Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010 - 2011 - 2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CLEAN ENERGY LEGISLATION AMENDMENT BILL 2012
CLEAN ENERGY (EXCISE TARIFF LEGISLATION AMENDMENT) BILL 2012
CLEAN ENERGY (CUSTOMS TARIFF AMENDMENT) BILL 2012
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Climate Change and Energy Efficiency, the Hon Greg Combet AM MP
and the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 5
Chapter 1 General amendments .................................................. 17
Chapter 2 Amendments relating to gaseous fuel ......................... 33
Chapter 3 Amendments relating to the Carbon Farming
Initiative ....................................................................... 51
Chapter 4 Amendments relating to the Australian National
Registry of Emissions Units ........................................ 57
Chapter 5 Amendments relating to the Clean Energy
Finance Corporation ................................................... 63
Chapter 6 Regulation impact statement - Carbon pricing
mechanism coverage of non-transport gaseous
fuels ............................................................................ 67
Index ..................................................................................................... 89
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ANREU Act Australian National Registry of Emissions
Units Act 2011
ANREU Regulations Australian National Registry of Emissions
Units Regulations 2011
ARENA Australian Renewable Energy Agency
ARENA Act Australian Renewable Energy Agency Act
2011
ATO Australian Taxation Office
The bill References to `the bill' are to the Clean
Energy Legislative Amendment Bill 2012.
Other bills are identified by their full titles.
Carbon pricing mechanism or The carbon pricing mechanism set up by the
mechanism CE Act
CE Act Clean Energy Act 2011
CEFC Clean Energy Finance Corporation
CEFC Bill Clean Energy Finance Corporation Bill 2012
CER Clean Energy Regulator
CER Act Clean Energy Regulator Act 2011
CFI Carbon Farming Initiative
CFI Act Carbon Credits (Carbon Farming Initiative)
Act 2011
Clean Energy Legislative A package of Acts including:
Package · Clean Energy Act 2011;
· Clean Energy (Consequential
Amendments) Act 2011;
· Clean Energy Regulator Act 2011;
· Climate Change Authority Act 2011;
· Clean Energy (Unit Shortfall Charge--
General) Act 2011;
· Clean Energy (Unit Issue Charge--
1
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Abbreviation Definition
General) Act 2011;
· Clean Energy (Charges--Excise) Act
2011;
· Clean Energy (International Unit
Surrender Charge) Act 2011;
· Ozone Protection and Synthetic
Greenhouse Gas (Manufacture Levy)
Amendment Act 2011;
· Ozone Protection and Synthetic
Greenhouse Gas (Import Levy)
Amendment Act 2011;
· Fuel Tax Legislation Amendment (Clean
Energy) Act 2011;
· Excise Tariff Legislation Amendment
(Clean Energy) Act 2011;
· Customs Tariff Amendment (Clean
Energy) Act 2011.
CNG Compressed natural gas
CO2-e Carbon dioxide equivalence
Customs Australian Customs and Border Protection
Service
Customs Tariff Act Customs Tariff Act 1995
DCCEE Department of Climate Change and Energy
Efficiency
DOIC Domestic Offsets Integrity Committee
DOIP Designated opt-in person
Excise Act Excise Act 1901
Excise Tariff Act Excise Tariff Act 1921
FTC Fuel tax credit
Fuel Tax Act Fuel Tax Act 2006
GST Goods and Services Tax
JV Joint venture
LPG Liquid petroleum gas or (once amended)
liquefied petroleum gas
LNG Liquefied natural gas
NGER Act National Greenhouse and Energy Reporting
Act 2007
2
Glossary
Abbreviation Definition
NGER Regulations National Greenhouse and Energy Reporting
Regulations 2008
OTN Obligation transfer number
Opt-in Scheme The Opt-in Scheme set out in Part 3,
Division 7 of the Clean Energy Act 2011
Registry Australian National Registry of Emissions
Units
3
General outline and financial impact
Background
Clean Energy Legislation Amendment Bill 2012
The Clean Energy Legislation Amendment Bill 2012 makes amendments
to the CE Act, the ANREU Act, the CFI Act, the Fuel Tax Act and the
NGER Act. These amendments cover:
· matters raised during the passage of the Act about which the
Government made commitments to examine alternative
approaches; and
· minor and technical changes.
The Clean Energy Legislative Package implements the carbon pricing
mechanism for Australia to reduce carbon pollution. Legislation in the
package links the carbon price to the CFI and to credible schemes
overseas. The Package provides assistance to households and industry
which will help households with the impact of the carbon price, support
jobs, protect the competitiveness of emissions-intensive trade-exposed
industries and support energy security.
Further detail about the policy context of the Clean Energy Legislative
Package is set out in the Explanatory Memorandum for the Clean Energy
Bill 2011.
The amendments to the CE Act make changes to the liquid fuel Opt-in
Scheme in Part 3, Division 7 which alter the criteria that a person must
meet in order to be declared a designated opt-in person for the purposes of
the Opt-in Scheme and also impose notification and reporting
requirements for persons subject to an obligation under the Scheme. The
CE Act and the NGER Act are changed to amend the definition of `carbon
dioxide equivalence' so that it applies to fuels which are eligible for the
Opt-in Scheme.
The bill amends provisions in the NGER Act that allow persons to
nominate who has operational control of a facility when it is not clear who
has operational control of that facility. `Operational control' is a central
principle used to determine who has responsibility for the emissions of a
facility which is covered by the carbon pricing mechanism.
5
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
During passage of the Clean Energy Legislative Package in 2011, the
Government committed to considering the coverage of gaseous fuels in a
similar manner to the way in which large liquid fuel users may opt-in to
the scheme. This responded to issues raised by the gaseous fuels industry
in the final report of the Joint Select Committee on Australia's Clean
Energy Future Legislation. Since then, the Government has consulted
extensively with participants in the gaseous fuels sector to develop a new
approach to coverage. This will allow greater flexibility for LPG, LNG
and CNG suppliers when meeting carbon pricing liabilities.
To implement the changes requested by the gaseous fuels industry, the bill
amends the CE Act and the Fuel Tax Act to reflect changes in coverage
arrangements for gaseous fuels. From 1 July 2013, a carbon price will be
applied to non-transport liquid petroleum gas and liquefied natural gas
through the carbon pricing mechanism rather than through fuel tax
arrangements. Emissions attributable to compressed natural gas will be
covered by the carbon pricing mechanism, rather than by fuel tax
arrangements, from 1 July 2012.
The bill amends the CFI Act to extend the timing for methodology
determinations to be backdated. The CFI Act established the CFI, a
carbon offsets scheme that credits abatement in the land sector. Because
CFI projects must be conducted in accordance with a methodology
determination, projects that seek to be backdated must also be in
accordance with a backdated methodology. The amendment to
backdating provisions for methodologies will ensure that existing offsets
projects can transition to the CFI as originally intended.
The bill also amends the CFI Act to ensure that CFI projects have all
required regulatory approvals in place before they can receive credits. It
also simplifies the process of finalising methodology determinations by
removing a requirement that the Domestic Offsets Integrity Committee
(DOIC) publish on its website matters incorporated by reference in
determinations. The explanatory material for methodology determinations
will contain a description of the incorporated material and indicate how it
may be obtained.
The bill amends the ANREU Act to increase the amount of time during
which the CER may defer giving effect to a transfer instruction from 48
hours to five whole business days. The bill also amends the ANREU Act
to make provision for conditions restricting or limiting the operation of
certain accounts to apply in prescribed circumstances.
The bill amends the ARENA Act and the CER Act to provide for the
sharing of relevant and appropriate information between the CEFC and
ARENA and the CEFC and the CER in specified circumstances.
6
General outline and financial impact
Clean Energy (Customs Tariff Amendment) Bill 2012 and Clean Energy
(Excise Tariff Legislation Amendment) Bill 2012
The Clean Energy (Customs Tariff Amendment) Bill 2012 and Clean
Energy (Excise Tariff Legislation Amendment) Bill 2012 make
amendments to the Excise Act, the Excise Tariff Act and the Customs
Tariff Act. The amendments provide that, from 1 July 2012, CNG used
for non-transport purposes will not be subject to the effective carbon price
through the fuel tax system so that it may be covered by the carbon
pricing mechanism.
Date of effect:
Clean Energy Legislation Amendment Bill 2012
Sections 1, 2 and 3 commence on the day the bill receives the Royal
Assent.
Schedule 1, which makes various amendments to the CE Act, the ANREU
Act and the NGER Act, commences on the later of the day after the bill
receives the Royal Assent or immediately after the commencement of
Part 2 of Schedule 1 to the Clean Energy (Consequential Amendments)
Act 2011.
Schedule 2, which makes various changes to the CE Act and the Fuel Tax
Act, commences on the latest of:
· the start of the day after the bill receives the Royal Assent;
and
· immediately after the commencement of Schedule 1 to the
Clean Energy (Fuel Tax Legislation Amendment) Act 2011;
and
· immediately after the commencement of Schedule 1 to the
bill.
Schedules 3 and 4, which deal with amendments to the CFI Act and the
ANREU Act, take effect the day after the bill receives the Royal Assent.
Schedule 5, which deals with changes to the Clean Energy Finance
Corporation Act 2012, takes effect at the same time as section 3 of that
Act commences.
7
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012 and Clean Energy
(Excise Tariff Legislation Amendment) Bill 2012
The amendments to the Excise Tariff Act and the Excise Act commence
on 1 July 2012, immediately after the commencement made by the
amendments contained in the Clean Energy (Excise Tariff Legislation
Amendment) Act 2011.
The amendments to subitem 10.19C are taken to commence immediately
after the relevant amendments made by the Excise Tariff (Taxation of
Alternative Fuels) Act 2011 commence.
The amendments to the Customs Tariff Act commence on 1 July 2012,
immediately after the commencement made by the amendments contained
in the Clean Energy (Customs Tariff Legislation Amendment) Act 2011.
That is, they will apply to goods that were imported on or after 1 July
2012. It also applies to goods imported before 1 July 2012 but not entered
into home consumption until on or after 1 July 2012.
Proposal announced:
The Acts which make up the Clean Energy Legislative Package passed the
Senate on 8 November 2011 and variously received the Royal Assent in
late November and early December 2011.
The measures in the Clean Energy Legislative Package are based on the
announcement on 10 July 2011 and the publication of Securing a clean
energy future: The Australian Government's climate change plan.
On 11 October 2011, the Government announced that it would consider
changes to give effect to alternative coverage of gaseous fuels under the
carbon pricing mechanism. The Minister for Climate Change and Energy
Efficiency said in the House of Representatives that:
`[a] number of companies in the consultation process have also
expressed interest in having liquid petroleum gas included in the
carbon pricing mechanism. The government is open to considering
this in a similar manner to the way in which large liquid fuel users may
opt into the scheme and we will consult on options for achieving it.
No amendments however are proposed in relation to this at this time.'1
The Government announced the approach to coverage of gaseous fuels by
the carbon pricing mechanism as part of the 2012-2013 Budget on 8 May
2012, having earlier informed industry participants.
1
House of Representatives Hansard, 11 October 2011 p.11433
8
General outline and financial impact
During the public exposure period for the Package, industry stakeholders
expressed a desire to manage their carbon liability for fuels under the
carbon pricing mechanism instead of paying the equivalent carbon price
through fuel tax arrangements. This arrangement was given effect
through the Opt-in Scheme set out in Part 3, Division 7 of the CE Act.
Those amendments in the bill which make minor and technical
amendments concern the operation of measures previously announced as
part of the Clean Energy Legislative Package and, therefore, have not
been the subject of any further specific announcements.
Financial impact:
Financial impact ($ millions): Mandatory coverage of LPG and LNG
2011-12 2012-13 2013-14 2014-15 2015-16 Total
Change to 0.0 0.0 -75.0 -75.0 -80.0 -230.0
administered
revenue (ATO)
Change to 0.0 0.0 +75.0 +75.0 +80.0 +210.0
administered
revenue
(DCCEE)
Total impact on 0.0 0.0 0.0 0.0 0.0 0.0
fiscal balance
Total impact on 0.0 0.0 -5.0 +15.0 +10.0 +20.0
underlying cash
Financial impact ($ millions): Mandatory coverage of CNG
2011-12 2012-13 2013-14 2014-15 2015-16 Total
Change to 0.0 0.0 0.0 0.0 0.0 0.0
administered
revenue (ATO)
Change to 0.0 0.0 0.0 0.0 0.0 0.0
administered
revenue
(DCCEE)
Total impact on 0.0 0.0 0.0 0.0 0.0 0.0
fiscal balance
Total impact on 0.0 0.0 0.0 0.0 0.0 0.0
underlying cash
9
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Summary of regulation impact statement
Coverage of gaseous fuels - Regulation impact on business
Impact:
The Regulation Impact Statement (RIS) for carbon pricing mechanism
coverage of non-transport gaseous fuels (LPG, LNG and CNG) is
available at http://ris.finance.gov.au. The RIS was prepared by DCCEE
and has been assessed as adequate by the Office of Best Practice
Regulation.
Main points:
The current approach to carbon pricing coverage of non-transport LPG
and LNG through the excise system would impose additional excise
compliance costs for LPG and LNG suppliers. It would also increase cash
carrying costs and reduce flexibility for suppliers to meet emissions
obligations compared to coverage under the carbon pricing mechanism.
The current approach to carbon pricing coverage of non-transport CNG
under the excise system would require up to 50 non-transport CNG
producers that had not previously been participants in the excise system to
install metering equipment to enable excise participation, potentially
curtailing expansion and use of CNG by small producers. CNG producers
would also face increased cash carrying costs and reduced flexibility to
meet obligations relative to the mechanism.
On balance the advantages of reducing compliance costs and providing
greater flexibility for liable entities in the sector to meet carbon pricing
obligations warrant the inclusion of non-transport LPG and LNG in the
carbon pricing mechanism. A mandatory approach to coverage is
preferable to a voluntary opt-in approach as it would reduce the
complexity of the carbon price and associated administration and
compliance costs. It is expected to apply to around 10 entities.
Carbon pricing mechanism coverage of LPG and LNG should commence
from 1 July 2013, as earlier commencement (from 1 July 2012) would
create substantial risks that implementation agencies would have
insufficient time to develop detailed systems for carbon pricing
mechanism coverage and adequately test these with industry stakeholders.
Coverage of non-transport CNG under the carbon pricing mechanism is
preferred as it will reduce compliance costs for small producers and
reduce administrative costs for the Government relative to excise system
coverage. The carbon pricing mechanism also provides greater flexibility
10
General outline and financial impact
for CNG producers to choose whether or not to directly manage their
carbon pricing obligations.
11
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Clean Energy Legislation Amendment Bill 2012, No. 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012, No. 2012
Clean Energy (Customs Tariff Amendment) Bill 2012, No. 2012
These bills are compatible with the human rights and freedoms recognised
or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the bills
These bills amend:
· the CE Act, to ensure that there is no double counting of
CNG under the carbon pricing mechanism established by the
Act, to amend the regulation-making powers dealing with
administrative arrangements and eligibility requirements in
relation to the Opt-in Scheme for liquid fuels, to provide for
the coverage of gaseous fuels by the carbon pricing
mechanism from 1 July 2013, and to make certain other
minor technical amendments;
· the NGER Act, in relation to the nomination of the person
who is to be taken to have operational control of a facility
when two or more persons could have such control, and to
make certain other minor technical amendments;
· the Fuel Tax Act, to make consequential amendments in
relation to the taxation treatment of gaseous fuels covered by
the carbon pricing mechanism;
· the CFI Act, to extend the backdating arrangements for
methodology determinations, to remove the publication
requirement in relation to the text of any materials
incorporated by reference in a methodology determination,
and to provide for CFI coverage to be conditional on projects
obtaining all necessary regulatory approvals before
Australian carbon credit units are issued in relation to a
project;
12
General outline and financial impact
· the ANREU Act, to create a regulation-making power to
impose restrictions or limitations on the operation of certain
Australian National Registry of Emissions Units accounts,
and to increase the period of time within which the CER can
defer giving effect to a transfer instruction;
· the ARENA Act, to enable the disclosure of information to
the Clean Energy Finance Corporation; and
· the Excise Act, the Excise Tariff Act and the Customs Tariff
Act. The amendments provide that, from 1 July 2012, CNG
used for non-transport purposes will not be subject to the
effective carbon price through the fuel tax system so that it
may be covered by the carbon pricing mechanism.
Human rights implications
The bills variously engage the following human rights:
Rights of equality and non-discrimination
The Clean Energy Legislation Amendment Bill 2012 amends the NGER
Act to enable two or more persons who might otherwise have `operational
control' of a facility to nominate one of them as the person who is to be
taken to have `operational control' of the facility for the purposes of the
NGER Act and, if the facility is not a facility of a joint venture, the CE
Act. The person with `operational control' of a facility has certain
reporting obligations under the NGER Act and certain liabilities for
greenhouse gas emissions from the facility under the carbon pricing
mechanism established by the CE Act. The Bill provides that if any of
these persons is a foreign person (being an individual who is not
ordinarily resident in Australia, a corporation incorporated outside of
Australia, a body politic of a foreign country, or a trust where the majority
of trustees are covered by any of these categories) and if any of these
persons is not a foreign person, then a foreign person cannot be
nominated.
The amendment replaces existing provisions dealing with the nomination
of a person who is to be taken to have operational control of a facility.
The main difference between the existing provisions and the new
amended provisions relates to the timing of the nomination. The Bill
continues the existing requirement that a foreign person not be nominated
if a non-foreign person is available to be nominated.
13
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
The Clean Energy Legislation Amendment Bill 2012 thus continues the
existing provision for different treatment of persons depending on their
national origin.
The amendment does not prevent foreign persons from operating or being
engaged in the operation of facilities in Australia or otherwise exercising
their property or other rights in Australia. Rather, the amendment
identifies persons who can voluntarily assume obligations and liabilities
under the NGER and CE Acts. The rationale for preferring the
nomination of non-foreign persons over foreign persons is that non-
foreign persons are more likely to have assets in Australia and are more
likely to be amenable to the enforcement of relevant obligations and
liabilities under the NGER and CE Acts. The amendment, and its
rationale, is therefore considered compatible with the rights of equality
and non-discrimination.
Privacy and reputation
The Clean Energy Legislation Amendment Bill 2012 amends the CE Act
to extend the existing provisions in relation to the OTN (Obligation
Transfer Number) Register to gaseous fuel suppliers. The OTN Register
is maintained by the CER and is open to public inspection. The Clean
Energy Legislation Amendment Bill 2012 requires the CER to publish on
the Register the following information about a gaseous fuels supplier: its
name, address, contact details, Australian Business Number (ABN) and, if
its willingness to accept quotations of OTNs, in cases where acceptance is
not mandatory, is subject to conditions--those conditions. This mirrors
the arrangements in relation to natural gas suppliers.
The listing of gaseous fuels suppliers serves two main purposes. First, it
assists users of gaseous fuels to find a supplier who may be willing to
accept their OTN quotation. It also provides the CER with a list of
suppliers who wish to be notified of any changes to the OTN Register,
such as when an OTN is cancelled, surrendered, when the name of an
OTN holder changes, or when a new entry is made in the Register. This
lowers compliance costs for suppliers as they will be sent up-to-date
information on changes to the OTN Register. The amendment, and its
rationale, is therefore considered compatible with the right to privacy.
The Clean Energy Legislation Amendment Bill 2012 also amends the
NGER Act in relation to the content of the material that must be published
by the CER on its website under section 24 of the NGER Act. In
particular, it removes the requirement to publish a registered corporation's
gross and net energy consumption, and replaces it with a requirement to
publish the corporation's net energy consumption only. This helps give
effect to one of the objects of the NGER Act, which is to inform the
Australian public about greenhouse gas emissions, and energy production
14
General outline and financial impact
and consumption. The amendment does not require the publication of any
personal information about an individual, and is considered to be
compatible with the right to privacy.
