of units in the unit shortfall × BAAC for the previous financial year.187 If the regulator decides to refuse to remit a part of the unit shortfall charge, the regulator must give written notice of the decision to the person.188 A decision refusing to remit a part of the unit shortfall charge is a reviewable decision.189

Remit of late payment penalty [112,550] The regulator has a discretion to remit late payment penalty interest. The regulator may, upon written application or upon its own initiative, remit the whole or a part of the late payment penalty interest payable by a person if the regulator is satisfied: [page 341] that the person did not contribute to the delay in payment and has taken reasonable steps to mitigate the causes of the delay; or that the person contributed to the delay but has taken reasonable steps to mitigate the causes of the delay and having regard to the nature of the reasons that caused the delay, that it would be fair and reasonable to remit some or all of the late payment penalty interest; or a part of the amount of the relevant unit shortfall charge has been remitted under s 134A of the Clean Energy Act 2011 (Cth); or the regulator is satisfied that there are special circumstances that make it reasonable to remit some or all of the late payment penalty interest.190 The regulator must notify the person who applied for the remission if the regulator decides to refuse to remit the late payment penalty interest.191 A decision refusing to remit the late payment penalty interest is a

reviewable decision.192

Unit surrender surplus [112,575] A person may have: a provisional surplus surrender number; or a surplus surrender number. A provisional surplus surrender number can only arise in the fixed charge period.

PROVISIONAL SURPLUS SURRENDER NUMBER — FIXED CHARGE YEAR [112,600] A person will have a provisional surplus surrender number for the relevant period (1 July to 15 June in the fixed charge year) if the number of eligible emissions units surrendered by the liable entity by the 15 June surrender deadline is more than the liable entity’s interim emissions number.193 The provisional surplus surrender number is the excess (expressed as a positive number).

SURPLUS AND ESTIMATION ERROR ADJUSTMENT NUMBER — FIXED CHARGE YEAR [112,625] Provisional surplus surrender numbers and estimation error numbers combine to create the “surplus and estimation error adjustment number” that is used in the calculation of any final unit shortfall: s 128 of the Clean Energy Act 2011 (Cth). They combine as follows: if the result of the following calculation: total estimation error numbers — provisional surplus surrender number — exceeds zero, that number is the surplus and estimation error

adjustment number of the person for the eligible financial year; and — is zero, the person’s surplus and estimation error adjustment number for the relevant eligible financial year is zero; and [page 342] — is less than zero, the person’s surplus and estimation error adjustment number for the relevant eligible financial year is equal to that number (expressed as a positive); if the person has one or more error estimation numbers but the person does not have a provisional surplus surrender number for the relevant eligible financial year, the person’s surplus and estimation error adjustment number for the relevant eligible financial year is equal to the total of the estimation error numbers; if the person has a provisional surplus surrender number but the person does not have any error estimation numbers for the relevant eligible financial year, the person’s surplus and estimation error adjustment number for the relevant eligible financial year is equal to the provisional surplus surrender number; and if the person does not have a provisional surplus surrender number and any estimation error numbers for the relevant eligible financial year, the person’s surplus and estimation error adjustment number for the relevant eligible financial year is zero.194

FINAL SURPLUS SURRENDER NUMBER — FIXED CHARGE YEAR [112,650] If the calculation of the final unit shortfall for a liable entity, starting with the liable entity’s emissions number and then subtracting: the number of eligible emissions units surrendered after 15 June and before 1 February; the number of units that needed to be surrendered to comply with the provisional surrender obligation and to avoid having a provisional unit shortfall; and the surplus and estimation error adjustment (if any) is a negative number, then that number is the final surplus surrender number.195

The Commonwealth must refund the amount calculated as: Final surplus surrender number × Fixed charge amount196 The fixed charge amount is the applicable per unit charge for a carbon unit with a vintage year of that fixed charge year.

SURPLUS SURRENDER NUMBER — FLEXIBLE CHARGE YEAR [112,675] A person will have a surplus surrender number for the relevant eligible financial year if the number of eligible emissions units surrendered by the liable entity by the 1 February surrender deadline is more than the liable entity’s emissions number for the eligible financial year, less the number of eligible emissions units that were over surrendered in a previous financial year.197 The surplus surrender number is the excess (expressed as a positive number). In the flexible charge years, the surplus surrender number carries forward into the s 133 compliance calculation for the coming eligible financial year(s). [page 343]

Appendix [112,700] Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) p 135.

Diagram 4.1 Payment and surrender process in fixed charge years

[page 344] Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) p 136.

Diagram 4.2 Payment and surrender process in flexible charge years

1 Professor Ross Garnaut, “Final Report to the Commonwealth, State and Territory Governments of Australia” (Report, Garnaut Climate Change Review, 30 September 2008) 323. 2 Professor Ross Garnaut, “Final Report to the Commonwealth, State and Territory Governments of Australia” (Report, Garnaut Climate Change Review, 30 September 2008) 323. 3 Clean Energy Act 2011 (Cth) s 5; cf Commissioner of Taxation v Hart (2004) 217 CLR 216; 206 ALR 207; [2004] HCA 26; BC200403006; Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359; 123 ALR 451; 68 ALJR 680; BC9404644. 4 Clean Energy Act 2011 (Cth) s 29(2); cf Federal Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235; 179 ALR 625; [2001] HCA 32; BC200102756. 5 The eight factors in s 177D of the Income Tax Assessment Act 1936 (Cth) are: (i)

the manner in which the scheme was entered into or carried out;

