Bills Digest no. 5 2008–09
National Greenhouse and Energy Reporting Amendment Bill
2008
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
National Greenhouse and Energy Reporting
Amendment Bill 2008
Date
introduced: 26 June
2008
House: House of Representatives
Portfolio: Climate Change and Water
Commencement:
Clauses 1-3, and Schedule
1, items 2-7, 11, 13-22 and 24-35 commence on Royal Assent.
Schedule 1, items 1, 8-10, 12, and 23 commence on the date of
Proclamation or 6 months after Royal Assent, whichever is the
earlier.
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/.
To amend the National
Greenhouse and Energy Reporting Act 2007 (the Act) to:
- make mandatory the separate disclosure of scope 1 (direct) and
scope 2 (indirect) greenhouse gas emissions
- allow the Minister to specify conditions, rating systems and
the particular rating for the use of alternative methods, which
have been determined by the Minister, to measure greenhouse gas
emissions
- allow publication of information relating to those methods of
measurement where the use of those methods satisfies the
conditions
- extend the obligations to comply with an external audit to
members of a registered corporation s group
- amend provisions relating to reporting requirements.
The Act was passed in September 2007 establishing a national
mandatory corporate reporting system for, and dissemination of
information related to, greenhouse gas emissions, energy
consumption and production. The reporting obligations under the Act
are intended to lay the foundation for the proposed national
emissions trading scheme, due to be introduced in 2010.
Probably the most
controversial issue contained in the (then) Bill was the potential
override of existing State and Territory Greenhouse and energy
reporting schemes by the national scheme to be established under
the Act. This was partially addressed by amendments made by
Parliament to clauses 5 and clauses 27. Background on this and
other aspects of the Bill can be found in the Bills
Digest prepared at the time of its introduction. Note that the
amendments were made after the Digest was produced so the Digest
does not address the amendments.
One of the objects of the Act, set out in section 3, is to
introduce a singe national reporting framework to underpin the
introduction of an emissions trading scheme in the future . Both
the Garnaut
Climate Change Review[1] and the Carbon Pollution Reduction Scheme Green
Paper[2] state
that although the National Greenhouse Energy Reporting Scheme
(NGERS) will be the basis for the carbon emissions scheme:
However, in some areas, NGERS will need to be
strengthened to support the special financial importance attached
to the emissions reported under the scheme.
At the time of the Act s commencement regulations underpinning
much of the detail of the Act had not been promulgated. The
National Greenhouse and Energy Reporting (Measurement)
Determination 2008
(NGER Determination) and the National Greenhouse and Energy
Reporting Regulations 2008
(NGER Regulations) have now been published and commenced
operation on 1 July 2008. The NGER Regulations establish detailed
requirements which underpin the Act. The NGER Determination
provides methods and criteria for calculating greenhouse gas
emissions and energy date under the Act.
The NGER Regulations have the key definitions, rules for
nomination, provisions on activities and facilities, the details of
obligations relating to registration and reporting, and provisions
relating to disclosure. Some key concepts and interrelationships
between the Act and the NGER Regulations are outlined below.
Regulation 2.23 provides the definitions for emissions ,
production and consumption under section 10 of the Act. By
subregulation 2.23(2) emissions has been defined to mean:
Greenhouse gas is defined in the Act as follows:[3]
Regulation 2.14 provides a definition of overall control for the
purposes of section 9 of the Act. A corporation will have
overall control in relation to an activity or
series of activities if it has the authority to introduce and
implement the operating, health and safety, or environmental
policies of the activities. If there is more than one corporation
that can satisfy this test, then the corporation that has the
greatest authority to introduce and implement the policies will be
taken to have overall control.[4] This is similar to the definition of
operational control contained in section 11 of the
Act relating to when a controlling corporation or another member of
the corporations group has operational control over a facility.
The Act left the definition of industry sector to the NGER
Regulations. Regulation 2.06 defines industry sector as those
industries set out in Schedule 2 of the Regulations. The range of
industries is extensive.[5] One report gives a brief summary of the initial impact
of the system:[6]
By law, coalmines, power stations, aluminium
smelters, banks, supermarkets and airlines that emit more than a
certain threshold must keep carbon accounts. About 700 companies
will eventually be required to join the scheme.
This significance of the definition
of industry sector relates to the existing definition of a facility
in section 9. Whether a company has reporting obligations under the
Act may sometimes relate to whether a facility it operates exceeds
the various thresholds outlined in section 13. The definition of a
facility allows for it to be made up of a series of activities
however these activities must be contained within one industry
sector . For example, as under Schedule 2 of the NGER regulations,
oil and gas extraction and electricity generation are counted as
different industry sectors, a company that had a gas-fired power
station located on, and fed by, a gas field that it operated, would
count these operations as separate facilities.
Companies will initially be required to report if[7]
- They have operational control of facility that emits 25
kilotonnes or more of greenhouse gases, or produce or consume 100
terajoules or more of energy; or
- Their corporate group emits 125 kilotonnes or more greenhouse
gases, or produces or consumes 500 terajoules or more of
energy.