Further, the Clean Energy Legislation Amendment Bill 2012 amends the
ARENA Act and the CER Act to enable the disclosure of information to
the CEFC. Information can only be disclosed if the disclosure will enable
or assist the CEFC to perform or exercise any of its functions or powers.
Enabling the disclosure of information in these circumstances is
considered to be compatible with the right to privacy.
Conclusion
The bills are compatible with human rights because, to the extent that they
may limit those rights, that limitation is reasonable, necessary and
proportionate.
Greg Combet
Minister for Climate Change and Energy Efficiency
15
Chapter 1
General amendments
Outline of chapter
1.1 Chapter 1 explains amendments to the Opt-in Scheme set out in
Part 3, Division 7 of the CE Act. These amendments:
· further define the criteria that a person must meet to be
declared a designated opt-in person (DOIP); and
· provide for the enforcement of reporting, record-keeping and
notification requirements.
Chapter 1 also explains amendments to the NGER Act relating to:
· potential greenhouse gas emissions that allow liability to be
assigned before emissions are produced; and
· nomination of operational control of a facility when it is not
clear who has operational control.
This chapter covers Schedule 1.
Context of amendments
Opt-in Scheme
1.2 The Opt-in Scheme is to be set out in regulations. A person who
meets the Opt-in Scheme's criteria can choose to have emissions from
specified liquid fuels covered directly under the carbon pricing
mechanism instead of paying an equivalent carbon price through the fuel
tax system. The amendments augment the existing provisions of Part 3,
Division 7 of the CE Act.
1.3 It is very easy to change the composition of GST groups and
GST joint ventures, which may be the way in which persons participate in
the Opt-in Scheme. This raises some practical difficulties for the
operation of the Opt-in Scheme, which is not intended to operate with the
same degree of flexibility as the GST system. For example, regular
changes of membership within an opted-in GST group would impose
17
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
significant administrative burdens on the CER, the ATO and Customs to
track changing liability under the carbon pricing mechanism. It would
also present an opportunity for GST groups and joint ventures to, in effect,
opt-out of the carbon pricing mechanism at any time for selected amounts
of fuel, by changing the composition of the GST group or GST joint
venture.
1.4 The amendments are designed to address these issues, by
providing that the membership of the GST group or GST joint venture at
the beginning of the relevant financial year is, in effect, `frozen' for the
year and the DOIP is liable for the emissions of that group or joint venture
for that year. The GST group or joint venture is `frozen' only for the
purposes of the CE Act.
Potential greenhouse gas emissions
1.5 The concept of potential emissions is used to assign liability for
emissions before they are produced. Section 7B of the NGER Act
currently refers to the potential greenhouse gas emissions embodied in an
amount of natural gas. However, the Opt-in Scheme assigns liability for
emissions from other fuel types before the emissions are produced.
1.6 The amendments allow the concept of `potential emissions' to
be used for the purposes of the Opt-in Scheme by extending it to fuel
types other than natural gas.
Nomination of operational control
1.7 Sections 11 to 11C of the NGER Act deal with the concept of
`operational control', which is used to determine who has obligations
under the NGER Act to report a facility's emissions, energy use and
production.
1.8 Operational control also determines who is liable for the
greenhouse gas emissions from the facility under the carbon pricing
mechanism. The exceptions are where the liability is transferred under a
liability transfer certificate or where a designated joint venture (JV) has
the facility. Liability for the emissions of a facility of a designated JV is
shared between the participants in the JV on the basis of the participating
percentage determination for that facility. Participating percentage
determinations are made by the CER.
1.9 The person with `operational control' of a facility is generally
the person with the authority to introduce and implement operating, health
and safety and environmental policies at the facility, or the person that the
CER has declared to have operational control of the facility.
18
Chapter 1: General amendments
1.10 In some circumstances it may not be clear who has operational
control of a facility, because two or more people have authority to
introduce and implement the relevant policies and two or more of those
people have equal authority to implement operating and environmental
policies.
1.11 Currently, the persons who have equal authority to introduce and
implement operating and environmental policies at a facility must together
nominate one of themselves as the person with operational control of that
facility.
1.12 The carbon pricing mechanism will begin with a fixed charge
period from 1 July 2012 until 30 June 2015 (called `fixed charge years'),
after which the carbon price will be determined by the market (`flexible
charge years'). The current provisions have the effect of requiring
nomination of operational control up to twice in each fixed charge year
and at least once per flexible charge year. These requirements may
impose additional compliance burdens on liable entities and others. This
is particularly the case for JV participants, because they are usually
unrelated companies which will need to reach agreement on operational
control issues. The amendments streamline the nomination process and
lessen the compliance burden on business.
Publication of energy consumption
1.13 Under section 24 of the NGER Act, the CER is required to
publish totals of scope 1 emissions and scope 2 emissions by 28 February.
From 28 February 2014 the CER is also required to publish the totals of
energy consumption for the group (i) as reported and (ii) `adjusted in
accordance with the regulations'.
1.14 The amendments streamline publication of energy consumption
data through only requiring the publication of an adjusted `net energy
consumption' figure, which is intended to avoid potential confusion by
users of the published data.
Summary of new law
Opt-in Scheme amendments
1.15 The amendments to the provisions in Part 3, Division 7 of the
CE Act, which underpin the Opt-in Scheme, concern administrative
obligations on participants in the Opt-in Scheme and the eligibility
requirements for DOIPs. These amendments provide additional powers to
19
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
ensure that the Opt-in Scheme is robust, and its requirements are complied
with by making reporting, record-keeping and notification obligations
enforceable.
1.16 Changes to the eligibility criteria will ensure that the flexibility
available to members of GST groups and GST joint ventures does not
compromise the integrity of the Opt-in Scheme and the carbon pricing
mechanism.
Potential greenhouse gas emissions
1.17 The amendments to the NGER Act and the CE Act concerning
potential greenhouse gas emissions allow these provisions to apply to the
liquid fuels covered by the Opt-in Scheme, in addition to natural gas.
Nomination of operational control
1.18 The amendments to the NGER Act concerning nomination of
operational control streamline the requirements for nominating
operational control, by removing any requirement for nomination to occur
up to twice for each reporting year in fixed charge years and at least once
for each reporting year in flexible charge years.
1.19 The amendments reduce the compliance requirements associated
with making nominations by allowing a nomination to continue until such
time as the CER cancels it, it is revoked by a new nomination or until it
reaches its end date.
1.20 The amendments empower the CER to cancel nominations that
become unnecessary or unsuitable. This is unnecessary under the current
law because nominations that become unnecessary or unsuitable could be
replaced each time a new nomination became due. The amendments also
allow the nominators to make another nomination which replaces the
original nomination. The nominators may also set an end date so that they
can set a time to review their arrangement in advance.
Publication of energy consumption
1.21 The amendments to the NGER Act concerning the publication of
energy consumption streamline publication of energy consumption data
through only requiring the publication of a single figure for energy
consumption which represents `net energy consumption'.
20
Chapter 1: General amendments
Comparison of key features of new law and current law
New law Current law
Opt-in Scheme - eligibility test
As well as meeting criteria specified As well as meeting criteria specified
in regulations, the DOIP must pass in regulations, the DOIP must pass
the eligibility test. A person will pass the eligibility test. A person will pass
the eligibility test for the fuel for the eligibility test where, for the fuel
which they are opting in where the for which they are opting in, they are
person is the entity that is entitled to the entity that is entitled to the FTCs
the fuel tax credits (FTCs) for that for that fuel or they are a member of
fuel or where a member of a GST the GST group or joint venture that is
group or joint venture acquired, entitled to the FTCs for that fuel.
manufactured or imported the fuel in
a financial year, the person was a
member of that group or joint venture
on 1 July of that financial year and
the group or joint venture would have
been entitled to the FTCs for the fuel
if the acquisition, manufacture or
import had taken place on 1 July of
that financial year.
Opt-in Scheme - notification requirement
The Opt-in Scheme may make There is no provision for the Scheme
provision for a DOIP to notify to require notification to the CER.
matters to the CER.
Opt-in Scheme - compliance with Scheme requirements
The notification, reporting and The notification, reporting and
record-keeping requirements under record-keeping requirements under
the Scheme are civil penalty the Scheme are not civil penalty
provisions. provisions.
Potential greenhouse gas emissions
The definition of potential The definition of potential
greenhouse gas emissions will apply greenhouse gas emissions only
to designated fuels. Designated fuels applies to natural gas.
include those covered by the Opt-in
Scheme and natural gas.
Nomination of operational control
Nominations of operational control Nominations of operational control
begin on their start date and persist must be renewed regularly because
until they are cancelled by the CER, they only apply for the financial year
revoked by a new nomination or or part of financial year for which
reach their end date. they are made.
21
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
There is no civil penalty if a A civil penalty of 1,000 penalty units
nomination is not made by the due applies if a nomination is not made
date. by the due date.
Where a nomination has been made There is no obligation to notify where
and the facility ceases to pass the a facility ceases to pass the eligible
eligible nomination test, each of the nomination test.
nominators has an obligation to notify
the CER of the cessation unless the
cessation occurred because the CER
declared a person to have operational
control of the facility. Civil penalties
apply.
Publication of energy consumption
The CER is required to publish `net The CER is required to publish both
energy consumption' which is the totals of energy consumption as
adjusted in accordance with the reported and energy consumption
regulations. adjusted in accordance with the
regulations.
Detailed explanation of new law
Preliminaries
1.22 The bill, once enacted, will be called the `Clean Energy
Legislation Amendment Act 2012'. The bill amends other legislation,
namely the CE Act, the ANREU Act, the CFI Act, the Fuel Tax Act and
the NGER Act, and does not contain any substantive provisions of its
own. [Section 1] [Section 3]
1.23 The provisions of the bill commence at varying times,
depending on the provisions concerned. These commencement
arrangements are described along with the relevant provisions below.
[Section 2]
Amendments to the Opt-in Scheme
Eligibility test
1.24 Section 92A of the CE Act sets out the eligibility test that must
be passed by a person that is the DOIP for an acquisition, manufacture or
import of fuel that is covered by the Opt-in Scheme.
1.25 The existing eligibility test in subsection 92A(4) of the CE Act
is replaced with a new test, which provides that, in addition to meeting the
criteria to be specified in regulations, the DOIP must, for fuel acquired,
22
Chapter 1: General amendments
manufactured or imported in a particular financial year for which it is
opting in:
· have been a member of a GST group at the start of the
financial year where, if it is assumed that the fuel was
acquired, manufactured or imported at the start of that
financial year, the GST group would have been entitled to the
fuel tax credit for that fuel; [Schedule 1, Part 1, item 19, new section
92A(4)(a), CE Act] or
· have been a member of a GST joint venture at the start of a
financial year where, if it is assumed that the fuel was
acquired, manufactured or imported at the start of that
financial year, the GST joint venture would have been
entitled to the fuel tax credit for that fuel; [Schedule 1, Part 1,
item 19, new section 92A(4)(b), CE Act] or
· if neither of these criteria apply, then the DOIP must be the
entity that was entitled to the fuel tax credit for the fuel.
[Schedule 1, Part 1, item 19, new section 92A(4)(c), CE Act]
1.26 The amendments remove the ability of members of GST groups
and GST joint ventures that have opted-in to change the composition of
GST groups and GST joint ventures for the purposes of changing their
liabilities under the carbon pricing mechanism in a relevant financial year.
This provides clarity and certainty around the liabilities of those covered
by the carbon pricing mechanism. It will reduce the potential for
administrative complexity and costs for opted-in liable entities and for the
CER, ATO and Customs.
1.27 The effect of the amendment is to, in effect, `freeze' the
membership of the GST group or GST joint venture at the beginning of
the relevant financial year for the year so that the DOIP is liable for the
emissions of that group or joint venture for that year. The GST group or
joint venture is `frozen' only for the purposes of the CE Act. The
provisions do not prevent changes in the group or joint venture under the
GST legislation.
· It is intended that in the case of a GST joint venture, the
operator of the joint venture would pass the eligibility test
under the new section 92A(4)(b) if it was also a participant in
the GST joint venture, or under the new section 92A(4)(c) if
it is not a participant.
23
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Notification obligation
1.28 The Opt-in Scheme may require a person to notify the CER
about matters which are relevant to the Opt-in Scheme. [Schedule 1, Part 1,
item 20, new section 92DA, CE Act] This means that the CER may be informed
of matters which may be relevant to a person's ongoing eligibility under
the Opt-in Scheme and related matters.
Compliance with reporting, record-keeping and notification obligations
1.29 Under sections 92C, 92D and new section 92DA of the CE Act,
the Opt-in Scheme may impose reporting, record-keeping and notification
requirements for a DOIP. These obligations allow the CER to adequately
monitor the fuel use of a participant in the Opt-in Scheme and be aware of
any changes that will affect the eligibility of a person to be opted-in.
Record-keeping requirements will allow the CER to ensure that the fuel
use of a person, and the liability of the DOIP for that fuel use, is measured
correctly. These records are needed because detailed information on a
person's fuel use is not required to be kept under the NGER Act.
1.30 The record-keeping and reporting requirements of the Opt-in
Scheme do not duplicate other record-keeping and reporting mechanisms
elsewhere in the CE Act and only cover those businesses wanting to
participate in the Opt-in Scheme.
1.31 A person who is subject to these requirements is obliged to
comply with them. [Schedule 1, Part 1, item 21, new sections 92H(1), (2) and (3),
CE Act] Furthermore, a person must not:
· aid, abet, counsel or procure;
· induce, whether by threats or promises or otherwise;
· be in any way, directly or indirectly, knowingly concerned
with; or
· conspire with others to effect,
a contravention of new sections 92H(1), (2) and (3). [Schedule 1, Part 1, item
21, new sections 92H(4), CE Act]
1.32 The obligations in new sections 92H(1), (2), (3) and (4) of the
CE Act are civil penalty provisions. [Schedule 1, Part 1, item 21, new section
92H(5), CE Act] Under section 253 of the CE Act the CER may apply to the
court for a civil penalty order against a person who has contravened a civil
penalty provision. Under section 255 of the CE Act the CER must seek
the order no later than six years after the contravention. Section 252 of
24
Chapter 1: General amendments
the CE Act provides that the court may order a civil penalty if it is
satisfied a person has contravened a civil penalty provision.
1.33 Section 9 of the CE Act provides that the CE Act applies to the
Australian, state and territory governments (that is, the Crown in right of
each Australian jurisdiction). However, no government is liable to a
pecuniary penalty. This protection does not apply to authorities of the
Crown or to administrative penalties or late payment penalties.
1.34 Under section 252 of the CE Act the maximum pecuniary
penalty for contraventions of new sections 92H(1), (2), (3) and (4) of the
CE Act is 10,000 penalty units (currently $1.1 million) for a corporation
or 2,000 penalty units (currently $220,000) for any other person.
1.35 These are civil penalty provisions because contravening them
does not involve conduct of such serious moral culpability that criminal
prosecution and sanctions are warranted. Further, as most liable entities
are expected to be bodies corporate, the financial disincentives to
misconduct provided by civil penalties are a more proportionate and
effective enforcement tool, reflecting the practice of other areas of
business regulation.
1.36 There is no requirement that the CER prove the person's
intention, knowledge, recklessness, negligence or any other state of mind
with regard to the penalty provisions in the CE Act. [Schedule 1, Part 1, item
22, new section 262(1)(ra), (rb) and (rc), CE Act] Section 262 of the CE Act
makes it clear, for the avoidance of any doubt, that it is not necessary to
prove a matter concerning a person's state of mind at the time the conduct
occurred. It is simply a matter of proving whether the relevant provision
has been contravened. Where a person's state of mind is relevant to the
issue at hand, then this is specifically dealt with in the relevant provision.
1.37 The reporting and notification requirements are continuing
contravention provisions under section 263 of the CE Act. A person who
contravenes these penalty provisions, which involve, for example, a
requirement to do something within a particular period, commits a
separate contravention on each of the days on which the person fails to
comply. [Schedule 1, Part 1, item 23, new sections 263(2)(ga) and (gb), CE Act]
Under section 263 of the CE Act the maximum daily penalty for a
continuing contravention of new sections 92H(1), (2), (3) and (4) is 500
penalty units (currently $55,000) for a corporation) and 100 penalty units
(currently $11,000) for any other person.
1.38 The level of civil penalties for a contravention of new sections
92H (1), (2), (3) and (4) of the CE Act reflects their seriousness and
represents a clear and strong disincentive for non-compliance. The
integrity of the Opt-in Scheme and the carbon pricing mechanism could
25
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
be compromised by liable entities failing to maintain records adequately
or at all, and failing to report or notify accurately or in a timely way. For
this reason, the penalties are significant.
Potential emissions embodied in a designated fuel
1.39 For the purposes of dealing with emissions embodied in a
particular fuel source, section 7B of the NGER Act currently refers to the
`potential emissions embodied in an amount of natural gas'. The concept
of `potential greenhouse gas emissions' is used to assign liability for
emissions before they are produced. In the CE Act, this concept has only
been applied to emissions from natural gas.
1.40 The Opt-in Scheme, however, will assign liability for emissions
from other specified fuel types before the emissions are produced. To
allow for this, a definition of `designated fuel' is inserted into the CE Act.
This definition includes the fuels covered by the Opt-in Scheme. Sections
7, 7B and 7C of the NGER Act are amended so that the concept of
potential greenhouse gas emissions is applied to designated fuels for the
purposes of the NGER Scheme. [Schedule 1, Part 1, item 1, section 5, CE Act]
[Schedule 1, Part 1, item 4, section 5, CE Act] [Schedule 1, Part 1, item 25, section 7,
NGER Act] [Schedule 1, Part 1, item 32, section 7B, NGER Act] [Schedule 1, Part 1,
item 33, section 7B(1), NGER Act] [Schedule 1, Part 1, item 34, section 7B(1), NGER
Act] [Schedule 1, Part 1, item 35, section 7B(2), NGER Act] [Schedule 1, Part 1, item 36,
section 7B(2), NGER Act] [Schedule 1, Part 1, item 37, section 7B(2), NGER Act]
[Schedule 1, Part 1, item 38, section 7B(3)(c), NGER Act] [Schedule 1, Part 1, item 39,
section 7B(4)(a), NGER Act] [Schedule 1, Part 1, item 40, section 7B(4)(c), NGER Act]
[Schedule 1, Part 1, item 41, section 7B(5), NGER Act] [Schedule 1, Part 1, item 42,
section 7B(5), NGER Act] [Schedule 1, Part 1, item 43, section 7C, NGER Act]
[Schedule 1, Part 1, item 44, section 7C(1), NGER Act]
1.41 To ensure consistency across the legislation, section 7 of the
NGER Act is amended to indicate that `designated fuel' has the same
meaning as in the CE Act and to include designated fuels in the
definitions of `potential greenhouse gas emissions' and `carbon dioxide
equivalence'. [Schedule 1, Part 1, item 2, section 5, CE Act] [Schedule 1, Part 1, item
3, section 5, CE Act] [Schedule 1, Part 1, item 24, section 7, NGER Act] [Schedule 1,
Part 1, item 25, section 7, NGER Act] [Schedule 1, Part 1, item 29, section 7, NGER Act]
1.42 References to `potential greenhouse gas emissions embodied in
an amount of natural gas' are replaced with references to `potential
greenhouse gas emissions embodied in an amount of designated fuel' in
sections 22A, 22AA and 24 of the NGER Act. This means that liable
entities have reporting obligations for their use of designated fuels and the
CER has obligations to publish certain information relating to designated
fuels. [Schedule 1, Part 1, item 47, section 22A(1)(c), NGER Act] [Schedule 1, Part 1,
item 48, section 22AA(1)(e), NGER Act] [Schedule 1, Part 1, item 51, section
24(1AA)(c), NGER Act]
26
Chapter 1: General amendments
1.43 To provide clarity to stakeholders, the terminology of liquefied
petroleum gas has been revised to be consistent with nomenclature used
by industry. [Schedule 1, Part 1, item 5, section 5, CE Act] [Schedule 1, Part 1, item
6, section 5, CE Act] [Schedule 1, Part 1, item 14, section 30(2)(b), CE Act] [Schedule 1,
Part 1, item 16, section 35(7), CE Act] [Schedule 1, Part 1, item 17, section 58, CE Act]
[Schedule 1, Part 1, item 18, section 58(1)(d), CE Act]
Nomination of operational control
1.44 For the purposes of liability under the carbon pricing mechanism
and for reporting in the NGER Scheme, sections 11AA, 11AB, 11B and
11C of the NGER Act provide for the nomination of `operational control'
for facilities where two or more persons have equal authority over
operational and environmental policies. In these cases, nominations are
required to specify a person who has `operational control' for the purposes
of determining the entity with NGER obligations and/or a liability under
the carbon pricing mechanism for a facility.