(ii) the form and substance of the scheme; (iii) the time at which the scheme was entered into and the length of the period during which the scheme was carried out; (iv) the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme;

(v) any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme; (vi) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme; (vii) any other consequence for the relevant taxpayer, or for any person referred to in subparagraph (vi), of the scheme having been entered into or carried out; and (viii) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in subparagraph (vi). 6 Federal Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235; 179 ALR 625; [2001] HCA 32; BC200102756; Commissioner of Taxation v Hart (2004) 217 CLR 216; 206 ALR 207; [2004] HCA 26; BC200403006; Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359; 123 ALR 451; 68 ALJR 680; BC9404644; Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404; 141 ALR 92; 71 ALJR 81; BC9605762. 7 Federal Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235; 179 ALR 625; [2001] HCA 32; BC200102756. 8 Clean Energy Act 2011 (Cth) s 3. 9 Protean (Holdings) Ltd v Environment Protection Authority [1977] VR 51 at 55; (1977) 40 LGRA 189. 10 This number is to be specified in regulations yet to be promulgated. 11 National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) s 74AA(2). 12 NGER Act s 74AA(2). 13 NGER Act s 74AA(3). The National Greenhouse and Energy Reporting (Audit) Determination 2009 (Cth) (NGER Audit Determination) is made pursuant to s 75 of the NGER Act. 14 NGER Act s 74AA(2). 15 NGER Act s 74AA(2). 16 NGER Act ss 73, 73A and 74B. 17 NGER Act ss 73(2), (3), 73A(2), (3) and 74B(2), (3). 18 NGER Act ss 73(5), 73A(5) and 74B(5). 19 NGER Act ss 74(1), 74A(1) and 74C(2). 20 NGER Act ss 74(2), 74A(2) and 74C(3). 21 NGER Act s 74(3). 22 NGER Act s 74A(4). 23 NGER Act s 74C(5). 24 NGER Act s 75(1), (3). 25 NGER Audit Determination s 1.6. 26 NGER Audit Determination s 1.7. 27 NGER Act ss 73(4), 73A(4), 74(2A), 74A(3), 74AA(4), 74B(4) and 74C(4).

28 NGER Act ss 73(4), 73A(4), 74(2A), 74A(3), 74AA(4), 74B(4) and 74C(4). 29 NGER Act s 7. 30 NGER Audit Determination s 1.4. 31 NGER Act s 7. 32 NGER Act s 75A. 33 National Greenhouse and Energy Reporting Regulations 2008 (Cth) (NGER Reporting Regulations) reg 6.06. 34 Commonwealth v Tasmania (1983) 158 CLR 1; 46 ALR 625; 57 ALJR 450; BC8300075. 35 Matthews v Chicory Marketing Board (1938) 60 CLR 263; [1938] ALR 370; (1938) 12 ALJR 184; BC3800023 at [276] per Latham CJ; Air Caledonie International v Commonwealth (1988) 165 CLR 462 at 467; 82 ALR 385; 63 ALJR 30; BC8802633. 36 R v Barger (1908) 6 CLR 41; 14 ALR 374; BC0800044. 37 Clean Energy Act 2011 (Cth) s 99. The holding of an account in the Australian National Registry of Emissions Units is also a prerequisite for acquiring a carbon unit. 38 Clean Energy Act 2011 (Cth) s 100. 39 Clean Energy Act 2011 (Cth) s 100(6). 40 Harper v Minister for Sea Fisheries (1989) 168 CLR 314; 88 ALR 38; 63 ALJR 687; BC8902706 per Mason CJ, Deane and Gaudron JJ at 325. 41 Harper v Minister for Sea Fisheries (1989) 168 CLR 314; 88 ALR 38; 63 ALJR 687; BC8902706 per Mason CJ, Deane and Gaudron JJ at 335. 42 Clean Energy Act 2011 (Cth) s 103. 43 Clean Energy Act 2011 (Cth) s 5; NGER Act s 7. 44 Clean Energy Act 2011 (Cth) s 248(2); NGER Act s 47(1A). 45 Clean Energy Act 2011 (Cth) s 248(3); NGER Act s 47(1B). 46 Clean Energy Act 2011 (Cth) ss 248(4), 252(6); NGER Act ss 47(3), 31. 47 NGER Act s 47(3). 48 Clean Energy Act 2011 (Cth) s 249; NGER Act s 48. 49 Generally Commonwealth laws require secrecy by prohibiting officers from divulging information collected: see for example, s 16 of the Income Tax Assessment Act 1936 (Cth) (1936 Tax Act); NGER Act s 23. 50 NGER Act s 24. 51 NGER Act ss 24(5), (5A), 27. 52 NGER Act s 25. 53 Clean Energy Act 2011 (Cth) s 183. 54 Australian National Registry of Emissions Units Act 2011 (Cth) (ANREU Act) Pt 5.

