BILLS DIGEST NO. 30, 2017–18              7 September 2017

Product Emissions Standards Bill 2017 [and] Product Emissions Standards (Excise) Charges Bill 2017 [and] Product Emissions Standards (Customs) Charges Bill 2017 [and] Product Emissions Standards (Consequential Provisions) Bill 2017

Bill McCormick
Science, Technology, Environment and Resources Section

Date introduced:  10 August 2017

House:  House of Representatives

Portfolio:  Environment and Energy

Commencement: In the case of the Product Emissions Standards Bill 2017: the day after the Act receives the Royal Assent.

The other Bills commence at the same time as the Product Emissions Standards Act 2017 but the provisions do not commence at all if that Act does not commence.

Links: The links to the Bills, their Explanatory Memoranda and second reading speeches can be found on the homepages for the Product Emissions Standards Bill 2017, Product Emissions Standards (Customs) Charges Bill 2017, Product Emissions Standards (Excise) Charges Bill 2017 and Product Emissions Standards (Consequential Provisions) Bill 2017, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at September 2017.

The Bills Digest at a glance

The Bills would create a regime to regulate emissions to protect air quality. They propose that an ‘emissions-controlled product’ can be certified where it meets an emissions standard. The importation or supply of a non-certified product will be an offence with such products being forfeited to the Commonwealth, although persons or products may be exempted from the operation of the Act.

The Bills impose charges for import or manufacture of emissions-controlled products and rule making and delegation powers for the Minister.

The Bills constitute part of the Commonwealth Government’s actions under the National Clean Air Agreement. Although not specified in the Bill, the Government has indicated that the first area to be regulated is likely to be ‘non-road spark ignition engines and equipment’ (NRSIEE) such as lawn mowers, garden trimmers and outboard motors, which are a major source of air pollution.

The proposed legislation stems from a substantial background of consultation and discussion with states, territories, and business and conservation groups. It does not appear controversial.

Three key issues appear to arise in relation to the Bills.

First is the extent to which the Bills only create a framework for the regulatory regime, leaving almost all detail to be set out in the Rules. These matters include:

•       what constitute emissions-controlled products

•       the relevant emissions standards

•       business reporting requirements

•       the quantum of charges for import or excises for manufacture of emissions-controlled products and

•       the scope of any rights of review over decisions taken under the legislation.

Second, the Bills propose a number of strict liability offences.

Both the first and second issues attracted critical comments from the Senate Scrutiny of Bills Committee.

Third, the effectiveness of the regime will depend on the capacity of Australian government agencies to actively conduct the scrutiny, inspections, investigations and enforcement activities provided for under the Bills. The legislative materials do not discuss which agencies will be responsible for enforcement and what resources they will be allocated. Although the Bills provide for cost recovery for the administration of the regulatory regime, the funds collected are not required to be allocated to the administering agency.

Purpose of the Bills

The purpose of the Product Emissions Standards Bill 2017, Product Emissions Standards (Excise) Charges Bill 2017, Product Emissions Standards (Customs) Charges Bill 2017 and the Product Emissions Standards (Consequential Provisions) Bill 2017 (the Bills) is to create a regulatory regime to regulate emissions from products by providing that an ‘emissions-controlled product’ can be certified where it meets an emissions standard. The importation or supply of a non-certified product by a person will be an offence with such products being forfeited to the Commonwealth, though persons or products may be exempted from the operation of the Act.

Structure of the Bills

The Product Emissions Standards Bill 2017 sets out core elements of the proposed regulatory regime:

•       Part 2 establishes a system for prescribing emissions-controlled products, with provisions for certification and exemptions

•       Part 3 establishes an enforcement regime governing the import, supply and marking of emissions-controlled products

•       Part 4 sets out record keeping requirements for importers and suppliers of emissions-controlled products

•       Part 5 deals with regulatory powers, including application of the Regulatory Powers (Standard Provisions) Act 2014 in relation to monitoring and investigation powers, and enforcement provisions relating to civil penalties, infringement notices, enforceable undertakings and injunctions

•       Part 6 establishes the forfeiture regime following contraventions of the import, supply or marking rules, and includes seizure, return and compensation provisions

•       Part 7 deals with the appointment of inspectors, publication and disclosure of information, conduct of compliance audits, delegation of powers, the periodic review of the operation of the Act, and authorises the Minister to make rules.

The Product Emissions Standards (Customs) Charges Bill 2017 and Product Emissions Standards (Excise) Charges Bill 2017 create charges on (respectively) the importation or domestic manufacture of products prescribed under the Product Emissions Standards Bill 2017.

The Product Emissions Standards (Consequential Provisions) Bill 2017 proposes amendments to the Customs Act 1901 so that forfeiture of relevant imported or exported goods to the Crown is dealt with by the process set out in Part 6 of the Bill rather than by the automatic forfeiture provision in the Customs Act.

Importantly, the Bills propose to create a general legislative framework, leaving the detail of what products are regulated, the standards and marking regime, and the applicable charges and excise to be dealt with by legislative instrument.

Background

Emissions from non-road spark ignition engines and equipment (NRSIEE) such as lawn mowers, garden trimmers and outboard motors contribute to about 10 per cent of smog in Australian cities.[1]

NRSIEE emit various air pollutants including particulate matter (PM), hydrocarbons (HC) and oxides of Nitrogen (NOx). Increased population exposure to air pollutants increases the risk of adverse health effects. Significant health costs are associated with inhalational exposure to fine PM by the general population, including costs of hospital admission and lost work productivity. There is also no known threshold for PM exposure below which health effects do not occur, meaning any exposure can be harmful.[2]

The Minister for the Environment and Energy, Josh Frydenberg, said that a ‘two-stroke leaf blower can produce the same amount of nitrogen oxides as one car and the same amount of hydrocarbons as 150 cars’.[3] However, unlike other countries such as the US, those in the EU, China, Japan and Canada, Australia has not yet adopted NRSIEE emission standards in order to minimise these emissions.[4] It has been estimated that if such regulations were placed on outboard motors that this would reduce hydrocarbon emissions by 30,000 tonnes annually.[5]

The two main sources of NRSIEE emissions are from marine engines and outdoor powered equipment. Approximately 40,000 marine engines and one million units of outdoor powered equipment are imported annually. Australian manufacturing is limited to incorporating engines manufactured overseas into products made in Australia.

