Bills Digest no. 176 2008–09
National Greenhouse and Energy Reporting Amendment Bill 2009
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.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced: 18 March 2009
House: House of Representatives
Portfolio: Climate Change and Water
Commencement: On the 28th day after Royal Assent
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
The Bill proposes minor amendments to the National
Greenhouse and Energy Reporting Act 2007 (the Act) to enhance the
robustness of its operation making it more consistent with the original policy
intent by:
- clarifying the definition of certain key operational terms
relating to greenhouse and energy audits conducted under the Act
- making it a requirement that the results of greenhouse and energy
audits be included in the National Greenhouse and Energy (corporation) Register
- broadening the secrecy provisions to include audit information
- enabling a decision by the Greenhouse Data Officer (GEDO) not to
register an auditor under the Act to be reviewed by the AAT
- expanding the scope of guidelines that may be determined by
legislative instrument (pursuant to section 75 of the Act) to include
requirements for the preparation, conduct and reporting of audits, and for
these determinations to be made by the Minister rather than the GEDO
- requiring potential auditors to register with GEDO and providing
for detailed conditions on auditor registration to be made by way of
regulations and a legislative instrument to be determined by the GEDO; and
- removing the obligation for the GEDO to publish
corporate level energy production information, due to difficulties in providing
meaningful corporate level ‘totals’.
The
Act, passed in September 2007, established a national mandatory corporate
reporting system for, and dissemination of information related to, greenhouse gas
emissions, energy use and production. The reporting obligations under section
24 of the Act provide useful public information and serve as an important guide
for government policy; also laying the foundation for the proposed national
Carbon Pollution Reduction Scheme.[1] The first reporting year under
the Act commenced on 1 July 2008. By August 2008 many of the largest corporate
groups in Australia began compiling data to comply with the Act, which made
emissions registration and reporting mandatory for controlling corporations whose
corporate groups produce energy or consume energy at or above specified
quantities over a financial year (1 July to 30 June). Corporations may also
voluntarily register if they are undertaking a greenhouse gas emissions
reduction project.
According
to the Department of Climate Change’s website: [2]
By the 2010-11 reporting period the legislation is expected
to cover around 700 medium and large corporations.
The reporting system will improve data coverage to over 70%
of greenhouse gas emissions in the covered sectors.
Lower thresholds for corporate groups will be phased in by
2010-11. The final thresholds will be 50 kilotonnes of greenhouse gases (CO2 equivalent) or 200 terajoules of energy.[3]
It
is expected that a significant number of companies required to report in the third
phase (2010-2011) may lack the requisite reporting experience and make costly
errors in their calculations and thus reporting.
The
system is backed up by a variety of tough pecuniary penalties for a failure to
register and report, and there is also the potential for personal liability for
CEOs under certain circumstances. The penalties highlight the significance of
diligent bona fide reporting for the purposes of effective policy planning.
Ensuring
the highest integrity of the data produced under this system will better enable
analysts and the market to meaningfully assess the impact of companies'
emissions profiles on their valuations following the introduction of the Government’s
proposed Carbon Pollution Reduction Scheme.
In
October 2008 the Department of Climate Change released The National
Greenhouse and Energy Reporting Act and Carbon Pollution Reduction Scheme External
Audit Consultation Paper[4] to the public for comment. The paper proposed options for the development of
external auditor regulations and an external audit guidelines legislative
instrument under the NGER Act. Organisations and individuals were invited to
provide feedback on the approaches suggested by the paper by 14 November 2008.
Also, External Audit Workshops were held on the consultation paper in a number
of capital cities during October 2008. Just under 300 people attended the
workshops and 58 written submissions were received on the consultation paper.[5] The outcomes of the consultation were used to inform a number of amendments to
the NGER Act, required to strengthen the audit framework to provide for more robust
reporting under both the NGER Act. This will assist with meeting Australia’s
international obligations and is a key component of the Government’s proposed Carbon
Pollution Reduction Scheme.
In February 2009, the
Department of Climate Change released an exposure draft of the Bill for public
consultation for a one week period commencing 23 February 2009. 22 formal
submissions were received, focusing mainly on the technical details of the Bill
and were reportedly supportive of the proposed amendments.[6] Following this, the Department stated that it:
is in the process of developing draft regulations and a
legislative instrument to outline the detail of the audit framework to be
developed under the NGER Act. Further public consultation on this subordinate
legislation is planned for May/June 2009 for a four week period.[7]
On 19 March 2009 the Bill was referred to the Senate
Finance and Public Administration Committee for inquiry. The Committee reported
on 7 May 2009. Details of the inquiry are at
http://www.aph.gov.au/Senate/committee/fapa_ctte/national_greenhouse_energy_reporting/index.htm
The
final conclusion of the committee:
[…]
notes that much of the detail of the legislation will depend on the development
of regulations and legislative instruments referenced in the amendments. The
committee encourages the department to ensure that adequate consultation
continues in the formulation of these regulations and legislative instruments.[8]
The Explanatory Memorandum
states that the Bill will have no financial impact.