55 Clean Energy Act 2011 (Cth) s 184. 56 Clean Energy Act 2011 (Cth) s 184. 57 Clean Energy Act 2011 (Cth) s 194; ANREU Act s 59. 58 Clean Energy Act 2011 (Cth) s 185. 59 Clean Energy Act 2011 (Cth) s 186. 60 Clean Energy Act 2011 (Cth) ss 187–188. 61 ANREU Act s 60. 62 Clean Energy Act 2011 (Cth) s 191. 63 Clean Energy Act 2011 (Cth) s 189. 64 Clean Energy Act 2011 (Cth) ss 190, 192; ANREU Act ss 62–63. 65 Clean Energy Act 2011 (Cth) s 195. 66 Clean Energy Act 2011 (Cth) s 196. 67 Clean Energy Act 2011 (Cth) s 197. 68 Clean Energy Act 2011 (Cth) s 198. 69 Clean Energy Act 2011 (Cth) s 199. 70 Clean Energy Act 2011 (Cth) s 200. 71 Clean Energy Act 2011 (Cth) s 201. 72 Clean Energy Act 2011 (Cth) s 202; ANREU Act s 61. 73 Clean Energy Act 2011 (Cth) ss 218–219. The disclosure does not apply to carbon units in the fixed charge period. 74 Clean Energy Act 2011 (Cth) ss 218(1), 219(1). 75 Clean Energy Act 2011 (Cth) ss 218(2), (3), 219(2), (3). No regulations have as yet been promulgated. 76 Clean Energy Act 2011 (Cth) ss 218(7), 219(7). 77 Clean Energy Act 2011 (Cth) ss 218(6), 219(6). 78 Karen Bubna-Litic, “Climate Change and Corporate Social Responsibility: The Intersection of Corporate and Environmental Law” (2007) 24(4) Environmental and Planning Law Journal at 253, 253. 79 The Commonwealth Bank of Australia and the National Australia Bank have been prevented by shareholder resolutions from investing in any industry or company that impacted on old growth forests. 80 Available on: www.asx.com. 81 ANREU Act s 4. 82 Australian Government, “Australia-NZ links on emissions trading” (Media Release, www.cleanenergyfuture.gov.au/australia-nz-links-on-emissions-trading); Tim Grosser, “Australia and New Zealand advance linking of their emissions trading schemes”, (Media Release, 5 December 2011, http://beehive.govt.nz/release/australia-and-new-zealand-advance-linking-their-emissions-trading-sche-

mes). 83 The Hon Greg, Combet AM MP (2012) “Australia and Europe strengthen carbon market collaboration”, 29 March 2012, (Media Release, www.climatechange.gov.au/minister/greg-combet/2012/mediareleases/March/mr20120329b.aspx). 84 Department of Climate Change and Energy Efficiency, “Australia and Republic of Korea working towards a low carbon future”, (Media Release, 27 April 2012, www.climatechange.gov.au/media/whats-new/australiakorea.aspx). 85 Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [7.14]. 86 Clean Energy Act 2011 (Cth) s 227(2). 87 Clean Energy Act 2011 (Cth) s 252(4), (6). 88 Clean Energy Act 2011 (Cth) s 227(3). 89 Clean Energy Act 2011 (Cth) s 227(1). 90 Clean Energy Act 2011 (Cth) s 227(1); Clean Energy Regulations 2011 (Cth) reg 14.1. 91 Clean Energy Regulations 2011 (Cth) reg 14.1(3). 92 Clean Energy Regulations 2011 (Cth) reg 14.1. 93 NGER Reporting Regulations reg 4.34. 94 NGER Act ss 22(3), 22B(2), 22C(2), 22F(2), 22H(2), and 22XA(2). 95 Clean Energy Act 2011 (Cth) s 228. 96 Clean Energy Act 2011 (Cth) s 228(1). 97 Clean Energy Act 2011 (Cth) s 228(2); see also Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [7.17]. 98 Clean Energy Act 2011 (Cth) s 228(3). 99 Clean Energy Act 2011 (Cth) s 228(2), (3)(b). 100 A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 38–590. 101 The Tax Institute has argued that dealings in derivatives in eligible emissions units should be GSTfree in the same manner as the underlying eligible emissions unit. GST-free treatment would eliminate the risk of carousel fraud and to relieve cash flow pressures and administrative burden: see The Tax Institute, “Submission to Carbon Price Legislation Branch” (Submission, The Tax Institute, 22 August 2011). 102 These issues were originally addressed in Ch 14 of the White Paper and Ch 11 of the Green Paper. 103 ITAA97 ss 4–1, 4–10. 104 Income Tax Assessment Act 1936 (Cth) (ITAA36) Pt 3, Div 1AB. 105 Income Tax Assessment Act 1997 (Cth) (ITAA97) s 50–25. 106 ITAA97 ss 420-10, 995-1(1). 107 ITAA97 s 420-12(1). This mirrors the definition of “hold” in the ANREU Act, s 5 and the Clean Energy Act 2011 (Cth) s 5.

108 ITAA97 s 420-12. 109 ITAA97 s 4–15. 110 ITAA97 s 118-15. 111 ITAA97 s 70-12. 112 ITAA97 s 420-15(1). 113 ITAA97 s 420-65(1). 114 ITAA97 s 420-65(2). 115 ITAA97 s 420-15(2). 116 Clean Energy Act 2011 (Cth) s 100. 117 New Zealand Flax Investments Pty Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179; [1939] ALR 1; (1938) 12 ALJR 313; BC3900037. 118 Commissioner of Taxation v Citylink Melbourne Ltd (2006) 228 CLR 1; 228 ALR 301; [2006] HCA 35; BC200605511. 119 Federal Commissioner of Taxation v James Flood Pty Ltd (1953) 88 CLR 492; [1953] ALR 903; (1953) 27 ALJR 481; BC5300430. 120 Federal Commissioner of Taxation v James Flood Pty Ltd (1953) 88 CLR 492 at 506; [1953] ALR 903; (1953) 27 ALJR 481; BC5300430. 121 ITAA97 s 420-15(3). 122 ITAA97 s 420-15(4). 123 ITAA97 s 420-15(5). 124 Clean Energy Act 2011 (Cth) s 134. 125 ITAA97 s 420-25(2), (3). 126 ITAA97 s 420-5(3). 127 ITAA97 s 420-5(1). 128 ITAA97 s 420-70(1). 129 ITAA97 s 420-40(1). 130 ITAA97 s 420-40(5). 131 ITAA97 s 420-40(2). 132 ITAA97 s 420-40(3). 133 Australian Government, “National Carbon Offset Standard” (Policy, version 2, Australian Government, Department of Climate Change and Energy Efficiency, 1 March 2012). VERs are not registered emissions units, as defined. 134 ITAA97 s 104-205(1). 135 ITAA97 s 104-205(1)(b)–(c), (2).

