On 24 February 2011, the Australian Government announced a two-stage plan for a new carbon price scheme to address climate change. The first part of the plan is a carbon tax before transitioning to a cap and trade emissions trading scheme. The Federal Government's aim is to reduce Australia's carbon emissions by 60% of 2000 levels by 2050.
Overview
Under the current proposal, Australia could have a fixed price on carbon as early as 1 July 2012 (subject to parliamentary approval this year). The fixed price term would last three to five years, with the price of carbon increasing to a predetermined rate in each year.
At the end of the fixed price period, the scheme could convert to a flexible price cap and emissions trading scheme. However, an option could exist to defer the commencement of the flexible price. Any decision to continue with the fixed price arrangements is likely to be taken 12 months before the end of the fixed price phase. In making this decision, the following issues will be relevant:
- the state of the international carbon market
- developments in carbon pricing in key competitor economies
- Australia's internationally agreed targets and progress towards meeting them
- the fiscal implications of any on-budget purchases of internationally accepted emissions units that may be required for Australia to comply with any internationally agreed emissions target
- potential impacts on the Australian economy
- creating investment certainty in clean technologies, energy efficiency and carbon markets.
Coverage
It is proposed that the new scheme will cover all six greenhouse gases recognised under the Kyoto Protocol, namely, carbon dioxide, sulfur hexafluoride, methane, nitrous oxide, hydrofluorocarbons and perfluorocarbons. The scheme will have broad coverage and extend to the following emissions sources:
- the stationary energy sector
- transport sector
- industrial processes sector
- fugitive emissions (other than from decommissioned coal mines)
- emissions from non-legacy waste.
Emissions caught by the proposed Carbon Farming Initiative, such as agricultural emissions, are not covered.
During the fixed price phase, international emissions units cannot be used. When a cap and trade emission trading scheme is in place, it is anticipated that international emissions units may be used for scheme compliance (subject to meeting specified criteria).
Issues still to be decided
There are still many issues to be resolved. They include:
- starting price
- annual rates of increase in the fixed price period
- assistance to emission intensive trade exposed businesses, electricity generators and households
- compensation for inclusion of fuel
- support for low emissions technologies and innovation
- appropriate criteria for the use of international emissions units.
How can DLA Phillips Fox help you?
We can assist you by providing initial advice on the possible implications of the new carbon scheme for your business and show you how minimise potential cost and risk to your business.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.