Chapter 2 Overview of the clean energy legislative package and the steel transformation
On 10 July 2011, the Government announced that it would implement a
carbon pricing mechanism (the mechanism) in Securing a clean energy future:
the Australian Government’s climate change plan.
At the same time, the Government announced assistance to the Australian steel
industry, through the steel transformation plan.
The carbon pricing mechanism
The mechanism will place a price on each tonne of greenhouse gases emitted
by a business or other entity covered by it (a ‘carbon price’). It is a
cap-and-trade emissions trading scheme which will commence on 1 July 2012. For
the first three years, the carbon price will be fixed, and from 1 July
2015, the price will be determined by the market.
The mechanism is to be implemented by the clean energy legislative package,
which is made up of 18 bills. These bills may be categorised as follows:
Table 1.1 The Clean Energy Bill 2011 and related bills
The Clean Energy Bill 2011 creates the mechanism. It sets
out the structure of the mechanism and process for its introduction. These
entities and emissions that are covered by the mechanism;
entities’ obligations to surrender eligible emissions units;
limits on the number of eligible emissions units that will be
the nature of carbon units;
the allocation of carbon units, including by auction and the
issue of free units;
mechanisms to contain costs, including the fixed charge period
and price floors and ceilings;
linking to other emissions trading schemes;
assistance for emissions-intensive trade-exposed activities and
coal-fired electricity generators;
monitoring, investigation, enforcement and penalties;
administrative review of decisions; and
reviews of aspects of the mechanism over time.
The Clean Energy Regulator Bill 2011 sets up the Clean
Energy Regulator (the Regulator), which is a statutory authority that will
administer the mechanism and enforce the law.
The responsibilities of the Regulator include:
providing education on the mechanism, particularly about the
administrative arrangements of the mechanism;
assessing emissions data to determine each entity’s liability;
operating the Australian National Registry of Emissions Units
monitoring, facilitating and enforcing compliance with the
allocating units including freely allocated units, fixed charge
units and auctioned units;
applying legislative rules to determine if a particular entity
is eligible for assistance in the form of units to be allocated
administratively, and the number of other units to be allocated;
administering the National Greenhouse and Energy Reporting
System (NGERS), the Renewable Energy Target (RET) and the Carbon Farming
Initiative (CFI); and
accrediting auditors for the CFI and NGERS.
The Climate Change Authority Bill 2011 sets up the Climate
Change Authority (the Authority), which will be an independent body that
provides the Government with expert advice on key aspects of the mechanism
and the Government’s climate change mitigation initiatives.
The Government will remain responsible for carbon pricing
This bill also sets up the Land Sector Carbon and
Biodiversity Board which will advise on key initiatives in the land sector.
Source Clean Energy Bill 2011 –
Explanatory Memorandum pages 24-26
Table 1.1 The Clean Energy Bill 2011 and related bills
The Clean Energy (Consequential Amendments) Bill 2011
makes consequential amendments to ensure:
NGERS supports the mechanism;
the Registry covers the mechanism and the CFI;
the Regulator covers the mechanism, CFI, the Renewable Energy
Target and NGERS;
the Regulator and Authority are set up as statutory agencies
and regulated by public accountability and financial management rules;
that emissions units and their trading are covered by laws on
that activities related to emissions trading are covered by
laws on money laundering and fraud;
synthetic greenhouse gases are subject to an equivalent carbon
price applied through existing regulation of those substances;
the Regulator can work with other regulatory bodies, including
the Australian Securities and Investments Commission (ASIC), the Australian
Competition and Consumer Commission (ACCC) and the Australian Transaction
Reporting and Analysis Centre (Austrac);
the taxation treatment of emissions units for the purposes of
GST and income tax is clear; and
the Conservation Tillage Refundable Tax Offset is established.
Those elements of the mechanism which oblige a person to
pay money are implemented through separate bills that comply with the
requirements of section 55 of the Constitution.
These bills are the Clean Energy (Unit Shortfall
Charge—General) Bill 2011, the Clean Energy (Unit Issue Charge – Fixed
Charge) Bill 2011, the Clean Energy (Unit Issue Charge – Auctions) Bill 2011,
the Clean Energy (Charges—Excise) Bill 2011, the Clean Energy
(Charges—Customs) Bill 2011, the Clean Energy (International Unit Surrender
Charge) Bill 2011, the Ozone Protection and Synthetic Greenhouse Gas
(Manufacture Levy) Amendment Bill 2011 and the Ozone Protection and Synthetic
Greenhouse Gas (Import Levy) Amendment Bill 2011.