1.45 To streamline these requirements and, in particular, to remove
the possibility that repeated nominations have to be made, the bill repeals
sections 11AA,11AB, 11B and 11C of the NGER Act and includes new
sections 11B and 11C.
1.46 New section 11B of the NGER Act applies in situations where
two or more persons potentially have operational control of a facility.
One of those persons can be nominated as the person with operational
control of the facility if the facility passes the `eligible nomination test'.
A facility passes the test if, at a time after the start of the carbon pricing
mechanism:
· two or more persons have authority to introduce and
implement operating, health and safety and environmental
policies; and
· it is not clear who has operational control of the facility
because no particular person has the greatest authority to
introduce and implement operating and environmental
policies; and
· the CER has not declared that a person has operational
control of the facility under section 55 or 55A of the NGER
Act. [Schedule 1, Part 1, item 46, new section 11B(1), NGER Act]
1.47 If the facility passes the eligible nomination test, the persons
who could be taken to have operational control of the facility can jointly
nominate one of them to be the nominated person for a specified amount
of time.
27
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
1.48 New section 11C applies where a trust with multiple trustees has
operational control of a facility, and no declaration of operational control
exists for the facility under section 55 or 55A of the NGER Act. The
trustees can jointly nominate one of them to be the nominated trustee for a
specified amount of time. [Schedule 1, Part 1, item 46, new section 11C, NGER
Act]
1.49 Nomination of a person requires the nomination of a non-foreign
person where possible. [Schedule 1, Part 1, item 46, new section 11B(4), NGER
Act] [Schedule 1, Part 1, item 46, new section 11C(4), NGER Act] Section 7 of the
NGER Act defines `foreign person'.
1.50 A nomination must specify the start and end days of the
nomination. [Schedule 1, Part 1, item 46, new section 11B(2), NGER Act] [Schedule
1, Part 1, item 46, new section 11C(2), NGER Act]
1.51 The nomination may be made before or after the start day.
However, the start date of the nomination cannot be in a period for which
a person's obligations under the NGER Act or carbon pricing mechanism
have lapsed and it cannot be after the financial year next following the
financial year that the nomination is made. There are no restrictions on
the end day. This means a nomination can be in force for a longer time
than under previous arrangements, removing the requirement to make a
nomination at least once every financial year. [Schedule 1, Part 1, item 46, new
sections 11B(6)-(9), NGER Act] [Schedule 1, Part 1, item 46, new sections 11C(6)-(9),
NGER Act]
1.52 A nomination has no effect if, at the start day of the nomination,
the facility does not pass the eligible nomination test or if the nominators
are not the persons who have potential operational control. [Schedule 1, Part
1, item 46, new section 11B(5), NGER Act] [Schedule 1, Part 1, item 46, new section
11C(5), NGER Act]
1.53 If a nomination is in force, liability and emissions reporting
responsibilities continue to apply in the same way as under existing
sections 11B and 11C of the NGER Act. That is, where the facility is a
facility of a joint venture, the nomination of operational control only
relates to reporting obligations under the NGER Act. Liability is
determined by the participating percentage determination. If the facility is
not a facility of a joint venture, the nomination relates to both reporting
obligations under the NGER Act and liability under the carbon pricing
mechanism. [Schedule 1, Part 1, item 46, new sections 11B(15) and (16), NGER Act]
[Schedule 1, Part 1, item 46, new section 11C(15), NGER Act]
1.54 The rules for liability and emissions reporting where there is no
nomination in force are also unchanged, however, a person will no longer
be liable for a civil penalty if that person fails to make a nomination by
the due date. In these cases, where the facility is a facility of a joint
28
Chapter 1: General amendments
venture, each relevant person or trustee is taken to have operational
control for the purposes of reporting under the NGER Act, while liability
under the carbon pricing mechanism is determined by the participating
percentage determination. If the facility is not a facility of a joint venture,
each relevant person or trustee is taken to have operational control for the
purpose of reporting under the NGER Act, while liability under the carbon
pricing mechanism is shared by the relevant persons/trustees. [Schedule 1,
Part 1, item 46, new sections 11B(17)-(19), NGER Act] [Schedule 1, Part 1, item 46, new
sections 11C(16) and (17), NGER Act]
1.55 The CER may cancel a nomination if:
· the nominated person does not have potential operational
control of the facility; or
· the facility does not pass the eligible nomination test;
· the nominated person has become an externally administered
body corporate or an insolvent under administration; or
· the nominated person has an unsatisfactory compliance
record. [Schedule 1, Part 1, item 46, new section 11B(10), NGER Act]
[Schedule 1, Part 1, item 46, new section 11C(10), NGER Act]
1.56 The effect of a nomination being cancelled is that no nomination
would be in place for that facility, and sections 11B and 11C set out the
consequences of no nomination being made, in terms of obligations to
report and liability for emissions. A nomination of another of the persons
who could be taken to have operational control of the facility could be
made upon an earlier nomination being cancelled by the CER. Decisions
made by the CER to cancel a nomination on the grounds that the nominee
has an unsatisfactory compliance record would be reviewable under
section 56 of the NGER Act. [Schedule 1, Part 1, item 58, new section 56(aaa)
and (aab), NGER Act]
1.57 New section 11D contains a list of matters that constitute an
unsatisfactory compliance record. Those matters may include acts or
omissions by executive officers of a body corporate, such as where that
officer breaches a provision of either the NGER Act or the CE Act. It is
intended that even if that officer breached a civil penalty provision or
committed an offence in another capacity before becoming an executive
officer of the nominee, this would still constitute an unsatisfactory
compliance record for the nominee. [Schedule 1, Part 1, item 46, new section
11D(1), NGER Act] Additional matters may be set out in the regulations so as
to provide flexibility in responding to relevant compliance issues, across
the range of reporting obligations, as they are experienced in the early
years of the carbon pricing mechanism. These matters could, for example,
include breaching a provision of climate change legislation other than the
29
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
NGER Act or CE Act. Any future proposed additions to the list of what
constitutes an unsatisfactory compliance record can be the subject of
focused consultation with affected persons and would be disallowable by
the Parliament. [Schedule 1, Part 1, item 46, new section 11D(1)(f)(ii), NGER Act]
[Schedule 1, Part 1, item 46, new section 11D(1)(g)(ii), NGER Act]
1.58 Where a nomination has been made and the facility ceases to
pass the eligible nomination test, the nominators have 30 days to notify
the CER of the cessation, unless the cessation occurred because the CER
declared a person to have operational control of the facility, or because the
question of operational control is not relevant to the NGER Act or the
CE Act. [Schedule 1, Part 1, item 46, new sections 11B(20)-(22), NGER Act]
[Schedule 1, Part 1, item 57, section 30(2A), NGER Act]
1.59 A person who fails to notify such cessation is liable for a
maximum civil penalty of 400 penalty units (currently $44,000), and each
day that the CER is not notified can amount to a continuing contravention.
This is a civil penalty provision because contravening it does not involve
conduct of such serious moral culpability that criminal prosecution and
sanctions are warranted. Further, as most persons are expected to be
bodies corporate, the financial disincentives to misconduct provided by
civil penalties are a more proportionate and effective enforcement tool,
reflecting the practice of other areas of business regulation.
1.60 The level of this civil penalty reflects the seriousness of the
contravention and represents a clear and strong disincentive for non-
compliance. The integrity of the carbon pricing mechanism could be
compromised by a failure to notify in a timely way.
1.61 Only one nomination may be in place at any given time. A new
nomination has no effect unless it is expressed to replace the original
nomination. When the new nomination starts, the original nomination is
revoked. [Schedule 1, Part 1, item 46, new sections 11B(13)-(14), NGER Act]
[Schedule 1, Part 1, item 46, new sections 11C(13)-(14), NGER Act] [Schedule 1, Part 1,
item 57, section 30(2A), NGER Act]
Publication of energy consumption
1.62 Section 24 currently requires the CER to publish certain
information on its website relating to scope 1 emissions, scope 2
emissions and energy consumption. In relation to energy consumption for
a registered corporation's group, the CER is required to publish a total
energy consumption figure as well as an adjusted energy consumption
figure.
1.63 To avoid potential confusion by users of the published data, the
Bill amends the publication requirements to require the CER to only
30
Chapter 1: General amendments
publish an adjusted `net energy consumption' figure for a corporate group.
[Schedule 1, Part 1, item 49, section 24(1)(c), NGER Act] [Schedule 1, Part 1, item 55,
section 24(1C), NGER Act] As a result, the total energy consumption figure
reported under parts 3 or 3F will not be required to be published.
1.64 Similarly, the discretionary publication requirements relating to
group members or business units are amended to only include the
publication of `net energy consumption' for each member of the
corporation's group or each business unit. [Schedule 1, Part 1, item 50, section
24(1A)(c), NGER Act]
1.65 To promote consistency and comparability of published data, the
publication requirements relating to data reported by reporting transfer
certificate holders and liability transfer certificate holders are also
amended by the Bill. The new provisions indicate that for these certificate
holders, the CER is required to publish the `net energy consumption'
figure derived from the report submitted under the NGER Act. [Schedule 1,
Part 1, item 52, sections 24(1AD)(a) and (b), NGER Act] [Schedule 1, Part 1, item 53,
section 24(1AD)(c), NGER Act] [Schedule 1, Part 1, item 54, sections 24(1AD), NGER
Act]
1.66 `Net energy consumption' for the purposes of publication is
calculated based on an adjustment process to be set out in the regulations.
[Schedule 1, Part 1, item 56, sections 24(7) and (8), NGER Act]
Application and transitional provisions
1.67 The provisions contained in Schedule 1 to the bill commence on
the later of:
· the start of the day on which the bill receives the Royal
Assent; and
· immediately after the commencement of Schedule 1, Part 2
to the Clean Energy (Consequential Amendments) Act 2011
on 1 July 2012. [Section 2]
1.68 The bill provides for transitional arrangements for
determinations made under section 7B of the NGER Act that set out
methods for determining the amount of potential greenhouse gas
emissions embodied in a fuel. An existing determination does not need to
be remade even though the head of power in the NGER Act under which
the determination was made is being amended. [Schedule 1, Part 2, item 59]
31
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Consequential amendments
Nomination of operational control
1.69 The bill amends the definition of `provisional emissions
number' in section 5 of the CE Act to indicate that its meaning is not
affected by the repeal of sections 11AA and 11AB of the NGER Act.
[Schedule 1, Part 1, item 7, section 5, CE Act]
1.70 The bill amends section 7 of the NGER Act to include
definitions of `externally-administered body corporate' and `insolvent
under administration'. This gives the terms the same meaning as those
given in section 9 of the Corporations Act 2001. The terms are used in
sections 11B and 11C as grounds that allow the CER to cancel a
nomination of operational control. [Schedule 1, Part 1, item 26, section 7, NGER
Act] [Schedule 1, Part 1, item 27, section 7, NGER Act]
1.71 The bill amends the definition of `operational control' in section
7 of the NGER Act to indicate that its meaning is not affected by sections
11AA and 11AB of the NGER Act, which have been repealed. [Schedule 1,
Part 1, item 28, section 7, NGER Act]
1.72 The bill amends section 7 of the NGER Act to include a
definition of `unit shortfall charge'. This gives the term the same meaning
as in section 5 of the CE Act. The term is used in new section 11D of the
NGER Act that sets out the meaning of `unsatisfactory compliance
record'. [Schedule 1, Part 1, item 30, section 7, NGER Act]
1.73 The bill amends section 7 of the NGER Act to include a
definition of `unsatisfactory compliance record', which indicates that the
term has the meaning given by new section 11D of the NGER Act.
[Schedule 1, Part 1, item 31, section 7, NGER Act]
1.74 The bill amends section 11 of the NGER Act, which sets out the
basic rule of operational control, so that it has effect subject to new
sections 11B and 11C of the NGER Act, and not sections 11AA and
11AB, which have been repealed. [Schedule 1, Part 1, item 45, section 11, NGER
Act]
32
Chapter 2
Amendments relating to gaseous fuels
Outline of chapter
2.1 Chapter 2 describes the following amendments contained in
Schedules 1 and 2 to the bill:
· amendments made to the CE Act to bring about mandatory
carbon pricing mechanism coverage of emissions from
non-transport LPG and LNG from 1 July 2013; and
· amendments to the CE Act related to the coverage of
non-transport CNG under the carbon pricing mechanism
from 1 July 2012; and
· amendments to the Fuel Tax Act which ensure that fuel tax
credit (FTC) entitlements will not be reduced for business
use of non-transport gaseous fuels (CNG, LPG and LNG)
when those fuels move into the carbon pricing mechanism;
and
· amendments to the Fuel Tax Act that also ensure that when
the non-transport gaseous fuels move into the carbon pricing
mechanism, the agriculture, fishing and forestry industries
will become entitled to a FTC equivalent to the amount of the
carbon charge that is embedded in the price of the fuel.
2.2 Chapter 2 also describes amendments made by the Clean Energy
(Excise Tariff Legislation Amendment) Bill 2012 to the Excise Act and
the Excise Tariff Act and amendments made by the Clean Energy
(Customs Tariff Amendment) Bill 2012 to the Customs Tariff Act. The
amendments ensure that from 1 July 2012, CNG used for non-transport
purposes will not be subject to the effective carbon price through the fuel
tax system.
Context of amendments
2.3 LPG, LNG and CNG intended for use in an internal combustion
engine for road transport were covered by the fuel tax system from
1 December 2011, when excise and excise-equivalent customs duty was
33
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
applied to these fuels. Non-transport LPG, LNG and CNG is not currently
subject to excise.
2.4 The Clean Energy Legislative Package will apply an effective
carbon price to non-transport LPG, LNG and CNG by bringing them into
the excise system and applying an automatic partial remission of excise of
an amount that would leave excise equivalent to the carbon price applying
to LPG, LNG and CNG.
2.5 Application of an equivalent carbon price through the fuel tax
system requires excise licensing for LPG and LNG importers, producers
and distributors and CNG producers and has rigorous requirements for
storage and movement of excisable products. The excise system also
requires remission of excise regularly during the year.
2.6 On 11 October 2011, the Government announced that it would
consider ways in which gaseous fuels could be covered by the carbon
pricing mechanism, consistent with the treatment of liquid fuels.
Inclusion of non-transport LPG and LNG in the carbon pricing
mechanism provides LPG and LNG distributors and marketers with more
flexibility to manage their carbon pricing obligations than the fuel tax
system.
2.7 Including non-transport CNG in the carbon pricing mechanism
allows the emissions obligation to be placed by default on the supplier of
the natural gas from which CNG is produced rather than producers of
CNG. As natural gas suppliers will already be managing much more
substantial obligations for residential and commercial consumers, any
additional burden for those suppliers will be negligible. Non-transport
CNG may be included in the carbon pricing mechanism through changes
to the excise tariff system.
2.8 The carbon pricing mechanism allows entities to access
emission unit markets to discharge carbon pricing liabilities. Inclusion in
the mechanism also reduces cash carrying costs associated with meeting
obligations under the fuel tax system during the mechanism's fixed price
period, with carbon price obligations accounted for once or twice yearly
rather than the more frequent requirements of the excise system.
2.9 Inclusion of these fuels in the carbon pricing mechanism is also
consistent with the general principle that wide coverage of the mechanism
is desirable to maximise opportunities for least-cost emissions abatement.
34
Chapter 2: Amendments relating to gaseous fuels
Summary of new law
Commencement of coverage and transitional arrangements
2.10 Non-transport LPG and LNG will have a carbon price applied
under the carbon pricing mechanism from 1 July 2013 in place of the
current arrangements. The current arrangements will apply from
1 July 2012 to 1 July 2013 and involve the application of an effective
carbon price to non-transport LPG and LNG through the fuel tax system.
2.11 Mandatory coverage of non-transport LPG and LNG under the
carbon pricing mechanism will begin on 1 July 2013. This allows time for
transitional and compliance arrangements to be carefully considered,
developed and implemented. This aligns the treatment of non-transport
LPG and LNG with the coverage of liquid fuels by the carbon pricing
mechanism. It is also consistent with the Government's original
commitment on 11 October 2011 to examine coverage of gaseous fuels.
2.12 Under the carbon pricing mechanism, the point at which excise
or customs duty becomes payable (entry into home consumption,
generally by the importer, manufacturer or marketer of non-transport LPG
or LNG) will be the initial point of liability for emissions resulting from
the use of these fuels.
2.13 Regulations made for the CE Act will be able to specify
situations in which a person can quote an `obligation transfer number'
(OTN). This will allow a large end user of LPG, LNG or CNG to manage
their own liability for emissions from these fuels in specified
circumstances. It will also enable businesses that use these fuels as
feedstock to avoid paying a carbon price in respect of fuel that does not
result in emissions. To bring about coverage of non-transport LPG and
LNG under the carbon pricing mechanism, these fuels will not have excise
and customs duties applied.
Coverage of non-transport CNG
2.14 To correctly apply the carbon charge on non-transport CNG
under the Government's Clean Energy Plan, the exemption from fuel
excise or excise equivalent customs duty for non-transport use of CNG
needs to be restored from 1 July 2012. Non-transport CNG will instead be
subject to the carbon price directly under the carbon pricing mechanism.
35
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
2.15 Coverage of non-transport CNG from 1 July 2012 will occur
because:
· CNG is produced from natural gas that is already subject to
an upstream price under the carbon pricing mechanism. This
allows coverage to be implemented relatively simply by
removing the requirement for producers of non-transport
CNG to pay carbon price equivalent excise duty; and
· some small non-transport CNG producers are not currently
required to participate in the excise system, and would be
required to install metering equipment to enable their
participation in the excise system.
2.16 The requirement for CNG producers to pay excise or customs
duty on non-transport CNG will be removed through legislative changes
to excise arrangements for CNG producers and the adjustment of
administrative arrangements by the ATO. The default point of liability for
emissions from non-transport CNG will then rest with the natural gas
supplier that supplies the gas from which the CNG is produced.
2.17 CNG producers will have the option of quoting an OTN to their
supplier which will enable them to assume mechanism liabilities for the
natural gas they use to create CNG. The natural gas supplier would not be
able to refuse this transfer of liability.
Off-road use in agriculture, forestry and fisheries activities
2.18 An equivalent carbon price is not applied to off-road fuel use by
the agriculture, forestry and fishing sectors. This policy will be continued
by allowing non-transport LPG, LNG and CNG users in these industries
to claim fuel tax credits which are equivalent to the amount of carbon
price even when the fuel is subject to the carbon pricing mechanism and
no fuel tax has been paid.
Ongoing coverage of gaseous fuels under the fuel tax system
2.19 Non-transport CNG will be covered by the carbon pricing
mechanism from 1 July 2012. From 1 July 2013 non-transport LPG and
LNG will move from the effective carbon price under the fuel tax system
to being covered by the carbon pricing mechanism.
2.20 Bringing about coverage of non-transport CNG, LPG and LNG
under the carbon pricing mechanism requires excluding non-transport
CNG, LPG and LNG from excise and customs duties and as a
36
Chapter 2: Amendments relating to gaseous fuels
consequence excluding users of non-transport CNG, LPG and LNG from
being able to claim FTCs for their use of the fuels.