Emissions from NRSIEE contribute to air pollution in Australia, especially on summer weekends in urban centres when their use is high. NRSIEE are high polluters relative to their size and usage. For example, one hour of operation of a brushcutter produces around the same emissions of air pollutants as ten cars operated over the same period.[6]

The options for reducing emissions from new NRSIEE were first canvased in September 2010 when the then Environment Protection and Heritage Council (EPHC) released a Consultation Regulation Impact Statement (RIS) that examined whether there was a case for government action.

In 2012 and 2013 the Senate Standing Committee on Community Affairs carried out an inquiry into the impacts on health of air quality in Australia and tabled its report in 2013. The Committee recommended that the Commonwealth should implement a national emissions standard for small non-road engines that are equivalent to US Environmental Protection Agency (EPA) standards.[7]

The April 2014 meeting of Environment Ministers requested finalisation of a Decision RIS on potential emission control options for NRSIEE.[8] The 2015 Decision RIS updated analysis to take into account submissions relating to the Consultation RIS and consultations undertaken since 2012. A cost-benefit analysis was carried out, for the period 2016–2035, of the policy options that included voluntary action by industry, co-regulation or regulation.[9] Table 6.3 in the RIS estimates the cost-benefit outcome for the regulation of NRSIEE over 2016–2035 to be $636 million with the avoidance of over $1.7 billion in health costs and reduction of $786 million in fuel costs.[10]

Table 1: regulation option: cost-benefit outcome

Source: Reducing Emissions from Non-road Spark Ignition Engines and Equipment, Regulation Impact Statement, September 2015.

At their December 2015 meeting, Environment Ministers endorsed a National Clean Air Agreement and agreed to introduce emission standards for NRSIEE that will bring Australia into line with existing international standards:

Ministers also noted that a working group of experts is on track to provide interim advice this year on implementing the standards, with the aim of introducing legislation into Federal Parliament in mid-2016.[11]

The forward of the National Clean Air Agreement stated that ‘the potential for a national approach to manage non-road diesel and marine engine emissions will be evaluated under the Agreement’s priority setting process’.[12]

The details of the NRSIEE emission control framework are included on the NRSIEE webpage and the emission standards are based on the United States’ EPA and equivalent international standards and will apply to:

•        spark ignition engines rated at 19 kilowatts and below used in household and commercial operations, including: lawn mowers, ride-on mowers, mulchers, brush/line cutters, generators (includes onboard marine), pumps, chain saws, and other small handheld or pushed/pulled equipment

•       spark ignition engines used in marine vessels including: outboard engines, personal watercraft and stern-drive/inboard engines.[13]

Stationary engines, road vehicles subject to other regulations, and diesel powered engines will not be regulated under this scheme.[14]

The webpage states that the scheme will be phased in and apply to all new NRSIEE imported into Australia from 1 July 2018 and to all new NRSIEE supplied to the Australian market from 1 July 2019.[15]

Emissions standards associated administrative arrangements and proposed cost recovery fees and levies that will be applied to the scheme have yet to be developed. A draft Cost Recovery Implementation Statement will be released explaining the proposed fees for the costs of ‘the Department in administering the new emissions standards and the levy that will apply for imported products, including how these will be administered and collected’.[16] Draft rules will also be released for public consultation of the proposed NRSIEE emissions standards and administrative arrangements.[17]

The emissions standards will apply to exhaust and evaporative emissions from newly imported or manufactured NRSIEE.[18] The proposed emissions standards may vary depending on the type of NRSIEE.[19] According to a 2016 fact sheet:

The proposed standards are performance rather than technology-based. In general, four-stroke and direct-injection two-stroke engines will meet the standards, as will a range of low-emitting two-stroke handheld equipment (e.g. some chainsaws and brush cutters). Conventional two-stroke outboards and non-handheld equipment such as mowers would not meet the new standards.[20]

The emissions standards ‘are expected to significantly reduce the availability of two stroke motors for NRSIEE and increase the price of other NRSIEE’.[21]

It has been reported that the scheme's scope may be broadened in future years to include diesel-operated mining and farm equipment, as well as forklifts.[22] The Explanatory Memorandum states:

Consistent with the National Clean Air Agreement it is anticipated that the first emissions-controlled products to be prescribed under the framework will be NRSIEE products.[23]

It has been argued that since the Bill doesn't restrict the definition of emissions to local air pollutants, it could also be used to help meet greenhouse gas abatement goals.[24]

Committee consideration

Senate Standing Committee for the Selection of Bills

The Senate Standing Committee for Selection of Bills decided that the Bills should not be referred to committee for inquiry.[25]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills made comments on significant matters in delegated legislation in the Product Emissions Standards Bill 2017, the Product Emission Standards (Customs) Charges Bill and the Product Emissions Standards (Excise) Charges Bill.[26] The Committee also commented on the reversal of evidential burden of proof in the Product Emissions Standards Bill 2017.

Product Emissions Standards Bill

The Committee commented that the Bill leaves the definition of an emissions-controlled product and the certification of such products, to delegated legislation. In the Committee’s view ‘significant matters should be included in primary legislation unless a sound justification for the use of delegated legislation is provided’, but that in this Bill ‘matters to be set out in the rules are central to the emissions standards framework being established’.[27] The Committee also noted that rules are used rather than regulations which are subject to a higher level of executive scrutiny than rules.[28] It also raised the issue that there are no specific consultation obligations prior to making the rules other than with the Information Commissioner in relation to information privacy matters.[29]

The Committee considered that the core elements of the new emissions standards framework should be included in the primary legislation and requested the Minister’s advice as to why the main elements of the framework need to be included in delegated legislation.