Other elements of the Government’s climate change plan are
being implemented through other legislation. These are:
the Clean Energy (Excise Tariff Legislation Amendment) Bill
2011 and the Clean Energy (Customs Tariff Amendment) Bill 2011, which imposes
an effective carbon price on aviation and non-transport gaseous fuels through
excise and customs tariffs;
the Clean Energy (Fuel Tax Legislation Amendment) Bill 2011,
which reduces the business fuel tax credit entitlement of non-exempted
industries for their use of liquid and gaseous transport fuels, in order to
provide an effective carbon price on business through the fuel tax system;
the Clean Energy (Household Assistance Amendments) Bill 2011,
Clean Energy (Tax Laws Amendments) Bill 2011 and the Clean Energy (Income Tax
Rates Amendments) Bill 2011, which will implement the household assistance
measures announced by the Government on 10 July 2011. These bills amend relevant
legislation to provide payment increases for pensioners, allowees and family
payment recipients and provide income tax cuts and establish new supplements
for low- and middle-income households.
Energy Bill 2011 – Explanatory Memorandum pages 24-26
Description of the clean energy bills
Clean Energy Bill 2011
The Clean Energy Bill 2011 will create the mechanism and provides for
the way in which it is set up and will work over time. It also provides for the
obligations of entities covered by the mechanism and its administration by the
The mechanism is to start on 1 July 2012, after which entities covered
by it – including businesses, government agencies and other bodies - will pay
for each tonne of carbon dioxide equivalent (CO2-e) greenhouse gas
pollution they emit each year.
The mechanism is to be implemented in two stages:
n for the first three
years, the price for each tonne CO2-e of greenhouse gas emissions
will be fixed. The price will start at $23 per tonne, rising by 2.5 per cent
per year, allowing for inflation of 2.5 per cent per year; and
n from 1 July 2015, the
mechanism will shift to a flexible cap and trade emissions trading scheme,
where the price will be set by the market.
After 1 July 2015, the Government will set an annual cap on Australia’s
annual greenhouse gas emissions, which will have limits on individual sectors,
firms or facilities. The cap will be set by issuing a fixed number of carbon
units each year. This will be one of the main ways Australia meets its
Table 1.2 Timeline for setting pollution caps
Pollution cap announced for financial year(s)
31 May 2014
2015, 2016, 2017, 2018 and 2019
30 June 2016
30 June 2017
Pollution caps will continue to be set annually
Energy Bill 2011 – Explanatory Memorandum, page 31
If no caps are set by the minister, then the Clean Energy Bill 2011
provides that default caps will apply. These are designed to ensure that
Australia meets its international obligation to reduce national emissions by at
least five per cent below 2000 levels by 2020.
Some of the carbon units issued each year are to be sold by the
Government at auction. Others are to be
allocated as free carbon units to businesses under the jobs and competitiveness
program or as assistance to energy generators. People will be able to buy
and sell the carbon units they have acquired, creating market for carbon units.
designed to ensure the reductions in pollution under the
carbon price are achieved at the lowest cost to the economy: firms will buy
units if they cannot reduce their pollution for less than the cost of the
The Clean Energy Bill 2011 requires the Authority to make
recommendations to the Government on pollution caps and on any national
emissions trajectory or ‘carbon budget’, with the first recommendations due by February
Price ceilings and floors
Under the Clean Energy Bill 2011, price ceilings and floors, intended to
avoid price spikes or plunges, are to apply from 1 July 2015 for three years
(that is, the first three flexible charge years):
n a price ceiling will
be set $20 higher than the expected international carbon price at the start of
the flexible price period (1 July 2015); and
n price floor will
mean that the carbon price cannot fall any lower than $15 a tonne in 2015-16.
Both the price ceiling and the price floor will increase
gradually each year. The Clean Energy Bill 2011 provides that the Authority is
to review the role of the price ceiling and price floor in 2017.
Coverage of the carbon price
The mechanism creates a liability for greenhouse gas pollution for
entities that have:
n facilities that emit
25,000 tonnes CO2-e or more of greenhouse gas pollution per annum;
n landfill facilities
that emit 10,000 tonnes CO2-e or more (provided that they are within
a specified distance of landfills that emit 25,000 tonnes CO2-e or
n large users of
natural gas, and
n natural gas suppliers
The measurement of greenhouse gas pollution is done through NGERS, which
has been in place since 2007. The Clean Energy (Consequential Amendments) Bill
2011 makes some amendments to the National Greenhouse and Energy Reporting
Act 2007 to integrate NGERS with the mechanism.
