EXPLANATORY STATEMENT

Issued by the Authority of the Minister for the Environment

Carbon Farming Initiative Amendment Act 2014

Proclamation

The Carbon Farming Initiative Amendment Act 2014 (the Act) amends the Carbon Credits (Carbon Farming Initiative) Act 2011 (the CFI Act), the National Greenhouse and Energy Reporting Act 2007 (NGER Act), the Australian National Registry of Emissions Units Act 2011 (ANREU Act) and the Clean Energy Regulator Act 2011 (CER Act). Section 2 of the Act provides for the commencement of the Act’s provisions.

Item 1 of the table in subsection 2(1) of the Act provides for sections 1 to 3 of the Act (and anything not elsewhere covered by the table) to commence on the day the Act receives the Royal Assent.

Item 2 of the table in subsection 2(1) of the Act provides that Schedule 1 to the Act will commence on a single day to be fixed by Proclamation. If the provisions do not commence within the period of six months beginning on the day the Act receives the Royal Assent, they commence on the day after the end of that period.

The purpose of the Proclamation is to fix 13 December 2014 as the day on which Schedule 1 to the Act will commence.

Schedule 1 to the Act amends the CFI Act, the NGER Act, the ANREU Act and the CER Act to provide for the establishment of the Emissions Reduction Fund, a key election commitment of the Australian Government.

Background to the Emissions Reduction Fund

The Emissions Reduction Fund is the centrepiece of the Australian Government’s efforts to reduce emissions. Its primary objective is to assist Australia to meet its emissions reduction target of five per cent below 2000 levels by 2020, consistent with its international obligations under the United Nations Framework Convention on Climate Change and the Kyoto Protocol.

The Emissions Reduction Fund will do this by purchasing approved and verified emissions reductions from registered projects. The Clean Energy Regulator is empowered under the Amendment Act to conduct processes to purchase emissions reductions, and enter into contracts for this purpose.

The Amendment Act also further streamlined the operation of the CFI to simplify making methodology determinations and encourage participation in the Emissions Reduction Fund, further facilitating the ability of the Fund to contribute to Australia’s emissions reduction target.

Public consultation 

The development of the Act, including its commencement provisions, was the subject of extensive consultation over 2013 and 2014 with business and the community as well as State and Territory Government and other Federal Government Agencies. This process included both a White Paper and an exposure draft of the Act. Further details are at Attachment A.

Regulatory Impact

The Department of the Environment certified the Emissions Reduction Fund White Paper as a Regulation Impact Statement for initial decisions on the Emissions Reduction Fund, including the Emissions Reduction Fund crediting and purchasing arrangements, Carbon Farming Initiative arrangements incorporated into the Emissions Reduction Fund, and coverage of the Emissions Reduction Fund safeguard mechanism in accordance with the Australian Government Guide to Regulation. The Regulatory Impact Statement will be finalised after consultation with business on the remaining aspects of the safeguard policy.

Statement of compatibility with Human Rights

A statement of compatibility with human rights for the purposes of Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is set out at Attachment B.

ATTACHMENT A

Public consultation on Emission Reduction Fund policy framework

In finalising the design of the Emissions Reduction Fund, the Government sought the views of businesses and the community through an extensive consultation process.

Terms of Reference

• Consultation period: 16 October 2013 – 18 November 2013
• Submissions: over 290

Green Paper

• Consultation period: 20 December 2013 – 21 February 2014
• Submissions: over 340
• Information sessions
  • Face to face:
    •  Canberra – 3 February 2014 – around 150 RSVPs
  • By phone: 4 public teleconference sessions across 4 and 5 February 2014

White Paper

• Information sessions
  • Face to face:
    • Sydney – 14 May 2014 – 98 RSVPs
    • Canberra – 15 May 2014 – 51 RSVPs
    • Melbourne – 16 May 2014 – 101 RSVPs
  • By phone:  2 sessions – 21 and 22 May 2014 – 28 RSVPs in total

Exposure draft legislation

• Consultation period: 9 May 2014 – 23 May 2014

• Submissions: 49

• Also considered by phone by legal workshop on 20 May 2014

 Expert Reference Group

• Has met twice: 12 February 2014 and 28 February 2014

 Technical Working Groups

• Policy development as of December 2014
  • Contracts – 1 meeting, consultation on draft contract from 27 June 2014 – 18 July 2014
  • Auctions – 1 meeting

• Industrial sector method development as of December 2014
  • Facility method – 12 face-to-face; 5 teleconferences
  • Waste – 4 face-to-face
  • Transport  – 3 face-to-face; 1 teleconference
  • Energy Efficiency Industrial – 4 face-to-face; 1 teleconference
  • Energy Efficiency Building – 4 face-to-face; 1 teleconference  
  • Coal Mine Fugitives  – 5 face-to-face; 1 teleconference
• Land sector method development
  • Sequestering Carbon in Soils in Grazing Systems – 8 face-to-face since 2011 (3 in 2014)
  • Livestock – 10 face-to-face; 18 teleconferences
  • Savanna method – 4 face-to-face; 9 teleconferences
  • Reforestation - 2 teleconferences
  • Avoided deforestation – No meetings as yet

Exposure draft methodology consultation

• Alternative waste treatment, coal mining and landfill gas: 3 September – 1 October 2014.