The committee's view is that significant matters, such as the core elements of the new emissions standards framework, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this regard, the committee requests the Minister’s detailed advice as to:

•        why it is considered necessary and appropriate to leave most of the elements of this new scheme to delegated legislation;

•        if significant matters are to be included in delegated legislation, why it is appropriate to include these in rules rather than regulations;

•        why the Bill only provides that the rules 'may' provide for the review of decisions under the Act, rather than the Bill stating that decisions made regarding the certification of an emissions-controlled product, the granting of exemptions relating to those products, and the imposition of fees for service will be subject to merits review; and

•       the type of consultation that it is envisaged will be conducted prior to the making of the rules and whether specific consultation obligations (beyond those in section 17 of the Legislation Act 2003) can be included in the legislation (with compliance with such obligations a condition of the validity of the legislative instrument).[30]

The Committee further noted that while the Explanatory Memorandum anticipates that the first emission-controlled products will be NRSIEE, the Bill does not state this, or how they will be certified or exempted, and what decisions under the certification process will be subject to merits review.[31]

Subclause 33 of the Bill provides that interfering with a seized product is an offence, which carries a maximum penalty of six months imprisonment. Subclause 33(2) provides that the offence does not apply if the person who interferes with the seized product is acting in accordance with a direction given to the person by the Minister. The person will bear the evidential burden of establishing that their actions were authorised by a Ministerial direction. This means that the person will need to adduce or point to evidence that suggests a reasonable possibility that they were acting in accordance with the Minister’s direction.[32] The prosecution would then be required to discharge its legal burden to negate the existence of the defence beyond reasonable doubt.[33]

The Committee raised concerns about the reversal of the evidential burden of proof in subclause 33(2) and advised that it expected the reversal of proof to be justified.[34] The Explanatory Memorandum says that the person’s conduct in accordance with a Ministerial direction would be known by the defendant who would not have difficulty in providing the evidence.[35] The Committee disagreed with this argument and stated:

It would appear that whether the Minister has issued a direction for a person to engage in specified conduct would be a matter that the Minister (and therefore the prosecution) would be particularly apprised of. The committee considers that this matter appears to be one that would be more appropriate to be included as an element of the offence, rather than as a defence.[36]

Therefore:

The committee requests the Minister's detailed justification as to the appropriateness of including the specified matter as an offence-specific defence. The committee suggests that it may be appropriate if clause 33(1) were amended to add an additional paragraph providing that a person will commit the offence if the Minister has not given a direction to the person to engage in that conduct (and the defence at subclause 33(2) were removed). The committee also requests the Minister's advice in relation to this matter.[37]

At the time of writing, the Minister had not provided advice to the Committee.

Product Emission Standards (Customs) Charges Bill and Product Emissions Standards (Excise) Charges Bill

The amount of the charge on the importation and manufacture of emissions-controlled products is to be prescribed in regulations or worked out in accordance with a method prescribed in regulations.[38] The Scrutiny Committee raised issues about the determination of the charge by regulation and not primary legislation.

One of the most fundamental functions of the Parliament is to impose taxation (including duties of customs and excise). The committee's consistent scrutiny view is that it is for the Parliament, rather than makers of delegated legislation, to set a rate of tax. The committee notes the statement in the explanatory memorandum that it is intended that the charges are to be imposed for the purposes of cost recovery. However, no guidance is provided on the face of the Bills limiting the imposition of the charges in this way (for example, there is no provision limiting the charges to 'the estimated cost of regulating the type of emissions-controlled product'), nor are maximum charges specified.[39]

The Committee went on say:

The committee therefore requests the Minister's advice as to whether at least some level of guidance (for example, limiting the charges to 'the estimated cost of regulating the type of emissions-controlled product') or a maximum level of charge can be specifically included in each Bill.

If no guidance is to be included on the face of the Bill, the committee considers that it may be appropriate for the Bill to be amended to increase parliamentary oversight by:

•        requiring the positive approval of each House of the Parliament before new regulations under clause 6 come into effect; or

•        providing that the regulations do not come into effect until the relevant disallowance period has expired (while retaining the usual procedures in subsection 42(2) of the Legislation Act 2003 so that any regulations are taken to be disallowed if a disallowance motion remains unresolved at the end of the disallowance period).

The committee also requests the Minister's response in relation to this matter.[40]

Policy position of non-government parties/independents

While there do not appear to be any specific articulated policies of non-government parties or independents on this issue, the senators participating in the inquiry into the Impacts on health of air quality in Australia included those from the Liberal Party, National Party, ALP and the Australian Greens. As discussed above, that inquiry recommended that the Commonwealth should implement a national emissions standard for small non-road engines that are equivalent to US EPA standards.[41]

Position of major interest groups

The Blue Sky Alliance states that it is working with government to make the emissions standards for non-road engines ‘happen in a smooth and sensible way’.[42] This body was founded by the Outdoor Power Equipment Association (OPEA) and the Australian Marine Engine Council (AMEC) who represent the manufacturers of outdoor equipment including lawn mowers, chainsaws and generators and marine engines, outboard motors and personal watercraft. The two founding bodies sell over one million engines per year.[43] President of the OPEA, Tim McCarthy reportedly stated:

The OPEA has been working closely for many years with Blue Sky Alliance and AMEC to bring a resolution regarding compliant off road engines for the long-term benefit of all Australians. We very much welcome and support the Bill that has now been tabled and look forward to a favourable outcome on emissions standards.[44]

More generally, the Working towards a National Clean Air Agreement: Discussion paper, released in 2015, received over three hundred submissions from various stakeholder groups.[45] The Department of the Environment and Energy prepared a summary of the submissions.[46]

Financial implications

The Decision Regulation Impact Statement (RIS) for reducing emissions from non-road spark ignition engines and equipment (NRSIEE) estimated a substantial net benefit of setting of NRSIEE emission standards through Commonwealth regulation of $636 million over the period 2016 to 2035.[47] This was due primarily to the benefits to the community through the reduction in emissions and resulting avoidance of health costs of an estimated $1.72 billion.[48] Total cost to business for this period was estimated to be $5 million and the cost to government for the same period was estimated to be $9 million.[49]

At present there is no clear indication of the financial implications of the Bills. The Explanatory Memorandum states:

The cost of implementation will depend on the type of emissions-controlled products that are prescribed in rules for the purposes of the Bill. The cost of regulating different types of emissions-controlled products will be considered on a case-by-case basis as part of the regulatory impact analysis process, the requirements of which will need to be met prior to the products being prescribed in rules made under the Bill. Costs associated with regulating emissions-controlled products will be offset by revenue from cost recovery activities where this is consistent with the Australian Government Charging Framework.[50] This would be through a charge on the import and domestic manufacture of emissions-controlled products and fees for services provided in the performance of functions under the Bill. Consistent with Australian Government policy, the amount of any applicable charge for different types of emissions-controlled products, or fees for services provided under the Bill, will be determined on a case-by-case basis through a Cost Recovery Implementation Statement.[51]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[52]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bills do not raise human rights concerns.[53]

Key issues and provisions

Product Emissions Standards Bill 2017

Emissions reduction measures

The 2015 National Clean Air Agreement implements the decision of Australia’s Environment Ministers to establish emission standards for NRSIEE that are targeted towards reducing air pollution and improving health outcomes.[54] The Product Emissions Standards Bill 2017 is the main Bill that will establish a national framework for the regulation of emissions-controlled products to ensure they meet national emissions standards.

The Bill will facilitate this by:

(a)              enabling the Minister to prescribe products as emissions-controlled products and make rules relating to those products;

(b)               providing mechanisms in the rules for emissions-controlled products to be certified to specified emissions standards;

(c)               providing a mechanism for the rules to exempt persons or products from the operation of one or more provisions of the Bill;

(d)               establishing offences and civil penalty provisions relating to the import of an emissions-controlled product to Australia, or supply of that product within Australia, if the product is not certified or marked in accordance with the rules for that product;

(e)               triggering the compliance and enforcement provisions of the Regulatory Powers (Standard Provisions) Act 2014 and providing for additional compliance and enforcement powers to support the objectives of the Bill;

(f)               enabling the sharing of information obtained under the Bill with other agencies and the publication of certain information relating to an emissions-controlled product;

(g)               enabling the delegation of the Minister’s and the Secretary’s functions and powers under the Bill, or the Regulatory Powers Act (as the case may be); and

(h)               requiring a review of the operation of the Bill at regular intervals.

The Excise Charges Bill and the Customs Charges Bill complement the Bill by establishing a mechanism for imposing a charge on the import or domestic manufacture of emissions-controlled products to recover the costs of implementing the product emissions standards framework where appropriate.

The Consequential Provisions Bill makes a consequential amendment to the Customs Act clarifying that emissions-controlled products imported or exported in contravention of the Bill are not forfeited to the Crown under section 229 of that Act.[55]

As noted previously, one issue with the Bill is the extent to which significant aspects of the scheme are not included in the Bill. Instead, the Bill provides an overarching framework, while details of how the scheme will operate are left to rules made by the Minister under proposed clause 51 of the Bill.

Preliminary Provisions

Clause 3 outlines the objects of the Bill that include the regulation of emissions from certain products by setting emissions standards.

Clause 7 includes definitions used in the Bill. Three important matters: ‘certified for the purposes of this Act’, ‘emissions-controlled product’ and ‘emissions standards’ are not clearly defined in this section but are to be prescribed in rules made by the Minister under clause 51. These are fundamental to the legislation and the Senate Standing Committee for the Scrutiny of Bills considered that significant matters should be included in primary legislation unless a sound justification for the use of delegated legislation is provided.[56]

The Explanatory Memorandum explains in relation to ‘certified for the purposes of this Act’:

As the Bill provides a framework to prescribe different types of emissions-controlled products over time, this definition provides the necessary flexibility to prescribe different certification methods for different types of emissions-controlled products. Ultimately the method of certification that is prescribed in the rules will depend on the type of product and the domestic and/or international requirements that may exist in relation to the product.[57]

The term ‘regulatory authority’ is defined to include ‘a regulatory authority of, or located in, a foreign country’. This will permit recognition of a product that has been certified by a body such as the United States’ EPA as being compliant with a relevant US emission standard.

Emissions-controlled product

Part 2 allows rules to be made that prescribe a product as an emission-controlled product and provide that such a product can be certified where it meets an emissions standard. Put differently, this enables rules to list products that are controlled and a process to certify those products if they meet the relevant standard.

Clause 9 states that the ‘rules may prescribe a product as an emissions-controlled product’. Prescribing the product as an ‘emissions-controlled product’ means that it cannot be imported or supplied unless it is certified (unless covered by an exemption) and triggers the operation of offence and civil penalty provisions of Part 3 of the Bill.[58] The Explanatory Memorandum provides the following reasons for prescription in rules and it states that it is anticipated that NRSIEE will be the first of different types of emissions-controlled products prescribed by rules:

Emissions-controlled products could be prescribed to refer to individually listed products or classes of products, and could include a specific engine as well as the equipment which contain these engines. For example, consistent with the National Clean Air Agreement, it is anticipated that the first emissions-controlled products to be prescribed will be NRSIEE. It is possible that the rules made for NRSIEE will prescribe two broad categories of NRSIEE: new small non-road spark ignition engines (up to 19 kilowatts in power) and new marine spark ignition propulsion engines.[59]

Clause 10 deals with certification of emissions-controlled products that provides a level of assurance that such products will meet relevant emissions standards in practice.[60]

Subclause 10(1) states that rules may provide for an emissions-controlled product to be certified for the purposes of the proposed Act. The Explanatory Memorandum says that this will provide flexibility to accommodate different products, standards and certification processes, to facilitate the potential regulation of different types of emissions-controlled products over time.[61]

Subclause 10(2) requires that the emissions-controlled product certification rules must not enable a product to be certified unless one of two criteria is met. Either: the Secretary of the Environment Department must be satisfied that it complies the emissions standards set out in the rules for that product or; the product is certified by a regulatory authority specified in the rules as meeting an emissions standards specified in the rules for that product.

The first is where the product is certified through an Australian certification process and the second is where the product is certified as meeting international standards that also meet Australian standards.

The Explanatory Memorandum provides the following reasons for this.

