Australian National Registry of Emissions Units Bill 2011

Bills Digest no. 7 2011–12

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WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Anita Talberg, Science, Technology, Environment and Resources Section
Juli Tomaras, Law and Bills Digest Section
4 July 2011

Contents
Purpose
Background
Financial implications
Key provisions 


Date introduced:  24 March 2011
House:  House of Representatives
Portfolio:  Climate Change and Energy Efficiency

Commencement:  The Carbon Credits (Carbon Farming Initiative) Act 2011 must receive Royal Assent for sections 3 to 97 to come into effect. For these sections, commencement is at the same time as section 3 of the Carbon Credits (Carbon Farming Initiative) Act 2011. For all other sections, commencement is the day of Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The Australian National Registry of Emissions Units Bill 2011 (the Bill) creates a legislative basis for the existing Australian National Registry of Emissions Units (Registry) and its administrative body (the Carbon Credits Administrator), both of which were established to manage Australia’s emissions units under the Kyoto Protocol. It expands the Registry’s functionality to include the accounting of Australian carbon credit units (ACCUs) to be issued following passage of the Carbon Credits (Carbon Farming Initiative) Bill 2011 (the CFI Bill) and outlines the administrative procedures associated with all Registry transactions.

Background

Under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), Australia is committed to maintaining its greenhouse gas emissions at (or below) 108 per cent of its 1990 emission levels for each year from 2008 to 2012. In total, Australia is allowed to emit 2 957 143 tonnes of carbon dioxide equivalent (CO2e) by 2012. For each tonne of CO2e, Australia has been allocated one Assigned Amount Unit (AAU). These AAUs are accounted for in the Registry, which is an electronic database.[1]

The Registry was first established in September 2009 by the Rudd Government.[2] Before this, Australian companies were unable to participate in two flexibility mechanisms of the Kyoto Protocol: the Clean Development Mechanism (CDM) and Joint Implementation (JI). The CDM and JI allow developed countries, and their authorised entities, to undertake projects that reduce emissions in other countries. Carbon credits generated through CDM and JI projects are allocated through the Registry, and then can be traded internationally. CDM projects may result in three types of units: Certified Emission Reductions (CERs), temporary CERs (tCERs) and long-term CERs (lCERs). JI units are known as emission reduction units (ERUs).

There is currently no legislative basis for the Registry as it was established under the Commonwealth’s executive power.[3] This Bill provides the legislative basis while also amending the Registry to account for new units that will come into existence following passage of the CFI Bill. These new units, to be known as Australian carbon credit units (ACCUs), recognise greenhouse gas emissions reductions that are the result of projects undertaken through the Carbon Farming Initiative (CFI). Details and background on the CFI are contained in the CFI Bill Digest.[4]

The Registry will recognise and account for Australia’s ACCUs, AAUs, CERs, tCERs, lCERs, ERUs and removal units (RMUs) which are Kyoto units for emissions or removals resulting from certain forestry activities. The Carbon Credits Administrator will have the ability to create accounts, issue, exchange and cancel units, and convert certain units to others. This Bill sets out the rules for such accounts and transactions in line with the international requirements outlined by the Kyoto Protocol and those defined nationally for the CFI.

Committee consideration

The Bill was referred to the Senate Standing Committees on Environment and Communications for inquiry, along with the CFI Bill and the Carbon Credits (Consequential Amendments) Bill 2011. Details of the inquiry are at the inquiry webpage.[5] The Committee released its report on 27 May 2011.[6]

The Bill was also referred to the House of Representatives Standing Committee on Climate Change, Environment and the Arts for inquiry, along with the CFI Bill and the Carbon Credits (Consequential Amendments) Bill 2011. Details of the inquiry are at the inquiry webpage.[7] The Committee released its report on 23 May 2011.[8]

The CFI Bills Digest contains more information on the outcomes of the Committee inquiries.[9]

Financial implications

The Explanatory Memorandum does not separate the financial impacts of this Bill from those of the CFI Bill and the Carbon Credits (Consequential Amendments) Bill 2011. It notes:

The total cost of the Carbon Farming Initiative is capped at $45.6 million over four years, with the following profile: $4.4 million in 2010-11, $16.1 million in 2011-12, $13.1 million in 2012-13 and $11.9 million in 2013-14. This includes $4 million to provide information about the scheme to land mangers via Landcare.[10]

Key provisions

For details of the key provisions please refer to the Explanatory Memorandum. The main issues relating to the provisions of this Bill are addressed by the Senate Scrutiny of Bills Committee in Alert Digest no. 4 of 2011 (pages 1-7) and also in Report no. 6 of 2011 (pages 258-271), which contains the Minister’s response.[11]

Some of the key concerns raised by the Senate Scrutiny of Bills Committee are briefly discussed below. Other concerns included the reversed onus of proof (under clause 26(3) relating to disclosure of information obtained from the Registry, strict liability offences (under clause 79) and a drafting oversight in relation to merits review (subclause 36(2)).

