The package of legislation to implement the carbon pricing mechanism (also called the carbon tax) was introduced into the Federal Parliament on 13 September 2011.
The Clean Energy Bill 2011 (Cth) sets out rules for determining who is liable to pay the carbon price. For a joint venture, the liable entity for a facility that emits covered greenhouse gases above the liability threshold will be:
The terms "facility" and "operational control" are defined in the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act). The NGER Act is to be amended by the Clean Energy (Consequential Amendments) Bill 2011 (Cth) (Consequential Amendments Bill).
The joint venture rules will only apply to unincorporated joint ventures. The term "joint venture" will be defined to mean "an unincorporated enterprise carried on by 2 or more persons in common otherwise than in partnership". This replaces the current definition under the NGER Act which omits the word "unincorporated". Nonetheless this new definition reflects the interpretation adopted in guidelines to the current NGER Act published by the Department of Climate Change.2
Incorporated joint ventures will be subject to the usual rules. An incorporated joint venture with a facility that emits covered greenhouse gases above the liability threshold will need to identify the person with operational control by applying the non-joint venture rules in the NGER Act.
The test for operational control is in section 11 of the NGER Act. The section is to be amended by the Consequential Amendments Bill, but the substance of the test remains unchanged. The test requires identification of authority to introduce and implement operating, health and safety and environmental policies (section 11 authority). Section 11 is also subject to a declaration being made by the regulator under section 55 or section 55A.
Once amended, the operational control provisions in the NGER Act will apply to unincorporated joint ventures as follows (assuming that no section 55 or section 55A declaration has been made):
The provisions distinguish between operational control for the purposes of the NGER Act and operational control for the purposes of the Clean Energy Bill. The Clean Energy Bill in turn defines operational control by reference to the NGER Act.
Turning to the carbon pricing mechanism in the Clean Energy Bill, the general rule is that operational control over a facility determines liability. The general rule is displaced for designated joint ventures. There are two types:
Joint ventures that are not designated joint ventures will be subject to the usual rules for determining liability.
The joint venture declaration test is in clause 67 of the Clean Energy Bill. A joint venture passes the joint venture declaration test in relation to a facility if:
The Bill sets out the application procedure including the requirements for operator consent to the application.
Even where the joint venture declaration test is passed, the Clean Energy Regulator3 must refuse an application if it is not satisfied that the applicants have, and are likely to continue to have (in the words of clause 70) the capacity, the access to information and the financial resources necessary for them to comply with obligations that will be imposed if the declaration is made. The Regulator can also refuse an application where a joint venture participant does not have a "satisfactory record of compliance". Regulations may set out additional requirements that need to be satisfied before the Regulator can make the declaration.
Where there is a designated joint venture, liability under the carbon pricing mechanism is shared among the joint venture participants in accordance with their respective participating percentages.
The participating percentage is determined by a declaration made by the Regulator, either on application by the joint venture participants or on the Regulator's own initiative. The default position under the legislation is for the participating percentage to reflect each participant's share of the output of the joint venture, whether in terms of goods or services. Where the joint venture is not operated on that basis, the participating percentage will be determined by rules to be set out in regulations. However in all cases the Regulator can reach a different determination if the Regulator is satisfied that another percentage would equally well, or better, represent the way in which the economic benefits from the facility are shared among the participants.
The NGER Act remains the source of the obligations to register and report emissions, both for the purposes of the NGER Act and to underpin the carbon pricing mechanism.
Mandatory designated joint ventures will also need to notify their status under the Clean Energy Act.
1 There is flexibility built into the scheme to transfer reporting obligations and liability under the carbon pricing mechanism. These mechanisms are not considered in this note.
2 Department of Climate Change, NGER Supplementary Guidelines, Joint Ventures and Defining a Corporate Group, January 2010.
3 The Clean Energy Regulator Bill 2011 provides for the establishment of the Clean Energy Regulator, which will be the regulator for the carbon pricing mechanism and will replace the Greenhouse and Energy Data Officer under the NGER Act.
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