The Clean Energy Futures package announced in 2011 includes the carbon pricing mechanism, the new $10 billion Clean Energy Finance Corporation, the $1.2 billion Clean Technology Program and the promise to undertake further work on an Australia-wide energy efficiency scheme. This note gives an update on the implementation of these measures.
The carbon pricing mechanism will start on 1 July 2012, just under a year after the Government launched its Clean Energy Futures package. Under the mechanism, liable entities will be required to surrender one eligible emissions unit for each tonne of emissions (measured in carbon dioxide equivalent) or pay a shortfall charge.
The package of legislation implementing the mechanism includes the Clean Energy Act 2011 (Cth) and amendments to the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) made by the Clean Energy (Consequential Amendments) Act 2011 (Cth).
While the legislative package has been passed, work on the regulations continues. Regulations already made principally deal with the support package for energy intensive, trade exposed industries and emissions intensive generators. Other regulations will need to be made before July 2012 in order, among other things, to provide the missing details under section 33 of the Clean Energy Act (which provides for gas suppliers to be liable entities in respect of the emissions embedded in the gas they supply) and to make applications under that Act. These include applications by large gas users for an obligation transfer number, applications by eligible joint ventures to become a declared designated joint venture and applications by joint ventures for a participating percentage determination.
The regulations under the NGER Act are also to be amended and (depending on the changes) may affect definitions and measurement of emissions.
Other matters that have been the subject of recent consultation but may not be in place for 1 July 2012 include the proposed design of carbon unit auctions for the flexible price phase and the arrangements for calculating the surrender charge for international units.
Carbon units, Australian carbon credit units issued under the Carbon Farming Initiative and international emissions units are to be regulated as financial products under the Corporations Act 2001 (Cth). Market participants without a licence will need to consider whether they need a licence or have the benefit of an exemption. Licence holders will need a licence variation.
Treasury has consulted on the draft regulations which, among other things, provide an exemption from the requirement to hold a licence for some activities, and modify the product disclose requirements.
The proposed regulations leave only a short time before the 1 July 2012 start date for entities with an Australian financial services licence to have their licence varied, or for market participants who need a licence, to obtain one.
The Clean Energy Finance Corporation (CEFC) will have $10 billion in funding for investment in commercialisation and deployment of renewable energy and clean technology and in the manufacturing businesses that provide inputs to those sectors. It will invest through loans on commercial or concessional terms, loan guarantees and equity. It will not provide grants and is intended to make a return on its investments.
The Government appointed an Expert Review Panel in October 2011 to review the CEFC's governance and its implementation plan, investment mandate and risk management approach. The Panel invited submissions as part of that review process. While some responses support a broad mandate for the CEFC, others are hostile to the introduction of the CEFC and urge an approach that minimises the potential to distort energy markets. The Panel is due to report in March 2012.
The Government announced on 7 March 2012 that the CEFC will be based in Sydney.
The $1.2 billion Clean Technology Program comprises three streams of grant funding for investment in energy efficient capital equipment and low emissions technologies, processes and products.
The manufacturing sector has access to $800 million through the Clean Technology Investment Program. For food and foundry manufacturers, the Clean Technology Food and Foundries Investment Program makes $200 million available.
The Minister launched these two programs in February 2012 and they are now open to eligible applicants for eligible projects and expenditure. Grants will cover some of the cost of projects, with the applicant required to find funding for the balance. Different levels of funding are available according to business and project size.
The third stream of funding, known as the Clean Technology Innovation Fund, makes $200 million available for research, development and commercialisation of clean technology products, processes and services. The relevant Department is conducting a consultation process about guidelines for the scheme and it is due to be launched in mid-2012.
The Clean Energy Package promised further work on an Energy Savings Initiative (ESI) proposed in the Report of the Prime Minister's Task Group on Energy Efficiency in 2010. The ESI would create incentives to implement energy efficiency measures and might, for example, take the form of a cap and trade or 'white certificate' scheme.
To implement this measure, the relevant Departments formed a National Energy Savings Initiative Advisory Group. Its terms of reference set the design parameters for the ESI and include:
The ESI Advisory Group released an issues paper in late 2011. The issues paper is wide-ranging, with 107 questions inviting comments on matters including scheme objectives, targets, eligible activities and scope.
Victoria, New South Walesand South Australia already have energy efficiency schemes. While the ESI, if implemented, seems likely to be a new national scheme, the issues paper indicates that harmonisation of existing schemes remains an option.
The deadline for responses to the issues paper was the end of February 2012. The ESI Advisory Group is due to report in the coming months and its report will be followed by a regulatory impact assessment. COAG is due to consider detailed proposals in 2013.
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