11 Jul 2014

Australian carbon price repeal fails, for now

The Australian Senate yesterday rejected the bills repealing the Clean Energy Act 2011, the centrepiece of the Australian carbon price scheme that commenced on 1 July 2012.

The proposed repeal legislation included several "price exploitation provisions", inserting sections in the Competition and Consumer Act 2010 that prohibit corporations from engaging in "price exploitation in relation to the carbon tax repeal" during the period 1 July 2014 to 30 June 2015, in relation to the supply of natural gas, electricity and other specified goods ("regulated supplies"). These price exploitation provisions were to commence on the day after royal assent is given to the repeal bills, and would have related to conduct engaged in from and after that date in relation to the period from 1 July 2014.

On Wednesday the Palmer United Party proposed additional consumer protections, including amendments making it compulsory for suppliers of regulated supplies (such as electricity and natural gas) to report to the Australian Competition and Consumer Commission on how much of their savings from the carbon price repeal had been passed through.

On Thursday morning the Palmer United Party proposed yet further amendments, including provisions requiring suppliers of regulated supplies to pay to the Government 250% of any savings from the carbon price repeal that were not passed through to customers. The Senate declined leave to the Party to introduce these amendments during the debate, and the amendments were probably unconstitutional anyway.

The Palmer United Party then withdrew its earlier amendments without putting them to the vote, and the Senate then voted to reject the repeal bills completely.

It is likely that the Abbott Government will continue negotiations with the cross-bench members to come up with amended repeal bills to be re-introduced into the House of Representatives next week. For now, the fixed carbon price of $25.40 until 30 June 2015 (and a floating price trading scheme after that) remains in law.

Two other substantive reforms to Australia's carbon emissions and renewable energy schemes are also still being considered:

The legislation to implement the Australian Government's Direct Action policy, under which an Emissions Reduction Fund will be established to buy up to A$2.55 billion in carbon credits from emissions abatement activity under a revised Carbon Farming Initiative, is expected to be considered by the Parliament later in the month.

The review into the Renewable Energy Target, which was originally intended to mandate that 20% of on-grid electricity be sourced from renewable sources, is still continuing. Potential outcomes from that review include closure of the whole scheme, closure of the small technology (rooftop solar PV) section of the scheme, or revision of the scheme to a lower target, perhaps prescribed by percentage of power acquisitions rather than the present fixed 41,000 GWh per annum target.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.