2.21 A new FTC will be available for the agriculture, fishing and
forestry industries. The FTC will be equivalent to the amount of the
carbon price that is embedded in the cost of gaseous fuels acquired for
non-transport use. This is consistent with the general policy that these
industries should not be subject to a carbon price on the fuels acquired for
non-transport use.
Comparison of key features of new law and current law
New law Current law
Carbon price on non-transport LPG and LNG
A carbon price will be applied to A carbon price will be applied to
non-transport LPG and LNG through non-transport LPG and LNG through
the carbon pricing mechanism from the fuel tax arrangements from
1 July 2013. From 1 July 2012 to 1 July 2012.
1 July 2013 a carbon price will be
applied through the fuel tax
arrangements as set out in the Clean
Energy Legislative Package.
The liable entity for non-transport The liable entity for non-transport
LPG and LNG under the carbon LPG and LNG will generally be the
pricing mechanism will generally be person that is liable to pay customs or
the person that is liable to pay excise duty in respect of the LPG or
customs or excise duty in respect of LNG.
the LPG or LNG.
Where it is not possible to identify Where it is not possible to identify
whether LPG or LNG will be used for whether LPG or LNG will be used for
transport or non-transport purposes transport or non-transport purposes
when it is entered for home when it is entered for home
consumption from excise licensed consumption, the carbon price will be
premises, the carbon price will be applied through reduced fuel tax
applied through reduced fuel tax credits.
credits.
Large users of LPG or LNG will be Excise liability is not generally
able to quote an OTN to assume transferrable to end users of LPG and
direct liability under the carbon LNG unless they apply for an excise
pricing mechanism where allowed by license.
regulations.
From 1 July 2013, carbon price Carbon price liabilities will be
liabilities will be acquitted twice for acquitted on a weekly or monthly
each financial year during the fixed basis.
price period (by 15 June for liabilities
37
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
in respect of the first 3 quarters, and
the remainder by the following
1 February), and once during the
flexible price period (the following
1 February).
Carbon price on non-transport CNG
A carbon price will be applied to A carbon price will be applied to
non-transport CNG through the non-transport CNG through the fuel
carbon pricing mechanism from 1 tax arrangements from 1 July 2012.
July 2012.
The default liable entity for The liable entity for non-transport
non-transport CNG will be the LPG and LNG will generally be the
supplier of natural gas from which producer of CNG that is liable to pay
CNG is produced. customs or excise duty.
Producers of CNG will be able to The liable entity for non-transport
quote an OTN to assume direct LPG and LNG will generally be the
liability under the carbon pricing producer of CNG that is liable to pay
mechanism. customs or excise duty. Producers of
CNG will be able to quote an OTN to
ensure that their natural gas supplier
is not also liable under the carbon
pricing mechanism.
From 1 July 2012, carbon price Carbon price liabilities will be
liabilities will be acquitted twice for acquitted on a weekly or monthly
each financial year during the fixed basis.
price period (by 15 June for liabilities
in respect of the first 3 quarters, and
the remainder by the following
1 February), and once during the
flexible price period (the following
1 February).
Fuel tax credits
CNG (from 1 July 2012) and LPG As part of the application of an
and LNG (both from 1 July 2013) effective carbon price the amount of
will be subject to the carbon pricing FTCs otherwise claimable by
mechanism rather than the effective business are reduced by an amount
carbon price under the fuel tax equal to the carbon price that would
system. When this occurs there will otherwise apply to the emissions from
be no reductions in FTCs by a carbon that fuel. This applies to both liquid
reduction amount claimed by and gaseous fuels.
businesses when using those fuels.
If the CNG, LPG or LNG is subject The agriculture, fishing and forestry
to the carbon pricing mechanism and industries are exempted from
is used in the agriculture, fishing or reduction in their FTCs by the carbon
forestry industry, a fuel tax credit reduction amount.
entitlement for the effects of the
carbon pricing mechanism will be
38
Chapter 2: Amendments relating to gaseous fuels
available to users in these industries.
Detailed explanation of new law
Liability under the carbon pricing mechanism
2.22 The bill amends the CE Act to provide that, under the carbon
pricing mechanism, a carbon price liability for emissions embodied in
non-transport LPG and LNG applies to:
· an importer or reseller of LPG or LNG that enters imported
LPG or LNG for home consumption;
· a manufacturer or reseller of LPG that enters domestically
manufactured LPG or LNG for home consumption;
· a person that quotes an OTN for a supply of LPG or LNG.
[Schedule 2, item 13, sections 36B-36D, CE Act]
2.23 For LPG and LNG, liability under the carbon pricing mechanism
applies to potential emissions embodied in the LPG or LNG supplied and
not the actual emissions produced at the time the LPG or LNG is
combusted. This is because liability generally arises before the LPG or
LNG is combusted and emissions are released into the atmosphere. In
practice, there is little difference between the actual emissions arising
from the combustion of LPG and LNG among different non-transport
customers. [Schedule 2, item 13, sections 36B-36D, CE Act]
Definitions
2.24 The bill amends section 5 of the CE Act to replace the term
`liquid petroleum gas' with the term `liquefied petroleum gas', which is
the more commonly used term in the industry. It is also the term used in
the Excise Tariff Act 1921, which sets out whether a fuel type is excisable
or whether it is covered by the carbon pricing mechanism. Any references
in the NGER Regulations to `liquid petroleum gas' are to be taken as
references to `liquefied petroleum gas'. [Schedule 1, Part 1, item 5, section 5,
CE Act] [Schedule 1, Part 1, item 6, section 5, CE Act]
2.25 LPG and LNG are `designated fuels' for the purposes of the
CE Act and the NGER Act (see Chapter 1 above). [Schedule 1, Part 1, item 4,
section 5, CE Act]
2.26 The bill inserts a new definition in section 5 of the CE Act of:
39
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
· `gaseous fuel supplier', being a person who supplies LPG,
LNG or natural gas; and [Schedule 2, item 3, section 5, CE Act]
· `non-transport combustion', being combustion that does not
occur in an internal combustion engine in a motor vehicle or
a vessel. [Schedule 2, item 4, section 5, CE Act]
2.27 The new definition of `gaseous fuel supplier' is created as a
collective term for the purposes of applying the OTN provisions of the CE
Act, as OTNs will now apply for LPG and LNG, as well as to natural gas.
2.28 The CE Act defines `taxable fuel' as having the same meaning
as in the Fuel Tax Act. The bill amends the definition of `taxable fuel' in
section 5 of the CE Act to provide that it does not cover circumstances
covered by paragraph (b) of the definition of `taxable fuel' in section 110-
5 of the Fuel Tax Act (as amended by item 85 of Schedule 2 to the bill).
The effect of this amendment is to ensure that `taxable fuel' fuel includes
CNG, LNG and LPG subject to the carbon pricing mechanism because
this fuel is excluded from the new definition of `taxable fuel' in the Fuel
Tax Act. [Schedule 2, item 5, section 5, CE Act]
Liability for LPG or LNG
2.29 The bill includes a new Division 3A after Part 3, Division 3 of
the CE Act which concerns the coverage under the carbon pricing
mechanism of LPG and LNG for non-transport use.
LPG or LNG for non-transport use which is imported
2.30 New section 36B sets out liability for imported LPG or LNG
which is intended for non-transport use. A person is liable for potential
emissions embodied in LPG or LNG where:
· the LPG or LNG is imported into Australia; and
· the LPG or LNG is entered for home consumption in a
financial year that begins on or after 1 July 2013; and
· customs duty is or was payable by the person on the LPG or
LNG, but duty is automatically remitted because the LPG or
LNG is not for use in an internal combustion engine in a
motor vehicle or vessel (that is, the LPG or LNG is for non-
transport use); and
· the LPG or LNG is not exempt under the regulations.
[Schedule 2, item 13, new section 36B, CE Act]
40
Chapter 2: Amendments relating to gaseous fuels
2.31 It is intended that the regulations could, for instance, provide an
exemption for fuel (typically LPG) which is packaged in small containers
for specific applications which use small volumes of fuel (such as
soldering). It would not be cost effective to require importers of these
products to participate in the mechanism.
LPG or LNG for non-transport use which is manufactured or produced
in Australia
2.32 New section 36C of the CE Act sets out liability for LNG or
LPG which is manufactured or produced in Australia and is intended for
non-transport use. A person is liable for potential emissions embodied in
LPG or LNG where:
· the LPG or LNG is manufactured or produced in Australia;
and
· the LPG or LNG is entered for home consumption in a
financial year that begins on or after 1 July 2013; and
· excise duty is or was payable by the person on the LPG or
LNG, but duty is automatically remitted because the LPG or
LNG is not for use in an internal combustion engine in a
motor vehicle or vessel (that is, the LPG or LNG is for non-
transport use); and
· the LPG or LNG is not exempt under the regulations.
[Schedule 2, item 13, new section 36C, CE Act]
2.33 It is intended that the regulations could, for instance, provide an
exemption for fuel (typically LPG) which is packaged in small containers
for specific applications which use small volumes of fuel (such as
soldering). It would not be cost effective to require manufacturers of
these products to participate in the mechanism.
LPG or LNG for non-transport use where an OTN is quoted
2.34 New section 36D of the CE Act sets out liability where a person
quotes an OTN in relation to a supply of non-transport LPG or LNG. An
OTN holder may quote an OTN in relation to a supply of LPG or LNG
from a person that has a preliminary emissions number for that supply
under s36B or 36C of the CE Act. The OTN holder will assume liability
for potential emissions embodied in the supply of LPG or LNG. [Schedule
2, item 13, new section 36D, CE Act] [Schedule 2, item 13, new section 36B, CE Act],
[Schedule 2, item 13, new section 36C, CE Act]
2.35 New sections 58AA and 58AB of the CE Act provide that
regulations may set out the circumstances in which the quotation of an
41
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
OTN is required or permitted for supplies of gaseous fuels. An OTN
holder must give a written notice to the supplier in circumstances where
the acceptance of an OTN quotation is mandatory. The Government
proposes that provision will be made for large users of LPG or LNG to
assume liability for direct emissions from LPG and LNG. Feedstock users
of LPG or LNG would also be permitted to quote an OTN to ensure that
they do not pay a carbon price on fuel that is consumed without producing
emissions. Other circumstances may also be prescribed. [Schedule 2, item
35, new section 58AA, CE Act] [Schedule 2, item 35, new section 58AB, CE Act]
2.36 The acceptance of an OTN quotation will be mandatory where a
quotation is required under the regulations or where quotation is permitted
and the conditions specified in the regulations are satisfied. [Schedule 2,
Item 36, section 59, CE Act] [Schedule 2, item 52, section 60, CE Act]
2.37 The bill extends the CE Act's provisions concerning the
issuance, surrender, cancellation, withdrawal and quotation of OTNs for
natural gas supplies to extend these to cover supplies of LPG and LNG.
An explanation of the provisions of the CE Act concerning OTNs is set
out in paragraphs 1.130 to 1.205 of the Explanatory Memorandum to the
Clean Energy Bill 2011. [Schedule 2, item 14, section 40(3)(a), CE Act] [Schedule
2, item 15, section 41(1)(a), CE Act] [Schedule 2, item 16, section 43(2)(a), CE Act]
[Schedule 2, item 17, section 45(8), CE Act] [Schedule 2, item 18, section 45(8)-(15), CE
Act] [Schedule 2, item 19, section 47, CE Act] [Schedule 2, item 20, section 47(2), CE
Act] [Schedule 2, item 21, section 47(2), CE Act] [Schedule 2, item 22, section 48(1), CE
Act] [Schedule 2, item 23, section 48(1), CE Act] [Schedule 2, item 24, section 48(1)(a),
CE Act] [Schedule 2, item 25, section 48(3), CE Act] [Schedule 2, item 26, section 49(a),
CE Act] [Schedule 2, item 27, section 49, CE Act] [Schedule 2, item 28, section 50(a),
CE Act] [Schedule 2, item 29, section 51, CE Act] [Schedule 2, item 30, section 52, CE
Act] [Schedule 2, item 31, section 53(1)(a), CE Act] [Schedule 2, item 32, section
53(2)(b), CE Act] [Schedule 2, item 33, section 54, CE Act] [Schedule 2, item 34, section
55, CE Act]
2.38 The bill also amends the CE Act provisions concerning the
misuse of OTNs and bogus quotation of OTNs to extend them to cover
supplies of LPG and LNG. [Schedule 2, item 68, section 63(1), CE Act] [Schedule
2, item 69, section 63(4), CE Act] [Schedule 2, item 70, sections 64(1) and (3), CE Act]
Provisional and preliminary emissions numbers
2.39 New subsections 36B(1), 36B(2), 36C(1), 36C(2), 36D(1) and
36D(2) of the CE Act give rise to preliminary ENs and provisional
emissions numbers (PENs) for the purposes of liability for covered
emissions embodied in supplies of LPG and LNG under the CE Act.
PENs are used to work out an entity's total liability under the carbon
pricing mechanism, and therefore the number of eligible emissions units
the entity must surrender to avoid paying a unit shortfall charge.
42
Chapter 2: Amendments relating to gaseous fuels
2.40 Each amount of non-transport LPG or LNG for which a person
is liable gives rise to a preliminary emissions number (preliminary EN)
for the person. A preliminary EN is equal to the amount of greenhouse
gas emissions in tonnes of CO2-e embodied in the amount of LPG or LNG
imported or manufactured.2 [Schedule 2, item 13, new section 36B(1), CE Act]
[Schedule 2, item 13, new section 36C(1), CE Act] [Schedule 2, item 13, new section
36D(1), CE Act]
2.41 Under sections 33, 35 and 36 of the CE Act a person's PEN is
the sum of the person's preliminary ENs for the financial year. If the
person has one or more PENs for imported or manufactured non-transport
LPG or LNG in a financial year, the person is a `liable entity' for that
financial year (see definition of `liable entity' in section 5 of the CE Act).
Entities liable for covered emissions embodied in LPG and LNG must
surrender eligible emissions units, or pay a unit shortfall charge, for each
tonne of emissions for which they are liable during an eligible financial
year. This includes the requirement to make a provisional surrender by
15 June in a fixed price year in respect of the first three quarters of the
year or pay a unit shortfall charge. [Schedule 2, item 71, new section 126(7A),
CE Act]
2.42 Entities liable for covered emissions embodied in LPG and LNG
have obligations to report the calculation of their liability to the CER
under sections 15A, 15AA, 22A and 22AA of the NGER Act (see
Chapter 1).
No double-counting - LPG and LNG
2.43 Emissions from combustion of LPG or LNG that have been
subject to an obligation under new sections 36B or 36C of the CE Act will
not generally form part of the direct emissions liability for a facility under
Part 3, Division 2 of the CE Act, although they will count towards
calculating whether the facility meets thresholds for liability. New
subsections 20(12) and (13) ensure that emissions from combustion of
LPG and LNG are not counted twice, once for the liable entity for import
or manufacture of LPG or LNG under new sections 36B and 36C of the
CE Act, and again when combusted at a covered facility. These amounts
may be pro-rated if there is a change in control during the year. [Schedule
2, item 7, new subsections 20(12)-(13), CE Act] [Schedule 2, item 8, new subsections
21(8C)-(8D), CE Act] [Schedule 2, item 9, new subsections 22(10)-(11), CE Act]
[Schedule 2, item 10, new subsections 23(9C)-(9D), CE Act] [Schedule 2, item 11, new
subsections 224(8C)-(8D), CE Act] [Schedule 2, item 12, new subsections 25(7C)-(7D),
CE Act]
2
See Chapters 1 and 4 of the Explanatory Memorandum for the Clean Energy Bill 2011 for
further explanation of how a person assesses and meets liabilities for covered greenhouse
gas emissions under the CE Act.
43
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
2.44 If a person quotes an OTN in relation to the supply of the LPG
or LNG to a facility, the emissions will form part of the obligations of the
facility, and will be netted-out from the obligations of the supplier of the
LPG or LNG. This will allow direct emitters to assume liability for
emissions from LPG or LNG where they meet any criteria for the
quotation of an OTN for LPG or LNG. [Schedule 2, item 7, new subsections
20(12)-(13), CE Act] [Schedule 2, item 8, new subsections 21(8C)-(8D), CE Act]
[Schedule 2, item 9, new subsections 22(10)-(11), CE Act] [Schedule 2, item 10, new
subsections 23(9C)-(9D), CE Act] [Schedule 2, item 11, new subsections 224(8C)-(8D),
CE Act] [Schedule 2, item 12, new subsections 25(7C)-(7D), CE Act]
Netted-out numbers - LPG and LNG
2.45 Where a person receives a supply of LPG or LNG from a
supplier that is a liable entity under new section 36B or new section 36C
of the CE Act and quotes an OTN to take on liability for that supply, then
the quotation will give rise to a netted-out number for the supplier. The
netted-out number can be subtracted from the supplier's PEN, reducing
the supplier's liability and ensuring that the emissions from the supply of
LPG and LNG are not double counted. [Schedule 2, item 13, new section
36B(4), CE Act] [Schedule 2, item 13, new section 36C(4), CE Act]
2.46 The regulations may also specify that a liable entity in relation to
import, manufacture or production of LPG and LNG can `net out' certain
amounts of LPG and LNG from their PEN. This allows for `fine tuning'
of a supplier's liability, which addresses specific circumstances where the
general rules result in liability being applied in situations when it should
not, such as additional cases of double-counting. [Schedule 2, item 13, new
section 36B(5), CE Act] [Schedule 2, item 13, new section 36C(5), CE Act] [Schedule 2,
item 13, new section 36D(5), CE Act]
Coverage of CNG
2.47 From 1 July 2012 non-transport CNG will be exempt from
excise duty or excise equivalent customs duty. Non-transport CNG will
be subject to the direct carbon charge under the carbon pricing mechanism
and as such will not also be subject to the effective carbon price as
imposed via the fuel tax system.
2.48 The fuel tax system refers to the system which imposes excise
duty on domestically manufactured fuels and excise equivalent customs
duty on imported fuels.
2.49 Previous amendments to the Excise Act and Excise Tariff Act
were made by the Clean Energy (Excise Tariff Legislation Amendment)
Act 2011, so as to impose an effective carbon price on non-transport
business use of CNG from 1 July 2012. Mirror amendments were also
44
Chapter 2: Amendments relating to gaseous fuels
made to the Customs Tariff Act by the Clean Energy (Customs Tariff
Amendment) Act 2011 to deal with imported CNG.
2.50 The Clean Energy (Excise Tariff Legislation Amendment) Bill
2012 and the Clean Energy (Customs Tariff Amendment) Bill 2012 will
effectively repeal these previous amendments, which were due to take
effect from 1 July 2012, and restore the provisions in the Excise Act,
Excise Tariff Act and Customs Tariff Act to retain the legislation on CNG
as it is currently written. [Section 1] [Section 3]
Amendments to the Excise Act 1901 and the Excise Tariff Act 1921
2.51 The non-transport CNG tariff rate will be removed from the
Schedule to the Excise Tariff Act and the consequential amendments
made to that Act by Clean Energy (Excise Tariff Legislation Amendment)
Act 2011. As a result, sub-item 10.19D (carbon-rated compressed natural
gas) and the associated a rate of duty will no longer appear in the
Schedule. [Schedule 1, items 2 to 9 and 13, subsections 3(1), 5(1), section 6H, and the
Schedule, Excise Tariff Act]
2.52 As part of the transitional arrangements for the taxation of
transport use of CNG, amendments are scheduled to commence over the
next three financial years, increasing the rate as contained in
sub-item 10.19C. These amendments assumed the presence of
sub-item 10.19D and referenced carbon-rated compressed natural gas.
The Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
removes these amendments. [Schedule 1, items 10 to 12, the Schedule, Excise
Tariff Act]
2.53 The Clean Energy (Excise Tariff Legislation Amendment) Bill
2012 restores section 77HA of the Excise Act, which deals with the
concept of CNG that is exempt from excise, is restored to what was set
out originally prior to the amendments made by the Clean Energy (Excise
Tariff Legislation Amendment) Act 2011. [Schedule 1, item 1, section 77HA,
Excise Act]
Amendments to the Customs Tariff Act 1995
2.54 The Clean Energy (Customs Tariff Amendment) Bill 2012
removes the reference to carbon-rated compressed natural gas and
associated rate from Schedule 3 of the Customs Tariff Act and amends
other schedules that have references to that item to exclude the reference.