136 ITAA97 ss 402-205(4), 420-21(2). 137 ITAA97 s 420-21(1). 138 ITAA97 s 420-43. 139 ITAA97 s 420-35. 140 ITAA97 s 420-45(1). 141 ITAA97 s 420-45(2). 142 ITAA97 s 420-45(3). 143 ITAA97 s 420-50(1). If the unit was not taken into account in 20X0, the opening value is nil. 144 ITAA97 s 420-55(2). 145 ITAA97 s 420-55(1), (4), (5). 146 ITAA97 s 420-57(5). 147 ITAA97 s 420-57(6). 148 ITAA97 s 420-70(3). 149 Clean Energy Act 2011 (Cth) s 115. 150 ITAA97 s 420-58(2). 151 ITAA97 s 420-60(1). 152 ITAA97 s 420-20. 153 ITAA97 s 420-30. 154 Clean Energy Act 2011 (Cth) s 125(5). The concept of “interim emissions number” is defined in s 126 of the Clean Energy Act 2011 (Cth) and is discussed in [70,350]. The interim emissions number for the relevant financial year is 75 per cent of the total provisional emissions numbers in the previous eligible financial year or a reasonable estimate of 75 per cent of the provisional emissions number for the relevant eligible financial year. 155 Clean Energy Act 2011 (Cth) s 125(2), (6). A number ending in .5 is rounded up. Zero is taken to be a whole number. 156 Clean Energy Act 2011 (Cth) s 127. 157 Clean Energy Act 2011 (Cth) s 125(7). 158 Clean Energy Act 2011 (Cth) s 129(2). 159 Clean Energy Act 2011 (Cth) s 129(4). 160 Clean Energy Act 2011 (Cth) s 128(5). 161 Clean Energy Act 2011 (Cth) s 128(2), (6). 162 Clean Energy Act 2011 (Cth) s 128(7). 163 Clean Energy Act 2011 (Cth) s 133(5). 164 Clean Energy Act 2011 (Cth) s 133(2).

165 Clean Energy Act 2011 (Cth) s 133(6). 166 Clean Energy Act 2011 (Cth) s 133(7). 167 Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth) s 8(1). 168 Clean Energy Act 2011 (Cth) s 134. 169 Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth) s 8(3)(a). 170 Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth) s 8(3)(b), (4). 171 Clean Energy Act 2011 (Cth) ss 135, 136. The regulations may specify a lower per annum rate of penalty interest. 172 Clean Energy Act 2011 (Cth) s 141(1). 173 Clean Energy Act 2011 (Cth) s 141(3). 174 Clean Energy Act 2011 (Cth) s 141(2). 175 Clean Energy Act 2011 (Cth) s 141(4). 176 Clean Energy Act 2011 (Cth) s 141(6). 177 Clean Energy Act 2011 (Cth) s 281 (items 27–29). 178 There are no “safe harbours” for reporting and liability under the Acts, and there is no legislative or administrative system for obtaining binding rulings from the regulator. Section 11D of the NGER Act defines “unsatisfactory compliance record” to include a person, at any time during the preceding five years, providing a report under the NGER Act that contains information that is false or misleading in a material particular. Best endeavours will not protect a liable entity. Nor will the effluxion of time, for there is no time limit on the ability of the regulator to issue a default assessment. 179 Clean Energy Act 2011 (Cth) s 130(2), (4). The application must be made by the person upon whom the estimation error unit shortfall charge was imposed. 180 Clean Energy Act 2011 (Cth) s 130(2). 181 Clean Energy Act 2011 (Cth) s 130(3). 182 Clean Energy Act 2011 (Cth) s 130(4). 183 Clean Energy Act 2011 (Cth) s 281 (item 24). 184 Clean Energy Act 2011 (Cth) s 134A(1), (2). 185 Clean Energy Act 2011 (Cth) s 134A(1). 186 Clean Energy Act 2011 (Cth) s 134A(2). 187 Clean Energy Act 2011 (Cth) s 134A(3). 188 Clean Energy Act 2011 (Cth) s 134A(4). 189 Clean Energy Act 2011 (Cth) s 281 (item 25). 190 Clean Energy Act 2011 (Cth) s 135(2), (3). 191 Clean Energy Act 2011 (Cth) s 135(4). 192 Clean Energy Act 2011 (Cth) s 281 (item 26).

193 Clean Energy Act 2011 (Cth) s 125(4). 194 Clean Energy Act 2011 (Cth) s 131. 195 Clean Energy Act 2011 (Cth) s 128(4). 196 Clean Energy Act 2011 (Cth) s 132. 197 Clean Energy Act 2011 (Cth) s 133(4).

