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Clean Energy Bill 2011

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2010-2011

 

The Parliament of the Commonwealth of Australia

 

 

House of Representatives

 

 

CLEAN ENERGY BILL 2011

 

 

SUPPLEMENTARY Explanatory Memorandum

 

 

 

  Amendments to be Moved on Behalf of the Government 

 

    

 

    

 

    



 

GENERAL OUTLINE

 

    

 

  These amendments to the Clean Energy Bill 2011 address issues raised by stakeholders following the introduction of the Bill into the Parliament, and improve the current drafting. They relate to: 

 

    

 

  ·             exempting certain emissions of small landfill facilities; 

 

    

 

  ·             the effect on provisional emissions numbers of failure to nominate operational control of a facility; 

 

    

 

  ·             liability for natural gas emissions in situations where gas is provided to a user without transfer of ownership in the gas; 

 

    

 

  ·             clarifying the conditions on which fuel users may opt into the carbon pricing mechanism; 

 

    

 

  ·             removing the current 5 per cent limit on the surrender of Australian carbon credit units during fixed price years for certain liable entities responsible for landfill emissions. 

 

    

 

    

FINANCIAL IMPACT STATEMENT

 

    

 

  These amendments will have no financial impact additional to that outlined in the Explanatory Memorandum to the Clean Energy Bill 2011.  

 

    

REGULATION IMPACT STATMENT

 

    

 

  These amendments have no major impacts beyond those outlined in the Regulation Impact Statement of the Clean Energy Bill 2011. No additional Regulation Impact Statement is required. 

 

    



 

NOTES ON CLAUSES

ITEMS 1, 2, 10, 11, 14, 15, 18, 19, 22, 23, 24, 25: LANDFILL EMISSIONS

 

    

Landfill facilities with emissions of at least 10,000 tonnes, but less than 25,000 tonnes, of carbon dioxide equivalence will be covered by the carbon pricing mechanism if they are within the prescribed distance of a ‘designated large landfill facility’ with emissions of at least 25,000 tonnes.

 

Increases in the prescribed distance after 1 July 2012 could bring additional small landfills into the mechanism for the first time. It is also possible that small landfills will become liable for the first time after 1 July 2012 because another landfill within the prescribed distance will start to pass the 25,000 tonne threshold.

 

These amendments ensure that small landfills brought into the carbon pricing mechanism as a result of these changes are only liable for emissions from waste deposited after those events. The amendments will not apply where a small landfill is within the prescribed distance of a large landfill and starts to pass the 10,000 tonne threshold for the first time.

The amendments will ensure that landfill operators do not face liabilities for emissions generated from waste deposited before changes which are beyond their control, as these entities have limited capacity to recover costs arising from such waste.

The amendments work by introducing the concept of ‘exempt landfill emissions’. Exempt landfill emissions are emissions from a landfill facility attributed to waste deposited after 1 July 2012 and before the facility becomes covered by the carbon pricing mechanism.

As with legacy emissions, exempt landfill emissions are not ‘covered emissions’ and therefore do not give rise to liability; but exempt landfill emissions are taken into account when determining whether a landfill facility meets the threshold that determines whether its covered emissions give rise to liability under the carbon pricing mechanism.

These amendments, and item 2 of the proposed amendments of the Clean Energy (Consequential Amendments) Bill 2011, also provide for legacy emissions and exempt landfill emissions to be measured using the determination under section 10(3) of the National Greenhouse and Energy Reporting Act 2007 (NGER Act), rather than regulations under the Clean Energy Act. This ensures that the measurement of landfill emissions will be conducted in accordance with a single, consistent set of NGER methods.

ITEM 3 PROVISIONAL EMISSIONS NUMBER

 

    

The definition of ‘provisional emissions number’ in the Clean Energy Bill provides that the meaning of the term is affected by proposed new sections 11B and 11C of the NGER Act. Those sections would attribute liability (provisional emissions numbers) amongst persons who are required, and have failed, to nominate a single person to be taken as having operational control of a facility.

