Macquarie Journal of International and Comparative Environmental Law
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Macquarie Journal of International and Comparative Environmental Law |
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RENEE GARNER[*]
There is no denying that carbon concentrations have risen since the industrial revolution … there is also no denying that global warming is taking place. (Peter Hendy, CEO of Australian Chamber of Commerce and Industry (2003)).The past two decades have been marked by growing international sentiment that opportunities for economic growth can no longer be considered independent of environmental conservation imperatives. At the forefront of international environmental concerns is the issue of human-induced global climate change.
When the Kyoto Protocol[1] to the United Nations Framework Convention on Climate Change (UNFCCC)[2] was adopted in December 1997, it provided a legal framework that addressed the issue of global climate change and placed quantifiable obligations upon sovereign States to decrease their levels of greenhouse gas emissions.[3] This legal framework established the beginnings of a global emissions trading system[4] utilising flexible mechanisms such as emission reduction units (‘ERUs’).[5] Generally, emission trading systems involve the use of emission permits or credits, issued by governments, which can be traded amongst participants and acquitted to cover emissions.[6]
An integrated international emissions trading scheme as envisaged in the Protocol is years away logistically. In the interim, however, the European Union has successfully implemented the world’s first and largest multi-country, multi-sector Greenhouse Gas (GHG) emissions trading program, namely the European Union Emissions Trading Scheme (‘EU-ETS’). Having commenced operation on 1 January 2005 the EU-ETS is a transparent, high volume and high liquidity broad-based market whereby installations[7] covered by the scheme can trade in emissions. It is believed that this scheme will be an effective model for the operation of Kyoto Protocol mechanisms in a broad-based market trading arena and if successful will be implemented on a global scale.[8]
The Australian Government has remained steadfast in its refusal to ratify the Kyoto Protocol. Despite this internationally unpopular stance, Australia is currently the 3rd highest emitter of Greenhouse Gases per capita in the world.[9] The primary justification the Howard Government has provided for non-ratification is that ‘to ratify would cost jobs and damage industry’.[10] However, the States[11] and various industries[12]
are pushing for a broad-based emission trading market to exploit international and domestic commercial opportunities. Non-government organisations, such as WWF-Australia[13]
and Australian Conservation Foundation,[14] support State action in this regard asserting that ‘a well designed emission trading scheme will help reduce greenhouse pollution … [and] will also help unlock Australia’s innovative spirit and create thousands of jobs in new clean industries’.[15] States such as Western Australia[16] and New South Wales[17] are also taking steps forward in this regard by implementing legislation giving sequestered carbon legal rights.
A national broad-based market for the trading of emissions, similar to that of the EU-ETS, would allow industry as well as the private and public sectors to fluidly trade emissions. Such a scheme has the potential to add value to business both in terms of environmental conservation and monetary value realisable in domestic and international carbon markets. The primary advantages of such a system over other policy options are ‘dependability and the [market-based system’s] potential to minimize the costs of achieving a given level of greenhouse gas abatement’.[18] Broad-based measures equalise costs of abatement by distributing costs and opportunities for reducing participant’s emission outputs, thus resulting in a fully efficient market with a price per unit of tradable carbon based squarely on market forces.[19] Further, a national emission trading market within Australia, similar to the EU-ETS (and thus compatible with the Kyoto Protocol) could be readily integrated into a future international trading system, and include ‘emission credits’ earned offshore by companies and individuals through Kyoto Protocol mechanisms.
The Australian Constitution prescribes and limits the Commonwealth’s power to legitimately allow a national emissions trading system within Australia. This paper examines the constitutional implications of regulating a national emissions trading system within Australia[20] that is compatible with the Kyoto Protocol and that displays similar key features of the EU-ETS.
Analysis of this model in light of Australia’s Constitutional framework provides insights into Australia’s future direction if a national emissions trading system were to be regulated at a Federal level.
This paper argues that successful regulation of a national emissions trading system can be achieved through a number of Constitutional powers, namely trade and commerce,[21] taxation[22] and external affairs.[23] However, each power contains its own limitations and issues that alters a potential trading system within Australia in comparison with a EU-ETS model. The paper concludes by comparing and contrasting the extent to which each Constitutional head of power gives rise to an emissions trading system most similar to the operational benchmark EU-ETS model.
“Combating climate change is not an option, it is a necessity” (EU Environment Commissioner, Stavros Dimas 17 February 2005).
On 1 January 2005 the world’s first and largest multi-country, multi-sector Greenhouse Gas emissions trading program began operation- the European Union’s Emission Trading Scheme (EU-ETS). Implementation of this trading scheme constitutes an effective policy instrument, based on economic rationality and sound business in order to achieve the EU’s commitment to reduce emissions under multilateral agreements such as the Kyoto Protocol. The main feature of the EU-ETS is the development of a broad-based market for the trading of carbon emissions and the use of market forces to create a price for carbon based on supply and demand.[24]
The importance of using the EU-ETS as a benchmark model for an Australian national emissions trading system cannot be overstated. This model provides the only successful, fully operational Kyoto-compatible trading system in the world that covers a large and diverse range of installations. By detailing the structure and operational features of the EU-ETS as a potential model for Australia, constitutional limitations of regulating a similar system in Australia can be assessed and applied in greater detail. The EU-ETS offers an opportunity to critically assess the design and regulation of a broad-based environmental market within Australia.
In 1992 180 parties signed the UNFCCC with the stated goal to ‘stabilize atmospheric GHG concentrations at “safe” levels’.[25] Under this agreement, the Kyoto Protocol was signed by the existing EU-15 nations to meet their commitment of an 8% greenhouse gas (GHG) emission reduction collectively. The accession of 10 new member states in May 2004 expanded Kyoto’s reach to 25 EU member countries.
The development of the EU-ETS developed swiftly from the submissions in the Green Book[26] in March 2000 to publication of the Directive[27] on 13 October 2003. Importantly, this Directive is ‘binding, as to the result to be achieved, upon each Member State to which it is addressed’.[28]
The Directive[29] sets out the legal framework and the main features of the EU-ETS’s broad based market, the purpose of which is to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.[30] These features are outlined below.
This section outlines the key market features of the EU-ETS.
The EU-ETS covers six key industrial sectors and imposes caps on emissions of carbon dioxide (‘CO2’) from installations.[31] These include energy activities, production and processing of ferrous metals, mineral industry production and other activities.[32] Installations are defined in the Directive as ‘a stationary technical unit where one or more activities listed in Annex 1[33] are carried out and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions and pollutions’.[34] For example, combustion installations with a rated thermal input exceeding a certain production[35] output are determined to be obliged participants under the scheme pursuant to Annex 1 of the Directive.[36]
At the heart of the EU-ETS is the common trading ‘currency’ of emission allowances (‘EUA’). Under the Directive[37] one allowance equals the right to emit ‘one tonne of carbon dioxide equivalent during the specified period, which shall be valid only for the purposes of meeting the requirements of [the] Directive and shall be transferable’. A transferable allowance facilitates the trading element of emission trading.
The EU-ETS consists of a ‘warm-up’ phase from 2005 to 2007 and then successive 5-year periods[38] with the second phases from 2008-2012 coinciding with the Kyoto commencement period. However, the EU-ETS operates independently of entry into force of the Kyoto Protocol; the Kyoto Protocol is negotiated between governments imposing emissions targets on countries, whereas the EU-ETS is a scheme aimed at targeted installations, based on the EU Directive and national legislation.[39]
The EU-ETS is a cap-and-trade program where a fixed amount of emissions allowances are allocated by the National Allocation Plans (‘NAPs’).[40] These allowance allocations provide the legal right to emit. Member States are required to submit a plan to the EU Commission ‘stating the quantity of allowances that it intends to allocate for that period and how it proposes to allocate them’.[41] Installations covered by the scheme are given allowances, however, individuals, institutions, NGOs or other parties are free to buy and sell in the market in the same way as the installations. The EU Commission can accept, conditionally accept or reject these plans.[42]
The limit or ‘cap’ on the total number of allowances allocated in the EU-ETS creates the limited supply needed for a market to emerge.[43] Installations that keep their emissions below the level of their given allowance are able to sell their excess allowances at a price determined by supply and demand at that time. Those facing difficulty in remaining below their allocated emissions limit then have a choice between taking measures to reduce their emissions, such as investing in more efficient technology or using less carbon-intensive energy source; buying extra allowances they need at the market rate; or a combination of the two, whichever is the most cost-effective for the installation.[44] This efficient market mechanism ensures that emissions are reduced for the benefit of society, but in the most cost-effective way for the installations, thereby ensuring minimal impact on profit margins. Notably, the EU-ETS utilises a cap-and-trade system over the alternative baseline-and-credit system.
The concept of emissions trading is thought to have been conceived during the United States Environmental Protection Authority regulation of air pollution under the Clean Air Act 1970.[45] However, the legal framework for an international emissions trading system was first comprehensively developed through the Kyoto Protocol. The UNFCCC provides the fundamental building blocks on which the Kyoto Protocol is based and commits each party to it to adopt national policies to mitigate climate change ‘by limiting its anthropogenic emissions of greenhouse gases and protecting and enhancing its greenhouse gas sinks and reservoirs’.[46]
The EU-ETS was specifically designed to be compatible with emissions trading as envisaged under Article 17 of the Kyoto Protocol.[47] This compatibility allows participating entities in domestic emissions trading programmes under the Directive to use credits generated by the other compatible emission mechanisms[48] to offset reduction obligations under the EU-ETS.
Under Kyoto, Joint implementation (JI) enables EU-ETS installations to invest in emission reduction projects (for the benefit of the environment) and credit this saving towards their own emission targets[49] (JI projects yield credits known as ‘emission reduction units’, or ‘ERUs’). Clean Development Mechanisms (CDM) operate in the same way as JI, however, it covers projects in countries without an emission target under the Protocol[50] (CDM yields credits called ‘certified emission reductions’,[51] or ‘CERs’). The EU scheme is the first in the world that recognises these credits as equivalent to EU-ETS emission allowances (1 EUA = 1 CER = 1 ERU) and allows them to be traded under the scheme.