The Clean Energy Bill 2011 provides for the specific treatment of
greenhouse gas pollution embodied in natural gas. It provides that facilities
that consume large volumes of natural gas are covered by the mechanism, and
that liability for other emissions of natural gas from the use of natural gas
supplied to small-to medium-sized customers is borne by the natural gas
supplier, unless an obligation transfer number (OTN) is quoted.
The Clean Energy Bill 2011 also recognises that businesses may
structure their affairs in various ways. Provision is made for the reallocation
of liability within joint ventures (through the provisions on mandatory and
declared designated joint ventures) and within corporate groups (through
liability transfer certificates).
Greenhouse gas pollution covered by the mechanism
The mechanism will cover four of the six greenhouse gases counted under
the Kyoto Protocol – carbon dioxide, methane, nitrous oxide and perfluorocarbon
emissions from the aluminium sector. The other greenhouse gases counted under
the Kyoto Protocol (hydrofluorocarbons and sulphur hexafluoride) as well as
other perfluorocarbon emissions will face an equivalent carbon price through
the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989. Amendments
to apply an equivalent carbon price to synthetic greenhouse gases are set out
in the consequential amendments bill.
The mechanism covers greenhouse gas emissions from stationary energy,
non-legacy waste, industrial processes and fugitive emissions (other than from
decommissioned coal mines).
The mechanism does not cover emissions from fuels subject to excise or
customs, combustion of biomass, biofuels or biogas, agriculture, emissions from
land (other than covered landfills), fugitive emissions from decommissioned
coal mines, legacy emissions from landfill facilities, closed landfill
facilities, synthetic greenhouse gases and those emissions defined as ‘scope 2’
and ‘scope 3’ emissions under the National Greenhouse and Energy Reporting
Under the Package transport fuels are treated differently to other
emissions. Coverage may be summarised as follows:
Table 1.3 Treatment of transport fuels
A carbon price will be applied to:
A carbon price will not apply to:
Fuel used by households for transport
Light on-road commercial vehicles
Ethanol, biodiesel and renewable diesel
Off-road transport use of liquid and gaseous fuels (except
in agriculture, forestry, fisheries)
Gaseous fuels used for on-road transport
Off-road fuel use by the agriculture, forestry and fishing
Non-transport use of liquid and gaseous fuels
Transport fuels when used as lubricants and solvents or in
other ways that do not result in emissions
Energy Bill 2011 – Explanatory Memorandum, page 35
Where an effective carbon price applies to transport fuels, it will be
applied through changes in fuel tax credits or changes in excise. The changes will
be calculated to have the same price effect as coverage by the mechanism and
will be adjusted periodically to ensure the effective carbon price on transport
fuels aligns with the price under the mechanism.
The Government has announced that it intends to apply an effective
carbon price to heavy on-road transport from 1 July 2014, but this is not part
of the bills being considered by the committee.
The Clean Energy Bill 2011 provides that large users of specified
transport fuels may, in certain circumstances, opt into coverage by the
mechanism through an Opt-in Scheme, which will start on 1 July 2013. The
details of the Opt-in Scheme will be set out in regulations.
Each carbon unit will represent one tonne CO2-e of pollution.
A unit is an item of personal property which may be sold or otherwise
transmitted to other persons. Ownership of units is determined by reference to
the Registry, and the person in whose name the unit is registered is the legal
owner of the account. The bill makes provision for correcting defects in title.
The mechanism also allows for the use of other forms of units in
specified circumstances, including Australian carbon credit units (ACCUs)
created under the Carbon Farming Initiative and eligible international units.
Assessing and meeting liabilities
Under the Clean Energy Bill 2011, liable entities must either make a
payment for emissions or surrender an equivalent number of units.
If a liable entity does not surrender any units or an insufficient
number to meet its liability, then it will become liable for a shortfall
charge. Those who choose to pay, or who are liable for, a shortfall charge
will pay a premium above the value of the unit.
Generally, liability will be determined by reference to the previous year’s
NGERS report for the entity concerned. However, liable entities may choose to
estimate their liability.
In the fixed charge period, there is a provisional payment and surrender
in June of the relevant financial year, with the remaining liability being met
in the following February. In the fixed charge period, units cannot be banked
to meet future liabilities.