… it is anticipated that NRSIEE will be the first emissions-controlled products prescribed under this framework. The manufacturers and suppliers of NRSIEE operate in an international market and, currently, all NRSIEE engines supplied to the Australian market are imported from a range of countries (predominantly China, Japan and the USA). There is currently no Australian manufacture of engines for NRSIEE, although some Australian companies import engines and then install them in their locally manufactured equipment. Consistent with good regulatory practice, the rules may accept products certified as meeting international emissions standards where they provide the level of emission control desired in Australia. Adoption of suitable international standards also reduces the regulatory burden on Australian companies importing emissions-controlled products into the Australian market.

Not all NRSIEE, however, are certified overseas in a comparable market. To enable manufacturers to demonstrate that their emissions-controlled products can meet requirements equivalent to that set by the international standards, the rules may also set out an Australian certification process (for both domestic and internationally manufactured products).[62]

Subclauses 10(3) and 10(4) enable the rules to include other certification requirements, such as:

•       applications for certification

•       processes and criteria for certification, including testing

•       processes for suspending or revoking certification and

•       the use of marks to indicate certification.

Clause 11 allows the rules to provide for the exemption of a specified emissions-controlled product from one or more provisions (paragraph 11(1)(a)) and for the exemption of a specified emissions-controlled product or person from one or more provisions of the proposed Act in circumstances set out in the rules (paragraph 11(1)(b)).

The Explanatory Memorandum states that the first type of exemption could be used to delay the commencement of offence and civil penalty provisions of the Bill to permit market-adjustment to the new rules for NRSIEE:

For example, it is anticipated that the import and supply prohibitions relating to NRSIEE emissions-controlled products, once prescribed, would not commence until 1 July 2018 and 1 July 2019, respectively.[63]

The second exemption allows for certain circumstances where there are no existing compliant products available for important uses:

For example, the emissions-controlled product is associated with specialised emergency or rescue activities, national security operations, testing or research purposes and the available products are not able to meet the emissions standard required for certification. The rules could provide for an exemption to allow these emissions-controlled products to be imported or supplied. In this way, being able to specify these exemptions ensures that the scheme operates efficiently and unintended market impacts are reduced.[64]

Subclauses 11(3) and 11(4) permit the rules to provide processes to obtain, vary, suspend and revoke exemptions and for the Secretary to make decisions in relation to exemptions.

Enforcing product emissions standards

Part 3 makes it an offence to import or supply uncertified emission-controlled products, mark uncertified products or incorrectly mark emissions-controlled products. The maximum penalties for each of these offences are 60 penalty units ($12,600) for a strict liability offence and 120 penalty units ($25,200) for a civil penalty.[65] These offences are not punishable by imprisonment.[66] The maximum penalty for strict liability offences by a body corporate is 300 penalty units ($63,000) and 600 penalty units ($126,000) for a civil penalty provision.[67]

Clause 13 prohibits the importation of an emissions-controlled product that is not certified.

Clause 14 prohibits the importation of a certified emissions-controlled product that is not marked as required by the rules.

Clauses 15 prohibits the supply of an emissions-controlled product that is not certified.

Clause 16 prohibits the supply of a certified emissions-controlled product that is not marked as required by the rules. ‘Supply’ is defined broadly in clause 7 as meaning ‘supply in the course of trading or commercial activities’ and includes offering to supply by displaying or advertising, as well as supplying by way of exchange, gift, loan or hire.

Clause 17 prohibits the application of a mark to an emissions-controlled product that is not certified or the certification of which has been suspended.

Clause 18 prohibits the application of a mark to an emissions-controlled product where that mark is not in accordance with the requirements of the rules.

Each of these provisions creates both a strict liability offence and a civil penalty provision. Strict liability offences are those where fault elements (intention, knowledge, recklessness or negligence) are not required. However, mistake of fact is a defence.[68] The civil penalty provisions in the Bill will be enforceable under the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory Powers Act). The implications of this are explored in the discussion of Part 5 of the Bill, below.

Record keeping

Part 4 requires importers and suppliers of emissions-controlled products to keep records and make them available to the Secretary of the Department.

Clause 20 states that where the rules require persons who import or supply emissions-controlled products to keep particular records and the person contravenes this requirement, it is a strict liability offence with a maximum penalty of 40 penalty units ($8,400) for an individual and 200 penalty units ($42,000) for a corporation; or a civil penalty of 80 penalty units ($16,800) for an individual and 400 penalty units ($84,000) for a corporation.[69]

Clause 21 permits the Secretary of the Department to write to a person requiring them to provide information that is required to be kept by the rules, where there is a reasonable suspicion that a provision of the Bill has been, or is being, contravened and the requested information is relevant to the contravention. Failure to provide this information is a strict liability offence with a penalty of 40 penalty units or a civil penalty of 80 penalty units for an individual.

Clause 22 states that where the rules prescribe a reporting period for an emissions-controlled product manufactured in Australia, the manufacturer is in contravention if the report is not supplied to the Secretary within 60 days after the end of reporting period. The maximum penalty for an individual is 60 penalty units for a strict liability offence and 120 penalty units for a civil penalty.

Regulatory powers

Part 5 provides for additional compliance and enforcement powers for the enforcement of the emissions standards framework through application of relevant provisions of the Regulatory Powers (Standard Provisions) Act 2014 (the Regulatory Powers Act). Authorised inspectors are granted monitoring, investigation and enforcement powers so as to be able to enforce the obligations created under the Bill. Monitoring powers are provided under Part 2 of the Regulatory Powers Act while investigation powers are provided under Part 3 of that Act. Enforcement, including civil penalties, infringement notices, enforceable undertakings and injunctions are provided under Parts 4 to 7 of the Regulatory Powers Act.

A number of consequences flow from the application of the Regulatory Powers Act, including as discussed above, maximum penalties for corporations that contravene a civil penalty provision being five times the pecuniary penalty specified in the relevant provision.[70] The Regulatory Powers Act also sets out how the criminal and civil penalties in the Bill interact, by providing:

•       a court cannot make a civil penalty order against a person who has been convicted of an offence constituted by the same conduct[71]

•       proceedings for a civil penalty order are stayed if criminal proceedings are commenced against the person for an offence constituted by the same conduct. The civil proceedings may be resumed if the person is not convicted of the offence[72]

•       criminal proceedings may be commenced against a person regardless of whether a civil penalty order has been made against the person for the same conduct. However, evidence given in the civil proceedings is not admissible in the criminal proceedings.[73]

Forfeiture of emissions-controlled products

Part 6 provides for the forfeiture of an emissions-controlled product when a provision of Part 3 has been proved to have been contravened or when such a product has been seized by an inspector who reasonably suspects that Part 3 has been contravened in relation to the product. In the second instance a court may return the product to its owner or may order relevant compensation.