[page 345]

Chapter 6 Enforcement Powers of the Regulator Introduction [130,001] This chapter deals with the significant powers of the Clean Energy Regulator to enforce the provisions of the Clean Energy Act 2011 (Cth), the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) and the Australian National Registry of Emissions Units Act 2011 (Cth) (ANREU Act) and their associated Regulations. Any breach of civil penalty provisions in the Acts and Regulations risks prosecution. The threat of prosecution by the regulator should act as a deterrent, for in many instances, the maximum penalty for a corporation is 10,000 penalty units (currently $1,100,000) and for any other person 2,000 penalty units ($220,000).1 At a price per carbon unit of $23, the 10,000 penalty unit is approximately equal to 47,826 carbon units.2 Penalties are not tax deductible, thereby further increasing their cost. In certain circumstances, the regulator can also advance criminal prosecution. The regulator (and its authorised officers, inspectors and assisting persons) may: enter premises and exercise monitoring powers, including: — searching the premises and anything on the premises; — examining any activity conducted on the premises; — inspecting and examining anything on the premises, including any document; — photographing and videoing anything on the premises, including taking copies and extracts from documents; — operating electronic equipment on the premises for a range of

purposes; — securing anything on the premises; ask questions and seek production of documents; issue infringement notices; enter into enforceable undertakings; and require a controlling corporation or liable entity to appoint an external auditor to carry out an audit on one or more aspects of compliance with the Acts and Regulations. [page 346] [130,025] It is well recognised in self-assessment regimes and market-based mechanisms such as emissions trading schemes that “a credible and robust Scheme will depend on strong monitoring, reporting, audit and compliance provisions.”3 In the course of her second reading speech for the Clean Energy Bill 2011 (Cth), the Prime Minister, the Hon Julia Gillard MP foreshadowed such powers in the regulator: The Clean Energy regulator will work with liable entities to ensure compliance with the mechanism and is specifically charged with educating and advising them about it and how they may comply. The regulator will have appropriate and proportionate powers to monitor compliance and, where problems emerge, to take action to address them. Enforcement and penalties are focused on those who have obligations under the mechanism — not on the general public.4

The Revised Explanatory Memorandum (EM) to the Clean Energy Bill 2011 (Cth) reinforces that “effective enforcement arrangements are vital to promote compliance with the mechanism and to achieving its objectives.”5 [130,050] In late May 2012, the regulator released a policy in support of the regulator’s approach to the facilitation of compliance with, and its enforcement powers under the Acts administered by the regulator: the NGER Act, the Clean Energy Act 2011 (Cth), the ANREU Act, the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) and the Renewable Energy (Electricity) Act 2000 (Cth). The policy, titled “Clean Energy Regulator Compliance, Education, and Enforcement Policy”6 urges stakeholders to familiarise themselves with the policy. The policy sits within the broader Australian government law enforcement policy context, framed by: Prosecution Policy of the Commonwealth; Commonwealth Fraud Control Guidelines; and Attorney-General’s Department — Overarching Principles for

Selecting Cases for Investigation and Administrative, Civil and Criminal Sanctions. The regulator says its core approach to enforcement involves: assisting participants to understand their rights and obligations through education and training programs; supporting those who want to do the right thing and, where appropriate, incorporating feedback into enhancement of systems and processes; using intelligence analysis where possible to inform regulatory response decisions; ensuring that procedural fairness is consistently applied to all participants so the system is seen as equitable and fair, exercising monitoring and enforcement powers independently in the public interest with integrity and professionalism and without fear, favour or bias; [page 347] ensuring that decision-making takes place within rigorous corporate governance processes and is able to be reviewed internally, and externally by relevant bodies, including the Administrative Appeals Tribunal and the courts (information about how to apply for an internal review of a decision can be found on the Clean Energy Regulator’s website and is discussed in Ch 7); actively pursuing those who opportunistically or deliberately contravene the law; ensuring that regulatory responses are proportionate to the risks posed by any non-compliance and take into account the conduct of scheme participants, including their compliance history; conducting investigations professionally; and ensuring that the investigative process and the resolution of enforcement matters is conducted as efficiently as possible.7 These statutory and administrative measures are designed so that many enforcement options can be pursued outside of the courts.8 As with other government agencies, the regulator will use intelligence analysis and risk assessment to make strategic decisions about resources allocation, aiming to maximise the number of persons that voluntarily comply with their obligations. Compliance monitoring will include:9

analysis of information reported by registered persons; analysis of information from other sources, such as the general public, peak bodies and industry groups, non-government organisations and other government agencies; desk top analysis, including use of satellite imagery and other innovative analysis techniques; targeted monitoring activities using authorised officers; and independent audits of registered persons. The regulator will also work closely with other national law enforcement and regulatory bodies, including the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC), the Australian Transaction Reports and Analysis Centre (AUSTRAC), the Australian Federal Police (AFP) and the Commonwealth Director of Public Prosecutions (DPP). [page 348] Chart 130,050-1 depicts the penalty hierarchy.

Source: Revised Explanatory Memorandum, Clean Energy Bill 2011 (Cth) at [7.6]. [page 349] [130,075] Section 11D of the NGER Act defines the meaning of “unsatisfactory compliance record” for the purposes of the NGER Act. Box 130,075-1 sets out the circumstances in which an unsatisfactory compliance record will arise. Box 130,075-1 — Unsatisfactory compliance record10 at any time during the preceding 5 years, the person has breached a requirement under the NGER Act to provide a report; at any time during the preceding 5 years, the person has provided a report under the NGER Act that contains information that is false or misleading in a material particular; at any time during the preceding 5 years, an amount of unit shortfall charge payable by the person remained unpaid more than 3 months after it became due for payment; at any time during the preceding 5 years, a copy of an audit report of a greenhouse and energy audit relating to the person and containing an adverse conclusion (within the meaning of the National Greenhouse and Energy Reporting (Audit) Determination 2009 (Cth)) was given to the regulator under the NGER Act; at any time during the preceding 5 years, the person has breached a civil penalty provision of the NGER Act, the Clean Energy Act 2011 (Cth) or a determination under s 113 of the Clean Energy Act 2011 (Cth) (relating to auctions); if the person is a body corporate — at any time during the preceding 5 years, an executive officer of the body corporate has breached a civil penalty provision of the NGER Act, the Clean Energy Act 2011 (Cth) or a determination under s 113 of the Clean Energy Act 2011 (Cth); at any time during the preceding 5 years, the person has done a particular act of a kind specified in the regulations or the person has omitted to do a particular act of a kind specified in the regulations; the person has been convicted of an offence against the NGER Act or the Clean Energy Act 2011 (Cth);