In the flexible charge period, payment and surrender must occur by
February following the relevant financial year. Units can be banked to meet
Jobs and competitiveness program
The jobs and competitiveness program is intended to provide transitional
assistance to emissions-intensive, trade-exposed industries. The Clean Energy
Bill 2011 - Explanatory Memorandum says:
Without appropriate assistance arrangements, applying
constraints on carbon pollution in Australia before other countries could risk
‘carbon leakage’ — activities could be relocated from Australia to countries
where those activities may not be subject to comparable carbon constraints.
Carbon leakage is not in Australia’s interests — either from an environmental
or an economic point of view. The Jobs and Competitiveness Program is designed
to reduce this risk.
Assistance will be provided through allocations of free carbon units
according to arrangements that are to be set out in regulations. The
Government has announced that draft regulations are to be released for
consultation by the end of September 2011.
The Productivity Commission will review assistance under the program.
Energy Security Fund and coal-fired electricity generation
The Clean Energy Bill 2011 provides for the setting up of an Energy
Security Fund, which will “smooth the transition and maintain energy security”.
This Fund will incorporate:
assistance to highly emissions-intensive coal-fired power stations, which will come
with conditions to ensure security of supply and transparent information on
emissions reduction efforts; and
n the potential for payments
for the closure of around 2,000 megawatts (MW) of very highly
emissions-intensive coal fired generation capacity by 2020, which is intended
to start the replacement of polluting electricity generation complexes.
The Government has announced that draft regulations on assistance to
generators are to be released for consultation by the end of September 2011.
The Productivity Commission will review assistance under the energy
The Clean Energy Bill 2011 provides that the mechanism will be linked to
international carbon markets from 1 July 2015. The Clean Energy Bill 2011 - Explanatory
Australian businesses will be able to buy international units
from credible international carbon markets or emissions trading schemes in
other countries. They will be allowed to use these units to meet some of their
local obligations. When an Australian business buys an international unit, it
means that a tonne of pollution cannot be released overseas. In addition,
farmers will be able to sell credits generated from the CFI to international
The Clean Energy Bill 2011 provides safeguards concerning the
credibility of international units and to ensure that they do not undermine the
environmental integrity of the mechanism.
Until 2020, businesses may meet at least half of their annual
obligations each year by buying carbon units or ACCUs. The Clean Energy Bill
2011 - Explanatory Memorandum says:
It will be more efficient and less costly to reduce
Australia’s carbon pollution by a mixture of domestic reductions and
international unit purchases compared with relying on domestic action alone.
International linking allows Australian businesses to pursue credible, cheaper
carbon pollution reduction opportunities wherever they are available.
Compliance and enforcement
The Clean Energy Bill 2011 gives the Regulator powers to encourage
compliance and, when problems emerge, the ability to investigate and take
enforcement action. The Regulator’s decisions are circumscribed and subject to
merits and judicial review.
Under the Clean Energy Bill 2011:
n liable entities are
required to make and keep records and to provide information to the Regulator
in specified circumstances, including disclosures about significant holdings;
n the Regulator has
investigatory powers, including information-gathering powers and monitoring
n the Regulator may
take action against liable entities and others concerned with compliance with
the mechanism for failures to comply with the mechanism. This can include:
infringement notices or seeking the acceptance of court-enforceable
court proceedings for the imposition of a civil penalty or a criminal sanction.
Reviews by the Authority
The Clean Energy Bill 2011 provides that the Authority must undertake
specific reviews concerning aspects of the mechanism (see above). In addition,
it may, at the request of either the minister or the Parliament, undertake
broader reviews of the mechanism.
Clean Energy (Consequential Amendments) Bill 2011
The Clean Energy (Consequential Amendments) Bill 2011 sets out
consequential amendments to existing Commonwealth laws on climate change and
environmental regulation, economic and business regulation and taxation. 
These changes are needed to implement the mechanism fully. The bill also
provides for transitional arrangements concerning the way in which the
mechanism will link with existing greenhouse gas management and reduction
The Clean Energy (Consequential Amendments) Bill 2011:
responsibility for the mechanism, NGERS, the Carbon Farming Initiative, the
Registry and the Renewable Energy Target under the Regulator;
arrangements for enforcement cooperation between the Regulator and other
national economic regulators, such as the Australian Competition and Consumer
Commission and the Australian Securities and Investments Commission, and law
enforcement agencies, such as the Commonwealth Director of Public Prosecutions
and the Australian Transactions Reports and Analysis Centre (Austrac);
n provides for the
application of an equivalent carbon price to emissions attributable to
synthetic greenhouse gases;
n implements the
Conservation Tillage Tax Offset, to encourage low-emissions farming practices;
n deals with the taxation treatment of carbon units, such that tax treatment
should not compromise the main objectives of the scheme: tax should not
influence decisions between purchasing, trading and surrendering units or
alternatively reducing emissions. The preferred tax treatment will help
implement the scheme and reduce compliance and administration costs for
taxpayers and the Australian government.
