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Standing Committee on Climate Change, Environment and the Arts - 20/08/2012

BAILEY, Mr Andrew C., First Assistant Secretary, Department of Climate Change and Energy Efficiency

FARRELL, Mr Timothy, Director, Department of Climate Change and Energy Efficiency

PRESTON-STANLEY, Mr Kane David, Senior Legal Officer, Greenhouse and Energy Minimum Standards Legislation Task Force, Department of Climate Change and Energy Efficiency

SLADE, Ms Melanie, Acting Assistant Secretary, Department of Climate Change and Energy Efficiency

Committee met at 16:39

CHAIR ( Mr Zappia ): Welcome. I declare the meeting open. I ask that one of our members move that today's public hearing be broadcast on the parliament's website and that recording and filming be permitted during the hearing.

Dr WASHER: I so move.

CHAIR: Thank you, Dr Washer. I declare open this public hearing of the House of Representatives Standing Committee on Climate Change, Environment and the Arts. Two bills, the Greenhouse and Energy Minimum Standards Bill 2012 and the Greenhouse and Energy Minimum Standards (Registration Fees) Bill 2012 were referred to the committee on 31 May this year. At the next meeting of the committee on 21 June it was noted that the provisions of the bills were to be referred to the Senate committee also for inquiry and report. The House committee noted that the Senate committee planned to report by 15 August. At that time the committee unanimously decided to write to Senator Cameron, Chair of the Senate Environment and Communications Legislation Committee and to publish the letter on our website.

The letter noted three main points. Firstly, at that stage about 150 bills in about 80 packages had been referred to House committees for review since the beginning of the 43rd Parliament. Secondly, while this is a welcome and valuable review mechanism, parliamentary inquiries should also seek to ensure that the resources of parliaments are appropriately used. When legislation is referred to similar committees in both houses, submissions and hearings can be unnecessarily duplicated for little additional benefit. Thirdly, given that the Senate committee has an inquiry process underway, the House committee would effectively wait to see what observations and conclusions were made about the bills at the conclusion of that inquiry and then based on those outcomes, may seek to take further action.

The letter to Senator Cameron also noted that the House Selection Committee had given reasons for the referral of the legislation, that is, 'that the scheme may increase costs and green tape for those involved'. Last week the House committee briefly considered the Senate committee's report, which was published the previous evening and contained a majority and a dissenting report. The inquiry received two submissions, from the Lighting Council Australia and the Clean Energy Council. Answers to questions on notice were also provided by the Department for Climate Change and Energy Efficiency and published on the Senate website.

The committee has reviewed these documents and decided it would assist its deliberations on the legislation to hold a short public hearing to follow up on some of the issues raised. The committee thanks the Department of Climate Change and Energy Efficiency for its submission and hopes that the appearance of some representatives today will provide an opportunity to follow up on any matters which members may feel need clarification. I remind members of the media who may be present or listening on the web of the need to fairly and accurately report the proceedings of the committee hearing.

I now welcome representatives of the Department of Climate Change and Energy Efficiency to today's hearing. Thank you for appearing before the committee today. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the House. We received a written submission to this inquiry from you on Friday afternoon and have authorised it for publication. I now invite you to make any opening comments, add to your submission if you wish to, or perhaps just outline it for the benefit of those who might be listening to these proceedings.

Mr Bailey : Thank you, Chairman. Thank you for the opportunity to appear today before this inquiry. In terms of opening remarks, I note that at the heart of the questions that are being raised is the issue of regulatory burden and green tape. This issue indeed has been central to the development of the GEMS legislation. If we go back to the start of this legislation, in 2009 it was a COAG commitment to try and develop single national legislation on minimum energy efficiency standards. That objective was really framed against the background of there being seven different state legislations, four different state regulators and varying compliance standards that have been enforced.

So the GEMS legislation, at the outset, was intended to be a way of reducing the regulatory burden on business. It will for the first time create a single national legislation and uniform compliance activities across all states and territories.

The issue of regulatory burden is of course inherent as a concern in any regulatory measure. So, in addition to those objectives of the act, a substantial amount of effort has gone into streamlining this legislation so it is easy for businesses to comply with. In particular, the committee has highlighted some concerns with data reporting, and those are outlined in clause 56. There are three specific steps that have been taken in the development of this legislation to make sure that the data reporting burden is at a minimum. Firstly, there has been quite extensive consultation with business about the design of the act. The data that businesses are being requested to report is data that would be readily available to all businesses in the normal course of their operations, and we believe that no additional data generation activity will be required. Secondly, the reporting requirement is targeted only to those companies that are registering products under the GEMS legislation. Thirdly, and at quite a detailed operating level, we have co-funded the development of a web interface so that the actual efficiency of reporting the data has been enhanced by a very easy to use reporting tool. So, whether it is at the macro level of the broad objectives of the act or at the more micro level of some of the reporting activities envisaged under the act, we believe this act will serve to reduce the reporting burden to a minimum and certainly below the level it is at the moment where we have multiple state legislations.