Items 1-3 and 5-6 propose the following
definitions be inserted into section 7 of the Act:
audit information: means
‘information obtained by or on behalf of an audit team leader in
the course of carrying out a greenhouse and energy audit’. This
clarifies the information that will enjoy protection by the secrecy provisions
provided for in the proposed amendment to section 23 of the Act.
audit team leader: ‘means
a registered greenhouse and energy auditor appointed to carry out a greenhouse
and energy audit’. They will be
responsible for the overall
conduct of the audit. Their tasks typically include: providing briefing about
the scope, details of the audit, and signing-off on the audits conducted
pursuant to the Act.
audit team member: ‘a
person assisting the audit team leader to carry out the audit’. Reference
to an ‘audit team’ member is designed to provide
for flexibility to be used in selecting persons with cross-disciplinary expertise to be valuably and appropriately used
in confidently conducting a successful meaningful audit.
greenhouse and energy audit: ‘means
an audit under any of sections 73 to 74A’ of the Act. The Explanatory
Memorandum points out that the term ‘auditor’ is used as a generic indicator of the activity to be performed
and does not have the same meaning as ‘auditor’ under the Corporations Act 2001.[9]
registered greenhouse and energy auditor: ‘an individual registered in
the register of greenhouse and energy auditors kept under section 75A’.
Publication of results of greenhouse and energy audits
Item 7 amends paragraph 16(4)(b) so that the
results of a greenhouse and energy audit carried out in relation to a
corporation must be made public by the GEDO. The significance of this lies in
its contribution to transparency, accountability and reliability of data.
Currently, the regulator does not have the power to make audit results publicly
available. However, what (level) of information may be made available will be
dealt with by regulations which will be tailored to take account of issues such
as commercially sensitive information.
Guarding against breaches of commercial confidence
Item 8 amends paragraph 23(1)(a) so as to deal
with potential commercial breaches by making it an offence to release ‘audit
information’, other than for the purpose of the Act or other Commonwealth,
state and territory laws.
Furthermore, under proposed paragraph 23(2)(d) audit
team members will be required to keep greenhouse and energy information and
audit information obtained under the Act confidential (item 10).
AAT review of refusal to register auditor
Item 15 enhances transparency and accountability by
enabling the Administrative Appeals Tribunal (AAT) to review decisions by the
regulator not to register an individual as an auditor in the register of
greenhouse and energy auditors (proposed paragraph 56(j)).
Appointment of Auditors
Item 17 enables the GEDO to provide a list of
possible auditors (rather than only specifying a particular auditor) in a
written notice requiring that a corporation undertake an audit (proposed
paragraph 73(2)(a)).
Audit Specification
Item 21 imposes an obligation by the GEDO to specify
the type of audit that is to be undertaken, as well as an existing obligation
such as stating the matters to be covered by the audit in any notice provided
by the GEDO (proposed paragraph 73(3)(a)).
Auditor Assistance and Facilities
Item 22 – the proposed amendment to paragraph
73(4) is designed to make it clear that a corporation is to provide ‘all
reasonable facilities and assistance necessary for the effective exercise’ of
duties of the auditor to all members of the audit team [emphasis added].
The amendment however, is silent as to what may be included under the rubric of
‘reasonable facilities and assistance’. While this phrase is commonly used in
other pieces of Commonwealth legislation without elaboration, it may be useful
to provide some guidance in this context for practical purposes.
Power to audit information under section 20[10]
Item 24 ensure that entities providing information to
the GEDO pursuant to section 20 of the Act are also subject to audit provisions (proposed section 74A). Item 34 mirrors this amendment.
Legislative instruments and audit requirements
Item 35 expands the scope of guidelines that may be
determined by legislative instrument to include requirements for the
preparation, conduct and reporting of audits and making these subject to
ministerial rather than the GEDO determination (proposed section 75).
The instrument provides opportunity for flexibility in tailoring for different
audit requirements.
Item 36 provides that a Minister may determine by
legislative instrument, requirements to be met by audit team leaders in
preparing for and carrying out greenhouse and energy audits and in preparing
audit reports. The Ministerial determination may set out different requirements
for different types of audits (proposed section 75).
Auditor registration
Item 37 creates a requirement that auditors register
with GEDO and provides detail of the registration requirements (proposed
section 75A). Requirements for registration are that an individual:
- has applied for registration in accordance with regulations;
- meets such requirements as to qualifications, knowledge,
expertise, competence, independence, and
- other matters as are set out in the regulations or in a
legislative instrument made under the regulations.
It is unclear as to whether the requirement of auditor
independence (sufficiently) covers the issue of conflict of interest, and if
not, then whether this needs to be included in the legislation or may be dealt
with by way of legislative instrument.
Publication of corporate total levels of production
Item 37 proposes that paragraph 24(1)(c) of
the Act be repealed, thus removing the obligation of the GEDO to publish
corporate level totals of energy production because of the difficulties in providing
meaningful corporate level ‘totals’. This is significant because as the
government’s consultation paper explains:
the current use of the term ‘totals’ in section 24(1) of the
Act means all energy produced or manufactured in a corporation’s group will be
aggregated for public disclosure by the GEDO. This could result in an
overestimation (or ‘double counting’) of energy produced.[11]
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2404.
Juli Tomaras
19 June 2009
Bills Digest Service
Parliamentary Library
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