Household assistance bills
Clean Energy (Income Tax Rates Amendments) Bill 2011
The Clean Energy (Income Tax Rates Amendments) Bill
2011 makes changes to personal income tax rates
and thresholds that will enact the tax cuts that form the household assistance
package. Under this package, the Government has dedicated more than half of the
revenue raised from pricing carbon pollution for assistance to households. This
assistance is targeted to low- and middle-income households.
All taxpayers with taxable income up to $80,000 will get a tax cut from
1 July 2012. Most are expected to get a cut of at least $300. From 1 July
2015, all taxpayers with taxable income up to $80,000 will get a further tax
cut that brings the total tax cut to at least $380 for most.
In addition, the amendments triple the tax-free threshold from $6,000 to
$18,200 on 1 July 2012, and to $19,400 from 1 July 2015.
Consequently, from 1 July 2012 workers will not start paying personal tax
until their income exceeds $20,542.
The Government expects these changes to also benefit part-time secondary
earners. Regular wage and salary earners with income below the new tax-free
thresholds will be able to keep every cent of their pay from their regular pay
Clean Energy (Household Assistance Amendments) Bill 2011
The Clean Energy (Household Assistance Amendments) Bill 2011 provides
for increased payments to pensioners, allowees, veterans, self-funded retirees
and families. The payments provide assistance greater than the average expected
price increase from putting a price on carbon. 
An initial lump sum advance payment will be made to eligible households
before the commencement of the carbon pricing scheme. The advance amount will
vary by household type: it will be $250 for single pensioners, and up to $110
per child for those who receive family tax benefit part A.
A new ongoing clean energy supplement will also be provided. This
supplement will be a new component of the rate of pensions, allowances and
family tax benefit. It will constitute a 1.7 per cent increase in payments to
age, disability and carer pensioners, allowees, veterans, self-funded retirees
and Australian families. This 1.7 per cent comprises:
n the expected
additional impact on the consumer price index from carbon pricing—0.7 per cent;
n an additional increase
of one per cent.
The annual amount of the clean energy supplement will be around $338 for
single pensioners, and up to $110 per child for recipients of family tax
benefit part A. The supplement will be indexed.
The Government estimates that eight million households will receive
assistance either through payment increases or tax cuts, or both.
Clean Energy (Tax Laws Amendments) Bill 2011
The Clean Energy (Tax Laws Amendments) Bill 2011 contains consequential
amendments to offsets and levies in the personal tax system to ensure nobody
pays more tax as a result of the changes in the Clean Energy (Income Tax Rates
Amendments) Bill 2011.
From 1 July 2012, $1,050 of assistance will be shifted from the
low-income tax offset into the tax scales. A further $145 will be delivered
through the tax scales instead of the offset from 1 July 2015. This bill will
roll the pensioner tax offset into the more generous senior Australians tax
offset to create the new seniors and pensioners’ tax offset.
The Clean Energy (Tax Laws Amendments) Bill 2011 will also increase the
Medicare levy low-income thresholds and phase-in limits to ensure that people
are not required to pay the Medicare levy before they have a tax liability. The
low-income threshold for a single individual with no dependants will increase
from $18,839 to $20,542.
Fuel tax bills
Clean Energy (Fuel Tax Legislation Amendment) Bill 2011
The Clean Energy (Fuel Tax Legislation Amendment) Bill 2011:
n amends the Fuel
Tax Act 2006 reducing businesses’ fuel tax credit entitlements by an amount
that reflects the equivalent carbon price on the emissions of the transport
fuels they use;
n imposes a
cent-for-cent impact on businesses, equivalent to the price on the carbon
content of the transport fuels they use;
n exempts the
agricultural, forestry and fishing industries from the carbon reduction to
their fuel tax credit entitlements. These industries will not pay an effective
carbon price on emissions from their off-road use of transport fuels, including
fuels used in stationary plant and equipment. It also ensures that no effective
carbon price will be payable in respect of emissions from heavy on-road
n gives effect to the
government's intention that separate arrangements will be made after the next
election so that heavy on-road transport will become liable for a carbon charge
after 1 July 2014.