EU-ETS compatibility with Kyoto mechanisms increases the range of options available for installations under the scheme for meeting emission targets, improves the liquidity of the market and potentially lowers the price of allowances (through increased market supply), thus further reducing compliance costs.[52] Further, the EU-ETS gives certainty to investors in the rapidly emerging global market for JI and CDM projects therefore encouraging more investment and promoting the transfer of environmentally sound technologies that help the host country meet their respective emission goals.
It is important to note that a number of assumptions have been made in this article for the purposes of assessing whether constitutionally valid legislation can be implemented to create a national emissions trading system within Australia. These assumptions are consistent with operational features of the EU-ETS and are listed below:
1. Consistent with the trading periods under the EU-ETS,[53] a national emissions trading system within Australia will be operational from 2008-2012 (when the Kyoto Protocol commences).
2. The rules, eligibility, procedures and regulations of an Australian emissions trading system will be consistent with the Protocol, ensuring consistency streamlines reporting and acquittal procedures; supports ready access to any international emissions market; minimises administrative compliance and costs; and allows for cost-effectiveness of domestic abatement efforts.[54]
3. A tradeable, fungible and transferable product exists representing one tonne of carbon dioxide[55] valid only for meeting the requirements of the specific legislation. For each emission of greenhouse gas (equalling 1 tonne of CO2) that is released into the atmosphere, one emission permit is used up and retired from the trading system.[56]
4. Participants within the scheme are to be determined by the same process as outlined under the threshold productivity Annexure under the EU-ETS.[57] These outputs will be determined by a governing body created under the scheme. An efficient emissions trading system would need to be underpinned by a widely accepted and robust centralised system of emission estimation and verification.[58]
It has often been argued that the Australian federal system of government, with constitutional powers held at varying levels, is not well adapted to dealing with global issues such as climate change and the move towards sustainable energy sources.[59] The Australian Constitution (and the interpretation given to its provisions by the courts) defines the institutions of Government, establishes their areas of operation, sets the outer limits to their functions, and prescribes their interrelationships. In assessing whether a national emissions system can be regulated successfully in Australia, recourse to the Australian Constitution is necessary as it prescribes and limits the Australian Government’s powers to legislate. Legislative powers that are not conferred on the Australian Federal Government under the Constitution are held by the States. It is this distribution of powers between the Commonwealth and States that is a key feature of the Federal nature of Australian Government.
In order to achieve successful regulation of a national emissions trading system it is fundamental that the Commonwealth legislate to give effect to the desired features of this emission trading system that, like the EU-ETS, is independent of and compatible with the Kyoto Protocol. The following passages assess potential regulation of a national emissions trading system in Australia, similar to the operational features of the EU-ETS, with specific reference to the federal nature of Australia.
The Australian Constitution contains no explicit governmental power to regulate activities to protect the environment. The only environmental issue expressly addressed by the Constitution is the restriction on Commonwealth power to pass laws limiting ‘the reasonable use of waters of rivers for conservation or irrigation’.[60] It is impracticable to assert that ‘since there is not specific reference in the Constitution to the power of the Federal government to make laws with respect to the environment, the States possess primary constitutional power in this area’.[61] The Commonwealth does have considerable power to solve environmental problems ‘but it is not the uniform, direct, plenary power needed’[62] to directly regulate emission outputs across varying industries in Australia in a similar way that the EU-ETS does.
Traditionally, environmental powers rest primarily with the States and Territories,[63] this being consistent with mainly State and Territory ownership or control of a substantial percentage of emission sources throughout Australia. The four largest sources of emissions of CO2 in Australia are electrical generation (33.5%), other stationary energy (14.9%), agriculture (19%) and transport (15%).[64] There are no Commonwealth powers over industrial pollution, manufacturing or mining which may have provided the foundation for Commonwealth direct regulation of emissions produced in these industries or as a result of production or manufacturing of certain high emission release processes.
It is well established in Australia that the primary means by which international law enters into domestic law is through incorporation by the Federal Parliament.[65] Section 51(xxix) confers power on the Commonwealth to legislate with respect to ‘external affairs’. The Australian States and Territories cannot possess international personality and cannot enter into treaties even where the subject matter of the treaty falls within the State and Territory reserve powers, such as matters regarding the environment. However, the scope of the external affairs power is not limited to aspects of matters covered by other paragraphs of s 51. The accepted broad view as expounded in R v Burgess; Ex parte Henry[66] is such that it is ‘impossible to say a priori that a subject is necessarily such that it could never properly be dealt with by international agreement’.[67] Over the past twenty years at least fifteen Commonwealth Acts[68] dealing specifically with the environment have been enacted under section 51(xxix). This demonstrates that the external affairs power is the most important of the Commonwealth powers regarding environmental matters.
Although legislative power relating to matters geographically external to Australia are contemplated under the external affairs power,[69] it is to legislative implementation of treaties that s 51(xxix) is particularly directed.[70]
The Australian Federal Government ratified the UNFCCC on 30 December 1992. However, the Australian government has not shown the same commitment to the Kyoto Protocol remaining resilient in its policy against ratification. Its only commitment, through a unilateral agreement, is to limit its GHG emissions to 108 percent of its 1990 baseline.[71]
In June 2002, Prime Minister Howard outlined to the Australian Parliament that it was not in Australia’s best interest to ratify the Kyoto Protocol.[72]
The Prime Minister announced that ‘because arrangements currently exclude, and are likely under the present setting to continue to exclude, both developing countries and the United States, for us to ratify the protocol would cost us jobs and damage our industry’.[73] The then Federal Minister for the Environment, Dr David Kemp reiterated the Prime Minister’s views.[74] The Australian Government asserts that Australian business and industry[75] ‘loses no significant business opportunities because Australia has not ratified the Kyoto Protocol[76] and as such a national emissions trading system should not be implemented’.[77] Further, the Australian Government holds that ratification of the Kyoto Protocol will effectively lead to an industry shift to offshore production facilities;[78] and Kyoto restrictions on emissions would make energy more expensive for both Australian industry and households.[79]
If the Australian Labor Party were to be voted into power in 2008, it is expected that they, as a part of their environmental policy, ‘will ratify the Kyoto Protocol [and] support a carbon trading regime’.[80]
Already, the State and Territory Labor governments have been pro-active in passing legislation which establishes a system enabling carbon rights to be traded independently of the land to which they attach. These rights currently enable unregulated trading of carbon rights, generally governed by the law of contract, and lay a foundation towards a regulated trading market. Whether or not the Australian Labor Party comes into power and subsequently ratifies the Kyoto Protocol remains to be seen.
The Tasmanian Dam[81] case provides a clear interpretation of the scope of the external affairs power with respect to the implementation of treaties following an expansive approach to the Commonwealth’s legislative power taken by the High Court in Koowarta v Bjelke-Petersen.[82]
The Tasmanian Dam[83] case determined that the Commonwealth may validly enact domestic legislation in relation to ‘external affairs’ if the subject matter of the legislation is of ‘international concern’, or if, in an appropriate manner, it implements the purposes of any international treaty or agreement. Mason J stated that ‘it conforms to established principle to say that s 51(xxix) was framed as an enduring power in broad and general terms enabling the Parliament to legislate with respect to all aspects of Australia’s participation in international affairs and of its relationship with other countries in a changing and developing world and in circumstances and situations that could not be easily foreseen in 1900’.[84] Notably, where legislation relies on the implementation of a treaty, no independent requirement of ‘international concern’ is necessary.[85]
In the subsequent High Court decision of Richardson v Forestry Commission[86] all seven members affirmed the expansive view adopted by the majority in the Tasmanian Dam[87] case.
It is apparent that the Commonwealth possesses legislative authority with respect to environmental regulation under the external affairs power to regulate an emissions trading system within Australia. In so far as the validity of a law under s 51(xxix) depends on its implementation of an international agreement, the law must be one which can be seen as an appropriate means for giving effect to that object.[88]
Australia, as a signatory to the UNFCCC, could seek to introduce legislation regulating greenhouse gas emissions through an emissions trading system pursuant to this treaty, provided that it substantially conforms to the subject matter of the treaty.[89] Commonwealth legislation which relies upon the external affairs power will be valid only to the extent to which the provisions of the legislation are appropriate and proportionate to the subject matter and concerns of the treaty.[90]
It is conceivable that the Commonwealth could seek to introduce legislation regulating a national emissions trading system pursuant to the UNFCCC[91] under the external affairs power. The UNFCC contemplates the ‘stabilisation of GHG concentrates in the atmosphere’,[92] reducing emissions within Australia[93] and monitoring and collecting data at a national level.[94] A national emissions trading system, based on the operational features of the EU-ETS, also addresses these issues. However, unlike the Protocol to this convention, the UNFCCC does not discuss the creation of, or include detail on how or what an emissions trading system will function or comprise of; it merely sets an overall framework for intergovernmental efforts to tackle the challenge posed by climate change. The UNFCCC is an overarching statement of strategic aims and methods for dealing with climate change; it does not obligate parties to achieve binding emissions reductions as seen in Annex B of the Kyoto Protocol.
It is difficult to determine whether a national emissions trading system based on the EU-ETS, is appropriately and proportionately adapted to the subject matter of the UNFCCC. There are several alternatives to implementing a national emissions trading system that the Commonwealth government could employ, and have employed, as a response to being party to the UNFCCC. For example, the Commonwealth government committed $1 billion for incentives to develop new less emission intensive technology[95] in emission rich industries;[96] supported uptake of low-emission energy by continuing the Mandatory Renewable Energy target; removed barriers to the use of renewable energy[97]
and development of the National Greenhouse Inventory,[98] all with the view to reduce and monitor emissions throughout Australia. These measures help satisfy Australia’s obligation under the UNFCCC. The presence of these alternatives, and the fact that large infrastructure is needed to implement a national emissions trading system may lead the courts, if the issue arises, to determine that a national emissions trading system, although appropriate in achieving the UNFCCC’s terms, is not proportionately adapted to the subject matter of the UNFCCC. That is, the terms of the emissions trading system may be deemed outside the scope of those found in the UNFCCC.[99]
It is undoubtedly the case that if the Kyoto Protocol was ratified by the Australian Parliament, regulation of a national emissions trading system within Australia may be constitutionally valid under the external affairs power. The Kyoto Protocol sets out the initial legal framework for global emission trading. As outlined earlier a national emissions trading system must be compatible with the Kyoto Protocol.[100] If the Commonwealth were to regulate a national emissions trading system that operates to reduce Australia’s greenhouse gas emissions pursuant to its obligations under the Kyoto Protocol and creates a system of trading that is compatible with the Kyoto based mechanisms, the system will likely be deemed to be appropriately adapted and proportionate to the terms of the Protocol.