CHAIR: Thank you. Paragraph 1.47 of the committee report, which, as you will appreciate, was presented last week to the Senate, notes that the Senate Scrutiny of Bills Committee requested further information from the minister about powers and procedural fairness and so on. Do you know if there has been a response to that section by the department or by the minister?

Mr Farrell : We have responded to that, yes.

CHAIR: And what kind of response did you provide?

Mr Preston-Stanley : The Senate Standing Committee for the Scrutiny of Bills requested the minister's advice on three matters. The minister responded on 10 August, which was prior to your committee's report, but I understand that the scrutiny of bills committee had not made that response public yet. I will give you a brief summary. The minister responded, acknowledging the issues the committee had raised. One of those issues was the broad discretionary power to impose conditions. The committee noted that the policy intention was very clearly stated in the explanatory memorandum but it inquired whether the intention could be made more explicit in the legislation. The minister agreed that it could, and will move a government amendment this week in the House to make it very clear that conditions can only be imposed on a product's registration where they are proportionate to the circumstances and go to the objectives of the act.

An example may be that a business may want to install a heat pump for heating and cooling. They are very efficient in a very dry climate. They are very inefficient in a coastal climate. So a condition on that registration might be that you install the machine that you are registering in the area where you have announced—in a desert mining operation, for example—and not all over the country. In a dry climate they will meet the standards; in a humid climate they are probably unlikely to meet the standards.

The second thing summarised here is the lack of procedural fairness concerning the suspension or cancellation of a product model's registration. The Senate committee noted that the bill was silent on whether procedural fairness would or would not apply and noted that in most cases, if it stays silent it does, but queried whether the minister could make it more explicit in the explanatory memorandum. The minister agreed that it could be. That change will be made to the explanatory memorandum when it transfers from the House to the Senate.

Another issue was about the ability to publicise matters of fact concerning the enforcement of legislation. I beg your pardon; I will just check that one. The minister's advice was not requested on that matter. It was left to the Senate as a whole. So the minister did not, I believe, respond on that issue.

The third issue that he did respond on was whether the bill could be made more explicit. I will check on the minister's response. It was about the delegation of legislative power and cost recovery—what issues can the fees recover the costs from? That was the third issue on which the minister responded. He took the committee's recommendation that the scope of the cost recovery be more clear in the legislation, which is to recover the costs of registering products and some costs involved in the compliance program only—not the entire costs of the program but a portion of the registration and compliance costs. This was developed in consultation with business because industry agreed that if a portion of those costs can be recovered by the government it will allow improvements to be made from the existing E3 programs' registration and compliance function.

I can give you some background on the GEMS regulator's ability to publicise matters of fact regarding enforcement if you would like, but that is not a matter that the minister responded to, because his advice was not directly requested.

CHAIR: I am more concerned personally—other members might have different concerns with respect to this matter—about the green or red tape, or whatever you want to refer to it as. So I ask this: given the answer you have just given us, was that information available at the time to the Senate committee when it prepared its report or was it really made available subsequent to that report?

Mr Preston-Stanley : The information on regulatory burden and red tape was not part of the response to the Senate Scrutiny of Bills Committee because it was not an issue they directly requested advice on.

CHAIR: More particularly, is the Lighting Council Australia aware of that response? Do you know if they are?

Mr Preston-Stanley : I have spoken with the Lighting Council Australia. That was prior to the department lodging its response with the Senate environment committee. I was, in fact, the one who advised the Lighting Council of the committee's hearing process and that our department would be making a submission as part of that. I am not aware whether they have seen the department's response to that inquiry.

CHAIR: Lastly, given that the coalition did in fact submit a dissenting report as a result of that inquiry, are there any comments or any additional comments that you wish to make in response to the dissenting report?

Ms Slade : The only comments we would like to make are about the use of the data collection. There was a comment that a more compelling reason for collecting data should be given. We currently have information from our registration system that enables us to approve what products are for sale but we do not have information that then relates that to sales at the moment, which means that we cannot track market trends and we cannot do an accurate evaluation of the program. We have discussed these issues with a variety of industry stakeholders over time and in most cases they actually support the collection of data to make sure that we target the program well, and that we can address the issue of products that are not improving in efficiency, and they also support the collection of the data so that we can target our compliance program more effectively. So the majority of our industry stakeholders do support this process.