Lower thresholds for corporate groups will be phased in by
2010-11. The final thresholds will be 50 kilotonnes for greenhouse
gases or 200 terajoules of energy.[8] However non-energy (non-combustion) greenhouse
emissions from agriculture, land use, land use change and forestry
activities will not be included until
methodologies for reporting at the facility and corporation level
are sufficiently developed .[9]
Under the proposed Carbon Pollution Reduction Scheme (which the
Government intends to commence 1 July 2010), stationary energy,
transport, industrial processes, waste and fugitive emissions from
oil and gas production could be covered from scheme commencement.
The Government also proposes to include reforestation in the scheme
from commencement on a voluntary basis, but will not include
agriculture before 2015.[10]
In the second reading speech, the Minister stated:[11]
The Bill will ensure the public and investors
have access to information on both a corporation s scope 1 (direct)
and scope 2 (indirect) greenhouse gas emissions. This distinction
has been added following public consultation. Corporations will
benefit from a greater public understanding of how their emissions
profile is composed, rather than from the publication of a single
total. In some sectors, scope 2 (indirect emissions) can compose a
significant share of a corporation s total greenhouse gas emissions
footprint.
There has been some criticism[12] by the National Generators Forum of this proposal
to include the reporting of indirect emissions (scope 2 emissions)
from electricity saying it will add to the red tape of the system
without assisting emissions trading. In the same newspaper report,
other business groups have warned they will face huge compliance
costs reporting their indirect emissions .
The Government s reported response includes that there will be
an online tool to automatically calculate these emissions which
will mean there will not be any increase in the reporting
burden.[13]
The Explanatory Memorandum states the Bill will have no
financial impact.
Section 10 of the Act governs the making of regulations and
determinations for the definitions of, and the mechanisms for
measuring, emissions, energy production and energy consumption.
Subsections 10(1) and (2) state the regulations will define certain
expressions. Subsection 10(3) gives the Minister power to make
determinations, by legislative instrument, setting out the methods
or criteria for methods by which the amounts of the emission,
reduction, removal, offsets, production or consumption are to be
measured. Item 3 extends subsection 10(3) by
adding new paragraphs 10(3)(c), (d) and (e) to
allow the Minister to specify conditions, rating systems and the
particular rating in relation to the different methods of
measurement specified in the determinations.
Section 12 of the Act governs applications for registration. The
heading to section 12 is amended to be more specific to become
[a]pplying to register in relation to meeting a
threshold by the new note added by item
4. Item 4 repeals and substitutes
subsection 12(1) to effectively delete
paragraph 12(1)(b) which is dealt with in
item 6 (see further below). New subsection
12(1) requires a corporation whose group meets one or more
of the thresholds under section 13 during a financial year tot
apply to be registered. An application must be made by 31 August in
the financial year after the trigger year[14] (new subsection
12(4)).
Item 6 repeals subsection 12(2) and inserts
new subsections 12(2), (3) and (4).
New subsection 12(2) will have the effect that
once a corporation is registered in a financial year it will
continue to be registered and will not have to reapply for
registration in the next financial year that the threshold is
reached.
New subsection 12(3) will allow a company that
anticipates that it is likely to meet the threshold requirements to
apply to be registered. The test under the provision is if the CEO
of the corporation is satisfied that the corporation is likely to
meet one or more of the thresholds. The Explanatory Memorandum
gives further detail on the test:[15]
This means a corporation may choose to apply
for registration based on a reasonable expectation
that the threshold will be met in the future. (Emphasis added).
Item 7 amends section 14 to
reflect the proposed changes made in section 12. It will have the
effect that a corporation that is not registered under section 12
may apply to be registered if the corporation or one of its members
is undertaking or proposing to undertake a greenhouse gas
project.[16]
Items 9 and 10 amend section
15 by repealing subsection 15(2) and
inserting the limitations of that provision into paragraph
15(1)(c). This means that a corporation must provide to
the Greenhouse and Energy Data Officer (the GEDO) information
required by the regulations, being information that relates to one
or more members of a controlling corporation s group.
Item 11 amends paragraph
16(4)(a) to change must register to registers under
Division 13 to allow the GEDO to enter on the register corporations
that are registered through voluntary action, such as under section
14 or subsection 17(2).
Item 12 simplifies the matters required to be
entered on the register under section 16 of the Act. As the
Explanatory Memorandum explains:[17]
Currently, the effect of subparagraph
16(4)(b)(i), in combination with other provisions, is to allow
regulations to cover the publication of all members of a
corporation s group on the register (and hence in an application
for registration), or none. This increases the burden on
corporations applying for registration, as it requires the
corporation to provide information on corporations which are not
directly relevant for reporting purposes.
The amendment is as a result of the amendment to sections 12 and
17 of the Act in relation to registration processes.
Item 13 repeals subsection 17(1) and replaces
it with new subsection 17(1) so that the GEDO must
register a corporation if it has applied for registration under
section 12, in accordance with section 15. The amendment will have
the effect of removing the requirement that the GEDO must be
satisfied that a corporation meets the thresholds specified by
section 13 as part of the application. (Note, however, that a
corporation can still be deregistered under section 18 of the Act
if the GEDO is satisfied that the registered corporation s group is
not likely to meet any of the thresholds under section 13 for the
financial year and the next 2 financial years).