An Australian emissions trading system, if based on the EU-ETS, will need to include the following features in order to conform with the Kyoto Protocol.
Identical to the base unit under the Kyoto Protocol,[101] within an Australian emissions trading system, a tradeable, fungible and transferable instrument will be created representing one tonne of carbon dioxide. Until the gases under the EU-ETS are expanded to include equivalent gases under Annex 1 Kyoto Protocol,[102] the Australian system, as it is based on the EU-ETS, will be confined to CO2 emissions only. The difference in scope of CO2 equivalent gases included under the Australian system and under the Kyoto Protocol is not detrimental to an argument that legislation enacting an Australian system ‘conforms’ and is ‘appropriately adapted’ to the terms of the Kyoto Protocol. It is an advantage for the success of implementing such a complex emissions trading system in Australia, that the scheme is initially structured as a less comprehensive scheme in which participants are limited to trading only in CO2,[103] with provision for including all other equivalent gases at a later date.
An Australian emissions trading system, similar to the EU-ETS, may utilise a cap-and-trade system of trading. A domestic cap-and-trade system within Australia ‘conforms’ with and is ‘appropriately adapted’ to Article 17 of the Kyoto Protocol.
The Kyoto Protocol cannot form the basis of a national emissions trading system under the external affairs power unless Australia’s greenhouse policy changes and ratification of the Kyoto Protocol is undertaken by the Executive.
Since the 1970’s international and domestic social and political consciousness of the environment has grown resulting in the Commonwealth action with respect to environmental purposes on a wide range of issues under various indirect heads of Constitutional power.[104] As Mason J asserted in Murphyores Inc Pty Ltd v Commonwealth,[105] ‘it is no objection to the validity of a law otherwise within a power that it touches or affects a topic on which the Commonwealth has no power to legislate’,[106] for example on matters relating to the environment.
The power of the Commonwealth Parliament to make laws with respect to taxation provides an indirect means by which a national emissions trading system can be implemented successfully. The introduction of the Commonwealth’s broad-based Renewable Energy Act[107] and the High Court case of Northern Suburbs General Cemetery Reserve Trust v Commonwealth[108] indicate that the Commonwealth can indirectly legislate to give rise to a purpose or object outside that of revenue-raising. The following discussion assesses whether a national emission trading system, similar to the EU-ETS, can be successfully regulated under the s 51(ii) of the Constitution.
The Renewable Energy (Electricity) Act,[109] based on the Commonwealth taxation power (s 51(ii) of the Constitution) created a mandatory obligation for electricity retailers within Australia to source increasing amounts of their required electricity from approved renewable sources (the Mandatory Renewable Energy Target (MRET)). Consistent with Australia’s unilateral agreement under the Kyoto Protocol,[110] the Act’s objectives are to encourage additional renewable energy generation, ‘reduce emissions of greenhouse gases’[111] and ensure that renewable energy sources are ecologically sustainable.[112] These objectives are aimed at correcting a number of market failures, notably that substantial greenhouse gas emission concentrations in the atmosphere cannot be achieved if a ‘business as usual’ approach is adopted by industry; and, renewable energy cannot compete with conventional energy sources depending on market prices.[113] The effect of the legislation is to place a legal liability on wholesale purchasers of electricity to proportionately contribute towards the generation of an additional 9500 giga watt hours (GWh) of renewable energy annually by 2010.[114]
The Act creates a statutory taxation credit known as a Renewable Energy Certificate (REC).[115] Accredited renewable energy generators are granted the ability to create REC’s for each megawatt hour (MWh) of electricity generated from accredited generation facilities. These certificates are transferable[116] through market based mechanisms[117] and are capable of being sold to liable entities. In order for liable entities to discharge their obligations they must surrender a prescribed number of RECs to the Office of the Renewable Energy Regulator[118] (ORER) based on the proportion of electricity they consume. There is no obligation on liable entities to purchase or surrender RECs, and a failure to surrender sufficient RECs is not an offence. However, the consequences for a retailer failing to surrender sufficient RECs are to pay the shortfall charge: a tax of $40/MWh imposed by a separate taxation Act, the Renewable Energy (Electricity) (Charge) Act;[119] and to be named in a report to Parliament as a payer of the shortfall charge.[120]
Every calendar year a power percentage[121] is calculated representing the percentage of electricity sales liable entities must surrender to discharge their obligations under the scheme. This scheme does not directly reduce CO2 emissions however, by requiring liable entities to generate energy from renewable facilities this scheme indirectly encourages, through economic incentives, an increase in production from low emission intensity sources. This scheme closely follows a model set out and approved by the High Court in Northern Suburbs General Cemetery. Further analysis of this case, in light of the Commonwealth’s Renewable Energy (Electricity) Act[122] provides insight and opportunity with regard to regulation of a national emission trading system in Australia.
The High Court case of Northern Suburbs General Cemetery considered the validity of the Training Guarantee Act[123] and the Training Guarantee (Administration) Act[124] (‘Training Guarantee Acts’). Similar to the obligations and consequential shortfall charges required under the Renewable Energy (Electricity) Act,[125] the Training Guarantee Act imposed ‘a charge equal to any shortfall in the amount spent by employers on training employees’[126] (the training guarantee levy). Further, the stated objectives of the Training Guarantee Acts were ‘to increase and improve the quality of, the employment related skills of the Australian workforce so that it works more productively, flexibly and safely, thereby increasing efficiency and international competitiveness of Australian industry’.[127] These objectives were to be achieved ‘by guaranteeing a minimum level of expenditure by employers on quality employment related training’.[128]
The validity of this legislation was challenged by the plaintiff arguing that either: The Training Guarantee Acts[129] are not laws with respect to taxation within the meaning of s 51(ii) of the Constitution and are not otherwise supported by any other head of legislative power; or if they are laws relating to tax, s 55 of the Constitution was breached by imposing a tax under legislation dealing with other matters.[130]
The High Court held that in fact the laws were not ‘a fee for services or at least akin to a fee for services’ rendered pursuant to Latham CJs view in Matthews v Chicory Marketing Board[131] finding that there is no statutory obligation on States or Territories to expend money paid under the agreement on eligible training programs for those employers who have paid money to the Commonwealth in discharge of an obligation to pay the charge. The legislative provisions in the Training Acts[132] do not make it an offence to fail to spend the minimum training requirement; nor do they provide for the recovery of civil penalties for such a failure. As such, the court found that the laws do not, by their terms, establish any sufficient relationship between the liability to pay the charge and the provision of employment related training by the ultimate expenditure of the money collected.[133]
With respect to the laws’ legislative purpose, the Court held that despite the fact that raising revenue is not among the primary objects of the Training Guarantee Acts,[134] this is not fatal in treating the charge as a tax.[135] The Court referred to Radio Corporation Pty Ltd v The Commonwealth[136] where Latham CJ stated that ‘after Osborne v The Commonwealth,[137] it is difficult to contend that an Act relating to taxation is invalid because it is designed for the purpose of carrying out a policy of the Commonwealth Parliament which affects matters which are themselves not directly within the legislative power of the Parliament’.[138] The law was held
to fairly answer the description of a law ‘with respect to one given subject-matter appearing in s 51’[139] regardless of whether it is, at the same time, more obviously or equally a law with respect to some other subject-matter.[140]
The decision in Northern Suburbs General Cemetery and the Commonwealth’s Renewable Energy Act[141] appear to provide a constitutional means of regulating a national emissions trading system within Australia. However, the law in this area is specific with respect to how the legislation is to be structured and the way in which the legislation is to operate.
Under an emissions trading system the payments made by participants in the scheme to the Commonwealth must not be a penalty or charge for carrying out, or failing to carry out, specified activities. Therefore, the Commonwealth cannot obligate liable entities under the scheme to lower their emissions to a stipulated amount or face monetary penalties but can only encourage entities, through economic incentives, to reduce greenhouse gas emissions. A national emissions trading system based on the taxation power must be structured similarly to the Commonwealth’s MREC scheme.
In order to utilise economic incentives to achieve environmental outcomes, legislation enacting a national emissions trading system must permit greenhouse gas abatement certificates, generated from sequestration activities, land reforestation and other abatement activities, to be created for each qualifying one tonne of CO2 emitted above a certain assigned baseline. By permitting certificates to be created from abatement activities, the system encourages, through economic incentives, entities to invest in lower greenhouse technologies or invest in forestation activities to offset their actual emissions. Notably, a ‘baseline’ abatement amount, rather than a ‘cap’ on emissions, must be used under the scheme so as to avoid payment for non-compliance to be construed as a penalty or charge as opposed to a tax.
Under the national emissions trading system implemented through the taxation power, baseline participants in the scheme are to be determined in a similar way to the EU-ETS.[142] Such a determination is based on the participant’s contribution or output within each listed production activity. Each year, the scheme will set out individual baselines of greenhouse gas emissions for each baseline participant.[143] Baseline participants surrender their quota of greenhouse gas abatement certificates to a governing body each year or pay the shortfall charge (imposed by a separate taxation act)[144] for every abatement certificate that is not surrendered (shortfall under the baseline amount). Surrendering certificates by baseline participants offsets their excess emissions above the level of their greenhouse gas baseline. Importantly, baseline participants cannot be obligated to purchase or surrender greenhouse gas abatement certificates. This feature ensures that there is no ‘sufficient relationship between the liability to pay the charge and the provision’[145] of surrendering certificates, thus not requiring the Commonwealth to expend the money collected by parties discharging their obligations under the scheme on greenhouse gas reduction.
