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Thursday, 26 June 2014
Page: 4108

Senator PAYNE (New South WalesMinister for Human Services) (16:20): I move:

That this bill be now read a second time.

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

Leave granted.

The speech read as follows—


The Carbon Farming Initiative Amendment Bill 2014 provides the framework for administering the Emissions Reduction Fund.

The Emissions Reduction Fund is an important election commitment and the key element of the Government's policy to respond to climate change.

Through the Emissions Reduction Fund, the Government will work in partnership with business and the community to achieve a cleaner environment through practical actions that will achieve real, measurable results.

The Government accepts the science of climate change. However, we reject the carbon tax as the mechanism to respond.

The carbon tax was a $7.6 billion hit on the economy in its first year, yet emissions were only 0.1 per cent lower. It fails to do the job. The carbon tax has led to higher electricity prices, higher gas prices and increased the cost of living. It is estimated that repeal of the carbon tax will reduce Australian household bills by $550 a year on average. It is an unnecessary burden on Australian businesses and a drag on our international competitiveness. For these reasons the Government has moved to abolish the carbon tax as a priority since coming to office.

The Emissions Reduction Fund will be a better way to reduce emissions than imposing a carbon tax that increases energy costs for businesses and households.

The Emissions Reduction Fund is a major environmental programme with benefits for air quality, land management and agricultural productivity and a programme to reduce emissions. It can be supported whatever one's views on climate issues.

Funding for the Emissions Reduction Fund is already allocated in the budget. This Bill sets out the administrative amendments to assist in implementation. Industry and farming groups strongly support implementing the Emission Reduction Fund through the approach set out in the Bill of building on — and streamlining — existing government mechanisms and processes.

Unlike the approach under the carbon tax, the Emissions Reduction Fund will provide positive incentives to help Australian businesses and households lower their energy costs, improve their agricultural productivity and increase their efficiency. It will do this by building on the Carbon Farming Initiative approach of supporting practical projects.

This Bill will implement the Emissions Reduction Fund to replace the carbon tax and provide a transition for the Carbon Farming Initiative. It will do this by amending the Carbon Credits (Carbon Farming Initiative) Act 2011 and related Acts.

The Emissions Reduction Fund

The objective of the Emissions Reduction Fund is to reduce emissions at lowest cost and help Australia meet its emissions reduction target of five per cent below 2000 levels by 2020.

The Government is making a significant investment in the Fund. The 2014-15 Budget sets out an initial commitment of $2.55 billion, with further funding to be considered in future budgets. The Clean Energy Regulator will be able to commit the full amount of funding in emissions reduction contracts from the commencement of the Emissions Reduction Fund.

Existing Carbon Farming Initiative participants will be well placed to bid in and access these funds to support their existing projects.

Three principles have guided the design of the Emissions Reduction Fund. These principles are embedded in the framework that is established by this Bill.

First, the Fund will encourage projects that deliver lowest cost emissions reductions.

Second, emissions reductions will be genuine and go beyond 'business-as-usual'.

Third, administration of the Fund will be streamlined and cost-effective.

The Emissions Reduction Fund will not create massive new government architecture. Instead, it will leverage and streamline existing structures and processes that are understood by industry.

This Bill does four key things to establish the Emissions Reduction Fund.

Expanding the Carbon Farming Initiative

First, this Bill expands the Carbon Farming Initiative to enable crediting of emissions reduction opportunities across all sectors of the economy.

Expanding the scope of the Carbon Farming Initiative will allow businesses from all over Australia to bring projects forward and receive Australian Carbon Credit Units for the emissions reductions they deliver through their projects.

Under the Carbon Farming Initiative, farmers and land managers are able to earn carbon credits by storing carbon or reducing greenhouse gas emissions on the land. These credits can then be sold to people and businesses wishing to offset their emissions. The Clean Energy Regulator has registered more than 130 Carbon Farming Initiative projects and issued over 6 million Australian Carbon Credit Units since the programme commenced in late 2011.

Under the Emissions Reduction Fund, this Carbon Farming Initiative approach will be expanded so that other parts of the economy can access the system. This includes areas like energy efficiency, waste coal mine gas, cleaning up power stations, the transport sector and large industrial facilities.

The expansion of the Carbon Farming Initiative will be achieved by amending existing legislation, which establishes the Carbon Farming Initiative, and amending the administrative and reporting arrangements that support it, including the National Greenhouse and Energy Reporting Scheme.

In particular, the Carbon Farming Initiative Amendment Bill 2014 amends the Carbon Credits (Carbon Farming Initiative) Act 2011, the National Greenhouse and Energy Reporting Act 2007, the Australian National Registry of Emissions Units Act 2011 and the Clean Energy Regulator Act 2011.

Empowering the Clean Energy Regulator

Second, this Bill empowers the Clean Energy Regulator to conduct auctions, enter contracts and purchase emissions reductions.

It provides for the Clean Energy Regulator to run regular reverse auctions or other procurement processes. This will allow the Government to simply and efficiently buy the lowest cost emissions reductions across the economy from new projects, as well as existing Carbon Farming Initiative projects.

The projects with the lowest cost per tonne will be selected, and the Clean Energy Regulator will enter into contracts to purchase the emissions reductions from these projects. These contracts will give businesses confidence and certainty about the payments they will receive and provide genuine incentives and support to improve energy efficiency and agricultural productivity.

The Clean Energy Regulator will publish information after auctions about auction outcomes to help businesses understand the opportunities available to them under the Emissions Reduction Fund.