Items 14 and 15 make consequential amendments
to section 19 arising from the amendments to
section 12 and subsection 10(3) discussed above.
Items 17-20 amend section 21 by removing the
voluntary[18]
reporting requirements relating to offsets of greenhouse gas
emissions, which will be governed instead under new section
21A inserted by item 22. Section 21 will
govern voluntary reports relating to greenhouse gas projects,
reduction of greenhouse gas emission and removals of greenhouse
gases. As the Explanatory Memorandum explains:[19]
By separating the concept of offsets from
projects undertaken by the registered corporation or a member of
its group, the new section 21A will allow a corporation to report
on offsets which may be created by the purchase of duly recognised
credits purchased from outside the corporation s group.
Offsets is yet to be defined in the regulations.
The maximum penalty of 1000 penalty units ($110 000) under
section 21 and new section 21A is deliberately
pitched at half the penalty that applies for breach of the
mandatory reporting requirements set out in section 19.[20]
Item 23 repeals subsection 24(1) and
substitutes new subsections 24(1), (1A), (1B) and
(1C). The amendment to subsection 24(1)
inserts that the GEDO must publish on a website, by 2 February each
year, the totals of scope 1 emissions and scope 2 emissions, as
well as totals of energy production and energy consumption. The
current provision does not refer to scope 1 and scope 2 emissions.
As noted above, emissions has now been defined in the regulations.
The Explanatory Memorandum states that the rationale for provision
of data on the separate type of emissions to the public is:[21]
[s]een as necessary to provide appropriate
levels of clarity on the emissions footprint of Australian
corporations.
The Minister, in his second reading speech,[22] recognises that the amendment
goes beyond existing policy in this area of public disclosure but
asserts that:
Even here, the amendments do not impose a new
reporting burden on corporations. Instead, the effect of the
amendments will be to increase the amount of information collected
by the system which may be publicly disclosed.
New subsection 24(1A) will allow the GEDO to
publish:
- totals for each member of the corporations group, or for each
business unit reported in relation to the corporation s group.
New paragraph 24(1A)(a) will provide for
publication of totals of scope 1 and scope 2 greenhouse gas
emissions, energy production and energy consumption
as well as:
- Information relating to the methods that are used to measure
the totals (new paragraph 24(1A)(b)) and the
rating given to each of those methods (new paragraph
24(1A)(c))
This discretion to publish under new subsection
24(1A) is subject to the GEDO accepting that publication
should not occur if the information would reveal trade secrets or
any other matter having a commercial value that would be, or could
reasonably be expected to be, destroyed or diminished if the
information were disclosed.[23]
The GEDO is not to publish information received under
new subsection 24(1) unless the corporation s
group meets a threshold set out in paragraph 13(1)(a)[24] and no application has
been made for the information not to be published (new
subsection 24(1B)). However, even if the GEDO does accept
an application not to publish, he[25] may instead publish the fact that the totals
concerned fall within a specified range of values (new
subsection 24(1C)).
Item 26 repeals subsections 24(3) and (4) and
substitutes new subsection 24(3) to allow the GEDO
to publish on a website reports received relating to offsets of
greenhouse gas emissions. This refers to reports received under
new section 21A. There is also discretion to not
publish these reports if the GEDO receives an application that the
publishing of the report would reveal trade secrets or destroy or
diminish the commercial value of any other matter.
Items 29, 30 and 31 amend section 73 to provide
that a corporation and each member of the group must provide an
external auditor with all reasonable facilities and assistance
necessary for the effective exercise of the auditor s duties, with
a civil penalty of 250 penalty units applying. The words and this
section are deleted at the end of subsection 24(5) so that the
heavier penalty of 1000 penalty points only applies to failure to
comply with a written notice issued by the GEDO under subsection
73(2) requiring a corporation to appoint an auditor and report the
results of the audit to the GEDO.
A similar amendment is made to section 74 by item
33 so that a corporation and each member of the group must
provide facilities and assistance to the external auditor appointed
under that section. A penalty of 250 penalty units will apply.
Item 35 provides to save or preserve the
validity of certain applications for registration that may have
been made before the commencement of amendments that will be made
under the Bill if it is passed.
Concluding comments
The Bill s amendments will address some of the complexity of
reporting requirements, and will add more reporting details at the
same time by adding in obligations for both scope 1 and scope 2
emissions. Organisations that are going to have to start reporting
from the middle of 2009 will need to have in place systems to
measure their emissions and trade carbon and will need to address
all reporting and monitoring responsibilities under the NGERS.
Currently about 450 companies are required to report under the
scheme and by 2011, the number of organisations is estimated to
increase to more than 700.[26] Evaluation of the implementation of the scheme and the
impact and costs of the measures is still to be undertaken as the 1
July 2008 start up has only occurred.
Diane Spooner
20 August 2008
Bills Digest Service
Parliamentary Library
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