With the release of the exposure draft of the Carbon Pollution Reduction Scheme Bill 2009 we now get a clearer picture of the Government's emissions trading proposal. While much of the detail remains, of course, to future regulations, there are a number of interesting developments:
- Key elements have been confirmed:
- The start date of 1 July 2010.
- Australian Emission Units will be a form of personal property.
- There is no statutory transitional mechanism for "pass-through" of Scheme costs in commercial contracts.
- The price cap of $40 per tonne of CO2-e (increasing at 5 percent per annum) is set out on a yearly basis in the legislation (rather than being left to regulations).
- There are two major liability transfer mechanisms - the complex "obligation transfer number" mechanism for netting out emissions for certain entities, and the transfer certificates between controlling corporations and subsidiaries, and from operational control entities to financial control entities.
- Section 764A(1) of the Corporations Act 2001 (Cth) will be amended to specify both an Australian emissions unit and an eligible international emissions unit as a financial product.
- The Regulator's powers are broad and include the power to require security from scheme participants in certain circumstances. The reforestation provisions include an additional level of security for the Government which will be imposed on a forest right holder (often the land owner), and the land on which a reforestation project is located, if a relinquishment requirement is not fulfilled.
- A substantial amount of information is to be made publicly available on the Scheme Registry or the Regulator's website, including the quantity of EITE free units issued to particular entities and notification of changes in a controlling corporation's significant holdings of AEUs.
- The definition of "person" under the legislation includes a local governing body and body politic.
- The Minister will issue auction policy, procedure and rules until 1 January 2012, after which time the role will transfer to the Regulator.
- And finally, there are significant criminal penalties in the order of 10 years imprisonment or $1,100,000 for certain breaches of the legislation relating to anti-avoidance schemes.
Although the draft legislation reflects the White and Green papers, and therefore holds few surprises, it does open up a further avenue for comment on the proposals and a chance to influence the Scheme's final shape. Comment must be in by 5pm (AEST) on Tuesday 14 April 2009, and we urge all stakeholders to consider making a submission on key elements of the Scheme. We will continue to follow developments in our regular Carbon Insights.