[Schedule 1, Part 1, items 1 to 9, Schedules 3,5,6,7 and 8, Customs Tariff Act]
2.55 Subsection 19A(3) of the Customs Tariff Act was intended to
provide the means by which changes in the duty rates calculated take into
account increases in the effective carbon price over the fixed price period
and the move to the floating price were inserted into the relevant
45
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
schedules. This is no longer required. [Schedule 1, Part 2, items 11 and 12,
subsections 19A(3) to (5), Customs Tariff Act]
No double-counting - CNG
2.56 Emissions from the combustion of non-transport CNG at a
facility will be counted towards the calculation of the facility's threshold
for participation in the carbon pricing mechanism, but will not give rise to
an emissions liability, unless the CNG is produced at the facility and a
person quotes an OTN in relation to the natural gas used to produce the
CNG. [Schedule 1, Part 1, item 8, new section 20(10)-(11), CE Act] [Schedule 1, Part
1, item 9, new section 21(8A)-(8B), CE Act] [Schedule 1, Part 1, item 10, new sections
22(8)-(9), CE Act] [Schedule 1, Part 1, item 11, new section 23(9A)-(9B), CE Act]
[Schedule 1, Part 1, item 12, new section 24(8A)-(8B), CE Act] [Schedule 1, Part 1, item
13, new section 25(7A)-(7B), CE Act]
2.57 Non-transport CNG will be removed from coverage under the
customs and excise systems by legislative changes to excise arrangements
for CNG producers and the adjustment of administrative arrangements by
the ATO. As non-transport CNG will no longer be subject to any duty
under the Customs Tariff Act or the Excise Tariff Act, it will no longer be
excluded from coverage in the carbon pricing mechanism under section
30(2) of the CE Act.
2.58 In general this will result in liability defaulting to the supplier of
the natural gas that is used to produce non-transport CNG, with that
supplier likely to pass through the cost of compliance with the carbon
pricing mechanism in the price of natural gas supplied to the CNG
producer. However, the CNG producer would also be able to quote an
OTN under section 58 of the CE Act to directly assume liability for the
gas used if it wished to.
2.59 In situations where an OTN is not quoted for natural gas used to
produce CNG, the emissions from combustion of CNG do not give rise to
a direct emissions liability. Otherwise the CNG user would face the
carbon price twice, once from the price pass-through from the natural gas
supplier, and a second time through the direct emissions obligations for
the combustion of the CNG. However, in cases where an OTN is quoted
for natural gas used to produce CNG, and the emissions from that CNG
count towards a direct emissions liability, the person who quotes the OTN
will be able to net-out the number from its emissions obligations to
eliminate double counting. [Schedule 1, Part 1, item 15, new section 35(6A), CE
Act]
46
Chapter 2: Amendments relating to gaseous fuels
Treatment of non-transport LPG, LNG and CNG under fuel tax
arrangements
2.60 New section 41-35 of the Fuel Tax Act will provide a general
exclusion for users of CNG, LPG and LNG fuels that are subject to the
carbon pricing mechanism from entitlement to claim FTCs. [Schedule 2,
item 78, section 41-35, Fuel Tax Act]
2.61 Whether a particular gaseous fuel is subject to the carbon pricing
mechanism is set out by reference to the CE Act. Broadly, if the fuel is
subject to a PEN under the CE Act then no FTCs can be claimed.
2.62 CNG will be taken to be subject to the carbon pricing
mechanism if a person has a PEN for a financial year and the PEN is
attributable to the supply of natural gas used to manufacture or produce
the CNG. [Schedule 2, item 79, subsection 42A 5(3), Fuel Tax Act]
2.63 Similarly, LPG and LNG will be taken to be subject to the
carbon pricing mechanism if a person has a PEN for a financial year and
the PEN is attributable to the import, manufacture or production of the
LPG or LNG. [Schedule 2, item 79, subsection 42A-5(4), Fuel Tax Act]
2.64 Broadly, under the CE Act, a PEN represents the emissions
which give rise to a liability under the carbon pricing mechanism.
Gaseous fuels and the agriculture, fishing or forestry industries
2.65 The agriculture, fishing and forestry industries will become
entitled to a FTC equivalent to the amount of the carbon charge that is
embedded in the price of gaseous fuels. Subdivision 43-B of the Fuel Tax
Act (which commences on 1 July 2012) defines those industries. [Schedule
2, item 76, section 2-1, Fuel Tax Act] [Schedule 2, item 77, subsection 41-15(1), Fuel
Tax Act] [Schedule 2, item 79, section 42A-5, Fuel Tax Act] [Schedule 2, item 80,
section 43-1, Fuel Tax Act]
2.66 Where a person acquires one of the gaseous fuels and that fuel
has been subject to the carbon pricing mechanism within the meaning of
new subsections 42A-5(3) or (4) of the Fuel Tax Act then the person will
be entitled to a FTC. The existing rule that a person must acquire the fuel
for use in carrying on an enterprise and be registered for the GST to obtain
a FTC operates in this situation.
Amount of FTC
2.67 In broad terms the amount of the FTC is the amount by which a
FTC will otherwise be reduced by the `carbon reduction'. The carbon
reduction for all fuels is the equivalent of the carbon charge on the fuel
47
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
had the fuel been subject to the carbon charge. [Schedule 2, item 81,
subsection 43-5(1 ), Fuel Tax Act] [Schedule 2, item 82, subsections 43-5(4) and (5),
Fuel Tax Act] [Schedule 2, item 85, section 110-5, paragraph (a) of new definition of
`taxable fuel', Fuel Tax Act]
2.68 The amount of the carbon reduction will be based in 2012-13,
2013-14 and 2014-15 on a carbon charge of $23.00 per tonne, $24.15 per
tonne and $25.40 per tonne respectively. From 1 July 2015, the FTC
carbon reduction will be based on the preceding six-month average carbon
unit auction price. The average auction price used on 1 July 2015 will be
for the preceding six-month forward permit auctions. For subsequent
periods the average price used will be for the actual six-month period.
2.69 The new FTCs will be adjusted in the same way.
Example 2.1 Adjusting FTCs
Huey undertakes qualifying agricultural activities and qualifies for
FTCs. He acquires 210 litres of LPG to use for heating a remotely
sited shearing shed during the 2013-14 financial year. Huey would be
entitled to a FTC credit for the amount of LPG (210 litres) times the
carbon reduction for LPG for 2013-14 (3.864 cents per litre).
Rounding calculation for the FTC carbon reduction
2.70 The bill makes a technical amendment to section 43-8 of the
Fuel Tax Act to ensure the carbon reduction is correctly rounded to three
decimal places of a cent in all circumstances. [Schedule 2, item 83, subsection
43-8 (1), Fuel Tax Act] [Schedule 2, item 84, subsection 43-8 (1A), Fuel Tax Act]
Application and transitional provisions
Clean Energy Legislation Amendment Bill 2012
2.71 The provisions in Schedule 2 of the bill will commence on the
latest of:
· the start of the day after the bill receives the Royal Assent;
and
· immediately after the commencement of Schedule 1 to the
Clean Energy (Fuel Tax Legislation Amendment) Act 2011;
and
· immediately after the commencement of Schedule 1 to the
bill. [Section 2]
48
Chapter 2: Amendments relating to gaseous fuels
2.72 CNG that has been supplied will have a PEN in respect of that
supply from the beginning of the 2012-13 financial year and so there will
be no FTC reductions for CNG acquired from the beginning of that year.
The new FTC for the agriculture, fishing and forestry industries' use of
CNG will also commence from the beginning of the 2012-13 financial
year.
2.73 LPG and LNG will only have PENs when the fuel is entered into
home consumption from the 2013-14 financial year. Consequently there
will be FTC reductions for those gaseous fuels for the 2012-13 financial
year but not beyond. The new FTC for the agriculture, fishing and
forestry industries' use of LPG and LNG will also not commence until the
beginning of the 2013-14 financial year.
The Clean Energy (Customs Tariff Amendment) Bill and Clean Energy
(Excise Tariff Legislation Amendment) Bill
2.74 The amendments to the Excise Tariff Act 1921 and the Excise
Act 1901 commence on 1 July 2012, immediately after the
commencement made by the amendments contained in the Clean Energy
(Excise Tariff Legislation Amendment) Act 2011. [Section 2]
2.75 The amendments to sub-item 10.19C are taken to commence
immediately after the relevant amendments made by the Excise Tariff
(Taxation of Alternative Fuels) Act 2011 commence. [Section 2]
2.76 The amendments to the Customs Tariff Act commence on
1 July 2012, immediately after the commencement made by the
amendments contained in the Clean Energy (Customs Tariff Legislation
Amendment) Act 2011. That is, they will apply to goods that were
imported on or after 1 July 2012. They also apply to goods imported
before 1 July 2012 but not entered into home consumption until on or
after 1 July 2012. [Section 2]
Consequential amendments
2.77 Schedule 2 to the bill includes consequential amendments to
give effect to the substantive amendments set out in Schedule 2 dealing
with coverage of gaseous fuels under the carbon pricing mechanism.
These amendments generally ensure that appropriate references are
included in provisions that allow for the administration of the carbon
pricing mechanism to ensure that the coverage of gaseous fuels is
included. [Schedule 2, item 37, section 59(2), CE Act] [Schedule 2, item 38, section
59(2), CE Act] [Schedule 2, item 39, section 59(3), CE Act] [Schedule 2, item 40, section
59(3), CE Act] [Schedule 2, item 41, section 59(3), CE Act] [Schedule 2, item 42, section
49
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
59(3), CE Act] [Schedule 2, item 42, section 59(4), CE Act] [Schedule 2, item 43, section
59(4), CE Act] [Schedule 2, item 44, section 59(4), CE Act] [Schedule 2, item 45, section
59(4), CE Act] [Schedule 2, item 46, section 59(5), CE Act] [Schedule 2, item 47, section
59(5), CE Act] [Schedule 2, item 48, section 59(5), CE Act] [Schedule 2, item 50, section
59(7), CE Act] [Schedule 2, item 51, section 59(8), CE Act] [Schedule 2, item 53, section
60(2), CE Act] [Schedule 2, item 54, section 60(2), CE Act] [Schedule 2, item 55, section
60(3), CE Act] [Schedule 2, item 56, section 60(3), CE Act] [Schedule 2, item 57, section
60(3), CE Act] [Schedule 2, item 58, section 60(4), CE Act] [Schedule 2, item 59, section
60(4), CE Act] [Schedule 2, item 60, section 60(4), CE Act] [Schedule 2, item 61, section
60(4), CE Act] [Schedule 2, item 62, section 60(5), CE Act] [Schedule 2, item 63, section
60(5), CE Act] [Schedule 2, item 64, section 60(5), CE Act] [Schedule 2, item 66, section
60(7), CE Act] [Schedule 2, item 67, section 60(8), CE Act] [Schedule 2, item 72, section
228(1)(a), CE Act] [Schedule 2, item 73, section 262(1)(f), CE Act] [Schedule 2, item 74,
section 262(1)(g), CE Act] [Schedule 2, item 75, section 262(1)(i), CE Act]
50
Chapter 3 Amendments relating to the
Carbon Farming Initiative
Outline of chapter
3.1 Schedule 3 to the bill amends provisions of the CFI Act relating
to projects approved on the condition that they obtain the necessary
regulatory approvals, and removes a requirement that the Domestic
Offsets Integrity Committee (DOIC) publish matters incorporated by
reference in methodology determinations. It also amends the CFI Act to
extend the timing for methodology determinations to be backdated.
Context of amendments
3.2 The CFI, which was set up by the CFI Act, is a carbon offsets
scheme that is part of Australia's carbon market. The CFI allows farmers
and land managers to earn carbon credits by storing carbon or reducing
greenhouse gas emissions on the land. These credits can then be sold to
people and businesses wishing to offset their emissions.
3.3 The CFI also helps the environment by encouraging sustainable
farming and providing a source of funding for landscape restoration
projects.
Regulatory approvals
3.4 All CFI projects are required to obtain all necessary regulatory
approvals. This was an important element of addressing potential
negative impacts of projects on the local environment and communities.
3.5 The CFI Act allows the CER to conditionally approve projects
that have not yet obtained all regulatory approvals. This is because
obtaining such approvals can be costly and time-consuming, and
proponents need certainty that their project would be eligible under the
CFI before making such an investment.
3.6 At present, project proponents are required to obtain the relevant
regulatory approvals by the end of the first crediting period for the project.
A crediting period is normally seven years, or 15 years for reforestation
projects.
51
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
3.7 Proponents can report on their project and receive credits 12
months after the project commences. Proponents could therefore receive
Australian carbon credit units prior to obtaining regulatory approval for
their project.
3.8 The proposed amendment addresses this risk by requiring that
approvals are obtained prior to the end of the first reporting period, rather
than the first crediting period. This means that the approval must be
obtained before credits are issued.
Publication of matters by the DOIC
3.9 The CFI Act currently requires the DOIC to publish on its
website the text of any matters incorporated by reference in methodology
determinations, such as an international measurement standard.
3.10 Complying with this provision could involve lengthy
negotiations and some expense to secure the right to publish material on
the DOIC website. This could considerably delay the finalisation of
methodology determinations.
3.11 The amendment will remove the requirement for the DOIC to
publish the matters. Instead, the explanatory material for methodology
determinations would contain a description of the incorporated material
and indicate how it may be obtained. Material that is incorporated into
legislative instruments is normally dealt with in this way.
Backdating of methodologies
3.12 All CFI projects must be conducted in accordance with a
methodology determination, which is a legislative instrument made by the
Minister. Prior to the Minister making a methodology determination, the
DOIC must provide a recommendation as to whether or not the
determination meets the offsets integrity standards established within the
CFI Act.
3.13 The CFI Act currently allows for methodology determinations to
be expressed to have come into force on 1 July 2010, if they are made by
30 June 2012. Projects using these methodologies can be backdated to 1
July 2010, and can be issued credits for all abatement that has occurred
since 1 July 2010, provided they were undertaken in accordance with the
methodology and met other CFI requirements in that period.
3.14 It has taken longer than initially anticipated for methodologies to
be assessed and made into methodology determinations. This is because,
initially, each methodology raises new policy and technical issues.
52
Chapter 3: Amendments relating to the Carbon Farming Initiative
3.15 This amendment will enable methodologies for existing
abatement projects to be eligible for backdating as originally intended.
Summary of new law
Regulatory approvals
3.16 The amendment will require participants to obtain all regulatory
approvals by the end of the project's first reporting period.
Publication of matters by the DOIC
3.17 The amendment removes a requirement for the DOIC to publish
matters incorporated by reference in methodology determinations.
Backdating of methodologies
3.18 The amendment allows more time for submission and
assessment of methodology applications that can be backdated.
Comparison of key features of new law and current law
New law Current law
The CER may declare an eligible The CER may declare an eligible
offsets project, subject to the offsets project, subject to the
condition that all regulatory approvals condition that all regulatory approvals
must be obtained during the first must be obtained during the first
reporting period. crediting period.
There will be no requirement for the The DOIC must publish on its
DOIC to publish matters applied, website the text of any matters
adopted or incorporated by reference applied, adopted or incorporated by
in methodology determinations. reference in methodology
determinations, unless publication
would infringe copyright.
A project can be declared to have A project can be declared to have
commenced from a date no earlier commenced from a date no earlier
than 1 July 2010, provided: than 1 July 2010, provided:
· the application for the · the relevant methodology
methodology was submitted to the determination is made on or
DOIC on or before 30 June 2012; before 30 June 2012, and
and · the determination is expressed to
53
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
· the relevant methodology have come into force on 1 July
determination is made on or 2010; and
before 30 June 2013, and · the project was undertaken in
· the determination is expressed to accordance with the methodology
have come into force on 1 July and other CFI requirements in the
2010; and backdated period.
· the project was undertaken in
accordance with the methodology
and other CFI requirements in the
backdated period.
Detailed explanation of new law
Regulatory approvals
3.19 The bill amends paragraphs 15(2)(e), 34(2)(a) and 168(1)(h) and
subsections 28(2) and 31(1) of the CFI Act to replace "crediting period"
with "reporting period" in instances where it refers to requirements to
obtain regulatory approvals. These references relate to the issuance of a
certificate of entitlement, the making of a project declaration conditional
on obtaining a regulatory approval, varying a project declaration to
remove such a condition, unilateral revocation of a project declaration if
the proponent fails to obtain the approval, and the listing of any such
condition on the Register of Offsets Projects. [Schedule 3, Item 1, section
15(2)(e), CFI Act] [Schedule 3, Item 2, section 28(2), CFI Act] [Schedule 3, Item 3,
section 31(1), CFI Act] [Schedule 3, Item 4, section 34(2)(a), CFI Act] [Schedule 3, Item
6, section 168(1)(h), CFI Act]
Publication of matters by the DOIC
3.20 The bill repeals subsections 106(10) and (11) of the CFI Act.
This removes the requirement for the DOIC to publish on its website any
matters applied, adopted or incorporated by reference in a methodology
determination. The explanatory statements for methodology
determinations will include descriptions of any matters applied, adopted
or incorporated by reference, and include information on how to obtain
the instrument or writing within which the matter is contained. [Schedule 3,
Item 5, section 106, CFI Act]
Backdating of methodologies
3.21 The bill amends subsection 122(3) of the CFI Act to provide that
methodology determinations made on or before 30 June 2013 may be
expressed to have come into force at the start of 1 July 2010, provided that
the application for endorsement of the methodology was submitted to the
54
Chapter 3: Amendments relating to the Carbon Farming Initiative
DOIC on or before 30 June 2012. This amendment allows the backdating
of methodology determinations that were anticipated to be made on or
prior to the originally specified date of 30 June 2012. [Schedule 3, Item 7,
section 122, CFI Act]
Application and transitional provisions
3.22 The provisions in Schedule 3 to the bill commence on the day
after which it receives the Royal Assent. [Section 2]
3.23 Transitional arrangements will apply for any projects declared
eligible, subject to obtaining a regulatory approval, prior to the
commencement of these provisions. Any project which, immediately
before the commencement of these provisions, is subject to a requirement
to obtain a regulatory approval before the end of the first crediting period
will be taken to be subject to a requirement that the approval is obtained
before the end of the first reporting period instead. [Schedule 3, Item 8, CFI
Act]
55
Chapter 4
Amendments relating to the Australian
National Registry of Emissions Units
Outline of chapter
4.1 Chapter 4 explains amendments to the ANREU Act concerning
the circumstances in which restrictions relating to the operation of a
Registry account apply and the period within which the CER may defer
giving effect to a transfer instruction.
Context of amendments
Amendments relating to the imposition of restrictions on the operation of
Registry accounts
4.2 The ANREU Act provides the legislative basis for the Registry.
The Registry tracks the location and ownership of carbon units issued
under the CE Act, Australian carbon credit units (ACCUs) issued under
the CFI Act, and certain international emissions units, including certain
units issued in accordance with the Kyoto rules (Kyoto units). Carbon
units and ACCUs can only be issued to or held by a person if the person
has a Registry account.
4.3 Detailed provisions relating to the opening of Registry accounts
are set out in the ANREU Regulations. Those regulations provide that the
CER can only open an account for a person if satisfied that the person
meets the fit and proper person criteria. In assessing whether a person
meets the fit and proper person criteria, the CER has regard to a number
of matters, including whether the person has been convicted of offences
relating to dishonesty, whether the person has complied with the ANREU
and NGER Acts, and whether the person is an externally-administered
body corporate or an insolvent under administration.
4.4 Proposed amendments to the ANREU Regulations will relax the
fit and proper person requirement in relation to liable entities and persons
who are eligible to receive free carbon units under the CE Act. This is to
ensure that liable entities are not precluded from meeting their surrender
obligations under the CE Act by reason of their solvency status, for
example. It is also to ensure that persons who would otherwise be eligible
57
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
to receive free carbon units under the Jobs and Competitiveness Program
or in accordance with Part 8 of the CE Act are not precluded from being
issued those units because of their solvency status.