The purpose of the legislation enacting a national emissions trading system within Australia, if outside of revenue raising, will not be fatal to treating the payment for failing to surrender abatement certificates as a tax.[146] Therefore, the Commonwealth can plainly set out in the legislation, akin to the EU-ETS, that the object of the emissions trading system ‘is to achieve stabilisation of greenhouse gas concentrations in the atmosphere at a level which prevents dangerous anthropogenic interference with the climate system’,[147] to ‘fulfil greenhouse reductions through an efficient [Australian] market in greenhouse gas emission allowances, with least possible diminution of economic development and employment’.[148]
Lastly, in order to comply with the constitutional requirement that bills imposing taxation deal only with taxation, the shortfall charge under a national emissions trading system would have to be a charge under a separate Act.[149]
An important distinction surfaces between an emissions trading system based on the operational features of the EU-ETS and one that is structured pursuant to the constitutional requirements under the taxation power. As outlined above, if a national emissions trading system within Australia is to be based on the taxation head of power, it must be structured as a baseline-and-credit system of trading, rather than a cap-and-trade system (as seen in the EU-ETS). The scheme must take the form of a baseline-and-credit system to satisfy the requirement that payment for failing to reduce greenhouse gas emissions, or failing to invest in greenhouse gas abatement activities to offset actual emissions, is structured as a tax (not charge or penalty). Therefore, an emissions trading system implemented through the taxation head of power results in a substantially different operational model to that seen in the EU-ETS.
Both cap-and-trade and baseline-and-credit systems have been used in trading schemes around the world.[150] Important differences between the two systems emerge in practice and these can have implications for ease of implementation and effectiveness within Australia. As discussed, it is fundamental that an emissions trading system within Australia be consistent with the Kyoto Protocol (similarly to the EU-ETS being compatible with the Kyoto Protocol). Further, the requirement that any Australian national emission trading system should integrate seamlessly into the international trading system implies a cap-and-trade framework, minimising inconsistencies between the national and international frameworks. For Annex B countries,[151] the trading and acquittal framework established under the Protocol is inherently cap-and-trade.[152] However, for non-Annex B countries the Protocol allows for project based ‘credits’ to be generated from eligible abatement activities, subject to verification procedures which are yet to be negotiated internationally. Therefore, to make baseline-and-credit systems compatible with Australia’s emission allocation under Kyoto[153] the sum of all emitters’ baseline for the period 2008 to 2012 would need to be no greater than Australia’s assigned amounts. Research suggests that Australia’s business-as-usual emission levels, the level of which baseline assigned amounts are calculated from, are expected to significantly exceed the national emissions quota assigned under Article 3 of the Kyoto Protocol.[154]
Unlike baseline-and-credit systems which focus on abatement activities that are costly to monitor and verify, cap-and-trade systems assure environmental outcomes by setting a total cap on the absolute quantity of emissions over a defined period.[155] Further, baseline systems impede liquidity in a broad-based market[156] and may face ‘double counting’ problems associated with attributing credits to more than one emitter.[157] Clearly an emissions trading system based on the constitutional requirements of implementing a system under the taxation head of power results in a distinctly different operational trading system with many disadvantages.
Inconsistencies arise between an EU-ETS based operational system and a system that adheres to the constitutional requirements of implementing a national emissions trading system under the taxation head of power. Again, inconsistencies result from the requirement of a baseline-and-credit system under the taxation power, rather than a cap-and-trade system (as seen in the EU-ETS). Under a baseline-and-credit system, greenhouse gas abatement certificates are created from a process of gathering carbon dioxide from the atmosphere and sequestering the gas for a period of time in a carbon ‘sink’.[158] As outlined above, State and Territory governments[159] have enacted legislation to create a carbon sequestration right pursuant to which a person could hold the right separately from either the right to the trees (a general forestry right) or the ownership of the land upon which the trees are located.[160] These rights are statutorily deemed to be profit á prendre; the profit which is taken from the land is the ‘legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land that is the subject of the carbon sequestration right’.[161] For a right to become a profit, the subject matter of the profit must be part of the land itself.[162]
Classification of a carbon credit as a profit á prendre is not without its problems. It does not appear that a traditional interpretation of a profit á prendre encompasses the right to ensure something remains on the land or the right to place something on the land. Carbon sequestration involves preventing carbon from leaving the land. At the moment, the legal characterisation of a carbon credit (under a baseline-and-credit system), while still uncertain in the absence of a court decision, appears to be in favour of a profit á prendre. As pointed out by Young J in Ellison v Vukicevi[163] the profit á prendre concept is flexible and the courts must continually adapt to new technologies and concepts. This suggests that carbon credits are likely to be seen as property rights when and if they come before the courts.
Alternatively, under the cap-and-trade system, a permit, ‘licence or equivalent control document is issued by government authorising a permit holder to emit a defined quantity of greenhouse gas’[164] over a defined period. Participants in the scheme have to acquit one permit to the Commonwealth Government for each tonne of CO2 gas to be emitted. It is doubtful whether this permit, as an authorisation, includes property rights.
Common law courts have generally held that a licence
which is not coupled with or granted in aid of an interest is revocable at law; it operates as a bare permission to do what would otherwise be an invasion of the licensor’s rights.[165]
More recently, in Commonwealth v WMC Resources[166] the High Court[167] discussed whether a petroleum exploration permit granted to WMC was propriety in nature. Brennan CJ held that the ‘rights of the permittee and of WMC, though created by statute, are properly to be regarded as proprietary in nature’.[168] McHugh J took a slightly different approach finding that ‘a property interest that is created by federal legislation, where no property interest previously existed, is necessarily of an inherently determinable character and is always liable to modification or extinguishment by a subsequent federal enactment’.[169]
In its Interim Report on greenhouse gases, the Standing Committee of Environment and the Arts recommended that emission permits not confer property rights.[170]
It becomes clear that an emissions trading system within Australia, if based on the constitutional requirements under the taxation head of power will trade credits as determinable property, rather than mere revocable permits. A fundamental characteristic of property is the right to hold the property in exclusion of others. This is inconsistent with what is contemplated under a model based on the operational cap-and-trade features of the EU-ETS which realises potential for unforseen circumstances necessitating reposition or re-allocation of permits.[171] If the legal nature of permits are definable property, in the instance that the government re-allocates permits, the holder of such permits could argue that it is entitled to just compensation for the governmental acquisition of an incorporeal property right based on s 51(xxxi) of the Constitution. Of course, given that the adoption of national emission constraints will tend to impose adjustment pressures on segments of industry, government might consider allowing emission permits to be defined in such a way that they are subject to the ‘just terms’ provision of Section 51, as an aid to industry planning and investment. Alternatively, the government might follow the United States SO2 example of explicitly shielding permits from compensation all together.[172] This issue would need to be resolved with investment confidence, risk sharing and assimilation of permits with international markets in mind.
A national emissions trading system within Australia can be implemented under the taxation head of power, however, the system must adhere to the constitutional requirements as illustrated above. Notably, a baseline-and-credit emissions trading system substantially differs from the cap-and-trade EU-ETS and impedes the efficient market mechanisms needed to ensure environmental outcomes.
Section 51(i) of the Constitution provides that the Commonwealth may make laws with respect to trade and commerce with other countries, and among the States. This power provides a constitutional basis for implementation of a national emissions trading system within Australia displaying key features of the EU-ETS. Within s 51(i) a sharp distinction is made between interstate and international trade on the one hand, and intrastate trade on the other. With respect to interstate trade, the coexistence of s 51(i) and s 92 of the Constitution (which guarantees freedom of interstate trade and commerce) has been considered to effectively act as a brake on too wide an interpretation of the trade and commerce power. The decision in the High Court in Cole v Whitfield[173] confirmed that so long as the law is not protectionist and discriminatory it will not offend s 92. The following Chapter assesses whether a national emissions trading system akin to the EU-ETS can be implemented in Australia under the trade and commerce power without being invalidated by s 92 of the Constitution.
In determining whether a national emissions trading system can be successfully implemented under this power it must be shown that such activities fall within the accepted definitions of ‘trade and commerce’. The High Court case of M & A McArthur Ltd v Queensland[174] has sought to define what falls within the definition of ‘trade and commerce’.[175] Subsequent cases on this point further qualified what activities fall under ‘trade and commerce’ stating that such activities include all interstate transport at least when conducted for reward,[176] conditions of work of persons engaged in interstate trade or commerce,[177] intangibles[178] (such as banking) and the undertaking of trade and commerce by the government.[179]
It is difficult to argue that Commonwealth regulation of a national emissions trading system would not be characterised as law with respect to trade and commerce. The creation of emissions permits and the subsequent trade involves the sale or delivery of permits across State and international boundaries.[180] The courts have adopted a relatively open view of the concept of trade and commerce, however, the law appears to be construed narrowly with respect to the distinction between interstate and international trade on the one hand and intrastate trade on the other.
An emissions trading system similar to the EU-ETS would not only regulate the trade of permits with other countries and among the States, it also contemplates trade amongst participants within the same State. The High Court’s view of the range of activities which can be controlled under s 51(i) has been expanded to allow the power to be exercised in relation to activities which are incidental or ancillary to trade and commerce. In Granville v Marrickville Margarine Pty Ltd[181] Dixon CJ stated:
Every legislative power carries with it authority to legislate in relation to acts, matters and things the control of which is found necessary to effectuate its main purpose, and thus carries with it power to make laws governing or affecting many matters that are incidental or ancillary to the subject matter.[182]
However, the courts have insisted that even in the application of this principle to legislative power made by s 51(i), the range of activities open to Commonwealth control is sharply restricted by the phrase in s 51(i), ‘with other countries and among the States’.[183]
The question is whether the Commonwealth can extend its power outside the scope of s 51(i) to include regulation of intrastate transactions under an emissions trading system.
In the past the judiciary has made concessions on the sharp distinction between international and interstate on the one hand, and intrastate on the other. The High Court has been willing to accept the ‘incidental’ nature of activities which are physically connected to interstate or international trade and commerce, but not economically.[184] Physical connection refers to vertical integration with a series of intrastate transactions, such as production, manufacture, processing, transport, distribution and sale. For example, in O’Sullivan v Noarlunga Meat Ltd[185] the High Court held that although the Commonwealth possesses no specific power with respect to slaughterhouses, Commonwealth regulation and control of the slaughter of meat for export were clearly identifiable as a part of the chain of activities which made up the export trade in meat.[186] A similar approach was taken in Crowe v Commonwealth[187] where McTiernan JJ and Evatt stated that ‘the sale and marketing of the goods abroad constitutes a typical and essential part of [international] trade’.[188]
It appears that if the Commonwealth were to attempt to regulate vertically integrated activities it would need to prove that these activities could be identified as being done or carried out for the interstate and international trade of emissions.