Delegation of legislative power

The Committee noted that there is a significant reliance on delegated legislation in the Bill for the Registry to function as intended. In addition, clause 27 allows for the creation of civil penalty provisions that carry significant penalties (see proposed paragraphs 69(4)(b) and 69(5)(b)) by regulation.  These penalties arise as a result of a failure to comply with the rules for use of accounts and the Registry.  The Committee expressed concern about the ability for provisions attracting significant penalties to be created by delegated legislation rather than in the primary legislation but it appears this approach may be more practically supportive of timely responses to operational challenges.[12]

Possible severe penalties

Clauses 23 and 24 introduce offences for a person to knowingly make a false entry in the Registry or to tender in evidence a document which falsely purports to be a copy or extract from an entry in the Registry.  The Explanatory Memorandum recognises that the penalty for the first offence is inconsistent with the standard penalty set out in section 4B of the Crimes Act 1914, whereas 7 years imprisonment equates to 420 penalty units, the penalty in the Bill is 2000 units.[13] 

The Minister’s response to the Scrutiny of Bills Committee explains the significance of maintaining the reputation of the Registry in terms of assuring market confidence, in addition to providing for a significant deterrence:

‘[T]he financial gain which could be made from tampering with the Registry would amount to several lifetimes’ worth of imprisonment on the standard ratio’ thus a substantial financial penalty is considered necessary given the potential gains which may be made from an offence under this provision.[14]

However, the matter of degree in terms of quantum is arguably debatable.

Incorporating material by reference

Clause 95 enables regulations to make provision in relation to a matter by applying, adopting or incorporating, with or without modification, a matter contained in an instrument or writing, as in force or existing at a particular time, or as in force or existing from time to time. The potential for uncertainty that incorporating materials by reference may create in the law, in addition to considerations of fairness for those who are under an obligation to follow a law made without scrutiny or ease of access to its terms, is perhaps a matter for re-consideration.  The Scrutiny of Bills Committee has recommended that the key aspect of the information which the Minister subsequently provided in response to this concern, be included in the Explanatory Memorandum.[15]

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2421.


[1].       Department of Climate Change and Energy Efficiency (DCCEE), ‘How the Kyoto Protocol Works’, DCCEE website, viewed 3 June 2011, http://www.climatechange.gov.au/government/initiatives/kyoto/kyoto-protocol-works.aspx

.       Department of Climate Change and Energy Efficiency (DCCEE), ‘How the Kyoto Protocol Works’, DCCEE website, viewed 3 June 2011,

[2].       P Wong (Minister for Climate Change and Water), Rudd Government helps businesses access the global carbon market, media release, 30 September 2009, viewed 3 June 2011, http://www.climatechange.gov.au/~/media/Files/minister/previous%20minister/wong/2009/media-releases/September/mr20090930.pdf

[3].       Explanatory Memorandum, Australian National Registry of Emissions Units Bill 2011, p. 3.

[4].       A Talberg, J Gardiner-Garden and J Tomaras, Carbon Credits (Carbon Farming Initiative) Bill 2011, Bills Digest, no. 5, 2011–12, Parliamentary Library, Canberra, 2011, 1 July 2011, viewed 4 July 2011, http://parlinfo.aph.gov.au/parlInfo/download/legislation/billsdgs/888842/upload_binary/888842.pdf

[5].       Senate Standing Committees on Environment and Communications, Carbon Credits (Carbon Farming Initiative) Bill 2011; Carbon Credits (Consequential Amendments) Bill 2011 and Australian National Registry of Emissions Units Bill 2011, The Senate, Canberra, 2011, viewed 10 June 2011, http://www.aph.gov.au/senate/committee/ec_ctte/carbon_farming/index.htm.

[6].       Senate Environment and Communications Legislation Committee, Carbon Credits (Carbon Farming Initiative) Bill 2011; Carbon Credits (Consequential Amendments) Bill 2011 and Australian National Registry of Emissions Units Bill 2011, The Senate, 27 May 2011, viewed 10 June 2011, http://www.aph.gov.au/senate/committee/ec_ctte/carbon_farming/report/report.pdf.

[7].       House Standing Committee on Climate Change, Environment and the Arts, Bills referred 24 March 2011, House of Representatives, Canberra, March 2011, viewed 10 June 2011, http://www.aph.gov.au/house/committee/ccea/24March2011/index.htm.

[8].       House of Representatives Standing Committee on Climate Change, Environment and the Arts, Advisory Report on Bills referred 24 March 2011, May 2011, viewed 10 June 2011, http://www.aph.gov.au/house/committee/ccea/24March2011/report/CCEA%20Final%2017%20May%202011.pdf.

[9].       A Talberg and others, Carbon Credits (Carbon Farming Initiative) Bill 2011, p. 11.

[10].     Explanatory Memorandum, op. cit., p. 4.

[11].     Senate Scrutiny of Bills Committee, Alert Digest No. 4 of 2011, The Senate, Canberra, 11 May 2011, viewed 23 May 2011, http://www.aph.gov.au/senate/committee/scrutiny/alerts/2011/d04.pdf; Senate Scrutiny of Bills Committee, Sixth Report of 2011, The Senate, Canberra, 22 June 2011, viewed 23 June 2011, http://www.aph.gov.au/senate/committee/scrutiny/bills/2011/b06.pdf

[12].     See Senate Scrutiny of Bills Committee, Report no. 6, op. cit., pp. 261—2.

[13].     Ibid., p. 262.

[14].     Ibid.

[15].     Ibid., p. 271.

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