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Monday, 20 June 2011
Page: 3295


Senator SHERRY (TasmaniaMinister Assisting on Deregulation and Public Sector Superannuation, Minister for Small Business and Minister Assisting the Minister for Tourism) (17:15): I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted

The second reading speeches read as follows—

Carbon Credits (Carbon Farming Initiative) Bill 2011

The government is committed to action on climate change and the need to reduce our carbon pollution.

This is because the government accepts the science and understands both the damage that unmitigated climate change would cause to Australia and the opportunities for our economy if we do take action.

On 24 February this year we announced the framework for a carbon price to take effect from 1 July 2012. That framework would not place any liability on agricultural, forestry or legacy waste emissions.

However, the government has also committed to create opportunities in these sectors for the creation of revenue through the reduction or storage of carbon pollution.

The Carbon Credits (Carbon Farming Initiative) Bill 2011 fulfils an election com­mitment to give farmers, forest growers and landholders access to carbon markets.

This will begin to unlock the abatement opportunities in the land sector which currently make up 23 percent of Australia’s emissions.

Australia has amongst the highest agricultural emissions of the developed countries. But we also have significant opportunities to increase carbon storage in our landscape.

We are a big country.

This scheme presents an opportunity for Australia to address these high emissions and for the agriculture sector to be part of the solution to climate change.

We are already making progress in this area.

Through Australia’s Farming Future, the government has invested $42.6 million into research and development into abatement options for the land sector.

The CSIRO and other research institutions are making important advances in carbon estimation techniques.

And around the country, innovative farmers have been developing ways to improve the health of agricultural soils, improve herd efficiency and to farm more sustainably.

This scheme will drive and reward the deployment of this Australian innovation.

The Carbon Farming Initiative will create incentives to protect our natural environment and adopt more sustainable farming practices as well as mitigate climate change.

Increasing carbon storage in agricultural soils improves soil health and productivity.

Revegetation will help restore degraded landscape and protect biodiversity.

Tree planting can help to address salinity and reduce erosion.

This is important because the agricultural sector is likely to be one of the most strongly affected by climate change.

The importance of these co-benefits is reflected in the objects of this bill.

We want to achieve carbon abatement in a manner that is consistent with protection of Australia’s natural environment and improves resilience to the impacts of climate change.

The Carbon Farming Initiative will create new, real and lasting economic opportunities for regional communities. Farmers and landholders will be rewarded for their actions to reduce or store carbon pollution. This is a very important step forward for regional and rural Australia.

This is not a government grant program.

The legislated scheme will allow sellers to deal directly with buyers and leverage the opportunities of the market place. Such a market place allows companies to invest in local land sector abatement through long term contracts and partnerships with farmers and landholders.

Markets are not new to farmers, nor are many of the things which can save or store carbon - trees and soil. What farmers need is a mechanism to add value to their actions and decide whether or not to invest.

Real and lasting economic opportunities are also what Indigenous Australians are telling us they want. The Carbon Farming Initiative includes a number of provisions to ensure Indigenous Australians can effectively participate and take up these opportunities.

This package of bills creates a legal framework which will provide certainty for private investment in carbon abatement.

The Carbon Farming Initiative provides a framework which is grounded in the science of climate change and provides clear economic value to actions which store or reduce our carbon pollution.

Overview

The Carbon Credits (Carbon Farming Initiative) Bill 2011 is one of a package of three related bills, including the Australian National Registry of Emissions Units Bill 2011 and the Carbon Credits (Consequential Amendments) Bill 2011.

The Carbon Farming Initiative is a voluntary scheme. There is no requirement to participate. But those that do will be eligible to receive carbon credits for every tonne of carbon pollution saved or stored.

These carbon credits can be exported or sold to companies that want to offset their emissions or to sell carbon neutral products.

The legislation seeks to balance environmental integrity with administrative simplicity. This is to enable broad participation in the scheme.

We have made a number of changes to the proposal released for consultation to reduce administrative costs.

The additionality test has been streamlined by removing the need to prove financial additionality. Instead, the government will iden­tify and list activities that are not already in wide­spread use - that go beyond common practice. The government will consult with stakeholders, and may undertake surveys, to identify activities that are beyond common practice. We will adopt a common sense approach that takes account of local conditions and industry circumstances.

Offsets reports will not be required once reforestation and vegetation has stopped growing and is no longer receiving credits.

Project proponents can choose a reporting period between 12 months and 5 years.

Audit requirements may be reduced for less complex projects.

This scheme will complement other govern­ment commitments to protect Australia’s unique natural environment and enable the development of competitive and sustainable farm industries.

This bill includes provision to exclude projects that have perverse impacts on water availability, biodiversity conservation; employment; or local communities from the scheme.

