AUSTRALIAN CARBON TAX LEGISLATION
Market cost of climate change can be seen in this comparison of the modelled expected market costs for Australia of unmitigated and mitigated climate change up to 2100.
Emissions per person as shown by the World Bank Chart, 2010 (selected countries) by the Howard Government in 2007 to provide data and accounting in relation to greenhouse gas emissions and energy. Australia has the highest carbon emissions per capita. This is mainly attributable to the significant coal use for electricity generation.
UNFCC Compliance markets and voluntary markets
Through the UNFCCC framework, Annex 1 countries have made the pledge of emission reduction obligations through the Kyoto Protocol. The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The major feature of the Kyoto Protocol is that it sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas (GHG) emissions .These amount to an average of five per cent against 1990 levels over the five-year period 2008-2012.
The major distinction between the Protocol and the Convention is that while the Convention encouraged industrialised countries to stabilize GHG emissions, the Protocol commits them to do so.
Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of “common but differentiated responsibilities.”
Under the Treaty, countries must meet their targets primarily through national measures. However, the Kyoto Protocol offers them an additional means of meeting their targets by way of three market-based mechanisms. The Kyoto mechanisms are:
- Emissions trading – known as “the carbon market”: countries that have emission units to spare – emissions permitted them but not “used” – to sell this excess capacity to countries that are over their targets
- Clean development mechanism (CDM): allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets.
- Joint implementation (JI): allows a country with an emission reduction or limitation commitment under the Kyoto Protocol (Annex B Party) to earn emission reduction units (ERUs) from an emission-reduction or emission removal project in another Annex B Party, each equivalent to one tonne of CO2, which can be counted towards meeting its Kyoto target.
Why take action?
Australian emissions trends
As part of the UN Framework Convention for Climate Change (UNFCC), Australia is an Annex 1 country and made an agreement to reduce economy-wide emissions reduction for:
- 5% reduction of Australia’s GHG Emissions below 2000 levels by 2020
- 80 % reduction of Australia’s GHG Emissions below 2000 levels by 2050
In addition, Australia will unconditionally reduce our emissions by 5% below 2000 levels by 2020, and by up to 15% by 2020 if there is a global agreement which falls short of securing atmospheric stabilisation at 450 ppm CO2-eq and under which major developing economies commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia’s.
Clean Energy Future policy package
The Australian Government released a Climate Change Policy package, effective 1 July 2012. The package includes:
- Carbon Pricing Mechanism (scheme)
- Carbon Farming Initiative (CFI)
- National Greenhouse and Energy Reporting Scheme (NGERS)
- Equivalent carbon price imposed through accompanying legislation
- Assistance for Clean and Renewable Energy
- Clean Technology Program
- Australian Energy Agency
- Clean Energy Finance Corporation
The package is greater than a carbon price. Other initiatives include:
- Price on carbon ($24 b)
- Personal Income tax reform (15.3 b)
- Changes to taxation of fuel ($2.8 b)
- Energy security measures ($3.0 b)
- Assistance to emissions intensive trade exposed industries ($9 b)
- Incentives for energy efficiency ($4 b)
- Land and biodiversity ($1.2 b)
Carbon Pricing Mechanism (scheme)
NATIONAL GREENHOUSE AND ENERGY REPORTING SCHEME (NGER)
The National Greenhouse and Energy Reporting (NGER) Scheme was introduced by the Howard Government in 2007 to provide data and accounting in relation to greenhouse gas emissions and energy consumption and production. The Scheme’s legislated objectives are to:
- underpin the carbon price mechanism;
- inform policy-making and the Australian public;
- meet Australia’s international reporting obligations; and
- provide a single national reporting framework for energy and emissions reporting.
The Scheme was administered by the Greenhouse and Energy Data Officer on behalf of the Department of Climate Change and Energy Efficiency until 1 April 2012, when the Clean Energy Regulator took on that role.
The Department of Climate Change and Energy Efficiency has retained formal oversight of the NGER Scheme and responsibility for tracking progress against Australia’s target under the Kyoto Protocol. The department will fulfill this role by ensuring that NGERS legislation continues to support the carbon price mechanism and by conducting research to inform policy makers and the public.
Corporations that meet a National Greenhouse and Energy Reporting (NGER) threshold must report their:
- greenhouse gas emissions
- energy production
- energy consumption, and
- other information specified under NGER legislation.
- Garnaut Climate Change Review Final Report, Chart 11.6 page 267
- Implication of carbon pricing for business – Centre for International Economics
- Clean energy legislation – Baker & McKenzie
- Issues on Business Implication of a carbon cost – PwC