Clean Energy (Customs Tariff Amendment) Bill 2011
The Clean Energy (Customs Tariff Amendment) Bill 2011:
n establishes a
cent-for-cent impact on aviation and non-transport compressed natural gas
equivalent to the price on the carbon content of the transport fuels they use;
n amends the Customs
Tariff Act 1995 by increasing aviation fuel excise equivalent customs duty
by an amount reflecting the price on the carbon emissions of the fuel had
aviation fuel emissions been liable emissions under the mechanism; and
n apply excise
equivalent customs duty for non-transport compressed natural gas on a
cent-for-cent basis equivalent to the carbon emission price on the fuel had
compressed natural gas emissions been liable emissions under the mechanism.
Clean Energy (Excise Tariff Legislation Amendment) Bill 2011
The Clean Energy (Excise Tariff Legislation Amendment) Bill 2011:
n establishes a cent-for-cent
impact on fuels to the price on the carbon content of the transport fuels they
use, this time on aviation and non-transport compressed natural gas equivalent;
n amends the Excise
Tariff Act 1921 and related acts to increase aviation fuel excise by an
amount reflecting the price on the carbon emissions of the fuel had aviation
fuel emissions been liable emissions under the mechanism.
Synthetic greenhouse gas bills
The Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment
Bill 2011 and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment
Bill 2011 ensure that the manufacture and importation of Kyoto protocol
synthetic greenhouse gases (hydrofluorocarbons, perfluorocarbons and sulfur
hexafluoride) will be subject to the carbon price by way of the existing levy
structure under the Ozone Protection and Synthetic Greenhouse Gas
(Manufacture Levy) Act 1995, the Ozone Protection and Synthetic
Greenhouse Gas (Import Levy) Act 1995 (together, the Levy Acts) and the Ozone
Protection and Synthetic Greenhouse Gas Management Act 1989.
The equivalent carbon price will be calculated based on the CO2-e
of the gas, multiplied by the applicable charge. The carbon price will be
additional to the existing levy imposed by each Levy Act.
The Levy bills will allow the minister to determine whether or not a
licensee is exempt from paying the levy in specific circumstances. These circumstances
include the manufacture of medical equipment or such circumstances where it is
simply impracticable to impose the levy.
The charges bills
Clean Energy (Unit Shortfall Charge—General) Bill 2011
If a person surrenders insufficient units to meet his or her liability
for greenhouse gas emissions, then the difference between their liability and
what they actually surrendered is a unit shortfall. If a person has a unit
shortfall, then he or she has a choice between surrendering more units to meet
the shortfall, or paying a unit shortfall charge.
The Clean Energy (Unit Shortfall Charge—General) Bill 2011 provides that
the unit shortfall charge is set at a level which is higher than the value of
n in fixed charge years
this is 130 per cent of the fixed charge for that year; and
n in flexible charge
years this is 200 per cent of the benchmark average annual price for the
previous year or an amount as specified in the regulations.
This is intended to provide an incentive to surrender units
rather than incur a shortfall charge.
The Clean Energy (Unit Shortfall Charge—General) Bill 2011 imposes a
unit shortfall charge as a tax so far as it is not a duty of customs nor a duty
of excise. A unit shortfall charge is designed to encourage liable entities
under the mechanism to surrender units, rather than pay the charge. There is no
compulsion to pay a unit shortfall charge, but it is payable if insufficient
units are surrendered.
Clean Energy (Unit Issue Charge – Fixed Charge) Bill 2011 and the Clean
Energy (Unit Issue Charge – Auctions) Bill 2011
Under the mechanism a person must pay a charge to for a unit to be
issued by the Regulator. The Clean Energy (Unit Issue Charge – Fixed Charge)
Bill 2011 and the Clean Energy (Unit Issue Charge – Auctions) Bill 2011 impose
as a tax the charges for the issue of carbon units (whether a fixed fee or
auctioned), so far as the charges are a tax, but not duties of customs or
excise, within the meaning of section 55 of the Constitution.
The Explanatory Memorandum for the two bills says:
The Commonwealth does not consider that issue charges are
taxation because taxation is necessarily compulsory and it is not compulsory to
However, a separate bill imposes those charges so far as they
are taxation to ensure there can be no argument that there has not been
compliance with section 55 [of the Constitution]. So far as the issue charges
are not taxation, they will be payable under clauses 110 and 111 of the main
The Commonwealth does not consider that, if the issue charges
are taxation, a law imposing both the fixed charge and the auction charge would
deal with more than one subject of taxation. However, separate bills impose the
different charges to ensure that there can be no argument that there has not
been compliance with section 55.