Items 1 and 3-11 of the amendments to the Clean Energy (Consequential Amendments) Bill 2011 include two new sections to the NGER Act (sections 11AA and 11AB) which would attribute provisional emissions numbers between more than one person in the circumstances described above.

Item 3 consequentially amends the definition of ‘provisional emissions number’ also to refer to new sections 11AA and 11AB.

Further information on the NGER Act amendments is included in the supplementary Explanatory Memorandum to the Clean Energy (Consequential Amendments) Bill 2011.

ITEMS 4-9, 12, 13, 16, 17, 20, 21, 26-45 NATURAL GAS

Purpose of amendments

 

The amendments relating to natural gas are technical amendments. They are intended to ensure that the liability of natural gas suppliers, holders of obligation transfer numbers (OTNs) and direct emitters applies in the way originally intended, even if the end user of the gas does not own the gas. The amendments address cases where gas is provided for use without transfer of ownership of the gas. For instance, the owner of a facility might buy gas for the facility and make it available for use at the facility without transferring ownership in the gas to the contracted operator of the facility.

 

The broad outline of natural gas liability will be that someone who supplies natural gas at least partly for end use is liable for the emissions embodied in that gas. In those circumstances, there is no liability for combustion of that gas under the direct emitter provisions. The supplier’s liability will arise even where it sells the gas to a purchaser who then provides the gas to the end user without transferring ownership in the gas.  

 

However, the supplier will not be liable if the purchaser of the gas quotes an OTN:

 

•                  A person acquiring the gas for use, without further transfer of ownership, at a large gas consuming facility must quote an OTN (whether or not for use by that person).

 

•                  That person, or a person approved by the Regulator on the basis that they will acquire gas for use at a facility which is likely to become a large gas consuming facility, may quote an OTN for other gas they acquire if there is no further transfer of ownership in the gas before use (by that person or another person).

 

•                  A person acquiring the gas for use, without further transfer of ownership, as a feedstock or in the manufacture of CNG, LNG or LPG may quote an OTN for other gas they acquire (whether or not for use by that person).

 

Where an OTN is quoted, the OTN holder will be liable for the natural gas except where it is:

 

•                  combusted at a large gas consuming facility or another facility where the emissions are captured by the direct emitter provisions;

 

•                  used as a feedstock or so as not to emit greenhouse gas;

 

•                  used to manufacture of CNG, LNG or LPG on which excise is payable;

 

•                 resupplied to another person.

EXAMPLE

 

Gascorp Pty Ltd sells natural gas to a mining company, Aussie Digger Pty Ltd. Aussie Digger is the holding company of a group of companies. Aussie Digger buys all of the natural gas used by the group and makes it available to the members of the group without transferring ownership in the gas to those members.

 

Other members of the group own and operate two sites which combust natural gas to process ores. The covered emissions from one are 35,000 tonnes of CO2-e and from the other are 15, 000 tonnes of CO2-e. 

 

The 35,000 facility is a large gas consuming facility. Aussie Digger must quote its OTN for the natural gas for use at the facility even though it will not itself use the gas. The operator of the facility will be liable for the emissions from the gas under the direct emitter provisions.

 

Because it is providing gas for a large gas consuming facility, Aussie Digger will be entitled to quote its OTN for the other gas it acquires even though it will not itself use the gas. If it quotes its OTN, it will be liable for the emissions attributable to the 15,000 tonnes of CO2-e unless the facility has other emissions which take it over the direct emitter threshold of 25,000 tonnes of CO2-e (in which case the operator will be liable). If Aussie Digger does not quote its OTN for the other gas, GasCorp will be liable for the gas.

