National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment Rule (No. 2) 2019

NATIONAL GREENHOUSE AND ENERGY REPORTING ACT 2007

EXPLANATORY STATEMENT

(Issued by the authority of the Minister for Energy and Emissions Reduction)

General outline and statements

Purpose

The National Greenhouse and Energy Reporting Act 2007 (the Act) establishes a single national framework for reporting and disseminating company information about greenhouse gas emissions, energy production, energy consumption and other information. The Safeguard Mechanism is part of the Act. Together with the reporting obligations under the Act, the Safeguard Mechanism provides a framework for Australia’s largest emitters to measure, report and manage their emissions.

Section 22XS of the Act empowers the Minister to make legislative rules to implement the Safeguard Mechanism. The Safeguard Mechanism was established through the National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 (the Principal Rule). The Principal Rule specifies the administrative detail of how Safeguard provisions are implemented and the administrative processes for demonstrating compliance with Safeguard obligations.

Amendments were made to the Principal Rule in March 2019 to:

1. Bring baselines up-to-date by transitioning all facilities to calculated or production adjusted baselines over 2018‑19 and 2019-20.
2. Simplify calculated baseline applications by giving businesses the option to use Government-determined prescribed production variables and default emissions intensity values for calculating baselines.
3. Update baselines annually for actual production where facilities use eligible production variables, so they continue to reflect facility circumstances. This requires business to report production.

The National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment Rule (No. 2) 2019 (the Amendment Rule) makes further minor amendments to the Principal Rule to provide for the implementation of the technical elements flowing from the March 2019 amendments.

The Amendment Rule implements two primary changes. The changes:

1. Extend the 2018-19 baseline application deadline by just under six months, from
   31 October 2019 to 15 April 2020 for facilities with a declared multi-year period that covers, at a minimum, the 2018-19 and 2019-20 compliance years; and 
2. Allow facilities to use the transitional calculated baseline criteria a second time from the 2019-20 year onwards to adopt newly-established Government-determined prescribed production variables.

The purpose of this Explanatory Statement is to explain these amendments to the Principal Rule.

Public consultation

On 14 August 2019, the Government released the proposed amendments to the Principal Rule along with an accompanying explanatory document. Comments closed on 28 August 2019. One formal and one informal submission were received, both supporting the proposed amendments. No policy changes were made from the version released for consultation.

Regulatory Impacts

The Amendment Rule implements minor changes to the Principal Rule that relate to existing application dates, and introduces no additional regulatory impacts. The Amendment Rule supports the implementation of the framework established by the March 2019 amendments to the Principal Rule, for which a regulation impact statement was prepared and assessed as compliant and consistent with best practice by the Office of Best Practice Regulation (reference number 22431).   

Safeguard Rule details

The Principal Rule and the Amendment Rule are legislative instruments within the meaning of the Legislation Act 2003. The Principal Rule commenced on 1 July 2016. The Amendment Rule will commence on the day after registration. The ordinary repeal arrangements to amending instruments apply. The rule is made by the Minster under section 22XS of the Act. Details of the amendments are at Attachment A.

Statement of Compatibility with Human Rights

A Statement of Compatibility with Human Rights, prepared in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, is at Attachment B of the Explanatory Statement.

Attachment A: Details of the sections in the Amendment Rule

1. Name

The name of the Amendment Rule is the National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment Rule (No. 2) 2019.

2.      Commencement

The Amendment Rule commences the day after it is registered.

3.      Authority

The Amendment Rule is made under subsection 22XS of the National Greenhouse and Energy Reporting Act 2007. The power to make rules under this subsection includes the power to amend or revoke rules that have already been made, with any doubt about this resolved by subsection 33(3) of the Acts Interpretation Act 1901.

4.      Schedules

This section provides for the Principal Rule to be amended by each of the items in Schedule 1. The intent of changes made through the Amendment Rule is set out below.