• Commercial building energy efficiency and avoided clearing of native regrowth: 25 September – 23 October 2014.
• Facilities, wastewater treatment and transport: 15 October 2014 – 12 November 2014.
• Industrial fuel and energy efficiency, aggregated small energy users, sequestration of carbon in soil using modelled abatement estimates and fertiliser use efficiency in irrigated cotton: 14 November 2014 – 12 December 2014.

Market testing of contract duration

• The Government committed in the Emissions Reduction Fund White Paper to hire a consultant to test the commercial impacts of alternate contract lengths.
  • A market survey was held between 8 and 27 May 2014.
  • 107 organisations were surveyed, with 71 responses in total. The survey respondents’ identities are confidential.

Carbon Market Institute information sessions

• Information sessions on the Emissions Reduction Fund by the Carbon Market Institute were held on behalf of the Department on:
  • 21 July in Melbourne;
  • 22 July in Sydney;
  • 28 July in Perth;
  • 29 July in Adelaide;
  • 1 August in Brisbane;
  • 2 August in Townsville;
  • 11 August in Geelong;
  • 12 August in Newcastle; and
  • 26 August in Dubbo.
• Around 500 participants took part overall (including Government representatives).

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Carbon Farming Initiative Amendment Commencement Proclamation 2014

The Carbon Farming Initiative Amendment Commencement Proclamation 2014 (the Proclamation) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Carbon Farming Initiative Commencement Proclamation 2014

The purpose of the Proclamation is to fix 13 December 2014 as the day on which Schedule 1 to the Carbon Farming Initiative Amendment Act 2014 will commence.

Schedule 1 to the Carbon Farming Initiative Amendment Act 2014 (the Act) amends the Carbon Credits (Carbon Farming Initiative) Act 2011 (the CFI Act), and makes minor amendments to a number of related Acts, to provide for the establishment of the Emissions Reduction Fund, a key election commitment of the Australian Government.

The primary objective of the Emissions Reduction Fund is to help Australia meet its international obligations, under the United Nations Convention on Climate Change and the Kyoto Protocol, to reduce emissions of greenhouse gases and meet its emissions reduction target of five per cent below 2000 levels by 2020, by supporting projects that will deliver reductions in emissions.

The focus of the Act is to amend the CFI Act to implement the crediting and purchasing components of the Emissions Reduction Fund.

Under the crediting component of the Emissions Reduction Fund, the Government will issue Australian carbon credit units (ACCUs) for abatement from ‘eligible offsets projects’.  Each ACCU represents one tonne of carbon emissions abatement and is a form of personal property that may be traded (section 150, CFI Act). The Regulator will assess an application for project approval against a range of statutory criteria designed to ensure that projects deliver genuine emissions reductions and can be used to meet Australia’s international obligations. Once carbon abatement from an approved project has been verified, the Regulator will issue ACCUs for the abatement.

The crediting element of the Emissions Reduction Fund set out in Part 2 of the Act builds on the existing scheme set out in the CFI Act, which already provides for the issuing of ACCUs for a limited range of emissions reduction projects. In broad terms, the Act provides amendments to expand the scope of the CFI Act to enable a broader range of emissions reduction projects to be approved and to make some changes to the project eligibility criteria and processes for approving projects and crediting ACCUs.

Under the purchasing component of the Emissions Reduction Fund, the Commonwealth will conduct carbon abatement purchasing processes to purchase low cost carbon reductions, in the form of ACCUs or other ‘prescribed eligible carbon units’. Part 1 of the Act amends the CFI Act to permit the Clean Energy Regulator to conduct purchasing processes, typically reverse auctions, to identify low cost emissions reductions and to enter into contracts for the purchase of those emissions reductions. 

The existing CFI Act operates in the context of a range of other Acts, including:

•       the Clean Energy Regulator Act 2011 (which establishes a Clean Energy Regulator to, amongst other things, administer the CFI Act)

•       the Australian National Registry of Emissions Units Act 2011 (which creates a registry for, amongst other things, ACCUs)

•       the National Greenhouse Energy and Reporting Act 2007 (which imposes certain reporting obligations on certain bodies and makes provision for the audit of compliance – some of the auditing provisions also apply to the CFI Act).

The Act makes a number of amendments to these Acts to reflect changes made to the CFI Act and to address other minor issues.

Human rights implications

The Carbon Farming Initiative Amendment Commencement Proclamation 2014 does not engage any of the applicable rights or freedoms.

A detailed statement of compatibility of the provisions of the Emissions Reduction Fund is provided in the Explanatory Memorandum for the Carbon Farming Initiative Amendment Bill 2014: http://www.environment.gov.au/system/files/pages/7aef9f12-8ba1-4d9a-bf6a-1bc89a0bd6f5/files/cfi-amendment-bill-explanatory-memorandum.pdf.

Conclusion

The Proclamation is compatible with human rights because the only potential limitations on human rights that the Act imposes impose relate to the right to privacy and the limits are reasonable, necessary and proportionate in achieving the Act’s legitimate policy objectives.