Australia’s Climate Change Bill: simple approach to a complex problem

Brendan Bateman
04 Aug 2022 Time to read: 3 MIN

While the main Climate Change Bill has garnered much attention, the consequential amendments to other legislation could end up being the main drivers of emissions reductions.

The new Federal Government lost no time in introducing as one of its first pieces of legislation the Climate Change Bill which sets to legislate Australia’s new emission reduction targets consistent with its updated Nationally Determined Contribution (NDC) under the Paris Agreement. The Bill passed the House of Representatives this morning, and with cross-bench support should pass the Senate.

The Bill has five key elements:

  • to set in legislation Australia’s greenhouse gas emission reduction targets – a 43% reduction from 2005 levels by 2030, and net zero by 2050.These are economy-wide commitments, covering all sectors and gases;
  • to require the Minister for Climate Change to deliver annual statements to Parliament on progress towards achieving those targets and the effectiveness of government policies in contributing to their achivement;
  • to require the Climate Change Authority to give the Minister advice on the annual statement;
  • to require the Climate Change Authority to advise the Minister at least every five years on future emission targets in new or updated NDCs; and
  • to provide for periodic reviews of the operation of the legislation.

The main Bill would commence the day after Royal Assent; the commencement of the consequential amendments would be triggered by the main Bill’s.

A floor or a ceiling for emissions reductions?

The passage of the Bill will almost certainly require the support of the Greens in the Senate and at least one cross-bench senator – the Greens’ conditions for support are well-known, but also appear negotiable.

The drafting of the Bill makes clear that the 2030 target of 43% does not constrain greater emission reductions – rather achieving that target means reducing emissions to at or below that level.

The Bill’s drafting also reflects the Paris Agreement’s “ratchet mechanism”: emission reductions targets in NDCs, and therefore under the Bill, can only increase with each review which can occur every five years (consistent with the periodic review under the Paris Agreement), or whenever a unilateral review under clause 4.11 of the Paris Agreement occurs. That is exactly what occurred when the Labor Government updated Australia’s NDC to adopt the more ambitious targets in place of the former Government’s 26-28% 2030 target.

Whether this is enough to satisfy the Greens’ conditions remains to be seen but the Bill certainly does not restrain more ambitious action. In fact, the Bill also makes clear that it does not limit any actions by State or Territories to reduce emissions, the targets of some being far more ambitious than that of the new Federal Government.

Annual statements, periodic review and public consultation

Under the Bill, the Minister must table in Parliament an annual statement detailing:

  • the progress made during the year towards achieving the reduction targets. It will not be limited to the expected emissions outcomes for the relevant financial year but will be more focused on how Australia is tracking towards its 2030 and 2050 targets;
  • international developments relevant to addressing climate change;
  • Australia’s climate change policy; and
  • the effectiveness of those policies in contributing to the achievement of Australia’s targets.

The Climate Change Authority is to play a central role in advising on GHG emission reduction targets. In addition to providing the Minister with advice on the preparation of the annual statement, which advice must be published, the Climate Change Authority may make provision for public consultation in relation to that advice. The Minister must have regard to that advice and, to the extent that it is not accepted, must provide written reasons for tabling in Parliament.

The same applies to advice given by the Climate Change Authority in respect of any new or adjusted NDC communicated under Article 4 of the Paris Agreement, but there must also be public consultation. The Government expects public consultation – whether for annual statements or NDC reviews – will be significant and broad-based, given the significant impacts these targets and associated policies will have across the economy.

Targets with action: making the Paris Agreement targets part of Government’s business as usual

The Government has done more than just proposed to legislate its new targets. A second Bill would embed consideration of those emission reduction targets and the Paris Agreement into the objectives and functions of key agencies and government departments implementing programs and policies which can contribute to emissions reductions, including the:

  • Australian Renewable Energy Agency;
  • Clean Energy Finance Corporation;
  • Clean Energy Regulator;
  • Climate Change Authority; and
  • Infrastructure Australia.

For example, the Climate Change Authority Act would:

  • expressly include as one of its relevant considerations the matters in Article 2 of the Paris Agreement– limiting the increase in global average temperature to well below 2 degrees above pre-industrial levels, and pursuing efforts to limit temperature increase to 1.5 degrees;
  • expressly include as one of its relevant considerations the need to boost economic, employment and social benefits, including for rural and regional Australia; and
  • enhance the Authority’s independence by ensuring any Ministerial directions cannot be inconsistent with the achievement of the legislated emission targets.

Consideration of targets would also be embedded in the decision-making processes of Infrastructure Australia and the Export Finance and Insurance Corporation, and standards set under the Greenhouse and Energy Minimum Standards Act 2012.

These consequential amendments are intended to facilitate and complement new policies and programs in the new Government’s climate change and energy policy agenda, including Rewiring the Nation, an enhanced Safeguard Mechanism which proposes to reduce emissions baselines for covered facilities consistent with the adopted emission reduction targets, and a new electric vehicle strategy.

Key takeaways for proponents

Although both Bills passed the House of Representatives with some Teal amendments to strengthen and clarify the commitments and language, they have not fundamentally changed.

It is also possible that some compromise on the passage of the Bills might be achieved in exchange for commitments as part of the Environment Protection and Biodiversity Conservation Act review foreshadowed last week by the new Minister for the Environment. The introduction of a “climate trigger” into that Act – which will require the Minister to expressly consider a project’s contribution to climate change – may well be a more effective mechanism for potentially limiting new GHG emitting projects. The Greens have already introduced a private members Bill in the Senate to seek to make this amendment to the EPBC Act.

The need for Proponents to give detailed consideration to the assessment of GHG emissions (including potential scope 3 emissions) from any new projects, and options to mitigate those emissions, as part of the environmental and approval processes, will only increase in response to the Bills. Conversely, those proponents undertaking clean energy or low emissions projects are likely to have an easier path, with the opportunity of securing increased Commonwealth agency support and/or funding.

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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.