Eligible projects will need to comply with all state, Commonwealth and local government water, planning and environment requirements.

Project proponents will also be required to take account of regional natural resource management plans. These provide a mechanism for local communities to have their say about the type and location of abatement projects.

The government will monitor the implications of the scheme for regional communities and on the environment.

If there is evidence that projects are likely to have a material and adverse impacts, we will consider what further protections are necessary.

On the positive side of the ledger, the government will make it easy to market the co-benefits of abatement projects.

We know that buyers in the voluntary market want projects that have positive environmental and social benefits.

Integrity of abatement

Carbon credits are used to offset emissions. The price that buyers will be willing to pay for credits will depend on their perceived environmental credibility.

An independent expert committee, the Domestic Offsets Integrity Committee, has been established to ensure that estimation methodologies are rigorous and lead to real and verifiable abatement.

Other elements of the design of the scheme to ensure the integrity of credits include: issuing credits after the sequestration or emissions reductions have actually occurred; tracking of credits through a central national registry - this is included in the Registry Bill; transparency provisions including the publication of a wide range of information about approved projects; appropriate enforcement provisions to address non-compliance; and a robust audit scheme based on the National Greenhouse and Energy Reporting Scheme.

Carbon storage has to be permanent if it is going to be treated as equivalent to carbon emissions from industrial sectors.

The provisions to deal with permanence are rigorous yet flexible and well suited to Australian conditions.

Participants would be able to cancel their project and hand back credits issued at any time, for example because they wish to sell the land or use it for something else.

Land managers would not have to hand back credits if carbon stores are lost because of bushfire or drought. Instead, land managers holders will be required to take steps to re-establish lost carbon stores.

Temporary losses of carbon following a bushfire or drought would be covered by a risk of reversal buffer where a proportion of the credits are withheld.

Conclusion

We must not let the debate over the carbon price stop us from making a start on land sector abatement through the Carbon Farming Initiative.

We need a long-term framework for rewarding land sector abatement.

This will provide the investment certainty the sector needs to be part of the solution to climate change.

 

Carbon Credits (Consequential Amendments) Bill 2011

The Carbon Credits (Consequential Amendments) Bill 2011contains consequential amendments and transitional provisions relating to the Carbon Farming Initiative and the establishment of the Australian National Registry of Emissions Units. It also makes various amendments to the National Greenhouse and Energy Reporting Act 2007.

The bill seeks to amend five Acts. Most of the proposed amendments will apply existing legislation relating to financial services, anti-money laundering and counter-terrorism financing to units held in the Registry. The amendments are intended to provide additional safeguards to protect purchasers of Australian carbon credit units and international units, and to provide deterrence against criminal activities involving the Carbon Farming Initiative.

The proposed amendments to the Corporations Act 2001 and Australian Securities and Investments Commission Act 2001 will provide a strong regulatory regime to reduce the risk of market manipulation and misconduct relating to Australian carbon credits and eligible international emissions units. Appropriate adjustments to the regime to fit the characteristics of the different types of units and to avoid unnecessary compliance costs will be made through regulations.

As required by the Corporations Agreement between the Commonwealth, states and territories, the Ministerial Council for Cor­porations has been consulted about the amendments to the corporations legislation.

The Bill also proposes amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to ensure that financial institutions and other persons who buy and sell ACCUs and eligible international emissions units are regulated under that Act. These bodies will be subject to reporting and other requirements, including requirements to verify their customer’s identity prior to trading in Australian carbon credit units or international emissions units.

To ensure that the Carbon Credits Administrator has sufficient information to tackle undesirable behaviours by scheme participants, administrators with relevant information, such as the Australian Competition and Consumer Commission, the Australian Securities and Investments Commission and the Greenhouse and Energy Data Officer, will need to be able to share this information with the Administrator. The bill therefore proposes amendments to the Competition and Consumer Act 2010, the Australian Securities and Investments Com­mission Act 2001 and the National Greenhouse and Energy Reporting Act 2007. This will allow, for example, ASIC to disclose information that it possesses about wrongdoing in connection with trading of Australian carbon credit units which is also of significance to the Administrator as the operator of the Registry.

Part 27of the Carbon Credits (Carbon Farming Initiative) Bill allows reciprocal flow of relevant information from the Carbon Credits Administrator to these bodies where it is required.

The Bill also proposes amendments to the NGER Act to allow the audit framework for the Carbon Farming Initiative to utilise the existing audit framework under the NGER Act. It also proposes to extend the arrangements for reporting transfer certificates beyond 30 June 2011, and other amendments to the Act.