4.5 The amendment to section 27 of the ANREU Act is intended to
allow restrictions to be imposed on the operation of accounts opened in
circumstances where the CER is not satisfied that the account holder
meets the fit and proper person criteria. This is to safeguard the integrity
of the Registry and protect it from abuse, whilst also ensuring that liable
entities can meet their surrender obligations and persons who would
otherwise be eligible to receive free carbon units can be issued those units.
Amendments relating to the deferral of transfer instructions
4.6 Section 28A of the ANREU Act confers power on the CER to
defer giving effect to an instruction to transfer a unit to or from a Registry
account for a period not exceeding 48 hours in certain circumstances.
This section is amended to increase the time in which instructions can be
deferred to five whole business days to enhance the capacity of the CER
to deal with suspicious conduct.
Summary of new law
Amendments relating to the imposition of restrictions on the operation of
Registry accounts
4.7 The bill amends the ANREU Act to enable regulations to
identify Registry accounts that are subject to restrictions or limitations in
relation to the operation of the account, including restrictions or
limitations on the transfer of carbon units, ACCUs, Kyoto units or
prescribed international units to or from the identified account or the issue
of carbon units to the account.
Amendments relating to the deferral of transfer instructions
4.8 The bill amends the ANREU Act to increase the period within
which the CER can defer giving effect to an instruction from no more than
48 hours to no later than the end of the fifth business day after the day on
which the instruction was received.
58
Chapter 4: Amendments relating to the Australian National Registry of Emissions Units
Comparison of key features of new law and current law
New law Current law
Regulations may restrict or limit the There is no power to prescribe
operation of identified Registry restrictions or limitations on the
accounts. operation of identified accounts, other
than by imposing transaction limits
on accounts that are opened using less
stringent identification procedures.
Instructions to transfer units can be Instructions can be deferred for no
deferred until the end of the fifth more than 48 hours.
business day after the day on which
the instruction was received.
Detailed explanation of new law
Amendments relating to the imposition of restrictions on operation of
Registry accounts
4.9 The bill amends section 27 of the ANREU Act to provide that
regulations made for the purposes of subsection 27(1) of the ANREU Act
may restrict or limit the operation of certain Registry accounts, to be
called `restricted Registry accounts'. [Schedule 4, item 2, section 27(3A),
ANREU Act]
4.10 The regulations may prohibit, restrict or limit the transfer of
carbon units, ACCUs, Kyoto units or prescribed international units to or
from a restricted Registry account. The regulations may also prohibit,
restrict or limit the issue of carbon units to a restricted account. The
regulations could, for example, provide that an account opened for a
person who did not meet the fit and proper person criteria (discussed in
4.3 and 4.3 above) is a restricted Registry account, and prohibit the
transfer of units into the account if the transfer would result in the account
exceeding a set number of units. [Schedule 4, item 2, section 27(3B), ANREU
Act] [Schedule 4, item 2, section 27(3C), ANREU Act]
4.11 As the detailed rules relating to the circumstances in which a
Registry account are opened are set out in regulations, it is appropriate
that the rules relating to when accounts are subject to restrictions limiting
the operation of the account are also set out in regulations. This ensures
that the restrictions can be appropriately tailored having regard to the
content of the account opening rules.
59
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
4.12 The CER's power in section 28C of the ANREU Act to impose
conditions on the operation of accounts is unaffected. The CER may still
exercise this power if satisfied that it is prudent to do so to ensure the
integrity of the Registry, to prevent, mitigate or minimise abuse of the
Registry or to prevent, mitigate or minimise criminal activity involving
the Registry. The existence of the section 28C power does not limit the
content of regulations made under subsection 27(1). [Schedule 4, item 2,
section 27(3E), ANREU Act]
4.13 Unlike section 28C, the restrictions imposed in accordance with
this amendment are not intended to rely on the exercise of the CER's
discretion. Rather, prescribed restrictions are intended to apply in
prescribed circumstances.
4.14 The power in section 11 of the ANREU Act to prescribe
transaction limits that apply to Registry accounts opened using less
stringent identification procedures is also unaffected.
4.15 New subsections 27(3A) and (3B) are not intended to limit the
otherwise broad power to make regulations making further provision in
relation to the Registry. [Schedule 4, item 2, section 27(3D), ANREU Act]
Time period for delay in Registry transactions
4.16 The bill amends subsection 28A(2) of the ANREU Act to
replace the period in which the CER can defer giving effect to a transfer
instruction, currently set at 48 hours, with a period which lasts until the
end of the fifth business day after the day on which the instruction was
received. [Schedule 4, item 3, section 28A(2), ANREU Act]
4.17 Business days are defined as they exist in the Australian Capital
Territory, where the Registry will be based, and therefore do not include
Saturdays, Sundays or ACT public holidays as gazetted from time to time.
[Schedule 4, item 1, section 4, ANREU Act]
4.18 Carbon units, ACCUs, Kyoto units and prescribed international
units must be transferred within the Registry `as soon as practicable' after
an electronic instruction to transfer is received by the CER (see section
107 of the CE Act, section 156 of the CFI Act and sections 34 and 51 of
the ANREU Act). International transfers will generally also need to be
made as soon as is practicable.
4.19 It is expected that routine processing of transfer transactions,
including checking for fraudulent transactions, could in some
circumstances take up to five business days and that it will only be
practicable to transfer the units once that processing has taken place.
Only then will consideration be able to be given to the question of deferral
60
Chapter 4: Amendments relating to the Australian National Registry of Emissions Units
of suspicious transactions under section 28A of the ANREU Act. It is
therefore necessary to extend the time in section 28A to allow for deferral
of suspicious transactions while further action (such as refusal to give
effect to the transfer under section 28B of the ANREU Act) is considered.
Example 4.1 Current law - Time period in which an instrument may
be made
If Stephen, an account representative, engaged in trading activity late
on a Friday evening, then the 48 hour period in which the CER may
take action would end on the following Sunday evening. Furthermore,
this sort of activity could also occur on public holiday weekends, when
Stephen may seek to take advantage of a longer period.
Example 4.2 New law - Time period in which an instrument may be
made
If Zali, an account representative, engaged in trading activity on
Wednesday, then the five business day period in which the CER may
take action would end at the end of the following Wednesday.
If Zali engaged in trading activity late on a Friday evening, then the
five business day period in which the CER may take action would end
at the end of the following Friday.
Application and transitional provisions
4.20 The provisions in Schedule 4 to the bill commence on the day
after which it receives the Royal Assent. [Section 2]
61
Chapter 5 Amendments relating to the
Clean Energy Finance Corporation
Outline of chapter
5.1 Chapter 5 explains amendments to the ARENA Act and the
CER Act concerning the sharing of information between the CEFC and
ARENA, and the CEFC and the CER. This Chapter covers Schedule 5.
Context of amendments
5.2 The CEFC will make decisions concerning investments in clean
energy technologies and projects. In making these decisions or
concerning the ongoing efficacy of investments, the CEFC may require
information about specific issues from ARENA or the CER.
5.3 The sharing of relevant and appropriate information between the
CEFC and ARENA and the CEFC and the CER is limited to the
circumstances spelt out in the ARENA Act and the CER Act respectively
and this is not a general ability for the CEFC to obtain or request
information.
Summary of new law
5.4 The bill includes a new section 73A in the ARENA Act, which
provides that ARENA may disclose information to CEFC if the disclosure
will enable or assist the CEFC to perform or exercise any of its functions
or powers.
5.5 The bill amends section 49 of the CER Act, to add the CEFC to
the list of bodies with which the CER may disclose `protected
information'. Section 49 specifies the circumstances in which the CER
may disclose such information and the manner in which this may occur.
63
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Comparison of key features of new law and current law
New law Current law
ARENA may disclose information to No provision is made for the sharing
the CEFC, if the disclosure will of information by ARENA with the
enable or assist the CEFC to perform CEFC.
or exercise any of its functions or
powers.
The CER may disclose protected The CER may not disclose protected
information to the CEFC. information to the CEFC unless the
disclosure is otherwise authorised by
Part 3 of the CER Act.
Detailed explanation of new law
Disclosure of information by ARENA
5.6 ARENA may disclose information to the CEFC, if the disclosure
will enable or assist the CEFC to perform or exercise any of its functions
or powers. This will facilitate the sharing of information between
ARENA and the CEFC and ensure the two have a close working
relationship. [Schedule 5, item 1, section 73A, ARENA Act]
Disclosure of information by the CER
5.7 The CER may disclose protected information to the CEFC in
accordance with the requirements of section 49 of the CER Act (which is
described below). [Schedule 5, item 2, section 49(1), CER Act]
5.8 Information obtained by the CER may be commercially
sensitive. For example, it could disclose the market share of a
corporation, or details of its supply arrangements. Part 3 of the CER Act,
including section 49, seeks to ensure that information obtained by the
CER is not disclosed unnecessarily or put to unauthorised use. Personal
information collected under Part 3 of the CER Act is subject to the
Privacy Act 1988. It should be noted that, under Information Privacy
Principle 11.3, a person, body or agency to whom personal information is
disclosed shall not use or disclose the information for a purpose other than
the purpose for which the information was given to the person, body or
agency.
5.9 Section 43 of the CER Act provides that it is an offence for a
person who is, or has been, an official of the CER to disclose or use
`protected information' - in broad terms, information obtained in an
64
Amendments relating to the Clean Energy Finance Corporation
official capacity - unless one of a number of exceptions apply. The
penalty for that offence is up to two years' imprisonment or 120 penalty
units (currently $13,200), or both. This penalty is the same as applies to a
similar offence in secrecy provisions (section 23) of the NGER Act.
5.10 Section 4 of the CER Act defines `official of the Regulator'
broadly, to include not only CER members and staff but also:
· public sector employees (state, territory or Commonwealth)
whose services are made available to the CER in connection
with the performance of its functions; and
· consultants engaged by the CER.
5.11 In broad terms, the exceptions - that is, the circumstances in
which `protected information' can be disclosed or used - include
disclosure to specified bodies listed in subsection 49(1) of the CER Act.
The bill amends this list to include the CEFC. [Schedule 5, item 2, section
49(1), CER Act]
Application and transitional provisions
5.12 The amendments to the ARENA Act and the CER Act
commence on the same day as section 3 of the CEFC Act (once enacted).
Clause 2 of the CEFC Bill provides that clause 3 of that bill will
commence on a single day to be fixed by Proclamation. However, if the
provisions do not commence within the period of 6 months beginning on
the day that the CEFC Bill receives the Royal Assent, they commence on
the day after the end of that period. [Section 2]
65
Chapter 6
Regulation impact statement - Carbon
pricing mechanism coverage of non-
transport gaseous fuels
Background
The gaseous fuels sector
Liquefied Petroleum Gas
6.1 LPG is produced either directly through the processing of crude
oil and natural gas or as a by-product of the petroleum refining process.
LPG is generally supplied for consumption in pressurised containers and
is composed of mixtures of propane and butane, with bottled LPG used
for domestic purposes usually composed solely of propane.
6.2 Key non-transport uses of LPG include residential and leisure
(for uses such as heating and gas barbecues), manufacturing, materials
handling (such as warehouse forklift use), and commercial.
6.3 LPG for non-transport uses is supplied by approximately 5 or 6
resellers. Of these, 3 are responsible for approximately 90 per cent of
supply of non-transport LPG and 2 or 3 smaller resellers are understood to
be responsible for the remainder. The supply chains by which LPG
reaches the end consumer can be complex. In some rare cases, it will not
be readily determinable at the marketer level whether a particular supply
of LPG is ultimately used for transport or non-transport purposes (for
instance, where LPG is delivered by the marketer into a tank from which
LPG used for both automotive and stationary heating is withdrawn).
6.4 Transport uses of LPG were brought under the fuel tax system
on 1 December 2011 to implement the longstanding plan for energy
content based taxation of alternative transport fuels, but will not be subject
to a carbon price. Non-transport LPG is not currently covered by the fuel
tax system. However, under the Clean Energy Package it will be brought
into the fuel tax system from 1 July 2012 to allow for the application of an
equivalent carbon price.
67
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
6.5 In 2009-2010 approximately 800, 000 tonnes of LPG was sold
into the stationary LPG market. This would result in approximately 2.4
million tonnes of carbon dioxide equivalent emissions. This would
account for approximately 0.7 per cent of total estimated emissions to be
covered under the carbon pricing mechanism in 2012/13.
Liquefied Natural Gas
6.6 LNG is natural gas (primarily methane) that has been cooled to
approximately minus 163 degrees Celsius. LNG produced in Australia is
primarily exported, with domestic LNG consumption accounting for less
than one tenth of 1 per cent of Australian production. Key uses of LNG
are as an industrial chemical and for electricity generation.
6.7 LNG is generally produced at large processing facilities, and
sometimes from upstream supplies of natural gas that will not have been
subject to coverage under the carbon pricing mechanism. There are 3
large producers of LNG for domestic non-transport consumption, and it is
expected that in most cases downstream uses of supplies of LNG will be
readily determinable.
6.8 Domestic LNG consumption in 2009-2010 was in the region of
35,000 tonnes, leading to approximately 105,000 tonnes of carbon dioxide
equivalent emissions. Based on this level of emissions, domestic LNG
consumption would account for about 3 hundredths of one per cent of
total emissions estimated to be covered under the carbon pricing
mechanism in 2012/13.
Compressed Natural Gas
6.9 CNG is created by compressing natural gas for storage in tanks
at pressures of around 200-240 bar. Key "non-transport" uses of CNG are
as fuel for forklifts and off-road mining vehicles. Non-transport CNG is
generally produced for own use on-site, from supplies of natural gas that
will be subject to carbon pricing mechanism coverage.
6.10 Disaggregated statistics for domestic non-transport CNG
consumption are not available, but CNG consumption is expected to be
lower than LNG consumption.
Current treatment of gaseous fuels under the Clean Energy Future Plan
6.11 Under the Clean Energy Future Plan, an equivalent carbon price
will be applied to emissions from non-transport LPG, LNG and CNG
through a reduction in fuel tax credits or through changes to excise from 1
July 2012.
68
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
6.12 Gaseous fuels are used in large part as transport fuels, and were
included under the fuel tax arrangements along with liquid transport fuels
that face an equivalent carbon price for certain business transport and non-
transport uses. Transport gaseous fuels are already covered under the fuel
tax arrangements (for the purpose of applying excise duty rather than the
carbon price). As noted in the regulation impact statement for the Clean
Energy Future Plan, applying a carbon price to transport fuels thorough
the fuel tax system has several advantages over the use of the carbon
pricing mechanism, including making use of existing business systems
and avoiding the need for liable entities to deal with both the ATO and the
CER.
6.13 On this basis, it was considered that it would be relatively
straightforward and minimise compliance costs to use the fuel tax system
to apply a carbon price to non-transport uses of gaseous fuels, which are
also used for transport purposes. However, there are a number of
differences between transport and non-transport supplies of gaseous fuels
compared to liquid fuels. Transport gaseous fuels would be subject to
coverage under the excise system irrespective of whether or not carbon
pricing is applied, whereas non-transport gaseous fuels would not be
subject to fuel tax system coverage in the absence of the carbon price. By
comparison, liquid fuels used for both transport and non transport
purposes are covered under the excise system irrespective of whether or
not carbon pricing is applied.
6.14 Non-transport gaseous fuels also have a lower frequency of
supply and billing in some instances. For instance, on some occasions
LPG is supplied to a central tank for distribution to multiple users via a
reticulated (pipeline) system for commercial use. A substantial period of
time may elapse between the delivery of LPG and billing for supply after
a user withdraws LPG from the reticulated system, potentially
exacerbating cash carrying costs of carbon price payments relative to
transport uses.
The problem
6.15 Industry stakeholders for non-transport LPG and LNG have
raised compliance cost and efficiency concerns with the inclusion of non-
transport gaseous fuels under the fuel tax arrangements rather than the
carbon pricing mechanism.
6.16 Coverage under the fuel tax arrangements generally requires the
settlement of excise returns on a weekly basis with an additional 6 days
provided beyond the weekly excise period to enable suppliers to reconcile
invoices issued during that week and finalise settlement. By comparison,
69
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
submission of reports and settlement of liabilities under the carbon pricing
mechanism would occur twice for each year of the mechanism's fixed
price period (2012-13 to 2014-15) and once for each year of the
mechanism's flexible price periods (2015-16 and onwards).
Compliance costs
6.17 Coverage of non-transport LPG and LNG under the excise
system imposes compliance costs for suppliers on top of the costs incurred
as a result of their participation in the excise system for transport gaseous
fuel. These additional costs relate to the need to submit excise returns and
make payments in relation to a larger volume of supplies.
6.18 In the case of CNG an unknown but small number (estimated at
up to 50) of producers of CNG for non-transport purposes that would not
otherwise be required to participate in the excise system would also be
required to install relatively expensive metering equipment to meet the
requirements of the excise system. More importantly, industry feedback
indicates that the costs of installation of this equipment would curtail
expansion of production and use of CNG by small producers.
Efficiency and fairness concerns
6.19 More regular payments under the fuel tax system during the
mechanism's fixed price period will result in increased cash carrying costs
for suppliers of gaseous fuels relative to other non-transport energy
sources, such as natural gas and electricity. In addition gaseous fuels
suppliers will not have access to the flexibility in meeting emissions
obligations provided by the ability to purchase units on international and
domestic markets available under the carbon pricing mechanism.
6.20 These differences, relative to carbon pricing mechanism
coverage, will potentially create marginal distortions affecting the
competitiveness of non-transport gaseous fuels when compared with other
non-transport fuels over the longer term.
Objectives
6.21 The problem being considered is the best approach to apply a
carbon price to non-transport gaseous fuels. In this context, the key
objectives for any approach adopted are to:
· Maximise the economic efficiency of the carbon price, and in
particular to:
70
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
- Incentivise emissions reduction at least cost by sending
out a clear signal about which activities should be
reduced;
- Minimise any competitive disadvantage arising from the
way in which the carbon price is applied;
· Ensure the equitable application of the carbon price;
· Minimise the compliance and transitional costs for liable
entities paying the carbon price;
· Ensure the administrative simplicity and workability of the
carbon price.
Options
LPG and LNG
6.22 The following options were considered for the coverage of non-
transport LPG and LNG:
· Option A: Maintain the status quo of coverage under the
alternative fuel tax arrangements.
· Option B: Mandatory coverage of all LPG and LNG under
the carbon pricing mechanism. Under this option some
supplies of LPG and potentially also LNG would remain
under the fuel tax arrangements. However, this would occur
in very limited circumstances, as noted above, where it is not
possible for the supplier of LPG or LNG to distinguish
whether the supply is going to be used for transport or non-
transport purposes. For instance, this would occur where a
marketer of LPG supplies LPG into a tank from which LPG
is withdrawn for both transport and non-transport purposes.
· Option C: Coverage on a voluntary opt-in basis under the
carbon pricing mechanism, with currently legislated fuel tax
arrangements for a carbon price continuing to apply to those
entities that choose not to opt-in.
6.23 Also as with Option B, some supplies of LPG and potentially
also LNG would remain under the fuel tax arrangements (and could not be
opted in). However, this would occur in very limited circumstances, as
noted above, where it is not possible for the supplier of LPG or LNG to
71
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
distinguish whether the supply is going to be used for transport or non-
transport purposes.
6.24 Because of the difficulty and associated costs in identification by
LPG and LNG suppliers of the end uses of all non-transport gaseous fuel,
complete mandatory coverage was not considered a viable option.
6.25 A secondary question for consideration was the date of
commencement of carbon pricing mechanism coverage under options B
and C, with dates of 1 July 2012 and 1 July 2013 considered.
CNG
6.26 The following options were considered for the coverage of
CNG:
· Option A: Maintain the status quo of coverage under the
alternative fuel tax arrangements.