Clause 31 states that where a person is convicted of an offence or ordered to pay a civil penalty for contravening a provision of Part 3, the emissions-controlled product is forfeited to the Commonwealth.

Clause 32 allows an inspector to seize such a product that has been forfeited. The seizure can occur by attaching a notice to the product specifying its identity, why it has been seized and the reason for the seizure. The inspector must give a copy of such a notice to the owner or the person from whom the product was seized.

Subclause 33(1) makes it an offence for a person to move, alter or interfere with a seized emissions-controlled product that has had a notice, referred to above, attached. The maximum penalty is imprisonment for six months.

Subclause 33(2) states that the offence in subclause 33(1) does not apply if the person acts in accordance with a direction given to the person by the Minister. Importantly, a person seeking to rely on this as a defence needs to provide supporting evidence, as set out in the note to this subsection:

The defendant bears an evidential burden in relation to the matter in subsection (2): see subsection 13.3(3) of the Criminal Code.

This note causes a reversal of evidential burden of proof. As mentioned above, the Senate Standing Committee for the Scrutiny of Bills raised concerns about this matter and questioned the justification provided in the Explanatory Memorandum.[74]

Subclause 33(3) states that a person commits an offence if they do not take reasonable steps to prevent a product that is subject to a notice under subsection 32(3) from being moved, altered or interfered with except in accordance with a direction from the Minister. The maximum penalty for this offence is six months imprisonment.

Clause 34 deals with forfeiture notices where an inspector seizes an emissions-controlled product under Part 3 of the Regulatory Powers Act on the reasonable suspicion of a contravention of Part 3 of the Bill. Under subclause 34(2) the inspector may give a written forfeiture notice to the owner of the product within seven days of seizure of the product. Where the owner cannot be identified, the forfeiture notice can be given to the person from whom the product was seized. According to subclause 34(4), the notice must identify the product and its seizure, specify the reason for seizure and state that the product will be forfeited to the Commonwealth unless a court orders the product to be returned following application under clause 35.

The owner of the product that has been seized or the person from whom it has been seized may, within 60 days of the receipt of the forfeiture notice, apply under subclause 35(2) to the Federal Court of Australia, the Federal Circuit Court of Australia or a court of a state or territory that has jurisdiction to have the product returned. Subclause 35(4) states that court must order the product returned if it is satisfied that no provision of Part 3 is contravened in relation to the product.

Subclauses 35(5) and 35(6) state that the Commonwealth must take reasonable steps to return the product where the court orders its return, except where the product is to be used as evidence in proceedings; returning the product could cause imminent risk of death or serious injury or serious damage to the environment; or the inspector is authorised by a law or court order to retain, destroy or dispose of the product.

Under clause 36, the product for which a forfeiture notice has been given under clause 34 is forfeited to the Commonwealth if no application under clause 35 has been made or the court has decided not to order its return.

Under clause 37, the owner of the forfeited emissions-controlled product may apply to a court for compensation. The court may decide to order the Commonwealth to pay market value compensation for the product to the applicant if it satisfied that the applicant owned the product prior to its forfeiture and either Part 3 of the Regulatory Powers Act (setting out investigation processes) was not complied with in relation to the seizure of the product, or no provision of Part 3 of this Bill was contravened if the product was forfeited under paragraph 36(a).

Clause 39 states that products forfeited under clauses 31 or 36 must be dealt with and disposed of in accordance with the directions of the Minister, but must not be sold.

Miscellaneous

According to clause 41, the Secretary may appoint an Australian Public Service (APS) employee to be an inspector, who must comply with any directions from the Secretary.

Clause 42 states that Secretary may publish information about emissions-controlled products certified under the Bill as well as the exemption of an emissions-controlled product or a person from the provisions of the Bill. However, there is no requirement for the publication of this information.

Clause 43 permits the disclosure of information obtained under the Bill by the Secretary to the Australian Border Force or other agency, body or person prescribed in the rules, if the information will ‘enable or assist the agency, body or person to exercise its powers or perform its functions or duties’.

Clause 44 permits the Minister to require, by written notice under subclause 44(2), a person who is suspected of engaging or having engaged in conduct that is in contravention of the Bill to conduct, or have conducted, an audit of a person’s compliance, if the Minister is satisfied that this would be in the public interest. Subclause 44(3) requires the notice to specify whether the person must arrange another person to carry out the audit, the matters to be covered by the audit, the time period of the audit, the form and content of the audit report and when that report must be given to the Minister. If the person fails to comply with this direction to conduct a compliance audit, the person contravenes subclause 44(5), which is a strict liability and civil penalty provision. The maximum penalty is 40 penalty units for the strict liability offence and 80 penalty units for the civil penalty provision.

Clause 45 permits the Minister to delegate, by writing, any or all of his or her powers or functions to the Secretary or an SES employee or acting SES employee of the Department, except clause 51, which allows the Minister to make rules under the Bill. Those exercising such Ministerial powers and functions must comply with any Ministerial directions.

Clause 46 permits the Secretary to delegate, by writing, any or all his or her powers or functions under the Bill to an SES Employee, acting SES employee or APS employee of Executive Level 2 or above of the Department. Those exercising such powers and functions of the Secretary must comply with any directions of the Secretary.

Clause 47 requires the Minister to cause a review of the operation of the proposed Act as soon as possible after seven years from its commencement and then at intervals of no longer than 10 years. The written report of these reviews must be tabled in both Houses of parliament within 15 sittings days after the report has been received by the Minister.

Under clause 51 the Minster may make rules prescribing matters required or permitted by the Bill or necessary or convenient for carrying out or giving effect to the Bill. The rules are disallowable instruments that are disallowable by either House of Parliament.