Clean Energy (Charges—Excise) Bill 2011 and the Clean Energy
(Charges—Customs) Bill 2011
There may be circumstances in which unit shortfall charges and issue
charges may be duties of customs or excise. The Clean Energy (Charges—Customs)
Bill 2011 imposes these charges so far as they are duties of customs. The Clean
Energy (Charges—Excise) Bill 2011 imposes the charges so far as they are duties
The Explanatory Memorandum for the two bills says:
It is not clear that the unit shortfall or issue charges
would be duties of customs or duties of excise. Imposition of the charges by a
separate bill so far as they are duties of customs or duties of excise ensures
that there can be no argument that there has not been compliance with section
55 of the Constitution. 
The Clean Energy (International Unit Surrender Charge) Bill 2011
The Clean Energy (International Unit Surrender Charge) Bill 2011 imposes
as a tax the charge for surrender of an eligible international emissions unit
during the eligible financial years beginning on 1 July 2015, 2016 and 2017.
Eligible international emissions units are defined in section 4 of the Australian
National Registry of Emissions Units Act 2011. The initial list of eligible
international emissions units includes currently traded Kyoto units which are
likely to be traded through to 2015.
The Clean Energy Regulator 2011
The Clean Energy Regulator Bill 2011 sets up the Regulator, which will administer:
n the mechanism;
n the Renewable Energy
n the Carbon Farming
n the Registry;
n the functions of the
Office of the Renewable Energy Regulator (ORER); and
n the functions of the Greenhouse
and Energy Data Officer (GEDO). 
The Clean Energy Regulator Bill 2011 sets up the Regulator as
independent of Government and provides that it will carry out its functions
within a limited and legislatively prescribed discretion. There is limited
scope for Ministerial directions to the Regulator and the limited grounds on which
a member of the Regulator may be removed from office.
The Regulator will be a body corporate comprising a Chair and between
two and four other members. For the purposes of the Public Service Act 1999,
the Chair of the Regulator is the head of a statutory agency and can employ
Australian Public Service employees on behalf of the Commonwealth.
To ensure proper use and management of public money, public property and
other Commonwealth resources, the Regulator will be bound by the Financial
Management and Accountability Act 1997.
The Regulator will be required to produce a corporate plan setting out
the Regulator’s objectives and the strategies and policies that are to be used
to achieve those objectives. The Regulator will also be required to produce an annual
report, which will be tabled in Parliament.
The Clean Energy Regulator Bill 2011 contains provisions designed to
ensure that information obtained by the Regulator in the course of its
functions is only disclosed and used for legitimate purposes.
The Climate Change Authority 2011
The Climate Change Authority Bill 2011 sets up the Authority, which
recommendations to the Government on future pollution caps;
n in doing so, make
recommendations on the indicative national trajectory and emissions budget,
having regard to the long-term target set by the Government and estimates of
the global emissions budget;
n provide independent
advice to the Government on the progress that is being made to reduce
Australia’s emissions to meet national targets, any indicative national
trajectory or budget;
n conduct regular
reviews of, and make recommendations on, the carbon pricing mechanism
(household assistance and the jobs and competitiveness program will be reviewed
n conduct reviews of
and make recommendations on the National Greenhouse and Energy Reporting System,
the Renewable Energy Target and the Carbon Farming Initiative;
n make recommendations
to the Government on whether a robust methodology could be developed to
recognise additional voluntary action by households;
n provide advice to
Government on the role of the price floor and price ceiling beyond the first
three years of the flexible price phase;
n conduct reviews and
make recommendations on other matters as requested by the Minister for Climate
Change and Energy Efficiency or the Parliament; and
n conduct or commission
its own independent research and analysis into climate change and other matters
relevant to its functions.
The Authority will engage with representatives interested in climate
change from across Australia in order to share research and information on
climate change and gain input into its analysis. The Authority is required to
undertake public consultation when completing its reviews and must publish all
of its reports on its website.
The Climate Change Authority Bill 2011 - Explanatory Memorandum says
The Government’s intention is to establish an independent
Authority to conduct reviews and provide advice to Government. The Authority
will be required to take a number of specified factors into account but is not
subject to Government direction in relation to the contents of its review
The Climate Change Authority Bill 2011 sets up the Authority as a body
corporate comprising a Chair and eight other members, one of whom is the Chief
Scientist, which will be supported by a secretariat.