· Option B: Mandatory coverage of CNG under the carbon
pricing mechanism.
6.27 Opt-in coverage was not considered for CNG as the ability for
individual CNG producers to opt-in or out of direct management of
liabilities can be provided under mandatory carbon pricing mechanism
coverage. This is possible because mandatory coverage would involve
natural gas suppliers being liable for gas supplied to entities that
manufacture CNG, and the existing obligation transfer number
mechanism provided for in the CE Act will allow CNG producers to take
on obligations from their supplier for natural gas used to produce CNG.
6.28 A similar approach to mandatory coverage is not possible for
LPG and LNG as the former is not always produced from natural gas and
the latter is not produced exclusively from supplies of natural gas that will
be subject to carbon pricing mechanism coverage.
Impacts and analysis
LPG and LNG
6.29 The impacts for options for LPG and LNG are summarised in
diagram 5.1 and set out in more detail under the headings below.
72
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Diagram 6.1 Impacts of options for LPG and LNG Coverage
Option A: Status Option B: Option C: Opt-in
Quo Mandatory Coverage
Coverage
Advantages: Advantages: Advantages:
· Avoiding · Reduced cash · Reduced cash
administration carrying costs (vs carrying costs (vs
costs of dual Option A) Option A)
systems · Increased · Increased
· Avoiding flexibility in flexibility in
compliance costs meeting meeting
of dual systems obligations (vs obligations (vs
Option A) Option A)
· Reduced · Flexibility to
administrative choose between
complexity (vs mechanism and
Option C) fuel tax coverage.
Disadvantages: Disadvantages: Disadvantages:
· Compliance cost · Mandatory carbon · Increased
of regular excise pricing administration cost
returns mechanism of dual systems
· Cash carrying compliance costs (vs Options A &
costs · Marginally B)
· Reduced increased
flexibility to meet administration
obligations. cost (vs Option A)
Option A: maintain the status quo
6.30 The main advantage of continuing coverage of non-transport
LPG and LNG solely under the alternative fuel tax arrangements is
avoiding complexities and costs associated with businesses being required
to participate in two systems, one for non-transport fuels (the carbon
pricing mechanism) and the other for transport fuels (the fuel excise
system), as would be the case for Option B.
6.31 An associated advantage is avoiding the need for the ATO and
the CER to maintain and reconcile dual systems for compliance under the
fuel tax arrangements and the carbon pricing mechanism. Dual systems
would be required under Option C, and, to a lesser extent, Option B.
6.32 The disadvantages of maintaining the status quo are:
73
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
· Compliance costs for industry associated with submitting
regular excise returns for a larger volume of supplies of LPG
and LNG.
· Cash carrying costs for LPG and LNG suppliers from more
regular payments under the fuel tax arrangements relative to
a cash carrying advantage under the carbon pricing
mechanism during the mechanism's fixed price period. For
instance, one of the three large LPG suppliers, which is
responsible for about 30 per cent of the sector's supply,
would on this basis be required on average to make 52
weekly carbon price payments each year of approximately
$300,000, but also would generally be billing their customers
on a regular basis. Under the carbon pricing mechanism, it
would make one payment of approximately $12 million
towards the end of the financial year, and a further payment
of approximately $4 million in the February next following
the financial year.
· Reduced flexibility for LPG and LNG suppliers to meet
obligations by purchasing emission units during the carbon
pricing mechanism's flexible price period.
Table 6.1 Option A additional explanation:
Advantage/Disadvantage Explanation
Reduced costs and complexity There is no need to maintain separate
systems for transport and non-
transport fuels because coverage will
be solely under the fuel tax
arrangements.
Removed need to reconcile dual systems As only one system is used there is
for compliance no need to reconcile systems to
ensure that a supply of LPG or LNG
has not evaded coverage.
Compliance costs with submitting More regular submission of returns
invoices and returns and payment of obligations is
required under the excise system than
under the carbon pricing mechanism.
Cash carrying cost Suppliers of LPG and LNG will only
be required to pay carbon obligations
once or twice per year under the
carbon pricing mechanism, but
payments will be required
approximately weekly under the fuel
tax arrangements. This will lead to
higher costs associated with carrying
74
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Advantage/Disadvantage Explanation
cash for more regular payments.
Reduced flexibility to purchase Participants in the carbon pricing
emissions units mechanism may purchase
international and domestic emissions
units to meet obligations during the
mechanisms flexible price period.
This will enable them to manage
timing of payments (i.e. choosing
when to buy units), and if they can
purchase units cheaply than the
average price paid under the carbon
pricing mechanism, they may gain a
price advantage over payments under
the excise system.
Option B: mandatory coverage
6.33 The advantages of mandatory coverage of non-transport LPG
and LNG are:
· Reduced cash carrying costs for LPG and LNG suppliers
during the carbon pricing mechanism's fixed price period
relative to the status quo.
· Increased flexibility to manage emissions obligations through
the purchase of emissions units during the mechanism's
flexible price period relative to the status quo.
· Reduced administrative complexity in comparison to Option
C, associated with the ATO and the CER maintaining and
reconciling dual systems for compliance under the carbon
pricing mechanism and under the fuel tax arrangements.
6.34 The disadvantage of mandatory coverage is the potential
compliance costs associated with carbon pricing mechanism participation.
These include costs associated with managing unit obligations. A broadly
analogous estimate for costs of participation of a large natural gas supplier
under the previously proposed Carbon Pollution Reduction Scheme was
that initial costs to set up systems for compliance would be approximately
$375,000 and that ongoing costs of compliance would be approximately
$291,000. To the extent that the largest LPG suppliers will already be
managing carbon pricing mechanism liabilities in respect of other
operations these costs will be largely mitigated. However, for smaller
suppliers of LPG and LNG and those that are not participants in the
carbon pricing mechanism these costs would be new.
75
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
6.35 In respect of timing of coverage, mandatory coverage from
1 July 2013 would require participation by LPG and LNG suppliers under
the fuel tax arrangements for one year from 1 July 2012 to 1 July 2013,
when coverage under the carbon pricing mechanism would commence.
This would entail LPG and LNG suppliers facing increased cash carrying
costs for one year. However, coverage from 1 July 2012 would create
substantial risks that implementation agencies would have insufficient
time to develop detailed systems for carbon pricing mechanism coverage
and adequately test these with industry stakeholders.
Table 6.2 Option B additional explanation:
Advantage/Disadvantage Explanation
Reduced cash carrying cost Suppliers of LPG and LNG will only
be required to pay carbon obligations
once or twice per year under the
carbon pricing mechanism, but
payments will be required
approximately weekly under the fuel
tax arrangements. This will lead to
higher costs associated with carrying
cash for more regular payments.
Increased flexibility to purchase Participants in the carbon pricing
emissions units mechanism may purchase
international and domestic emissions
units to meet obligations during the
mechanisms flexible price period.
This will enable them to manage
timing of payments (i.e. choosing
when to buy units), and if they can
purchase units more cheaply than the
average price paid under the carbon
pricing mechanism, they may gain a
price advantage relative to payments
under the excise system.
Reduced administrative complexity It will be simpler for the CER (which
is the administrator of the carbon
pricing mechanism) and the ATO
(which administers the excise
system) to reconcile records between
the carbon pricing mechanism and
excise system as almost all non-
transport LPG and LNG supplies will
be covered under the carbon pricing
mechanism with transport LPG and
LNG covered under the excise
system. The limited exception is
cases where it is not possible to apply
carbon pricing mechanism coverage
76
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Advantage/Disadvantage Explanation
to LPG and LNG because it is not
possible for the supplier of the LPG
or LNG to determine whether the
LPG or LNG supplied will be used
for transport purposes which will not
be subject to a carbon price or non-
transport purposes, which are. This
exception will lead to a limited
requirement for the ATO to deal with
non-transport LPG and LNG.
Carbon pricing mechanism compliance To meet liabilities under the carbon
costs pricing mechanism liable entities will
be required to report emissions and
purchase emissions units to meet
assessed emissions liabilities. This
will entail costs around measurement
and purchasing units. As coverage
will be mandatory under option B,
the LPG or LNG supplier will not
have the option of choosing whether
or not compliance under the
mechanism or excise system would
be preferable.
Option C: voluntary opt-in coverage
6.36 The advantages of a voluntary opt in approach to coverage of
LPG and LNG are:
· Reduced cash carrying costs for LPG and LNG suppliers
during the carbon pricing mechanism's fixed price period,
relative to the status quo.
· Increased flexibility to manage emissions obligations through
the purchase of emissions units during the mechanism's
flexible price period, relative to the status quo.
6.37 The ability to elect whether to opt-in or remain under the carbon
pricing mechanism allows LPG and LNG suppliers to assess the costs and
benefits of participation under each approach and adopt the one that best
reflects their particular circumstances. For instance, smaller suppliers that
would not otherwise expect to develop unit purchasing and liability
management capabilities may elect to remain under the fuel tax
arrangements whereas large suppliers that expect to have obligations
under the carbon pricing mechanism for other activities might choose to
opt-in to mechanism coverage.
77
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
6.38 The disadvantages of opt-in coverage are that this option would
have the highest administrative complexity for the CER and the ATO as it
would require dual systems for compliance under the carbon pricing
mechanism and fuel tax systems and close interaction between the two
agencies to reconcile these systems. Coverage under the fuel tax
arrangements will apply for both the relatively limited LPG and LNG
supplies that will be impracticable to cover under the carbon pricing
mechanism, and for any LPG and LNG suppliers that choose not to opt-in
to the carbon pricing mechanism. Introducing an opt-in element will
introduce an additional element of complexity to already complex fuel tax
arrangements for gaseous fuels.
6.39 Only a small number of businesses (around 8 or 9 in total
comprised of 5-6 supplying LPG and 3 supplying LNG) supply non-
transport LPG and LNG. In addition feedback from the three largest
suppliers of LPG (which account for approximately 90 per cent of the
market) is that they would participate in the carbon pricing mechanism,
and it is possible that LNG suppliers and the smaller LPG suppliers would
choose to participate in the carbon pricing mechanism. Given these
factors the expense of setting dual systems may not be justified.
6.40 Similarly to Option A above, opt-in coverage from 1 July 2013
would require participation by LPG and LNG suppliers under the fuel tax
arrangements for 1 year from 1 July 2012 to 1 July 2013, when voluntary
coverage under the carbon pricing mechanism would commence. This
would entail those LPG and LNG suppliers that would choose to opt in to
mechanism coverage facing increased cash carrying costs for one year.
However, coverage from 1 July 2012 would create substantial risks that
implementation agencies would have insufficient time to develop detailed
systems for carbon pricing mechanism coverage and adequately test these
with industry stakeholders.
Table 6.3 Option C additional explanation
Advantage/Disadvantage Explanation
Reduced cash carrying cost Suppliers of LPG and LNG will only
be required to pay carbon obligations
once or twice per year under the
carbon pricing mechanism, but
payments will be required
approximately weekly under the fuel
tax arrangements. This will lead to
higher costs associated with ensuring
funds are available to make more
regular payments.
Increased flexibility to purchase Participants in the carbon pricing
emissions units mechanism may purchase
78
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Advantage/Disadvantage Explanation
international and domestic emissions
units to meet obligations during the
mechanisms flexible price period.
This will enable them to manage
timing of payments (i.e. choosing
when to buy units), and if they can
purchase units cheaply than the
average price paid under the carbon
pricing mechanism, they may gain a
price advantage relative to payments
under the excise system.
Ability to elect whether to opt-in The ability to elect whether to opt-in
under option C will allow suppliers
of LNG and LPG to assess the
advantages or disadvantages of
participation under each of the
mechanism and the excise system
and choose the one that best matches
their particular business needs. In
particular, this may be relevant for 2-
3 small participants in the LPG sector
which may not be participants in the
mechanism and may have relatively
limited resources to manage
emissions obligations under the
carbon pricing mechanism.
Increase administrative complexity It will be necessary for the CER
(which is the administrator of the
mechanism) and the ATO (which
administers the excise system) to
maintain systems and reconcile
records between the carbon pricing
mechanism and excise system. This
will apply to supplies of LPG and
LNG which are opted-in to the
carbon pricing mechanism and to
those limited cases where it is not
possible to apply carbon pricing
mechanism coverage to LPG and
LNG because it is not possible for
the supplier of the LPG or LNG to
determine whether the LPG or LNG
supplied will be used for transport
purposes (which will not be subject
to a carbon price) or non-transport
purposes (which are subject to a
carbon price). This will lead to a
higher requirement for the ATO and
the CER to reconcile the two systems
79
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Advantage/Disadvantage Explanation
than under options B and C.
CNG
6.41 The impacts for options for CNG are summarised in diagram 5.2
and set out in more detail under the headings below.
Diagram 6.2 Impacts of options for CNG Coverage
Option A: Status Quo Option B: Mandatory Coverage of
CNG
Advantages: Advantages:
· Provides for direct management of · Removes requirements to install
carbon liabilities under the excise metering systems.
system if preferred · Reduced cash carrying costs
· Eliminates need for small CNG
producers to directly manage
liabilities.
· Provides flexibility in managing
obligations via ability to opt-in
· Reduced administrative costs
Disadvantages: Disadvantages:
· Cost of installing metering systems · Very small increase in the
· Requires all CNG producers to liabilities of natural gas suppliers
participate in excise system under the carbon pricing
mechanism.
· Also effectively requires all CNG
producers to quote an OTN under
carbon pricing mechanism
· Cash carrying costs and lack of
flexibility in managing obligations
Option A - maintain the status quo
6.42 The advantage of a retaining coverage of non-transport CNG
under the fuel tax arrangements is that to the extent that any CNG
producer wishes to manage its carbon pricing obligations directly it is
possible that it may prefer to do so by making payments under the excise
system rather than under the carbon pricing mechanism.
6.43 The disadvantages of coverage under the fuel tax arrangements
are:
80
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
· The imposition of a requirement for an indeterminate number
of small users to install metering equipment to enable
participation in the excise system. Installation of metering
equipment would be costly, and industry feedback indicates
that this cost would be sufficient to stop expansion of the use
of CNG.
· The requirement that all producers of CNG directly manage
carbon pricing obligations through participation in the excise
system (with the exception of producers of CNG for non
commercial "home" use which are exempted from excise
system and instead face a passed-through carbon price under
the carbon pricing mechanism on the supplies of natural gas
that they convert to CNG).
· To avoid incurring a `passed through' carbon price from their
natural gas supplier, CNG producers would also need to
obtain and use an obligation transfer number which would
also require them to register and report under the National
Greenhouse and Energy Reporting Act, and to manage
carbon price liability for any natural gas that is supplied to
them and that is not used to manufacture CNG.
· More regular payments under the excise system and lack of
flexibility to manage obligations through the purchase of
emissions units.
Table 6.4 Option A additional explanation:
Advantage/Disadvantage Explanation
Coverage under the excise system may It is possible that a CNG producer
be preferred may prefer to manage its obligations
directly under the excise system
rather than under the carbon pricing
mechanism. Carbon pricing
mechanism coverage involves
different costs to the excise system,
relating to purchasing units to meet
emissions obligations and differing
reporting obligations.
Installation of metering equipment Installation of metering equipment is
required under the excise system to
accurately measure the amount of
CNG produced. Under carbon
pricing mechanism coverage the
default obligation would apply to the
natural gas supplier that supplied
natural gas to the CNG producer.
81
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Advantage/Disadvantage Explanation
The natural gas supplier would then
pass the carbon price through to the
CNG producer. Direct payment of
liabilities and measurement of CNG
production would not be required by
the CNG producer.
Requirement to directly manage To participate in the excise system
obligations CNG producers will be required to
measure, report and pay the carbon
price for CNG produced
approximately weekly. Under
carbon pricing mechanism coverage
the natural gas supplier that supplied
the gas used to produce CNG would
face the carbon pricing obligation
and the CNG producer would simply
face a higher price charged by the
natural gas supplier (i.e. it would not
need to directly manage its obligation
by measuring, reporting and directly
paying the carbon price for CNG
produced).
Requirement to quote an obligation Supplies of natural gas that are used
transfer number to produce CNG will be subject to a
carbon price under the carbon pricing
mechanism. If CNG is covered
under the current fuel tax
arrangements for applying a carbon
price, this would lead to the CNG
facing a carbon price twice, once
under the mechanism and then again
under the excise system. To
eliminate this double pricing, the
CNG producer would be able to
quote an obligation transfer number
to the natural gas supplier to remove
the carbon price under the
mechanism. This will be an addition
piece of compliance for the CNG
producer and lead to extra work for
the CER that administers the carbon
pricing mechanism.
More regular payments and lack of Producers of CNG would be required
flexibility to manage unit obligations to make payments of the carbon price
approximately weekly under the fuel
tax arrangements. Under the carbon
pricing mechanism only one or two
payments a year will be required.
82
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Advantage/Disadvantage Explanation
This will lead to higher costs
associated with ensuring funds are
available to make more regular
payments.
Participants in the carbon pricing
mechanism may purchase
international and domestic emissions
units to meet obligations during the
mechanisms flexible price period.
This will enable them to manage
timing of payments (i.e. choosing
when to buy units), and if they can
purchase units more cheaply than the
average price paid under the carbon
pricing mechanism, they may gain a
price advantage relative to payments
under the excise system.
Option B - "Mandatory" carbon pricing mechanism coverage
6.44 The advantages of mandatory coverage of non-transport CNG
under the carbon pricing mechanism are:
· The removal of the requirement for producers of non-
transport CNG to (i) register and report under the National
Greenhouse and Energy Reporting Act, and (ii) install
metering equipment to allow for excise system compliance
and reporting.
· The removal of the requirement for non-transport CNG
producers to actively manage carbon pricing obligations.
The carbon pricing mechanism obligation will by default rest
with the supplier of natural gas, which will pass through the
carbon price to users, including CNG producers.
· Flexibility for non-transport CNG producers to opt-in to
manage carbon pricing obligations. CNG producers will be
able to use existing provisions of the carbon pricing
mechanism to quote an obligation transfer number and
directly assume obligations under the carbon pricing
mechanism if they wish to do so.
· A reduction in administrative costs associated with the ATO
administering and ensuring compliance for up to
approximately 50 small CNG users under the excise system.
83
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
6.45 The disadvantage of mandatory coverage is that there may be a
small increase in the amount of liabilities for natural gas suppliers.
However, any increase in costs is likely to be negligible as the increase in
liability will be tiny relative to size of obligations managed by gas
suppliers for residential and commercial gas users.
Table 6.5 Option B additional explanation
Advantage/Disadvantage Explanation
Removal of requirement to install Installation of metering equipment is
metering equipment required under the excise system to
accurately measure the amount of
CNG produced. Under carbon
pricing mechanism coverage the
default obligation would apply to the
natural gas supplier that supplied
natural gas to the CNG producer. The
natural gas supplier would then pass
the carbon price through to the CNG
producer. Direct payment of
liabilities and measurement of CNG
production would not be required by
the CNG producer.
Removal of requirement to directly To participate in the excise system
manage obligations CNG producers will be required to
measure, report and pay the carbon
price for CNG produced
approximately weekly. Under carbon
pricing mechanism coverage the
natural gas supplier that supplied the
gas used to produce CNG would face
the carbon pricing obligation and the
CNG producer would simply face a
higher price charged by the natural
gas supplier (i.e. it would not need to
directly manage its obligation by
measuring, reporting and directly
paying the carbon price for CNG
produced).
Removal of requirement to quote an Supplies of natural gas that are used
obligation transfer number to produce CNG will be subject to a
carbon price under the carbon pricing
mechanism. If CNG is covered under
the current fuel tax arrangements for
applying a carbon price, this would
lead to the CNG facing a carbon
price twice, once under the
mechanism and then again under the
excise system. To eliminate this
84
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Advantage/Disadvantage Explanation
double pricing, the CNG producer
would be able to quote an obligation
transfer number to the natural gas
supplier to remove the carbon price
under the mechanism. This will be an
additional piece of compliance for
the CNG producer and lead to extra
work for the Clean Energy Regulator
that administers the carbon pricing
mechanism, and would not be
required under carbon pricing
mechanism coverage.