Subclause 51(2) states that the rules may provide for charging fees for services provided in performing functions under the Bill as well as review of decisions made under the Bill. The Explanatory Memorandum used an example where a fee may be charged in relation to an application for certification or an exemption.[75]

The Explanatory Memorandum makes the following comment about review of decisions:

It is appropriate that the rules, and not the Bill, contain the details regarding merits review as the decisions for which merits review will be available will be specified in the rules. This will include decisions made under the rules for the certification of an emissions-controlled product, the granting of exemptions relating to those products, and the imposition of fees for service.[76]

According to the Explanatory Memorandum, subclause 51(3) is designed to permit an emission standard to adopt existing standards that apply in international markets to allow the Australian market to keep pace international industry developments.[77] It provides that a rule setting out an emission standard for the purpose of paragraph 10(2)(a) may incorporate any matter contained in an instrument as in force or existing from time to time, if produced by one of the following international organisations:

(a) the International Electrotechnical Commission
(b) the International Organization for Standardization;
(c) the United Nations Economic Commission for Europe; or
(d) any other organisation that is specified in the rules.[78]

Subclause 51(4) states that rules specifying an emissions standard for the purposes of subparagraph 10(2)(b)(ii) may specify a standard as in force or existing from time to time. The Explanatory Memorandum gives the following reasons for this subclause:

This will enable the rules to allow the import and supply of emissions-controlled products which are certified to subsequent versions of adopted overseas standards, without the need to amend the rules to reflect an update in those standards. This approach facilitates trade without compromising standards, as it enables products that produce lower emissions to be readily supplied to the Australian market.

In adopting existing standards from time to time consideration has been given to the fundamental principle of the Legislation Act 2003, and of access to justice, that people are easily able to understand their rights and obligations at law.

An example of standards to be adopted in rules include the following primary standards relating to NRSIEE:

(a)               the US Code of Federal Regulations Title 40 Parts 1045 and 1054; and
(b)               the EU standard for non-road engines.[79]

There are limits on the rules that can be made. Subclause 51(5) provides:

To avoid doubt, the rules may not do the following:
(a) create an offence or civil penalty;
(b) provide powers of:
              (i) arrest or detention; or
              (ii) entry, search or seizure;
(c) impose a tax;
(d) set an amount to be appropriated from the Consolidated 10 Revenue Fund under an appropriation in this Act;
(e) directly amend the text of this Act.

Subclause 51(6) states that Minister must consult with the Information Commissioner in relation to privacy matters before making rules permitting the disclosure of information to agencies, bodies or persons under paragraph 43(1)(b). The Senate Standing Committee for the Scrutiny of Bills commented:

While subclause 51(6) provides that consultation must be undertaken with the Information Commissioner before rules are made regarding the persons to whom information can be disclosed, no other specific consultation obligations are included in the Bill.[80]

Subclause 51(7) allows the rules to provide for the collection and recovery of charges imposed by the proposed Product Emissions Standards (Customs) Charges Act 2017 and the Product Emissions Standards (Excise) Charges Act 2017.

Product Emissions Standards (Customs) Charges Bill 2017

Clause 5 states that a charge will be imposed on the importation of emissions-controlled products and clause 6 states that amount of such a charge will be prescribed in regulations or worked out in accordance with a method prescribed in regulation. Clause 7 provides that the charge on the importation of an emissions-controlled product is payable by the importer.

The Bill and the Product Emissions Standards (Excise) Changes Bill will allow full recovery of the costs associated with regulating emissions-controlled products, through the imposition of a charge on the import and manufacture of emissions-controlled products plus the imposition of fees for services in the performance of functions under the Producer Emissions Standards Bill.[81] The Explanatory Memorandum discusses clause 6:

This clause would enable the amount of the charge to be imposed on the importation of an emissions-controlled product to be prescribed by the regulations or worked out in accordance with a method prescribed by the regulations. As the amount of the charge includes a nil amount (see the definitions at clause 4), the regulations may prescribe a threshold below which the liability to pay the charge is waived. Alternatively, the regulations may also prescribe a cap on the amount of charge to be paid for a particular period. A method prescribed by the regulations may include, for example, the ability for the charge to increase in accordance with the Consumer Price Index, or some other specified formula.[82]

The comments by Senate Standing Committee for the Scrutiny of Bills on clause 6 are included above.

Clause 8 provides for the Governor-General to make regulations under the proposed Act.

Product Emissions Standards (Excise) Charges Bill 2017

Clauses 5–8 mirror the Product Emissions Standards (Customs) Charges Bill in relation to the manufacture of emissions-controlled products.

Product Emissions Standards (Consequential Provisions) Bill 2017

Schedule 1 amends section 229 of the Customs Act 1901 to provide that goods are not forfeited to the Commonwealth merely because they are imported or exported in contravention of the proposed Product Emissions Standards Act. This is because Part 6 of the Product Emissions Standards Bill 2017 establishes a process by which emissions-controlled products may be forfeited to the Commonwealth through either automatic forfeiture (Division 2 of Part 6 of the Bill) or general forfeiture (Division 3 of Part 6 of the Bill).[83]

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[1].              Meeting of Environment Ministers (MEM), Agreed statement, MEM Meeting, 6, Sydney, 25 November 2016, p. 4.

[2].              Department of the Environment and Energy (DEE), Reducing emissions from non-road spark ignition engines and equipment: Decision Regulation Impact Statement, DEE, Canberra, September 2015, p. 7.

[3].              J Frydenberg, ‘Second reading speech: Product Emissions Standards, Bill 2017’, House of Representatives, Debates, (proof), 10 August 2017, p. 2.

[4].              DEE, Reducing emissions from non-road spark ignition engines and equipment: Decision Regulation Impact Statement, op. cit., p. 7.

[5].              Senate Community Affairs References Committee, The impacts on health of air quality in Australia, The Senate, Canberra, August 2013, p. 52.

[6].              DEE, Reducing emissions from non-road spark ignition engines and equipment: Decision regulation impact statement, op. cit., p. 7.

[7].              Senate Community Affairs References Committee, The impacts on health of air quality in Australia, op. cit., p. 54.