CHAIR: Dr Washer, do you have some questions on it?

Dr WASHER: I think you have covered it very well from my point of view, thanks, Chair, except for one aspect that I may ask about, one that Lighting Council Australia brought up. That was an issue for them, as you know, in the dissenting report. Could you tell me what their problem would be? If you were them, why would you have this as a problem?

Ms Slade : We believe they are concerned about what the information would be used for and they are concerned that sensitive information might be used inappropriately. So the team have developed an information handling process which we believe should allay their concerns.

Ms MARINO: Does it cover who would have access to that information?

Ms Slade : Absolutely.

Ms MARINO: What is then the process of scrutiny of that? And then what happens as a result of that?

Ms Slade : It covers who should have access, what they can use it for and under what conditions they can use it and what the penalties are if it is misused.

Mr Farrell : Commercially sensitive information is something that has been given a lot of attention in terms of the development of GEMS. Throughout all of our consultation with industry we have talked about the importance we place on commercially sensitive information. We understand it was a concern of Lighting Council Australia. So they understand, as to the level of information that we obtain, that our officers will be protecting that information and that it will be at a level of aggregation that does not give away information that might be commercially sensitive for those organisations. So we have given that undertaking at our consultation events.

Ms MARINO: So is there a process for how that is to be managed to be presented to the parliament 'or other', so that parliament can be assured on a regular basis that there have been no breaches 'or other'?

Mr Farrell : That is right. One of the things we have put a lot of effort into is developing an information handling policy and that is going to be a public document that all officers will be well aware of to make sure that the industry understand that the information they provide will be well looked after.

Mr Bailey : To add to that answer, there is an overall limitation on the purposes for which the data can be released, so—and correct me if my generalisation is inaccurate—the data can only be released for purposes related to the energy efficiency objectives of the act. I think one of the concerns raised was: could some of the sales data be released to overseas governments? Our advice is that can only happen if the underlying nature of the query from another government relates to energy efficiency issues. So other governments cannot come on a fishing expedition for tax or crime or any other purposes. The data can only be released in circumstances where it is related to energy efficiency.

Ms MARINO: On a purely infrastructure issue, given that this will be a repository of some very sensitive information, are you confident that there would be no capacity for anyone to hack into the system from any outside source for their own purposes?

Mr Preston-Stanley : Our information-handling office will address that issue specifically by reference to the Australian Public Service data and IT protection, which meets the standards set down by, I believe, the Defence Signals Directorate. Our IT system complies with the standards set down by DSD, and our information will be protected in that system.

Ms MARINO: Thank you.

CHAIR: Could I go back to something that was mentioned at the beginning of your comments. I thought you said that this replaces several pieces of state legislation, or words to that effect. Given the concerns that were raised within the dissenting report, would it be your view that this is an improvement on the state legislation that currently exists and that it replaces? In terms of the security or the red tape that has to be complied with by the private sector, would this legislation be an improvement on those pieces of legislation?

Ms Slade : An example of how it is an improvement is that we had a situation a while ago where a state government decided to introduce a new energy efficiency requirement unilaterally, and then another state government decided to follow suit but do it slightly differently. So we had three regimes: the national regime and these two state based regimes. So that industry sector in particular—the air-conditioning industry sector, who are very important from an energy efficiency perspective—are very keen to see this in place, because they had three changes of regulation within a very short period and they were not able to re-engineer their processes to meet those requirements, so it was a great burden on them. This will stop that sort of thing from happening.

CHAIR: Very specifically, then, did Lighting Council Australia make any comments along the lines that, whilst they have concerns, this is better than what they currently have to deal with, or was that simply an assessment of the department and other industry sectors? Maybe I could reverse the question: had the Lighting Council previously raised their concerns with the states in a similar way to how they have now appeared to raise them with the government about this legislation?

Ms Slade : The only specific reference they have made in the past to the state regulations was to the lack of certainty of when things would happen, and that is one of the things we have tried to address. The Lighting Council in particular were concerned that there was not a sufficiently firm or long notice period of changes in regulation. So that is something we have certainly taken into account in developing GEMS. That is the only specific reference I can give you.

Mr Preston-Stanley : I have here the Lighting Council's submission to the department through our consultation process. The Lighting Council says:

While Lighting Council Australia continues to support national legislation for appliance energy performance standards and labelling, we remain seriously concerned at some elements of the proposal.