Flexibility to opt-in to direct Under carbon pricing mechanism
management of liabilities under the coverage the default obligation
carbon pricing mechanism would apply to the natural gas
supplier that supplied the natural gas
from which CNG is produced. The
natural gas supplier would then pass
the carbon price through to the CNG
producer. However, the CNG
producer would be able to use the
existing obligation transfer number
provisions of the carbon pricing
mechanism to take the liability for
emissions under the mechanism. In
this event the CNG producer will
take on the obligations to report and
purchase and surrender emissions
units to meet emissions obligations,
and the natural gas supplier will be
relieved of these obligations.
Reduction in administrative costs Up to approximately 50 small
producers of CNG that were not
previously required to participate in
the excise system (as non-transport
CNG is not currently required to
participate in the excise system)
would be required to register and
meet other requirements to
participate in the excise system. This
would lead to administration,
education and enforcement costs for
the ATO.
85
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Consultation
6.46 In submissions made during the passage of the Clean Energy
Bills in 2011 and in representations to Government, LPG sector
businesses requested coverage under the carbon pricing mechanism
instead of under the fuel tax arrangements. On this basis, the Government
committed to consult on options for including gaseous fuels in the carbon
pricing mechanism similar to the liquid fuels opt-in scheme, and
established an industry technical working group in November 2011.
6.47 Membership of the Technical Working Group included the three
largest LPG sector participants responsible for the supply of over 90 per
cent by volume of non-transport LPG, and also representatives of LPG
producers and distributors of transport LPG. Producers and distributors of
LNG, and CNG producers were also represented on the Technical
Working Group.
6.48 The key messages from the working group in relation to LPG
and LNG were:
· there is broad support for the coverage of non-transport LPG
and LNG in the carbon pricing mechanism, including support
from participants responsible for the supply of over 90 per
cent by volume of non-transport LPG for coverage under the
carbon pricing mechanism from 1 July 2012;
· there was concern from some participants that adequate time
should be provided to allow for the implementation of
coverage and along with opportunity to identify and resolve
any potential unintended impacts on transport uses of
gaseous fuel, which would remain within the excise
arrangements.
6.49 Engagement by CNG stakeholders in consultation was more
limited, partially reflecting the more dispersed nature of CNG production.
However, feedback identified:
· some concerns with compliance costs associated with the
current position of excise system coverage for small scale
CNG production, thereby limiting opportunities for
expansion of CNG;
· a general level of comfort with carbon pricing mechanism
coverage, particularly to the extent that this may reduce some
of the administrative and compliance costs associated with
excise participation.
86
Regulation impact statement: Carbon pricing mechanism coverage
of non-transport gaseous fuels
Conclusion
LPG and LNG
6.50 On balance the advantages of coverage of non-transport LPG
and LNG under the carbon pricing mechanism of reducing compliance
costs and providing greater flexibility for liable entities in the sector to
meet carbon pricing obligations warrant the inclusion of non-transport
LPG and LNG in the Carbon Pricing Mechanism. Therefore, Option A
(the status quo) is not preferred.
6.51 On balance a mandatory approach is preferable to a voluntary
approach to coverage as it would reduce the complexity of the carbon
price and associated compliance and administration costs. On this count
Option B (and also Option A) is superior to Option C.
6.52 Mandatory coverage requires that liable LPG and LNG suppliers
assume the costs of managing emissions unit obligations and participating
in the carbon pricing mechanism. However, most liable entities for LPG
and LNG will already be managing liabilities under the carbon pricing
mechanism. From the perspective of the Government, mandatory
coverage has advantages in reducing administrative complexities and
costs compared to an opt-in coverage.
6.53 Conversely opt-in coverage may reduce overall compliance for a
small number of smaller LPG suppliers (two or possibly three), by
providing them with flexibility to assess which approach is best for their
particular business circumstances. However, it is not clear whether the
smaller LPG suppliers would chose to remain under the fuel tax
arrangements and this flexibility comes at a significant cost in the form of
increased administrative complexity and cost for the Government.
Therefore given the uncertainty surrounding the use of the opt-in scheme
and the administration costs associated with its provision regardless of its
use, on balance Option B is preferred overall.
6.54 Regarding timing of coverage, the significant risks associated
with implementing coverage by 1 July 2012 outweigh the cash carrying
costs for LPG and LNG suppliers for one year of coverage under the fuel
tax arrangements. The preferred timing option (for either mandatory or
voluntary opt-in coverage) is for coverage to commence from 1 July 2013.
CNG
6.55 There are clear advantages to Option B (coverage of non-
transport CNG under the carbon pricing mechanism) in terms of reduced
compliance costs for small producers, and reduced administrative costs for
87
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
the Government relative to the status quo. Moving to mandatory coverage
under the carbon pricing mechanism also provides greater flexibility for
CNG producers to choose whether or not to directly manage their carbon
pricing obligations.
6.56 The preferred option is Option B.
Implementation and review
6.57 Amendments to the CE Act would be required for carbon
pricing mechanism coverage of non-transport LPG and LNG (whether on
an opt-in or mandatory basis), along with the development of detailed
implementing regulations.
6.58 For mandatory coverage the primary implementing agency
would be the CER. However, the ATO would retain responsibility for
administering the continuation of the excise arrangements for those
limited supplies of LPG and LNG that would not be subject to coverage
under the carbon pricing mechanism.
6.59 For opt-in coverage the ATO would retain a larger role in
relation to the fuel tax arrangements commensurate with the potentially
higher level of coverage. In either case systems and procedures will be
developed to clarify the interaction between the CER and the ATO on the
administration of carbon pricing arrangements for LPG and LNG.
6.60 The additional burden for the CER would be small, as the
number of additional entities responsible for LPG and LNG will be small
(at around 8 or 9 in total) and most will already be participants in respect
of other emissions.
6.61 The implementing agency for the coverage of CNG will be the
Clean Energy Regulator. Legislative arrangements for coverage of CNG
will be initially implemented via legislative changes to excise
arrangements for CNG producers and the adjustment of administrative
arrangements by the ATO.
6.62 The additional burden for the Clean Energy Regulator would be
small, as the default liability for CNG will rest with natural gas suppliers
that will already be liable entities under the carbon pricing mechanism,
and the number of CNG producers that might wish to quote an obligation
transfer number to directly take on obligations under the scheme is likely
to be small (as it is estimated there are up to 50 non-transport CNG
producers, and only a small proportion of these are likely to wish to
88
Index
Clean Energy Legislation Amendment Bill 2012
Preliminaries
Bill reference Paragraph number
Section 1 1.22
Section 2 1.23, 1.67, 2.71, 3.22,
4.20, 5.12
Section 3 1.22
Schedule 1
Bill reference Paragraph number
Part 1, item 1, section 5, CE Act 1.40
Part 1, item 2, section 5, CE Act 1.41
Part 1, item 3, section 5, CE Act 1.41
Part 1, item 4, section 5, CE Act 1.40, 2.25
Part 1, item 5, section 5, CE Act 1.421, 2.24
Part 1, item 6, section 5, CE Act 1.421, 2.24
Part 1, item 7, section 5, CE Act 1.69
Part 1, item 8, new section 20(10)-(11), CE Act 2.56
Part 1, item 9, new section 21(8A)-(8B), CE Act 2.56
Part 1, item 10, new sections 22(8)-(9), CE Act 2.56
Part 1, item 11, new section 23(9A)-(9B), CE Act 2.56
Part 1, item 12, new section 24(8A)-(8B), CE Act 2.56
Part 1, item 13, new section 25(7A)-(7B), CE Act 2.56
Part 1, item 14, section 30(2)(b), CE Act 1.421
Part 1, item 15, new section 35(6A), CE Act 2.59
Part 1, item 16, section 35(7), CE Act 1.421
Part 1, item 17, section 58, CE Act 1.421
Part 1, item 18, section 58(1)(d), CE Act 1.421
Part 1, item 19, new section 92A(4)(a), CE Act 1.25
Part 1, item 19, new section 92A(4)(b), CE Act 1.25
Part 1, item 19, new section 92A(4)(c), CE Act 1.25
89
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Bill reference Paragraph number
Part 1, item 20, new section 92DA, CE Act 1.28
Part 1, item 21, new sections 92H(1), (2) and (3), CE Act 1.31
Part 1, item 21, new sections 92H(4), CE Act 1.31
Part 1, item 21, new section 92H(5), CE Act 1.32
Part 1, item 22, new section 262(1)(ra), (rb) and (rc), CE Act 1.36
Part 1, item 23, new sections 263(2)(ga) and (gb), CE Act 1.37
Part 1, item 24, section 7, NGER Act 1.41
Part 1, item 25, section 7, NGER Act 1.40, 1.41
Part 1, item 26, section 7, NGER Act 1.70
Part 1, item 27, section 7, NGER Act 1.70
Part 1, item 28, section 7, NGER Act 1.71
Part 1, item 29, section 7, NGER Act 1.41
Part 1, item 30, section 7, NGER Act 1.72
Part 1, item 31, section 7, NGER Act 1.73
Part 1, item 32, section 7B, NGER Act 1.40
Part 1, item 33, section 7B(1), NGER Act 1.40
Part 1, item 34, section 7B(1), NGER Act 1.40
Part 1, item 35, section 7B(2), NGER Act 1.40
Part 1, item 36, section 7B(2), NGER Act 1.40
Part 1, item 37, section 7B(2), NGER Act 1.40
Part 1, item 38, section 7B(3)(c), NGER Act 1.40
Part 1, item 39, section 7B(4)(a), NGER Act 1.40
Part 1, item 40, section 7B(4)(c), NGER Act 1.40
Part 1, item 41, section 7B(5), NGER Act 1.40
Part 1, item 42, section 7B(5), NGER Act 1.40
Part 1, item 43, section 7C, NGER Act 1.40
Part 1, item 44, section 7C(1), NGER Act 1.40
Part 1, item 45, section 11, NGER Act 1.74
Part 1, item 46, new section 11B(10), NGER Act 1.55
Part 1, item 46, new section 11C(10), NGER Act 1.55
Part 1, item 46, new section 11D(1), NGER Act 1.57
Part 1, item 46, new section 11D(1)(f)(ii), NGER Act 1.57
Part 1, item 46, new section 11D(1)(g)(ii), NGER Act 1.57
Part 1, item 46, new sections 11B(20)-(22), NGER Act 1.58
Part 1, item 46, new sections 11B(13)-(14), NGER Act 1.61
90
Index
Bill reference Paragraph number
Part 1, item 46, new sections 11C(13)-(14), NGER Act 1.61
Part 1, item 46, new section 11B(1), NGER Act 1.46
Part 1, item 46, new section 11C, NGER Act 1.48
Part 1, item 46, new section 11B(4), NGER Act 1.49
Part 1, item 46, new section 11C(4), NGER Act 1.49
Part 1, item 46, new section 11B(2), NGER Act 1.50
Part 1, item 46, new section 11C(2), NGER Act 1.50
Part 1, item 46, new sections 11B(6)-(9), NGER Act 1.51
Part 1, item 46, new sections 11C(6)-(9), NGER Act 1.51
Part 1, item 46, new section 11B(5), NGER Act 1.52
Part 1, item 46, new section 11C(5), NGER Act 1.52
Part 1, item 46, new sections 11B(15) and (16), NGER Act 1.53
Part 1, item 46, new section 11C(15), NGER Act 1.53
Part 1, item 46, new sections 11B(17)-(19), NGER Act 1.54
Part 1, item 46, new sections 11C(16) and (17), NGER Act 1.54
Part 1, item 47, section 22A(1)(c), NGER Act 1.42
Part 1, item 48, section 22AA(1)(e), NGER Act 1.42
Part 1, item 49, section 24(1)(c), NGER Act 1.63
Part 1, item 50, section 24(1A)(c), NGER Act 1.64
Part 1, item 51, section 24(1AA)(c), NGER Act 1.42
Part 1, item 52, sections 24(1AD)(a) and (b), NGER Act 1.65
Part 1, item 53, section 24(1AD)(c), NGER Act 1.65
Part 1, item 54, sections 24(1AD), NGER Act 1.65
Part 1, item 55, section 24(1C), NGER Act 1.63
Part 1, item 56, sections 24(7) and (8), NGER Act 1.66
Part 1, item 57, section 30(2A), NGER Act 1.58, 1.61
Part 1, item 58, new section 56(aaa) and (aab), NGER Act 1.56
Part 2, item 59 1.68
Schedule 2
Bill reference Paragraph number
Item 3, section 5, CE Act 2.26
Item 4, section 5, CE Act 2.26
Item 5, section 5, CE Act 2.28
Item 7, new subsections 20(12)-(13), CE Act 2.43, 2.44
91
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Bill reference Paragraph number
Item 8, new subsections 21(8C)-(8D), CE Act 2.43, 2.44
Item 9, new subsections 22(10)-(11), CE Act 2.43, 2.44
Item 10, new subsections 23(9C)-(9D), CE Act 2.43, 2.44
Item 11, new subsections 224(8C)-(8D), CE Act 2.43, 2.44
Item 12, new subsections 25(7C)-(7D), CE Act 2.43, 2.44
Item 13, new section 36B(1), CE Act 2.40
Item 13, new section 36B(4), CE Act 2.45
Item 13, new section 36C(4), CE Act 2.45
Item 13, new section 36B(5), CE Act 2.46
Item 13, new section 36C(5), CE Act 2.46
Item 13, new section 36D(5), CE Act 2.46
Item 13, new section 36C(1), CE Act 2.40
Item 13, new section 36D(1), CE Act 2.40
Item 13, sections 36B-36D, CE Act 2.23
Item 13, sections 36B-36D, CE Act 2.22
Item 13, new section 36B, CE Act 2.30, 2.34
Item 13, new section 36C, CE Act 2.32, 2.34
Item 13, new section 36D, CE Act 2.34
Item 14, section 40(3)(a), CE Act 2.37
Item 15, section 41(1)(a), CE Act 2.37
Item 16, section 43(2)(a), CE Act 2.37
Item 17, section 45(8), CE Act 2.37
Item 18, section 45(8)-(15), CE Act 2.37
Item 19, section 47, CE Act 2.37
Item 20, section 47(2), CE Act 2.37
Item 21, section 47(2), CE Act 2.37
Item 22, section 48(1), CE Act 2.37
Item 23, section 48(1), CE Act 2.37
Item 24, section 48(1)(a), CE Act 2.37
Item 25, section 48(3), CE Act 2.37
Item 26, section 49(a), CE Act 2.37
Item 27, section 49, CE Act 2.37
Item 28, section 50(a), CE Act 2.37
Item 29, section 51, CE Act 2.37
Item 30, section 52, CE Act 2.37
92
Index
Bill reference Paragraph number
Item 31, section 53(1)(a), CE Act 2.37
Item 32, section 53(2)(b), CE Act 2.37
Item 33, section 54, CE Act 2.37
Item 34, section 55, CE Act 2.37
Item 35, new section 58AA, CE Act 2.35
Item 35, new section 58AB, CE Act 2.35
Item 36, section 59, CE Act 2.36
Item 37, section 59(2), CE Act 2.77
Item 38, section 59(2), CE Act 2.77
Item 39, section 59(3), CE Act 2.77
Item 40, section 59(3), CE Act 2.77
Item 41, section 59(3), CE Act 2.77
Item 42, section 59(3), CE Act 2.77
Item 42, section 59(4), CE Act 2.77
Item 43, section 59(4), CE Act 2.77
Item 44, section 59(4), CE Act 2.77
Item 45, section 59(4), CE Act 2.77
Item 46, section 59(5), CE Act 2.77
Item 47, section 59(5), CE Act 2.77
Item 48, section 59(5), CE Act 2.77
Item 50, section 59(7), CE Act 2.77
Item 51, section 59(8), CE Act 2.77
Item 52, section 60, CE Act 2.36
Item 53, section 60(2), CE Act 2.77
Item 54, section 60(2), CE Act 2.77
Item 55, section 60(3), CE Act 2.77
Item 56, section 60(3), CE Act 2.77
Item 57, section 60(3), CE Act 2.77
Item 58, section 60(4), CE Act 2.77
Item 59, section 60(4), CE Act 2.77
Item 60, section 60(4), CE Act 2.77
Item 61, section 60(4), CE Act 2.77
Item 62, section 60(5), CE Act 2.77
Item 63, section 60(5), CE Act 2.77
Item 64, section 60(5), CE Act 2.77
Item 66, section 60(7), CE Act 2.77
93
Clean Energy Legislation Amendment Bill 2012
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Clean Energy (Customs Tariff Amendment) Bill 2012
Bill reference Paragraph number
Item 67, section 60(8), CE Act 2.77
Item 68, section 63(1), CE Act 2.38
Item 69, section 63(4), CE Act 2.38
Item 70, sections 64(1) and (3), CE Act 2.38
Item 71, new section 126(7A), CE Act 2.41
Item 72, section 228(1)(a), CE Act 2.77
Item 73, section 262(1)(f), CE Act 2.77
Item 74, section 262(1)(g), CE Act 2.77
Item 75, section 262(1)(i), CE Act 2.77
Item 76, section 2-1, Fuel Tax Act 2.65
Item 77, subsection 41-15(1), Fuel Tax Act 2.65
Item 78, section 41-35, Fuel Tax Act 2.60
Item 79, subsection 42A 5(3), Fuel Tax Act 2.62
Item 79, subsection 42A-5(4), Fuel Tax Act 2.63
Item 79, section 42A-5, Fuel Tax Act 2.65
Item 80, section 43-1, Fuel Tax Act 2.65
Item 81, subsection 43-5(1 ), Fuel Tax Act 2.67
Item 82, subsections 43-5(4) and (5), Fuel Tax Act 2.67
Item 83, subsection 43-8 (1), Fuel Tax Act 2.70
Item 84, subsection 43-8 (1A), Fuel Tax Act 2.70
Item 85, section 110-5, paragraph (a) of new definition of `taxable 2.67
fuel', Fuel Tax Act
Schedule 3
Bill reference Paragraph number
Item 1, section 15(2)(e), CFI Act 3.19
Item 2, section 28(2), CFI Act 3.19
Item 3, section 31(1), CFI Act 3.19
Item 4, section 34(2)(a), CFI Act 3.19
Item 5, section 106, CFI Act 3.20
Item 6, section 168(1)(h), CFI Act 3.19
Item 7, section 122, CFI Act 3.21
Item 8, CFI Act 3.23
94
Index
Schedule 4
Bill reference Paragraph number
Item 1, section 4, ANREU Act 4.17
Item 2, section 27(3B), ANREU Act 4.10
Item 2, section 27(3C), ANREU Act 4.10
Item 2, section 27(3E), ANREU Act 4.12
Item 2, section 27(3D), ANREU Act 4.15
Item 2, section 27(3A), ANREU Act 4.9
Item 3, section 28A(2), ANREU Act 4.16
Schedule 5
Bill reference Paragraph number
Item 1, section 73A, ARENA Act 5.6
Item 2, section 49(1), CER Act 5.7, 5.11
Clean Energy (Customs Tariff Amendment) Bill 2012
Bill reference Paragraph number
Section 1 2.50
Section 2 2.74, 2.75, 2.76
Section 3 2.50
Schedule 1, Part 1, items 1 to 9, Schedules 3,5,6,7 and 8, Customs 2.54
Tariff Act
Schedule 1, Part 2, items 11 and 12, subsections 19A(3) to (5), 2.55
Customs Tariff Act
Clean Energy (Excise Tariff Legislation Amendment) Bill 2012
Bill reference Paragraph number
Section 1 2.50
Section 2 2.74, 2.75, 2.76
Section 3 2.50
Schedule 1, item 1, section 77HA, Excise Act 2.53
Schedule 1, items 2 to 9 and 13, subsections 3(1), 5(1), section 6H, 2.51
and the Schedule, Excise Tariff Act
Schedule 1, items 10 to 12, the Schedule, Excise Tariff Act 2.52
95