A more difficult issue in relation to implementing a national emissions trading system within Australia under the trade and commerce power is the issue of horizontal integration; that is, the question of whether the transaction directed towards intrastate trade and commerce so affects other transactions directed towards international or interstate trade and commerce that the transactions should be regarded as integrated and open to control under s 51(i). This is particularly pertinent under an emissions trading system, as such a system not only regulates the trade of permits ‘with other countries and among the States’,[189] it also contemplates trade amongst participants within the same State. For example, under a national emissions trading system, a high emission output from ferrous metal production plant in Western Australia can purchase (at market value) emissions permits from a liable glass fibre production plant in Western Australia to comply with Commonwealth emission output allocations.[190] In this respect the High Court has adopted a very cautious approach.
Commonwealth control over intrastate trade of emissions permits can only be achieved upon proving that foreign and interstate and intrastate trade were so intermingled that the Commonwealth could not regulate the former without regulating the latter.[191] In Swift Australian Co Pty Ltd v Boyd-Parkinson[192] the organisation of Swift’s processing plant inextricably mixed its export and domestic trade processes and as such the Commonwealth was justified in extending its power to regulate the whole. Similarly, in Redfern v Dunlop Rubber Australia Ltd[193] the High Court conceded that some commercial activities have composite character and cannot easily be segregated into their intrastate, interstate and international aspects. The permit to be traded under an emissions trading system represents one tonne of CO2 and is fungible and transferable within the broad-based market. Installations under the scheme, once allocated permits by a governing body (Commonwealth controlled) created under the scheme, may trade them with other intrastate, interstate or international entities. Further, one permit may be traded numerous times during a defined period. When the permits are allocated, one would argue that it is difficult to predict the destination of the permits and if or with whom they will be traded.[194] Although the Commonwealth would seek to regulate intrastate emissions trading under s 51(i), as well as interstate and international emissions trading, it is justified considering the composite and inextricable intermingling between intrastate, interstate and international activities under an emissions trading system.
Another argument justifying Commonwealth regulation of the intrastate element of an emissions trading system is that the composite or integrated character of trading activity may come from some inherent feature of a broad-based emissions market. In Airlines of New South Wales Pty Ltd v New South Wales (No 2)[195] the Air Navigation Regulations (Cth)[196] provided for a system of licensing, to be controlled by the Commonwealth Director-General of Civil Aviation extending to all air navigation within Australia. Airlines of New South Wales Pty Ltd commenced action in the High Court against the State of New South Wales, seeking a declaration that the State Transport (Co-ordination) Act 1931 (NSW) and the Air Transport Act 1964 (NSW) were invalid because of their inconsistency with the Commonwealth regulations. Kitto J considered the physical, rather than economic, connection of trading activities stating:
Where the intrastate activities, if the law were not to extend to them, would or might have a prejudicial effect upon matters merely consequential upon the conduct of an activity with Federal power for example, where the profit or loss likely to result from interstate commercial air navigation would or might be affected, that mere fact would not suffice, in my judgment, to make the law a law ‘with respect to’ that activity itself. But by contrast, where the law, by what it does in relation to intrastate activities, protects against danger of physical interference the very activity itself which is within Federal power, the conclusion does to me to be correct that in that application the law is a law within the grant of Federal power.[197]
The High Court held that the ‘Federal law which provides a method of controlling regular public transport services by air with regard only to the safety, regularity and efficiency of air navigation is a law which operates to protect against the real possibility of physical interference the actual carrying on of air navigation’,[198] and therefore is a law within Federal power.
Under an emissions trading system, the process of verification, monitoring and reporting will occur at Federal level by a body to be created by legislation enacted by Federal Parliament,[199] this being essential to the accuracy and efficiency of an emissions trading system. There would be a potential for the system to fail due to mismanagement and inconsistent reporting of permit trades if States and Territories were to regulate intrastate permit trades leaving the Commonwealth to regulate international and interstate trade.
Non-Commonwealth regulation of the intrastate element of trade under an emissions trading system may also result in impediments to a broad-based trading market. For example, if States and Territories regulated their own interstate emission trading (through their own registry system), the Commonwealth’s national registry would need to confer with each State or Territory registry every time an interstate or international trade occurred to determine and attempt to consolidate total emission permit amounts. This would be extremely complex and the time involved in cross-checking and consolidating permit amounts may result in barriers to trade and result in the potential for physical interference in the efficiency in the market.[200] The inherent nature of a national emissions trading system is composite and integrated – a broad-based market involves complex, instantaneous, far reaching transactions that rely on efficient market mechanisms. Where these efficient market mechanisms (such as liquidity) are adversely affected by State and Territory regulation of intrastate emissions trading a physical interference occurs within the market.
A national emissions trading system within Australia can be implemented under the Federal trade and commerce power.[201] Undoubtedly, the trading of emissions permits falls within the sort of trade and commerce contemplated under s51(i) as it would involve the creation of emissions permits and the subsequent trade of these permits resulting in the sale or delivery of permits across State and international boundaries.[202] Although it is strongly argued for the inclusion of intrastate trade under the Commonwealth’s regulatory power in an emissions trading system, the issue of vertical integration and horizontal integration will only be resolved with a constitutional challenge of the enacting legislation in the courts. However, it does appear that Commonwealth regulation of intrastate trade in emission permits may be justified considering the composite and inextricable intermingling between intrastate, interstate and international activities under an emissions trading system.
It may be argued that section 92 of the Constitution, which states that trade and commerce among the states shall be absolutely free, acts as a limitation on legislation implementing a national emissions trading system within Australia under the trade and commerce power.[203] However, the decision of Cole v Whitfield confirmed that so long as a law is not protectionist and discriminatory it will not offend section 92. Federal regulations made under the trade and commerce power are not likely to contravene s 92, as the Commonwealth is less likely to pursue protectionist policies that favour particular states.[204]
While this article has focused primarily on regulating a national emissions trading system under the trade and commerce, taxation and external affairs powers, it is important to briefly consider state referral of powers,[205] or co-operative federalism, as a possible means to regulate an emissions trading market. Since federation there have been a number of references of power[206] pursuant to section 51(xxxvii) which authorises the Commonwealth to legislate on matters referred to it by the States. Notably, corporations law[207] and laws with respect to terrorism[208] are examples of recent referrals legislated by the Commonwealth by virtue of s 51(xxxvii). For effectiveness and consistency of a national emissions trading market, it is vital that all Australian jurisdictions refer to the Commonwealth. Once the Commonwealth makes laws with respect to the matters referred, the laws are federal in nature and are therefore subject to constitutional prohibitions (such as Section 109 with respect to inconsistent State laws).[209] States are able to refer the matter of ‘emissions trading’ – to the Commonwealth, and not necessarily the ‘conversion of a specific bill for a law into a law’.[210]
Lastly, the power of Commonwealth to make laws with respect to trading corporations[211] has been used to regulate the behaviour of trading of such corporations in terms of trade practices, access to essential infrastructure, securities and other financial instruments. This power might be used to regulate the behaviour of trading corporations in relation to emissions activities, although the absence of powers over individuals and unincorporated trading groups (such as partnerships) may result in large unregulated exposure.[212] Alternatively, the fact that a national emissions trading system creates a transferable and fungible permit, capable of being traded, leaves scope for regulation of these financial instruments under the corporations power. These avenues will need to be explored in greater detail in the future.
The Australian Government has not ratified the Kyoto Protocol which sets the framework and provides a constitutional basis for regulation of a national emissions trading system. Ostensibly, the Australian federated system of government, with constitutional power held at various levels, is not well adapted to dealing with global issues such as climate change. However, several heads of power discussed in this paper provide the Commonwealth with the power to regulate a national emissions trading system. The European Union, as a signatory to the Kyoto Protocol, has implemented the world’s first broad based market for the trading of emissions. It appears that if the Commonwealth were to regulate an emissions trading system, the operational features of the system will inevitably be different to those of the EU-ETS.
The most appropriate head of power for regulating a national emissions trading system within Australia, displaying key operational features of the EU-ETS, is the trade and commerce power (notwithstanding inherent vertical and horizontal integration issues). A national emissions trading system based on the constitutional requirements of the taxation head of power is undesirable due to inconsistencies with the operational features of the EU-ETS. If the Kyoto Protocol is ratified by the Australian government in the future, the external affairs power may provide a basis for the regulation of a national emissions trading system. Until that time however, it appears that neither the Kyoto Protocol nor the UNFCCC can form the basis of Commonwealth regulation of a national emissions trading system.
[*] BCom, LLB (Hons), Articled Clerk, Freehills Melbourne.
[1] The Kyoto Protocol, opened for signature 11 December 1997 (entered into force 16 February 2005) (‘Kyoto Protocol’).
[2] United Nations Framework Convention on Climate Change, opened for signature 4 June 1996 (entered into force 21 March 1994) (‘UNFCCC’).
[3] Kyoto Protocol, above n 1, Article 3.
[4] Kyoto Protocol, above n 1, Article 17.
[5] Kyoto Protocol, above n 1, Article 3.10.
[6] Australian Greenhouse Office, Federal Government, ‘National Emissions Trading: Establishing the Boundaries (Discussion Paper 1, 1999) 8. <http://www.greenhouse.gov.au/ emissionstrading/papers/paper1/index.html
> 6 March 2005.
[7] Installations under the EU-ETS are liable participants in the scheme as per article 3, Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emissions allowance trading within the EC and amending Council Directive 96/61/EC [1003] OJ L275/32 (‘Directive’).
[8] PEW Centre: Global Climate Change, The European Union Emissions Trading Scheme (EU-ETS) Insights and Opportunities (2005) http://www.pewclimate.org/docUploads/EU-ETS%20White%20Paper.pdf1, 15 March 2005.