[8].              G Hunt (Minister for the Environment), Agreed statement: Environment Ministers meeting, media release, 29 April 2014.

[9].              DEE, Reducing emissions from non-road spark ignition engines and equipment: Decision Regulation Impact Statement, op. cit., pp. 45–55.

[10].              Ibid., p. 55.

[11].              Meeting of Environment Ministers (MEM), Agreed statement, MEM Meeting, 4, 15 December 2015, p. 1.

[12].              National Clean Air Agreement, Commonwealth of Australia, 2015, p. 4.

[13].              DEE, ‘Non-road spark ignition engines and equipment’, DEE website.

[14].              Ibid.

[15].              Ibid.

[16].              Ibid.

[17].              Ibid.

[18].              DEE, Emission standards for non-road spark ignition engines and equipment, Environment protection fact sheet, DEE, 2016.

[19].              Ibid.

[20].              Ibid.

[21].              Department of Prime Minister and Cabinet (PM&C), ‘COAG Decision Regulation Impact Statement: Meeting of Environment Ministers’, PM&C website.

[22].              Footprint, ‘Frydenberg introduces air pollution bill’, Footprint website, 10 August 2017.

[23].              Explanatory Memorandum, Product Emissions Standards Bill 2017, p. 2.

[24].              Footprint, ‘Frydenberg introduces air pollution bill’, op. cit.

[25].              Senate Selection of Bills Committee, Report, 9, 2017, 17 August 2017.

[26].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 9, 2017, 16 August 2017, pp. 12–20.

[27].              Ibid., p. 12.

[28].              Ibid., p. 13.

[29].              Ibid., p. 14. The Committee noted the general consultation requirements under section 17 of the Legislation Act 2003.

[30].              Ibid., p. 14.

[31].              Ibid., p. 12.

[32].              Section 13.3 of the Criminal Code.

[33].              Ibid., subsection 13.1(2).

[34].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 9, 2017, op. cit., p. 15.

[35].              Explanatory Memorandum, Product Emissions Standards Bill 2017, p. 10.

[36].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 9, 2017, op. cit., p. 16.

[37].              Ibid., p. 16.

[38].              Ibid., p. 19.

[39].              Ibid., p. 20.

[40].              Ibid., p. 20.

[41].              Senate Community Affairs References Committee, The impacts on health of air quality in Australia, op. cit., p. 54.

[42].              Blue Sky Alliance, ‘Proposed emission standards: the story of emissions’, Blue Sky Alliance website.

[43].              Blue Sky Alliance, ‘About the Blue Sky Alliance: who we are’, Blue Sky Alliance website.

[44].              A Shaw, ‘Small spark engine emissions standards: new legislation’, Turfmate website, n.d.

[45].              DEE, ‘National Clean Air Agreement: public consultation’, DEE website.

[46].              DEE, Working towards a National Clean Air Agreement: summary of submissions, July 2015.

[47].              Office of Best Practice Regulation, Reducing emissions from non-road spark ignition engines and equipment: Decision Regulation Impact Statement, September 2015, p. 55.

[48].              Ibid.

[49].              Ibid., p. 54.

[50].              Department of Finance (DoF), ‘Australian Government charging framework’, DoF website, 15 May 2017.

[51].              Explanatory Memorandum, op. cit., p. 2.

[52].              The Statement of Compatibility with Human Rights can be found at page 4 of the Explanatory Memorandum to the Bills.

[53].              Parliamentary Joint Committee on Human Rights, Report, 8, 2017, Parliament of Australia, Canberra, 15 August 2017, p. 81.

[54].              National Clean Air Agreement, op. cit.

[55].              Explanatory Memorandum, op. cit., p. 1.

[56].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 9, 2017, op. cit., p. 12.

[57].              Explanatory Memorandum, op. cit., p. 15.

[58].              Ibid., p. 16.

[59].              Ibid., pp. 16–17.

[60].              Ibid., p. 17.

[61].              Ibid., p. 18.

[62].              Ibid., pp. 17–18.

[63].              Ibid., p. 18.

[64].              Ibid., pp. 18–19.

[65].              The value of a penalty unit is defined by section 4AA of the Crimes Act 1914 (Cth) and has a current value of $210.

[66].              Explanatory Memorandum, op. cit., p. 22.

[67].              Ibid., p. 22. The penalty for a body corporate for a strict liability offence is derived from subsection 4B(3) of the Crimes Act 1914, which enables a court to ‘impose a pecuniary penalty not exceeding an amount equal to 5 times the amount of the maximum pecuniary penalty that could be imposed by the court on a natural person convicted of the same offence’. Similarly, subsection 82(5) of the Regulatory Powers (Standard Provisions) Act 2014 (which is applied by clause 26 of the Bill) allows the court to impose a penalty on a body corporate that is five times the pecuniary penalty specified for the relevant civil penalty provision.

[68].              Section 6.1, Criminal Code Act 1995.

[69].              The penalty for a body corporate for a strict liability offence is derived from subsection 4B(3) of the Crimes Act 1914, which enables a court to ‘impose a pecuniary penalty not exceeding an amount equal to 5 times the amount of the maximum pecuniary penalty that could be imposed by the court on a natural person convicted of the same offence’. Similarly, subsection 82(5) of the Regulatory Powers (Standard Provisions) Act 2014 (which is applied by clause 26 of the Bill) allows the court to impose a penalty on a body corporate that is five times the pecuniary penalty specified for the relevant civil penalty provision.

[70].              Subsection 82(5) of the Regulatory Powers (Standard Provisions) Act 2014.

[71].              Ibid., section 88.

[72].              Ibid., section 89.

[73].              Ibid., sections 90 and 91.

[74].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 9, 2017, op. cit., pp. 15–16.

[75].              Ibid., p. 43.

[76].              Ibid., p. 43.

[77].              Ibid., p. 44.

[78].              Ibid., p. 43.

[79].              Ibid., p. 44.

[80].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 9, 2017, op. cit., p. 14.

[81].              Explanatory Memorandum, op. cit., p. 48.

[82].              Ibid., pp. 46–47.

[83].              Ibid., p. 50.