if the person is a body corporate — an executive officer of the body corporate has been convicted of an offence against the NGER Act or the Clean Energy Act 2011 (Cth).

Sources of law [130,100] This chapter references these primary sources of law: Australian National Registry of Emissions Units Act 2011 (Cth); Clean Energy Act 2011 (Cth); and National Greenhouse and Energy Reporting Act 2007 (Cth). [page 350]

Information and document gathering powers [130,125] Many provisions of the Acts and Regulations require persons to make an application to the regulator, and in the course of such application to provide information and documents to the regulator. In most instances, the regulator is empowered in the course of considering applications to request further information. If the regulator requires the applicant to give the regulator further information in connection with the application, then the regulator must exercise that power in a reasonable way and ensure that the further information sought is relevant to the matter to which the application relates.11 The powers of the regulator to gather information or documents from a person are further expanded in: Subdivision F of Div 4 of Pt 6 of the NGER Act; and Part 13 of the Clean Energy Act 2011 (Cth). [130,150] As a precondition to the exercise of its information and document gathering powers under the Acts, the regulator must first satisfy an objective

test: the regulator must have reason to believe that information relating to whether the NGER Act has been complied with is in a person’s possession, custody or control;12 or the regulator must believe on reasonable grounds that a person has information or a document that is relevant to the operation of the Clean Energy Act 2011 (Cth) or any of the associated provisions.13 The “associated provisions” are:14 the provisions of the Regulations; the provisions of the Clean Energy (Charges-Excise) Act 2011 (Cth); the provisions of the Clean Energy (Charges-Customs) Act 2011 (Cth); the provisions of the Clean Energy (Unit Issue Charge-Auctions) Act 2011 (Cth); the provisions of the Clean Energy (Unit Issue Charge-Fixed Charge) Act 2011 (Cth); the provisions of the Clean Energy (Unit Shortfall Charge-General) Act 2011 (Cth); the provisions of the Clean Energy (International Unit Surrender Charge) Act 2011 (Cth); ss 15A, 15AA, 18A, 22A, 22AA, 22B, 22C, 22E and 22F of the NGER Act; the remaining provisions of the NGER Act, in so far as those provisions relate to the Clean Energy Act 2011 (Cth) or the regulations or ss 15A, 15AA, 18A, 22A, 22AA, 22B, 22C, 22E and 22F of the NGER Act; and ss 134.1, 134.2, 135.1, 135.2, 135.4, 136.1, 137.1 and 137.2 of the Criminal Code 1995 (Cth), in so far as those sections relate to the Clean Energy Act 2011 (Cth) or the Regulations or the provisions of the NGER Act. [page 351]

SECTION 71 NOTICE TO GIVE COMPELLABLE INFORMATION

[130,175] If the regulator has reason to believe that information relating to whether the NGER Act has been complied with is in a person’s possession, custody or control (the compellable information), the regulator may, in writing, require the person to give specified compellable information to the regulator, within the period and in the manner and form specified: NGER Act s 71. The information provided must not be false or misleading in any particular. The requirement to give information to the regulator is expressed to apply despite any law of the Commonwealth, a state or territory prohibiting disclosure of the information.15 However, it may be arguable that this exclusion of prohibitions on disclosure does not override the common law claim for legal professional privilege. A breach of the obligation to provide specified information to the regulator attracts a civil penalty, unless the person has a reasonable excuse16 or providing the information might tend to incriminate the person or expose the person to a penalty.17 The maximum penalty is 50 penalty units (currently $5500).18 A person will not have a reasonable excuse merely because the information is commercially sensitive or of a commercial nature or subject to an obligation of commercial confidentiality.19 Providing information that is false or misleading attracts a civil penalty up to 60 penalty units ($6600).20

SECTION 221 NOTICE TO GIVE INFORMATION OR PRODUCE DOCUMENTS [130,200] If the regulator believes on reasonable grounds that a person has information or a document that is relevant to the operation of the Clean Energy Act 2011 (Cth) or any of the associated provisions, the regulator may, by written s 221 notice given to a person, require the person within the period and in the manner and form specified in the notice to:21 give the regulator any information; produce to the regulator any documents; or make copies of any documents and produce them to the regulator. The minimum time that the regulator must specify for complying with a s 221 notice is 14 days after the notice is provided.22

The Commonwealth will provide reasonable compensation if a person is required to provide copies of documentation to the regulator.23 If a person is capable of complying with the s 221 notice, the person must comply with the notice.24 [page 352] Additionally, a person must not:25 (a) aid, abet, counsel or procure or (b) induce, whether by threats or promises or otherwise or (c) be in any way, knowingly concerned in, or party to or (d) conspire with others to effect a contravention of the obligation to provide information or produce documents. A breach of the s 221 notice obligation to provide information or produce documents to the regulator attracts a civil penalty. The maximum penalty for a corporation is 10,000 penalty units (currently $1,100,000) and for any other person the maximum penalty is 2,000 penalty units ($220,000).26

RETENTION OF DOCUMENTS BY THE REGULATOR [130,225] The regulator may take and retain possession of a document that is produced under a s 221 notice for as long as necessary.27 However, if a person is entitled to the document, then the regulator must supply a certified copy to the person as soon as practicable.28

CLAIMS FOR LEGAL PROFESSIONAL PRIVILEGE AND SELF-INCRIMINATION [130,250] The common law recognises that a person may: resist statutory requests to produce documents if the documents are claimed to be held subject to legal professional privilege (LPP) or choose not to divulge information on the basis that it may tend to incriminate.