Using the existing audit framework under the NGER Act will promote administrative efficiency and reduce duplication; for example, there will be a single register for qualified assurance auditors. It reduces complexity for auditors (many of whom will operate under both Acts) as they are already familiar with audit requirements set out under the NGER Act and can apply the same legislative requirements in areas of overlap between NGER and CFI legislation.

Reporting Transfer Certificates allow the voluntary transfer of reporting obligations relating to a facility from a registered controlling corporation to another corporation. This could occur where the other corporation has financial control of the facility and formally applies for the transfer of responsibilities. These provisions are voluntary and impose no additional burden on industry stakeholders. They are intended to reduce administration and economic costs for industry and increase flexibility in establishing reporting arrangements.

The Reporting Transfer Certificate arrangements were a temporary measure and it was intended they would be replaced by the liability transfer certificate provisions of the proposed Carbon Pollution Reduction Scheme legislation. As this legislation failed to pass the Senate, it is necessary to extend these arrangements.

The bill also provides for transitional measures arising from the Carbon Credits (Carbon Farming Initiative) Bill and the Australian National Registry of Emissions Units Bill. It is proposed that accounts held in the non-statutory Registry prior to commencement of the bill will continue in existence under the legislated Registry. Pre-existing audit determinations will also continue to have effect.

The consequential amendments contained in this bill are important for the efficient and effective operation of the Carbon Farming Initiative and the National Greenhouse and Energy Reporting System. The amendments seek, where possible, to streamline institutional and regulatory arrangements and minimise administrative costs in both schemes, and to provide additional safeguards for the Carbon Farming Initiative.

Australian National Registry of Emissions Units Bill 2011

This bill provides for the establishment and maintenance of a robust Australian National Registry of Emissions Units to underpin implementation of the Carbon Farming Initiative.

An efficient electronic registry, governed by clear rules and supported by appropriate enforcement mechanisms, will allow farmers, landholders and other participants with offsets projects under the Initiative to receive, hold and transfer their carbon credits securely, with minimum costs and delay.

This important piece of infrastructure will be based on an existing registry that the Australian government established in 2008 to meet key obligations that Australia has under the Kyoto Protocol. The bill will put the Kyoto registry, which has operated on an administrative basis to date, on a legislative footing.

Combining the registry functions of the Carbon Farming Initiative and the Kyoto Protocol means that anyone who owns tradeable units issued under both systems will be able to hold those units in a single account. This will significantly reduce account establishment and operating costs, and streamline all transactions for account holders.

All accounts that exist in the current registry will be transferred to the statutory registry at the commencement of the Carbon Farming Initiative, without disruption to current account holders.

The bill provides for the recognition in Australian legislation of the emissions units created under the Kyoto Protocol. It sets out how these units can be issued and transferred and is consistent with Kyoto Protocol rules. The Carbon Credits (Carbon Farming Initiative) Bill 2011 deals with the process for exchanging Australian carbon credit units issued under the Carbon Farming Initiative with certain Kyoto units, which can then be sold in international carbon markets.

Other types of international units may also be recognised through regulations. This would allow other international carbon trading systems to be recognised and possibly linked to the Carbon Farming Initiative.

The bill will clarify that Kyoto and non-Kyoto units held in the registry are to be treated as personal property for the limited purposes of laws relating to bankruptcy, external administration, wills, intestacy and deceased estates, and any other prescribed purpose. This reduces any legal uncertainty surrounding the units in these circumstances.

A range of information in the registry will be made publicly available, including the name of account holders and the regulations may require publication of the total number of specified Kyoto units held in accounts. This information is required to meet requirements under the Kyoto Protocol and is currently available on the Department of Climate Change and Energy Efficiency website. Publication of information will also provide a high level of transparency to ensure public confidence in the Carbon Farming Initiative.

Users of the registry will expect the administrator of the registry to protect their accounts from misuse and to safeguard their carbon credits from theft.

High standards of security and a range of anti-fraud measures are already being applied to the existing registry. For example, the registry complies with IT security standards set by the Defence Signals Directorate and the United Nations Framework Convention on Climate Change. Anyone seeking to open a registry account must also undergo an identity check.

The bill will introduce additional safeguards to minimise the risk of fraud and misuse of the registry. These safeguards include: criminal penalties for fraudulent or dishonest conduct; powers to suspend registry operations temporarily to address threats to the system; the Administrator will have discretion not to transfer units where there are reasonable grounds to suspect that the transaction is fraudulent; powers to correct unauthorised entries in the registry; and powers to close the accounts of any persons who breach their registry obligations.

This bill provides for an efficient and safe system to hold and track carbon credits and other units used to implement the Carbon Farming Initiative and to meet Australia’s international obligations under the Kyoto Protocol.

Debate adjourned.