[9] 16.59 tones per capita as at 13 September 2002. Australia is 3rd behind the US and Luxembourg. See, Mike Roarty, The Kyoto Protocol – Issues and Developments through to Conference of the Parties (COP3) (2002) Parliamentary Library E:brief <http://www.aph.gov.au/library/inguide/SCI/kyoto.htm> 25th February 2005 6 April 2005.
[10] Prime Minister, The Hon John Howard MP, Representatives, 5 June 2002, Answers to Questions without Notice, 3163.
[11] And Territories.
[12] Not surprisingly, many bi-lateral ‘early’ carbon emission trades have occurred in Australia as multinationals are positioning themselves financially to hedge the future risk of ratification of the Kyoto by the Australian Government or to position themselves to be competitive in the international market. For example, In 2000, State Forests of NSW entered into the world’s largest private carbon agreement with Tokyo Electric Power Company (TEPCO), worth $130 million, agreeing that 40,000 hectares of new plantation will be established in NSW over ten years with TEPCO receiving the revenue form sale of timber as well as any benefits form the carbon sequestration profile of the forest; Tokyo Electric Power Company (TEPCO), New South Wales Department of Primary Industries: Forests website <http://www.forest.nsw.gov.au/env_services/carbon/investments/tepco/default.asp
> at 25th April 2005. Similarly, in 2001 Australian Plantation Timber (ATP) signed a deal with Cosmo Oil, one of Japan’s largest oil companies, to supply carbon credits form 5,000 hectares of its Western Australia blue gum plantations, see: Australian Greenhouse Office, Federal Government, Growing Trees as Greenhouse Sinks: A Bush for Greenhouse Project (2001) <http://www.greenhouse.gov.au/land/vegetation/pubs/landowners
> 25 April 2005. Also see, Fiona Wain, ‘Environmental Business Australia Submission to the Federal Government: The Business Case for Ratification of the Kyoto Protocol’ 25 October 2002, 3-4 available at http://www.environmentbusiness.com.au/policy%20papers/Kyoto%20-%20business%20case.pdf
at 25 April 2005.
[13] WWF Australia, Welcome Move Toward State Emission Scheme (2005), WWF-Australia <http://www.wwf.org.au/News_and_information/News_room/viewnews.php?news_id=195
> 22 April 2005.
[14] Australian Conservation Foundation stated that ‘we applaud the efforts of Premiers Carr, Bracks, Beattie and other state leaders in showing the courage and leadership required to tackle one of the greatest challenges facing Australia today. Of course, in an ideal world it would be good to see the Commonwealth and states moving together as this is an issue requiring a unified national approach’ See: Australian Conservation Foundation, State based emissions trading just plain common sense (31 March 2005) <http://www.acfonline. org.au/news.asp?news_id=83> 25 April 2005.
[15] Ibid. Support has also stemmed form the Council of Australian Governments in its Energy Market Review (the Parer Report), ‘Towards a Truly National and Efficient Energy Market’.
[16] Carbon Rights Act 2003 (WA) and the amendment to the Transfer of Land Act 1983 (WA).
[17] Conveyancing Act 1919 (NSW).
[18] Australian Greenhouse Office, above n 6, 8.
[19] Zada Lipman and Gerry Bates, Pollution Law in Australia (1st ed, 2002) 82.
[20] A recent Senate inquiry stressed that the Commonwealth is better equipped to ‘muster the expertise and fund the resources needed for adequate protection of important areas’ and that state governments ‘merely viewed the environment in terms of economic or political values’. The report recommended that the States and not the Commonwealth should regulate schemes of environmental importance. See Senate, Parliament of Australia, Senate Report on Commonwealth Environmental Powers (27 May 1999) chap 2, 1.
[21] The Australian Constitution s 51(1).
[22] The Australian Constitution s 51(ii).
[23] The Australian Constitution s 51(xxix).
[24] Pergiorgio Mazzorcchi, Head of Delegation, European Commission to Australia and New Zealand, Speech at the Kyoto NSW Greenhouse Office Advisory Panel, Sydney, 16 February 2005 available at http://www.delaus.ec.europa.eu/pressandinformation/speeches/speech_
Kyoto_Protocol_Feb2005.htm> 29 April 2005.
[25] `UNFCCC, Article 2.
[26] European Commission, 2000, Green Paper on greenhouse gas emissions trading within the European Union COM (2000) 87, <http://europa.eu.int/comm/environment/docum/ 0087_en.htm> 5 May 2005.
[27] Directive, above n 7.
[28] European Community Treaty (ECT) (1992) s 249(3).
[29] Directive, above n 7.
[30] Directive, above n 7, Article 1.
[31] Directive, above n 7, Annex 1 for table of sectors and threshold values in the EU-ETS.
[32] Directive, above n 7, for the threshold amounts under each sub-heading.
[33] Directive, above n 7, which specifies thresholds within sectors of production thus determining installations under the scheme.
[34] Directive, above n 7, Article 3.
[35] Directive, above n 7, Annex 1. Combustion plants with a rated thermal input exceeding 20 MW are determined installations under the scheme. Also, pig iron or steel production plants with a capacity exceeding 2.5 tonnes per hour are installations under the scheme.
[36] Ibid.
[37] Directive, above n 7, Article 3.
[38] Directive, above n 7, Article 11.
[39] David Freestone and Charlotte Streck, Legal Aspects of Implementing the Kyoto Protocol Mechanisms Making Kyoto Work (1st ed, 2005) 421.
[40] The National Allocation Plans allocate emissions allowances among its covered sectors and facilities under the EU-ETS.
[41] Directive, above n 7, Article 9.
[42] See PEW Centre, above n 9, 12. Directive, above n 7, Article 4.
[43] Demand and Supply determines prices in a given market by the balance between product availability and consumer demand.
[44] M Jeffrey, ‘Where do we go from here? Emissions trading under the Kyoto Protocol’ (2001) University of New South Wales Law Journal 571, 572-573.
[45] M Hinchy, B S Fisher and B Graham, ‘Emissions Trading in Australia: Developing a Framework’ (ABARE Research Report 98.1, 1998, Canberra) 2.
[46] UNFCCC, above n 2, Article 4.2
[47] Kyoto Protocol, above n 1, Article 17.
[48] Such as Joint Implementation (JI) and Clean Development Mechanisms (CDM).
[49] JI applies to projects in countries that have agreed to an emission target.
[50] Kyoto Protocol, above n 1, Article 12(2).
[51] Kyoto Protocol, above n 1, Article 12.
[52] Freestone and Streck, above n 39, 511.
[53] Directive, above n 7, Article 11.
[54] Australian Greenhouse Office, Federal Government, ‘National Emissions Trading: Designing the Market (Discussion Paper 4, Federal Government, 1999, Canberra) 10.
[55] One tonne of CO2 represents the same allowance under the EUA and also the Kyoto Protocol.
[56] F Mullins and R Baron, ‘International GHG Emissions Trading: Policies and Measures for Common Action, Annex 1’ (Working Paper, Expert Working Group on the FCCC, 9 March 1997).
[57] Directive, above n 7, Annex 1
[58] Don Gunasekera and Antonia Cornwell, ‘Economic Issues in Emissions Trading’ (Paper to: Kyoto the Impact on Australia Conference, Melbourne, February 1998) 8.
[59] Graeme Dennis, ‘Climate Change: Australia Legislative Responses’ (2002) AMPLA 71.
[60] The Australian Constitution, s 100.
[61] H Opei ‘Commonwealth power to Regulate Industrial Pollution’ [1976] MelbULawRw 18; (1976) 10 MULR 577. 578.
[62] M Crommelin ‘Resources Law and Public Policy’ (1983) 15 UWALR 1, 1.
[63] See J Crawford, ‘The Constitution and the Environment’ (1991) 14 SLR 11, 13.
[64] The Australian Government, Securing Australia’s Energy Future (June 2004) 134.
[65] Bradley v Commonwealth [1973] HCA 34; (1973) 128 CLR 557, 582-3; Diertrich v R [1992] HCA 57; (1992) 177 CLR 292, 305, 359-360; Minister for Immigration and Ethnic Affairs v Teoh [1995] HCA 20; (1995) 183 CLR 273, 286-7; Victoria v Commonwealth (1996) 187 CLR 416, 480; Re East; Ex Parte Nguyen (1998) 196 CLR 354, 380.
[66] R v Burgess; Ex parte Henry [1936] HCA 52; (1936) 55 CLR 608.
[67] R v Burgess; Ex parte Henry (1936) 55 CLR 641 per Latham CJ. Cited in Koowarta v Bjelke-Petersen [1982] HCA 27; (1982) 153 CLR 168, 190, 213, 223, 245. Further evidence that section 51(xxix) does not confer power on the parliament to implement at least some treaties on matters that are not within other heads of power see: Airlines of New South Wales Pty Ltd v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54; Commonwealth v Tasmania (the Franklin Dam case) [1983] HCA 21; (1983) 158 CLR 1, 97-9.
[68] For instance, Crimes (Biological Weapons) Act 1976; Historic Shipwrecks Act 1976; Whale Protection Act 1980; Environment Protection (Sea Dumping) Act 1981; Protection of the Sea (Civil Liability) Act 1981; Protection of the Sea (Prevention of Pollution form Ships) Act 1983.
[69] The external affairs power gives the Commonwealth Parliament some legislative authority over things, matters and events external to Australia. See, New South Wales v Commonwealth [1975] HCA 58; (1975) 135 CLR 337, 306, 497, 503-4. See also, Polyukhovich v Commonwealth [1991] HCA 32; (1991) 172 CLR 501, 528-31, 599-604, 632, 696, 712-4 per majority Mason CJ, Deane, Dawson, Gaudron and McHugh JJ). Also see, Senate, Parliament of Australia, Senate Report on Commonwealth Environmental Powers (2000) chap 4, 1. The external affairs power also extends to give effect to rules of customary international law which apply to Australia (Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1, 171-2 ) and they give effect to non-binding international obligations (Victoria v Commonwealth (1996) 187 CLR 416, 509).
[70] Gabriel Moens and John Trone, The Constitution of the Commonwealth of Australia (6th ed, 2001) 143.
[71] Mike Roarty, above n 9.