Legal professional privilege [130,275] Section 302 of the Clean Energy Act 2011 (Cth) provides that the Clean Energy Act 2011 (Cth) does not affect the law relating to legal professional privilege. The doctrine of legal professional privilege is recognised in the common law.29 Gleeson CJ, Gaudron, Gummow and Hayne JJ of the High Court of Australia affirmed this position in the case of Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission, saying:30 It is now settled that legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings (at 552).

[page 353] LPP attaches to: (1) confidential communications passing between a client and the client’s legal adviser, for the dominant purpose of obtaining or giving legal advice (legal advice privilege); and (2) confidential communications passing between a client, the client’s legal adviser and third parties, for the dominant purpose of use in or in relation to litigation, which is either pending or in contemplation (litigation privilege).31 The claim for LPP is made by the client, not the lawyer. A valid claim for legal professional privilege in respect of documents will excuse the lawyer and the client from producing them to the regulator under a Clean Energy Act 2011 (Cth) s 221 notice. Arguably, a valid claim for legal professional privilege in respect of information contained in documents should also excuse the lawyer and client from providing them to the regulator under a NGER Act s 71 notice. The Law Council of Australia (LCA) has an agreed set of protocols with the Australian Federal Police (AFP) for the execution of search warrants on lawyer’s premises, particularly under s 10 of the Crimes Act 1914 (Cth), which protects access to documents the subject of a claim for LPP. Generally, where the lawyer is prepared to co-operate with the police search team: no member of that team will inspect any document identified as potentially within the warrant until the lawyer has been given a

reasonable opportunity to seek instructions to claim legal professional privilege on behalf of a client in respect of any of the documents so identified; and if a claim for LPP is made in the agreed circumstances, no member of the police search team will inspect any document the subject of the claim until either the claim is abandoned or the claim is dismissed by a court. All the documents which the lawyer claims are subject to LPP are to be placed in a container which shall then be sealed under the supervision of the executing officer and the lawyer. A list of the contents of the container and the container are then to be deposited with an officer of the court. It would not be unreasonable for the regulator to agree a similar approach to its requests under the Acts.

Self-incrimination [130,300] If information sought by the regulator in a NGER Act s 71 notice might tend to incriminate a person or expose the person to a penalty, the information need not be provided.32 However, a person is not excused from giving information or producing a document to the regulator under a Clean Energy Act 2011 (Cth) s 221 notice on the ground that the information or the production of the document might tend to incriminate the person or expose the person to a penalty.33 Self-incriminatory disclosures cannot be used against the person who makes the disclosure, either directly in court (known as “use” immunity) or indirectly to gather other evidence against the person (known as “derivative use” immunity).34 Accordingly, [page 354] information or documents provided by an individual are not admissible as evidence against the individual in: civil proceedings under the Clean Energy Act 2011 (Cth) for the recovery of a civil penalty order; or criminal proceedings; other than offences under the Clean Energy Act 2011 (Cth) involving false or misleading information or documents.35

Monitoring compliance [130,325] The regulator and appointed authorised officers and inspectors that act on its behalf have considerable power to monitor and enforce compliance under the Acts by entering the premises of a facility in order to: determine whether the Acts have been complied with; or substantiate any information provided.36

APPOINTMENT OF AUTHORISED OFFICERS AND INSPECTORS [130,350] Authorised officers must be appointed strictly in accordance with the NGER Act37 and inspectors must be appointed strictly in accordance with the Clean Energy Act 2011 (Cth).38 Authorised officers and inspectors must carry their regulator-issued identity cards at all relevant times when attending the premises of a person.39 The regulator may, in writing, appoint: an APS employee or an employee of a state or a territory or of an authority of a state or a territory as an authorised officer;40 a member or special member of the AFP or a suitably qualified staff person of the regulator as an inspector. An inspector who is a member of the staff of the regulator must be an SES or acting SES employee or an APS employee performing the duties of an Executive Level 1 or 2 positions, or an equivalent position.41 In order to appoint a person as an inspector the regulator must be satisfied that a person has suitable qualifications and experience to carry out the duties of an inspector.42

ISSUE AND USE OF IDENTITY CARDS [130,375] Authorised officers and inspectors must be issued identity cards. The identity card must contain a recent photograph of the authorised officer or inspector.43 [page 355]

The inspector’s identity card must in the form approved by the regulator. The authorised officer’s identity card must contain the full name of the authorised officer, the office held, the date the card expires, a signature of the authorised officer and a statement that the authorised officer is authorised to exercise powers and to perform functions under the NGER Act.44 The authorised officer must carry his or her card at all times when exercising powers or performing functions as an authorised officer, and the authorised officer is not entitled to exercise any powers if he or she fails to produce the identity card for inspection when requested by the occupier.45 The inspector must carry his or her card at all times when exercising powers as an inspector.46 If a person that has been issued with an identity card ceases to be an authorised officer or inspector and does not as soon as practicable after ceasing return the identity card to the regulator, the former authorised officer or inspector commits a strict liability offence47 (see s 6.1 of the Criminal Code 1995 (Cth)) and will be penalised one penalty unit ($110).48