The competitive nature of this process will ensure that the Emissions Reduction Fund achieves the best value for taxpayers' money. Payments will be made after emissions reductions are achieved.

Streamlining processes

Third, the Bill streamlines existing processes from the Carbon Farming Initiative, removing red tape to make it easier to register projects and receive credits.

Fewer project registration steps will see projects approved more quickly.

More flexible reporting arrangements will improve cash flow.

A risk-based approach to audit means that lower risk projects will have fewer obligations.

The simplified eligibility requirements around property rights will make project aggregation easier.

Importantly, the Bill will remove the 100-year permanence requirement, which has been a significant barrier to landholders increasing carbon stores in soils and vegetation. Landholders will now have the option of storing carbon for 25 years.

Approving estimation methods will be quicker and easier than under the Carbon Farming Initiative.

An independent expert body established under the current scheme will be broadened in scope and renamed the Emissions Reduction Assurance Committee. It will advise the Government to ensure methods are consistent with the scheme's focus on genuine emissions reductions. The complex and time-consuming process of assessing every activity against the common practice test under the Carbon Farming Initiative will be removed.

Transitioning the Carbon Farming Initiative

Fourth, this Bill provides transitional arrangements for existing participants in the Carbon Farming Initiative.

Landholders and businesses with existing CFI projects will be able to transition smoothly into the Emissions Reduction Fund.

Existing Carbon Farming Initiative projects — such as projects to manage savannas, plant trees or capture methane from piggeries — will be automatically registered under the Emissions Reduction Fund and will be well placed to secure contracts at auction that will deliver them a guaranteed revenue stream for their existing projects.

Existing Carbon Farming Initiative projects will also benefit from less red tape, and simplified reporting and audit processes under the new scheme.

Finally, the Bill defines the roles and responsibilities of the Clean Energy Regulator. The Clean Energy Regulator has established a reputation as an effective, fair and independent body since its establishment, and has the required expertise to administer the Emissions Reduction Fund.

Safeguard mechanism

The Emissions Reduction Fund also includes a safeguard mechanism to ensure that emissions reductions paid for by the Government are not displaced by a significant rise in emissions elsewhere in the economy.

The safeguard mechanism will commence on 1 July 2015 and its detailed design will be given effect by a separate legislative package.

Consultation and opportunities

In preparing this Bill, the Government has consulted widely with business, environment and community representatives from across the Australian economy.

I would like to acknowledge the more than 300 organisations, businesses and individuals who have taken the time to contribute their expertise and ideas on the design of the Emissions Reduction Fund.

This feedback has made it clear that there are low cost emissions reduction opportunities across Australia that can be unlocked through positive incentives from the Emissions Reduction Fund.

The Emissions Reduction Fund is both an emissions reduction programme and a major environmental programme. It is also about substantial co-benefits to improve both economic and environmental outcomes.

It can be supported as an environmental programme whatever one's position on climate issues.

There are many types of projects that could be supported under the Emissions Reduction Fund. Examples include:

Cleaning up Australia's waste sector by capturing the methane for flaring or generating electricity, improving local air quality.

Emissions reductions from the transport sector — covering air, sea, road and rail activities — from technology upgrades, low emission vehicles and operational changes. Again, this offers real opportunities to improve local air quality and reduce dangerous particulate pollution.

The capture of coal mine gas, which could be flared or used to generate electricity.

Using alternative waste treatment facilities to stop the waste getting to landfills in the first place. This is an approach widely supported in Europe for generating clean electricity while avoiding noxious fumes.

Capturing methane from waste water facilities at abattoirs and chemical processing facilities, with significant air quality benefits for neighboring landholders.

Improving industrial energy efficiency at large energy using facilities through large scale changes — such as installing more efficient process heating and the replacement of boilers and furnaces — or pulling together smaller incremental improvements that aggregate up to large savings at power stations, cement and aluminium production facilities, and oil and gas extraction plants.

Energy efficiency improvements in the commercial building sector, including offices, retail chains and education facilities. This could include partial and full retrofits of existing commercial buildings, installation of energy efficient lighting or fans, or the installation of co- and tri-generation.

Improvements in the efficiency of household electricity consumption through aggregating up individual changes at large numbers of households, reducing household energy costs.

Projects to destroy the methane that is generated from manure in piggeries and dairies.

Projects to reduce emissions by feeding dietary additives to milking cows.

Projects to manage fires in savanna grasslands, supporting indigenous land management.

Revegetating land to improve water quality, and reduce erosion and salinity.

Replenishing the carbon content of soils to improve the health and productivity of Australian farms.


The Government knows that the protection of the environment and pursuit of economic growth are not mutually exclusive objectives.

They are two essential elements of a stronger Australia.

That is why we do not agree with the proposition that the only way to protect the environment is by destroying Australia's competitiveness.

And that is why we moved to abolish the carbon tax as our first act as an incoming Government.

There is a menu of approaches available to reduce emissions in different economies and societies.

For Australia, an approach that directly purchases emissions reductions through an Emissions Reduction Fund is a better way than an approach that raises prices for all Australians.

By building on the successes of the Carbon Farming Initiative, this Bill supports positive action by farmers, businesses and households.

This Bill will use positive incentives to reduce emissions, unlock economic benefits, boost energy efficiency and improve agricultural productivity.

This Bill makes economic sense for Australia. It makes environmental sense for Australia. It can be supported wherever one stands on climate change. The Government stands for practical actions that will achieve real, measureable results for the economy and the environment.

This Bill will deliver these results through the Emissions Reduction Fund.

Ordered that further consideration of the second reading of this bill be adjourned to 26 August 2014, in accordance with standing order 111.