 

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Detail of amendments

 

The relevant items make a number of amendments to achieve the object of assigning liability for natural gas in the way originally intended, even if the end user of the gas did not own the gas:

 

·          All of the provisions are applied to end use supplies - i.e., supplies where it may reasonably be expected that the natural gas is wholly or partly for use by the person to whom the gas is supplied. [ items 26, 28, 31, 33, 35, 40, 43 ]

 

·          The amendments deem ‘use’ by a person (such as Aussie Digger in the above example) to include use by another person (such as the operator of the large gas consuming facility) to whom the gas is provided without ‘supplying’ it (because ‘supply’ is defined to involve transfer of ownership). Use would otherwise have its ordinary meaning of ‘consumption’. [ items 32, 45 ]

 

·          The amendments replace the requirement that the withdrawal of the gas be ‘for the purposes of the supply’ with a requirement that the withdrawal be for the purposes of the use. Consequential amendments are made to the ‘for the purposes of supply’ references in the direct emitter provisions to ensure that the imposition of liability on a natural gas supplier matches the exemption from liability of a direct emitter. [ items 4-9, 12, 13, 16, 17, 20, 21, 26, 28, 31, 33, 35, 40, 43 ]

 

·          Clause 35(7)(c) is deleted so that, if an OTN holder provides natural gas for the manufacture of CNG, LNG or LPG without transferring ownership in the gas, the OTN holder does not have liability for the natural gas where a carbon price would be paid on the CNG, LNG or LPG manufactured from the natural gas. [ item 29 ]

 

·          Clause 56(1)(d) is deleted so that there is no need for a person who acquires natural gas for use at a large gas consuming facility, or a facility likely to become a large gas consuming facility, to operate another facility in order to quote an OTN for other gas acquired by that person. [ item 36 ]

 

·          The amendment of clause 56(6) and addition of clause 56(6A) ensure that an approved person (a person who acquires gas for a facility which is likely to become a large gas consuming facility) can quote an OTN for other gas acquired by that person, whether or not the person operates the facility at which the gas is used.  [ items 37, 38 ]

 

·          Clauses 57(1)(d) and 58(1)(d) have been recast so that it does not matter whether the acquirer of the natural gas or the person to whom they provide the gas (without transfer of ownership) uses the gas. [ items 41, 44 ]

ITEM 46  OPT-IN SCHEME

Item 37 is a technical amendment to clause 92A that deals with the Opt-in Scheme for fuel users. The amendment is to ensure that aviation fuel users can use the Opt-in Scheme as intended.

The amendment seeks to clarify that fuel users may opt into the carbon pricing mechanism if the user or another entity is entitled to a fuel tax credit after opting in (not before). Without amendment, clause 92A could be read as requiring an entity to be entitled to fuel tax credits as a precondition to a person opting-in. This could exclude aviation fuel users because, for aviation fuel, an entity will only be entitled to fuel tax credits equivalent to the carbon price once the user opts in. The amendment will ensure that the opt-in scheme operates as intended and will remove any doubt as to the eligibility of aviation fuel users.

ITEM 47 PROVISIONAL UNIT SHORTFALL & ITEM 48 FINAL UNIT SHORTFALL

These amendments allow entities with a majority (at least 50 per cent) of their liability from landfill emissions to surrender eligible Australian carbon credit units (ACCUs) up to their full liability during the fixed price period. Currently a liable entity may only surrender ACCUs to discharge a maximum of 5 per cent of its liability in fixed charge years (see clauses 125(7) and 128(7) and (8) of the Clean Energy Bill).

Some liable entities who operate landfills will also be able to generate ACCUs under the Carbon Farming Initiative from landfill legacy emission avoidance projects at the same landfill. The amendments allow those liable entities to use their ACCUs for compliance under the mechanism without restriction.

Without these amendments, liable entities that operate landfills and also generate ACCUs would need to purchase fixed price units from the Regulator for at least 95 per cent of their emissions and sell their excess ACCUs for use by other liable entities, incurring unnecessary transaction costs.

 

(Circulated by the authority of the Minister for Climate Change

 and Energy Efficiency, the Honourable Greg Combet AM MP)