[72] This position is not held by the coalition. In October 2001 the Labor Party stated that it would ratify the Kyoto Protocol if it had won the last federal election: See Kim Beazley, Leader of the Opposition, Australian Labour Party, ‘Labor’s Leadership on Climate Change’ Media Statement, 9 October 2001. It is unclear whether at the next federal election, in 2008, the Labour Party will hold these views. See also ABC Television, Sarah Clarke, ‘Pressure Remains on Australia as Kyoto takes effect’, ABC News Online, 16 February2005 <www.abc.net.au/news/newsitem/200502/s1303628.htm
.> 25 February 2005.
[73] Prime Minister, The Hon John Howard MP, Representatives, 5 June 2002, Answers to Questions Without Notice, 3163. See also Australia leads the way in tackling greenhouse gas emissions, 16/2/05 CO45/05 Media Release – Minister for the Environment and Heritage Senator the Hon Ian Campbell, where he stated ‘if Australia were to sign up to this treaty not only would it achieve next to nothing for the environment, but the competitiveness of some Australian industries would be severely harmed and job losses would follow’.
[74] Law Society of NSW, Policy Position- The Kyoto Protocol on United Nations Framework Convention on Climate Change (UNFCCC) August 2004.
[75] The Australian Government, ‘Securing Australia’s Energy Future’, June 2004 and Hinchy, above n 45.
[76] Allan Oxley and Steven Macmillan, ‘The Impact of Non-Ratification of the Kyoto Protocol by Australia on Australian Businesses in the Global Economy’ (Report Commissions by Minerals Council of Australia and the Business Council of Australia, 2003) 47.
[77] Australian Greenhouse Office, Federal Government, ‘Government – Business Climate Change Dialogue: Report to Ministers by the Five Working Groups: Overview’ (April 2003).
[78] D Kemp, ‘Economic Impacts and Alternative Mitigation Strategies’ (Opening Address to Conference Beyond Kyoto, Melbourne Institution of Public Affairs, 28 February 2003) www.deha.gov.au/minister/env/2003/sp28feb03.html accessed 22 July 2005. D Coutts, ‘The Resource Industries Perspective’ (presentation given at Greenhouse Beyond Kyoto Conference, Canberra, 31 March to 1 April 1998) Day 1; Issues, Opportunities and Challenges.
[79] ABARE, Climate Change Key Issues (2003) <www.abare.gov.au/research/climatechange/ keyissues.html accessed 27 July 2005
> 20 July 2005.
[80] Australian Labor Party, Homepage< http://www.alp.org.au/policy/index.php
> 10 September 2005.
[81] Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1.
[82] Koowarta v Bjelke-Petersen [1982] HCA 27; (1982) 153 CLR 168. Murphy and Brennan JJ adopted a wide view of the power (222, 236, 253) stating that the existence of the treaty determined the existence of the matter of international concern and therefore made it an appropriate subject matter for Federal legislative power under s 51(xxix). See, Peter Banks and Deborah Cass Australian Constitutional Law: Materials and Commentary (6th ed, 1999) 129 See also, Senate, Parliament of Australia, Senate Report on Commonwealth Environmental Powers (2000) chap 4.13.
[83] Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1
[84] Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1, 127 per Mason J. Therefore, so long as the treaty is not a mere device for attracting jurisdiction, that is, it is the treaty is entered into bona fide (R v Burgess; ex parte Henry [1936] HCA 52; (1936) 55 CLR 608, 642 per Latham CJ, Airlines of New South Wales Pty Ltd v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54, 85 per Barwick CJ) then the Commonwealth may enter into international agreements and its power in this respect is not limited to agreements conferred with subjects within its express or implied legislative power outside of s 51(xxix).
[85] Ross Ramsay and Gerard Rowe Environmental Law and Policy in Australia; Text and Materials (6th ed, 2001) 291.
[86] Richardson v Forestry Commission [1988] HCA 10; (1988) 164 CLR 261.
[87] Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1.
[88] R v Burgess; Ex parte Henry [1936] HCA 52; (1936) 55 CLR 608, 646, 647, 688; R v Poole; Ex parte Henry (No 2) [1939] HCA 19; (1939) 61 CLR 634; Airlines of New South Wales v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54, 82, 102, 118, 126, 141; Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1.
[89] R v Burgess; Ex parte Henry [1936] HCA 52; (1936) 55 CLR 608, 645-6; R v Poole; Ex parte Henry [1939] HCA 19; (1939) 61 CLR 634, 644, 647-8, 655-6; Airlines of NSW Pty Ltd v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54, 86, 125-6, 136.
[90] Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1, 259-260 per Dean J.
[91] A Bradbrook ‘Green Power Schemes: The Need for a Legislative Base’ (2002) MLR 2, IV available online at http://www.austlii.edu.au/cgi-bin/disp.pl/au/journals/MULR/2002/2.html ?query=%5e+%20%28%28green+%29+and+%28on%29%29#fnB62 accessed 29 September 2005.
[92] UNFCCC, above n 2, Article 2.
[93] UNFCCC, above n 2, Article 4(2)(d).
[94] UNFCCC, above n 2, Article 4(1).
[95] See, The Australian Government, Securing Australia’s Energy Future (2004) 141.
[96] Such as stationary energy (47.6%); agriculture (19.2%); transport (14.4%); and land use change and forestry, industrial processes and waste (13%), ibid 132.
[97] Australian Greenhouse Office, Federal Government, ‘Australia’s Third National Communication on Climate Change, A Report Under the UNFCCC, Chapter 5 Projections (2002) <www.greenhouse.gov.au
> 26 July 2005.
[98] The inventory is a tool for monitoring and reporting emissions throughout Australia. This inventory is lodged with the United Nations Convention on Climate Change (UNFCCC) Secretariat pursuant to Article 4(1) UNFCCC.
[99] R v Burgess; Ex parte Henry [1936] HCA 52; (1936) 55 CLR 608, 645-6.
[100] A key operational feature of the EU-ETS is that it is compatible with the Kyoto Protocol.
[101] Kyoto Protocol, above n 1, Annex A.
[102] Kyoto Protocol, above n 1
[103] A comprehensive trading scheme is more difficult to monitor and has higher transactions costs than, for example, a trading scheme covering only CO2; F Mullins and R Baron. ‘International GHG Emissions Trading: Policies and Measures for Common Action’ (Expert Working Group on the FCCC, Working Paper, 9 March 1997) Annex 1.
[104] For example, the Environment Protection (Impact of Proposals) Act 1974 (Cth) the Australian Heritage Commission Act 1975 (Cth); the Great Barrier Reef Marine Park Act 1975 (Cth) and the National Parks and Wildlife Conservation Act 1975 (Cth).
[105] [1976] HCA 20; (1976) 136 CLR 1.
[107] Renewable Energy (Electricity) Act 2000 (Cth). Otherwise known as the Mandatory Renewable Energy Certificate Scheme (MREC)
[108] Northern Suburbs General Cemetery Reserve Trust v Commonwealth [1993] HCA 12; (1993) 176 CLR 555. Hereinafter Northern Suburbs General Cemetery.
[109] Supported by the Renewable Energy (Electricity) (Charge) Act 2000 (Cth) and the Renewable Energy (Electricity) Regulations 2001 (Cth).
[110] Second Reading Speech to House of Representatives, The Hon Dr Sharmon Stone MP, Parliamentary Secretary to the Minister for the Environment and Heritage, (22 June 2000).
[111] Renewable Energy (Electricity) Act 2000 (Cth) s 3.
[112] See Renewable Energy (Electricity) Act 2000 (Cth) s 3. Australian Greenhouse Office, Federal Government, Renewable Opportunities, A Review of the Operation of the Renewable Energy (Electricity) Act 2000 (2003) <http://www.mretreview.gov.au/report/pubs/mret-review.pdf> May 18 2005, 8.
[113] Australian Chamber of Commerce Industry, Submissions to the Australian Greenhouse Office, Mandatory Renewable Energy Target, (May 2003) 2.
[114] Australian Greenhouse Office, above n 112, 7. Between 2010 and 2020 this target will be kept constant at 9,500 Gwh. See generally, Australian Chamber of Commerce Industry, above n 113.
[115] Renewable Energy (Electricity) Act 2000 (Cth) s18.
[116] RECs are transferable on notification to the Office of Renewable Energy Regulator (‘ORER’).
[117] Second Reading Speech to House of Representatives, The Hon Dr Sharmon Stone MP, Parliamentary Secretary to the Minister for the Environment and Heritage (22 June 2000) 18032.
[118] Renewable Energy (Electricity) Act 2000 is administered by a Commonwealth statutory authority, the Office of Renewable Energy Regulator (ORER).
[119] Renewable Energy (Electricity) (Charge) Act 2000 (Cth).
[120] Renewable Energy (Electricity) (Charge) Act 2000 (Cth) s 105.
[121] Renewable Energy (Electricity) (Charge) Act 2000 (Cth) s 39(1).
[122] Renewable Energy (Electricity) (Charge) Act 2000 (Cth)
[123] Training Guarantee Act 1990 (Cth)
[124] Training Guarantee (Administration) Act 1990 (Cth).
[125] Renewable Energy (Electricity) Act 2000 and Renewable Energy (Electricity) (Charge) Act 2001.
[126] Long Title of the Training Guarantee Act 1990 (Cth).
[127] Training Guarantee Act 1990 (Cth) s 3.
[128] Training Guarantee Act 1990 (Cth) s 3(3).
[129] Training Guarantee Act 1990 (Cth) and Training Guarantee (Administration) Act 1990 (Cth).
[130] Banks, above n 82, 614.
[131] Matthews v Chicory Marketing Board (Vic) [1938] HCA 38; (1938) 60 CLR 263, 276 per Latham CJ.
[132] Training Guarantee Act 1990 (Cth) and Training Guarantee (Administration) Act 1990 (Cth).
[133] Northern Suburbs General Cemetery Reserve Trust v Commonwealth [1993] HCA 12; (1993) 176 CLR 555, 7 (Mason CJ, Dean, Toohey and Gaudron JJ).
[134] Training Guarantee Act 1990 (Cth) and Training Guarantee (Administration) Act 1990 (Cth) s 3.
