A change in the climate

By Peter Briggs, Brad Wylynko and Darren Fooks.

Key Points:
We can now expect Labor to implement a new (or at least an accelerated) climate change agenda.

In the lead up to the election Labor promised a lot on climate change - and identified climate change as one of two priority issues for the new government. Though Senate control will greatly affect the ultimate legislative landscape, we can now expect Labor having won Government to implement a new (or at least an accelerated) climate change agenda.

Ratification of Kyoto

Labor has committed to ratifying the Kyoto Protocol in its first 12 months in office, and if yesterday's media reports are correct, perhaps sooner. Once ratified, the Kyoto Protocol commits Australia to stabilising its greenhouse gas emissions at 108% of 1990 levels by 2012. Current modelling indicates that Australia will not meet its target. This suggests major initiatives are forthcoming.

What has Labor committed to?

In the run up to the election Labor announced:

• a target for GHG emissions reductions of 60% of 2000 levels by 2050
• an Australian Emissions Trading Scheme by 2010
• a $500[1] million Clean Coal initiative
• $240 million to help business and industry deliver energy and water efficiency projects[2]
• $150 million for clean energy research; and
• extending the Mandatory Renewable Energy Target to 45,000 GWh/year (from the current 9,500 GWh/year), bringing Australia's total renewable electricity capacity to 20% by 2020.

What does this mean for business?

In addition to the money available for coal, clean energy and water efficiency projects, business will be able to begin participating in the Kyoto Protocol trading system, and begin participating in the Australian system when it commences in 2010. This presents a range of opportunities:

• the World Bank has estimated the international carbon market at US $30 billion – with a projected market value of $100 billion by 2010. With ratification, Australian companies have the opportunity to possibly be allowed access to the largest part of that market, the European Union Emissions Trading Scheme
• the largest source of Certified Emission Reductions under the Kyoto Protocol come from Asia (principally India and China). Australian companies will be able to access those markets to create and obtain CERs to trade into the European Trading Scheme (or even a Global Trading Scheme which may result from Australia’s ratification) and possibly to bank in anticipation of the Australian Emissions Trading Scheme; and
• business can make emission reduction and emission sequestration investments in Australia anticipating that such investments may be capable of generating internationally tradeable Kyoto compliant credits.

Of course, the renewables target of 45,000 GWh/year, which is an expansion of the already existing Mandatory Renewable Energy Target, should see sidelined renewable energy projects coming online, as that sector is now assured of support.

Greenhouse gas reporting obligations will be streamlined into a national scheme. The legislation for the Reporting Scheme has already passed through Parliament and the new Government will continue assembling the regulatory framework to make it happen. There are significant numbers of businesses for whom this will be a new obligation; for many more, this scheme will see a rationalisation of greenhouse gas reporting obligations.

Where to from here?

The future of the Kyoto Protocol will be decided in Bali next month. Australia will now be at the negotiating table. The outcome of this meeting will set the scene for international agenda.

New national environmental legislation will be required very quickly in order to implement Kyoto and to establish the Australian Emissions Trading Scheme (including a national registry). While this legislation will build upon efforts elsewhere, the next two years promise to be a time of great uncertainty as Australian governments and business work out the rules. This will require project and business flexibility. Clayton Utz is up-to-date and fully versed on climate change law and policy, and is available to assist as may be required.

Thanks to Trisha Cashmere for her help in writing this article.

For further information, please contact Brad Wylynko and Darren Fooks.