Two of those were raised in the submission to the Senate committee. The other one, as Mel has just mentioned, is about the amount of notice between when new standards are made and when they will come into force. Currently there is no statutory notice period, so initially we proposed three months and that has now moved to 12 months. Another one was that in the process for making new determinations the law should mandate Standards Australia's role in that, to which we responded that that is not currently a legal requirement and it would be very unusual for the law to say, 'You must use a specific private body.' So we responded to each of these concerns in the public response to the consultation issues. The Lighting Council subsequently raised two issues: the existence of criminal penalties and the confidentiality of data that may be acquired.

We have not ignored these issues by any stretch. We have at each stage responded with the government's and the department's views on those, including, most recently, to the Senate environment committee.

I will just clarify the process for some of those responses to the Senate committees. We have had two inquiries by the Senate committees: one by the Senate Scrutiny of Bills Committee, and one by the Senate Environment and Communications Legislation Committee. The parliamentary secretary responded directly to the Senate Scrutiny of Bills Committee and delivered that response on 10 August. The department responded to the Senate Environment and Communications Legislation Committee; again, that was delivered on 10 August. I talked you through the parliamentary secretary's response to the Senate Scrutiny of Bills Committee, which prompted two minor government amendments and an update to the EM. The Senate Environment and Communications Legislation Committee response focused directly on the concerns of the Lighting Council, being: protection of data that may be acquired, and the processes we have and legal protections to protect that data, and also the existence of criminal penalties, which are a fine, only—no imprisonment. The only imprisonment term is actually for an offence for government officers that inappropriately share data.

Dr WASHER: Can I ask: based on that, obviously you are replacing state legislation. What sort of penalties do they have, currently, that would be different?

Mr Preston-Stanley : I believe they vary. I could not actually tell you off the top of my head what the penalties are in terms of financial penalties.

Dr WASHER: But, as a generalisation, they would have fines or similar penalties—not a heck of a lot different?

Mr Farrell : In terms of the enforcement of the state programs, they have been applied a little bit inconsistently because not all the states have the same level of resourcing. So one of the benefits of having a national program is that there is some level of consistency across all of Australia. That is something that we have focused on. So we are going to be delivering a consistent compliance program.

Dr WASHER: I will just make a comment. Again, we had a division, as you are aware, and I left some of my paperwork back in my office and did not get it, but basically I gather there were only two submissions to the Senate environment committee—correct?—the Lighting Council and someone else; I forget who they were now. Who was it?

Mr Preston-Stanley : The Clean Energy Council.

Dr WASHER: So, if you have only got two people wanting to make a submission when you think there is a lot of anxiety out there about it, and when generally you would get a lot more attraction to that, we—Nola and I, because obviously this will come up in our party room—need to reassure ourselves on this. I am just telling you openly that, if we have got some of our senators showing some angst that we have covered that part—although what this committee has been asked to do is just on the red tape, or the 'green tape', so-called, and so it is not part of what we have been asked—obviously we cannot ignore it. From what you tell me, though, the penalties are not much different to a state that was very efficient—if it was; if any states are efficient. They would have fines and penalties. That would be a natural way of punishing people for not doing the right thing. So nothing has greatly changed—this has not become more extreme than any state could possibly have done before if they were more efficient.

Mr Farrell : Whilst we have got penalties, based on our experience one of the biggest deterrents for industry is the public notification that one in the industry has done something wrong. That is what they are most worried about—dirtying their name. So, from our experience in the compliance program, that has been the biggest deterrent. Whilst, yes, we have enforcement procedures here that can scare some parts of industry off, that is what they are most worried about, and that is where we have had a lot of success in terms of getting industry doing the right thing, because that is what they are most worried about.

Dr WASHER: So what you are saying is that that is still a mechanism that you would, as a national body, continue with, you would anticipate?

Mr Farrell : That is right.

Mr Bailey : I would add: one of the themes that came through in quite a number of the consultation sessions we have had with industry was: if you are going to have a uniform compliance and enforcement policy, collect the data so that your policies are accurate and so that we are absolutely confident we have got a level playing field for everybody. So that issue of compliance and green tape relates not only to the issue of penalties but also to the positive benefit that the industry sees in having a genuine level playing field for all players. So while, at the macro level, we think that the amount of green tape has been substantially reduced by going to single national legislation, there is this additional benefit that, we think, most industry players would articulate—that the data that is being collected will inform a genuine level playing field when it comes to compliance.

Mr Preston-Stanley : In fact we had half a dozen submissions or more from industry bodies saying a targeted data collection can improve the accuracy, and voicing support for this.

CHAIR: I have no further questions; did anyone else have any? There being no further questions, thank you very much for appearing today. You will be sent a copy of the transcript of your evidence to the committee and if you feel that anything needs to be corrected then please advise the secretariat and we will ensure that that happens.

Resolved (on motion by Ms Marino):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 17:12