EXERCISE OF POWER UNDER THE DIRECTIONS OF THE REGULATOR [130,400] Each authorised officer and inspector must comply with the directions of the regulator when exercising his or her powers.49

ENTERING PREMISES [130,425] Authorised officers will be able to enter any premises and exercise their powers provided: if the premises are business premises, the occupier of the premises has consented to the entry and, if required by the occupier, the authorised officer has shown his or her identity card;50 or the entry is under a monitoring warrant.51 An authorised officer may enter any premises and exercise powers under the NGER Act for the purposes of determining whether the NGER Act has been complied with.52 An authorised officer may not enter premises outside of normal business

hours unless the entry is made under a warrant.53 Inspectors will be able to enter any premises and exercise their powers provided: [page 356] the occupier of the premises has consented to the entry and, if required by the occupier, the inspector has shown his or her identity card;54 or the entry is under a monitoring warrant.55 An inspector may enter any premises and exercise the monitoring powers set out in s 233 of the Clean Energy Act 2011 (Cth) for the purpose of:56 (a) determining whether the Clean Energy Act 2011 (Cth) or associated provisions have been or are being complied with; or (b) substantiating information provided under the Clean Energy Act 2011 (Cth) or the associated provisions.

With consent [130,450] Consent has effect until it is withdrawn.57 If an authorised officer or inspector is on the premises with the consent of the occupier, and the occupier asks the authorised officer or inspector to leave, they must do so.58 Consent to entry must be given voluntarily in order for the entry into premises pursuant to that consent to be lawful.59 Consent may limit entry to a particular period.60 Before consent is obtained, the occupier must be informed that the occupier can refuse consent.61

Under warrant [130,475] The requirements for obtaining monitoring warrants are discussed in [130,675]. Before entering premises under a monitoring warrant, the authorised officer must: announce that he or she is authorised to enter the premises; and give any person at the premises an opportunity to allow entry to the premises.62

The authorised officer must identify himself or herself to the occupier of the premises or another person who apparently represents the occupier,63 and the authorised officer must make a copy of the warrant available to that person.64 Before entering premises under a monitoring warrant, the inspector must: announce that he or she is authorised to enter the premises; show his or her identity card to the occupier of the premises (or if the occupier is not present, to another person who apparently represents the occupier); and give any person at the premises an opportunity to allow entry to the premises.65 [page 357] The inspector exercising a monitoring warrant must be in possession of the warrant or a copy of the warrant.66 The inspector must make a copy of the monitoring warrant available to the occupier or other person apparently representing the occupier if the occupier is not present.67

Rights and responsibilities of occupiers [130,500] The inspector must inform the occupier or the other person of their rights and responsibilities.68 Generally: the occupier or other person is entitled to observe the execution of the monitoring warrant. However, the right to observe the execution of the monitoring warrant ceases if the occupier or other person impedes that execution; the monitoring warrant may be executed in two or more areas of the premises at the same time; the occupier or other person must provide the inspector executing the monitoring warrant and any person assisting the inspector with all reasonable facilities and assistance for the effective exercise of their powers; and the occupier or other person commits an offence if they fail to provide reasonable facilities and assistance. The penalty is 30 penalty units ($3,300).69

MONITORING POWERS [130,525] The powers of authorised officers to monitor compliance and the monitoring powers of inspectors are prescribed.70 Table 130,525-1 sets out their respective powers. In entering premises and exercising monitoring powers an inspector may be assisted by other persons if the assistance is necessary and reasonable. Such person(s) assisting may only enter and exercise monitoring powers in accordance with a direction given to them by the inspector.71 Table 130,525-1 — Powers of authorised officers and inspectors An authorised officer may: An inspector may: search the premises for anything on the premises that may relate to compliance with the NGER Act

search the premises and anything on the premises

examine any activity conducted on the premises that may relate to information provided for the purposes of the NGER Act

examine any activity conducted on the premises

[page 358] search the premises for anything on the premises that may relate to compliance with the NGER Act

search the premises and anything on the premises

examine anything on the premises that may relate to information provided for the purposes of the NGER Act

inspect, examine, take measurements of or conduct tests on anything on the premises

take photographs or make

make any still or moving

video or audio recordings or sketches on the premises of any such activity or thing

image or any recording of the premises or on anything on the premises

inspect any document on the premises that may relate to information provided for the purposes of the NGER Act and take extracts from, or make copies of, any such document

inspect any document on the premises and take extracts from, or make copies of, any such document

take such equipment and materials onto the premises as the authorised officer requires for the purpose of exercising powers in relation to the premises

take such equipment and materials onto the premises as the inspector requires for the purpose of exercising powers

to secure a thing that is found during the exercise of monitoring powers on the premises for a period not exceeding 24 hours, provided that the inspector believes on reasonable grounds that:

the power to secure a thing that is found during the exercise of monitoring powers on the premises until a warrant is obtained to seize the thing, provided that an authorised officer believes on reasonable grounds that the thing affords evidence of a contravention of the NGER Act or of the

— the thing affords evidence of the commission of an offence against the Clean Energy Act 2011 (Cth), the Crimes Act 1914 (Cth) or the Criminal Code 1995 (Cth) that relates to the Clean Energy Act 2011 (Cth); — it is necessary to secure

commission of an offe