The primary functions of the Authority are to conduct reviews of the
Clean Energy Act (as enacted), the Renewable Energy Target Scheme, the Carbon
Farming Initiative, the National Greenhouse and Energy Reporting System, and
other special reviews as requested by the Minister.
There is to be a Chief Executive Officer (CEO) of the Authority who is
responsible for the day-to-day administration of the Authority. For the
purposes of the Public Service Act 1999, the CEO is the head of a
statutory agency and can employ Australian Public Service employees on behalf
of the Commonwealth.
In order to ensure proper use and management of public money, public
property and other Commonwealth resources, the Authority will be bound by the Financial
Management and Accountability Act 1997.
The Authority will be required to produce:
n a corporate plan
setting out the Authority’s objectives and the strategies and policies that are
to be used to achieve those objectives;
n an annual report,
which will be tabled in Parliament.
As with other bodies where a significant degree of independence is
required, such as the Productivity Commission, the Authority is subject to
Ministerial direction on general matters only.
The Minister may only terminate an appointment (other than the Chief
Scientist) to the Authority on narrow grounds, including for misbehaviour,
physical or mental incapacity or repeated absence from meetings of the
The Climate Change Authority Bill 2011 also sets up the Land Sector
Carbon and Biodiversity Board, comprising a Chair and four other members.
The Board will:
n advise on performance
indicators, implementation and funding guidelines for measures supported by the
Government’s Biodiversity Fund relating to biodiverse ecosystems and carbon
sequestration in those ecosystems; and
n provide advice to the
Government on the implementation, performance indicators and priorities for
research of other prescribed land sector measures included as part of the
Government’s plan for a clean energy future.
The Climate Change Authority Bill 2011 - Explanatory Memorandum says
The Board’s functions are intended to ensure that efforts are
not duplicated and benefits for landholders and the environment are realised. 
The Board will also be required to produce an annual report for the
Environment Minister, which will be tabled in Parliament.
The steel transformation plan
The steel transformation plan (the plan) is implemented by the Steel
Transformation Plan Bill 2011 and is related to the mechanism.
The plan is a $300 million entitlement program over four years from
the 2012-13 financial year. It is intended to encourage investment, innovation and
competitiveness in the Australian steel manufacturing industry as it transforms
into an efficient and economically sustainable industry in a low carbon economy.
Steel Transformation Plan Bill 2011
The Steel Transformation Plan Bill 2011 (STP Bill) provides assistance
to the Australian steel industry by way of competitiveness assistance advances
in 2011-2012 and entitlement payments under the plan.
Under the plan, assistance is limited to $300 million and is guaranteed
through a standing appropriation. The standing appropriation provides the steel
manufacturing industry with certainty in respect of the amount of assistance it
will be entitled to receive through the plan.
The Minister may approve up to $164 million in competitiveness
assistance advances in 2011-2012. This is limited to circumstances where the
advances are necessary to assist eligible Australian steel manufacturers to
undertake activities that will significantly enhance the competitiveness and
economic sustainability of the steel manufacturing industry in Australia. The
amount of an advance will be deducted from future entitlement payments under
The administrative details of the plan are to be set out in a
legislative instrument. This is to
[reduce] the administrative complexity of the legislation and
provides the flexibility required to deal with changing circumstances in the
Australian steel manufacturing industry.
The STP Bill sets out the matters to be contained in the legislative
n the registration of
n the making of
payments under the plan (including conditions that are to be complied with);
n the recovery of
amounts by the Commonwealth;
n the payment of
interest on overpaid amounts;
n the inalienability of
n the review of
n other matters
required or permitted to be included in the plan.
The STP Bill provides that debts under the plan may be recovered by the
Commonwealth, including by offsetting against a participant’s future payments.
Monies recovered may then be redistributed within future plan years. Any unspent
funds at the end of the plan will be returned to the Consolidated Revenue Fund.
The STP Bill includes a monitoring regime, to enable the Department of
Innovation, Industry, Science and Research (DIISR) to ensure that the plan is
complied with and payments are applied to proper purposes. This monitoring
regime is required because:
the plan is a self-assessment scheme for which payments are
provided on trust, subject to later compliance and verification. These powers
aim to ensure the integrity of the plan by deterring participants from
over-claiming assistance. 
DIISR’s monitoring powers include:
n powers to access
premises by authorised departmental officers; and
n information gathering
powers, including powers to obtain information and documents.
The STP Bill provides that DIISR is required to provide an annual report
on the plan to the Minister for Innovation, Industry, Science and Research.