Schedule 1 – Amendments 

1. Subsection 22(3)

Subsection 22(3) of the Principle Rule establishes a timing window within which applications for calculated-emissions baseline determinations can be made to the Clean Energy Regulator. It establishes that such applications can be made no later than the first 31 October after the end of the first financial year to which the calculated-emissions baseline determination is to apply. Item 1 of the Amendment Rule establishes a new exception to the timing window by referring to a new subsection 22(6).  

2.      Subsection 22(6)

The new subsection 22(6) establishes that an application for a calculated-emissions baseline determination with a requested start date of 1 July 2018 can be made no later than 15 April 2020 provided the facility to which the application relates has a declared multi-year period that covers, at a minimum, the 2018-19 and 2019-20 years.

Requiring that a facility is on such a declared multi-year period is necessary because it removes the requirement to surrender Australian Carbon Credit Units (ACCUs) by 28 February 2020 to cover any baseline exceedance in the 2018-19 year. This is needed because the new 2018-19 baseline application deadline is 15 April 2020, which falls after the 28 February 2020 ACCU surrender deadline.

3.      Subsection 26A(2)

Subsection 26A(2) is repealed and replaced with a new subsection 26A(2) that includes a new paragraph 26A(2)(b). New paragraph 26A(2)(b) establishes that the transitional calculated baseline criteria can be met if a calculated-emissions baseline determination was made for a facility for the 2018-19 or the 2019-20 year, and an application is made for a second calculated-emissions baseline for the 2019-20 year or a later year. The second calculated-emissions baseline determination must use one or more prescribed production variables that were not used in the first calculated-emissions baseline determination.

The intention of the new paragraph 26A(2)(b) is to ensure that where a facility applies for a transitional calculated baseline ahead of Government-determined prescribed production variables and default emissions intensities being set in the Schedules to the Principle Rule, it can reapply for a new transitional calculated baseline to adopt the newly-established default values. This will help to ensure facilities have access to all aspects of the new arrangements.     

Paragraph 26(2)(a) is the same as the existing subsection 26A(2).   

4.      Subsection 40(3)

This item has the same effect as item 1, but instead of applying to calculated-emissions baseline determinations, it applies to production-adjusted baseline determinations. It introduces a new exception to the timing window for production-adjusted baseline applications by referring to a new subsection 40(5A). 

5.      Subsection 40(5A)

This item has the same effect as item 2, but instead of applying to calculated-emissions baseline determinations, it applies to production-adjusted baseline determinations. It establishes that an application for a production-adjusted baseline determination with a requested start date of 1 July 2018 can be made no later than 15 April 2020 provided the facility to which the application relates has a declared multi-year period that covers, at a minimum, the 2018-19 and 2019-20 years.

Attachment B

Statement of Compatibility with Human Rights

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

National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment Rule (No. 2) 2019.

This legislative instrument 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 legislative instrument

The Safeguard Mechanism is part of the National Greenhouse and Energy Reporting Act 2007. Together with the emissions reporting obligations under the Act, the Safeguard Mechanism provides a framework for Australia’s largest emitters to measure, report and manage their emissions. The Safeguard Mechanism was established through the National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 and commenced on 1 July 2016.

The Safeguard Mechanism establishes emissions baselines for Australia’s largest greenhouse gas emitters. It covers facilities with more than 100,000 tonnes of carbon dioxide equivalent emissions each year, and applies to around 200 facilities in the mining, oil and gas, manufacturing, transport, and waste sectors. Businesses must manage emissions at their facilities and have a legislated obligation to keep to their baseline. Baselines are intended to accommodate business growth and allow businesses to continue normal operations.

The National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment Rule (No. 2) 2019 makes minor changes to extend the application deadline for baseline determinations under the Safeguard Mechanism for the 2018-19 year. It also allows facilities to use the transitional calculated baseline criteria a second time from the 2019-20 year onwards to adopt newly-established Government-determined prescribed production variables.

Human rights implications

This legislative instrument does not engage any of the applicable rights or freedoms.

Conclusion

This legislative instrument is compatible with human rights as it does not raise any human rights issues.

Angus Taylor, Minister for Energy and Emissions Reduction