[135] Northern Suburbs General Cemetery Reserve Trust v Commonwealth [1993] HCA 12; (1993) 176 CLR 555, x. See also Fairfax v Federal Commissioner of Taxation [1965] HCA 64; (1965) 114 CLR 1, 12 (Kitto J).
[136] Matthews v Chicory Marketing Board (Vic) [1938] HCA 38; (1938) 60 CLR 263, 276 (Latham CJ).
[137] Osborne v Commonwealth [1911] HCA 19; (1911) 12 CLR 321.
[138] Northern Suburbs General Cemetery Reserve Trust v Commonwealth [1993] HCA 12; (1993) 176 CLR 555, 569.
[139] Re F; Ex parte F (1986) 161 CLR, 387-8 citing with approval Actors and Announcers Equity Association v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169, 194.
[140] Northern Suburbs General Cemetery Reserve Trust v Commonwealth [1993] HCA 12; (1993) 176 CLR 555, 571-2.
[141] Renewable Energy (Electricity) Act 2000 (Cth) and Renewable Energy (Electricity)(Charge) Act 2001 (Cth).
[142] Directive, above n 7, Annex 1.
[143] This will be determined by the governing body to be created under the Act.
[144] Similarly, the Renewable Energy (Electricity) (Charge) Act 2000 (Cth) is separate from the Renewable Energy (Electricity) Act 2000 (Cth) and the Training Guarantee (Administration) Act 1990 (Cth) is separate form the Training Guarantee Act 1990 (Cth). Section 55 of the Constitution states that laws imposing taxation shall deal with one subject of taxation only.
[145] Northern Suburbs General Cemetary 7 (Mason CJ, Dean, Toohey and Gaudron JJ).
[146] Ibid. See also Fairfax v Federal Commissioner of Taxation [1965] HCA 64; (1965) 114 CLR 1, 12 (Kitto J).
[147] Directive, above n 7, Article 3.
[148] Directive, above n 7, Article 5.
[149] Section 55 of the Constitution states that laws imposing taxation shall deal with one subject of taxation only.
[150] Baseline-and-credit has been used in the US Emissions Credit Trading Program for criteria pollutants and the US Lead Phasedown. Cap-and-Trade has been used in the US Acid Rain Program, US Emission Credit Trading Program for criteria pollutants, See Australian Greenhouse Office, above n 54, 23.
[151] See Kyoto Protocol, above n 1.
[152] Kyoto Protocol, above n 1, Article 3
[153] That is, our unilateral agreement not to exceed 108 per cent over the 1990 baseline.
[154] Commonwealth of Australia (1997) ‘Australia’s Second National Report under the UNFCCC’.
[155] Jane Castle and Jeff Angle, ‘Emissions Trading’ (Discussion Paper, prepared by the CANA Secretariat and the CANA member organisations).<http://www.cana.net.au/documents/ ETDraftPositionPaper231204.pdf>. 23 May 2005.
[156] Illiquidity is caused by the fact that credits, by definition, can only be generated by those emitters who have demonstrated an emission output below their allocated baseline; credits are likely to represent only a fraction of total allowable emissions; and credits only accumulate at the end of each acquittal period.
[157] Australian Greenhouse Office, above n 6, 28.
[158] A ‘sink’ may take various forms including plants (such as trees), underground rock formations, or coral reefs.
[159] This paper will only refer to New South Wales and Western Australia’s relevant legislation for the purpose of providing examples. Queensland, South Australia and Victoria are all exploring legislative schemes to enshrine carbon sequestration.
[160] The legislation provides that the carbon sequestration right can itself be registered on title. This legislatively created right is deemed to carry the same attributes as a common law property right. See Carbon Rights Amendment Act 1998 (NSW) which amended the Conveyancing Act 1919 (NSW) and the Forestry Act 1916 (NSW). The Carbon Rights Act 2003 (WA), Tree Plantation Agreements Act 2003 (WA) also give carbon proprietary rights. See, T M Power, ‘Issues and opportunities for Australia under the Kyoto Protocol’ (2003) 20(6) Environmental Planning Law Journal 459, 472.
[161] Australian Softwood Forests Pty Ltd v Attorney General (NSW) [1981] HCA 49; (1981) 36 ALR 257, 263 (Mason J).
[162] For example, the right to take animals which are on land at any one time is capable of being a profit (Peech v Best [1931] 1 KGB 1) and the right to remove sand from land is a profit, but the right to collect sand and objects blown onto the land is not (Blewett v Tregonning [1855] EngR 168; (1835) 119 ER 259.
[163] Ellison v Vukicevic (1986) 7 NSWLR, 104.
[164] Australian Greenhouse Office, above n 54, 52.
[165] Cowell v Rosehill Racecourse Co (1937) 56 CLR 605, 630 (Dixon J).
[166] Commonwealth v WMC Resources (1998) 196 CLR 17.
[167] Majority: Brennan CJ, Gaudron, McHugh and Gummow JJ.
[168] Commonwealth v WMC Resources (1998) 196 CLR 17, 48 (Brennan CJ).
[169] Commonwealth v WMC Resources (1998) 196 CLR 17, 51.
[170] Ian Causley, ‘Inquiry into the regulatory arrangements for trading in greenhouse gas emission’ Interim Report, 17 August 1998, 29.
[171] Gunasekera, above n 58.
[172] Australian Greenhouse Office, above n 54, 23.
[173] Cole v Whitfield [1988] HCA 18; (1988) 165 CLR 360.
[174] (1920) CLR 530. Also see Banks and Cass, above n 82, 743-744 and Moens and Trone, above n 70, 95-96.
[175] Ibid (1920) CLR 530, 546-7. See also, Leslie, The High Court and the Constitution (4th ed, 1997) 64-65.
[176] Australian National Airways Pty Ltd v Commonwealth [1945] HCA 41; (1945) 71 CLR 29. See also Moens, above n 70, 96.
[177] See R v Foster: Ex parte Eastern and Australian Steamship Co Ltd [1959] HCA 10; (1959) 103 CLR 256 and R v Wright: Ex parte Waterside Workers Federation of Australia [1955] HCA 35; (1955) 93 CLR 528.
[178] Bank of New South Wales v Commonwealth [1948] HCA 7; (1948) 76 CLR 1.
[179] Australian National Airways Pty Ltd v Commonwealth [1945] HCA 41; (1945) 71 CLR 29, 81 (Dixon J).
[180] HC Sleigh Ltd v South Australia (1977) 136 CLR 475.
[181] Granville v Marrickville Margarine Pty Ltd [1955] HCA 6; (1955) 93 CLR 55.
[182] Granville v Marrickville Margarine Pty Ltd (1955) 93 CLR 77.
[183] See Wragg v New South Wales [1953] HCA 34; (1953) 88 CLR 353, 386 (Dixon CJ). See also, Melissa Castan, Sarah Joseph and David Wiseman, Federal Constitutional Law: A Contemporary View (1st ed, 2001) 49.
[184] O’Sullivan v Noarlunga Meat Ltd [1954] HCA 29; (1954) 92 CLR 565. Also see, Banks and Cass, above n 82, 746.
[185] O’Sullivan v Noarlunga Meat Ltd [1954] HCA 29; (1954) 92 CLR 565; ibid.
[186] O’Sullivan v Noarlunga Meat Ltd (1954) 92 CLR 598 (Fullagar J).
[187] Crowe v Commonwealth [1935] HCA 63; (1935) 54 CLR 69.
[188] Crowe v Commonwealth (1935) 54 CLR 94. Dixon J also stated at 90 that ‘the Commonwealth’s authority over exportation is complete, and what it may forbid unconditionally, it may allow conditionally’.
[189] The Constitution s 51(1).
[190] Liable participants are to be determined by a production threshold. See assumptions made by author in Chapter 1.
[191] R v Burgess; ex parte Henry (1936) 55 CLR, 629 (Latham CJ).
[192] Swift Australian Co Pty Ltd v Boyd-Parkinson [1962] HCA 41; (1962) 108 CLR 189, 226 (Owen J).
[193] Redfern v Dunlop Rubber Australian Ltd (1964) 100 COR 194.
[194] Swift Australian Co Pty Ltd v Boyd-Parkinson (1962) 108 CLR.
[195] [1965] HCA 3; (1965) 113 CLR 54.
[196] Made under the Air Navigation Act 1920 (Cth).
[197] Airlines of New South Wales Pty Ltd v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54, 115 (Kitto J).
[198] Airlines of New South Wales Pty Ltd v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54, 115 (Kitto J).
[199] Under the EU-ETS,
[200] Airlines of New South Wales Pty Ltd v New South Wales (No 2) [1965] HCA 3; (1965) 113 CLR 54, 115 (Kitto J).
[201] The Constitution s 51(1).
[202] HC Sleigh Ltd v South Australia (1977) 136 CLR 475, 506.
[203] The Constitution s 51(1).
[204] Gerry Bates, Environmental Law in Australia (5th ed, 2002) 59.
[205] The Constitution s 51(xxxvii)
[206] Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth).
[207] For example, Commonwealth Powers (Air Transport) Act 1950 (Qld), 1952 (Tas); Commonwealth Powers (Family Law) Act 1986 (SA), 1987 (Tas) etc. For a complete list of referrals up until 2001, see G Aitken and R Orr, The Australian Constitution (3rd ed, 2002) 218-220.
[208] In WA, referral is effected by the Terrorism (Commonwealth Powers) Act 2002 (WA).
[209] Section 5E of the Corporations Law 2001 (Cth) seeks to overcome the risks of inadvertent inconsistency by expressly denying any intention ‘to exclude or limit the concurrent operation of any law of a State’.
[210] R v Public Vehicles Licensing Appeal Tribunal (Tasmania); Ex parte Australian National Airways Pty Ltd [1964] HCA 15; (1964) 113 CLR 207, 224-255. This case held that the Commonwealth Powers (Air Navigation Transport) Act 1952 (Tas) was a valid reference by the parliament of the State of Tasmania to the Commonwealth parliament of a ‘matter’ under section 51 (xxxvii).
[211] The Constitution s 51(xx).
[212] This is pertinent in the rural sector where unincorporated trading entities are common place.
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