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Clean Energy (Consequential Amendments) Bill 2011

Clean Energy (Consequential Amendments) Act 2011

Explanatory Memorandum

Circulated By the Authority of the Minister for Climate Change and Energy Efficiency, the Honourable Greg Combet Am MP

General outline of the Clean Energy (Consequential Amendments) Bill 2011

The 2011 Clean Energy Legislative Package

The Clean Energy (Consequential Amendments) Bill 2011 is part of the Clean Energy Legislative Package, which sets up the carbon pricing mechanism (the mechanism) as part of the Government's climate change plan, as set out in Securing a clean energy future: the Australian Government's climate change plan.

The full policy context and background to the mechanism is set out in the explanatory memorandum for the Clean Energy Bill 2011. A description of the bills which will introduce the mechanism is set out below.

Table 1: The Clean Energy Bill 2011 and related bills

Main bill The Clean Energy Bill 2011 creates the mechanism. It sets out the structure of the mechanism and process for its introduction. These include:

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entities and emissions that are covered by the mechanism;
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entities' obligations to surrender eligible emissions units;
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limits on the number of eligible emissions units that will be issued;
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the nature of carbon units;
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the allocation of carbon units, including by auction and the issue of free units;
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mechanisms to contain costs, including the fixed charge period and price floors and ceilings;
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linking to other emissions trading schemes;
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assistance for emissions-intensive trade-exposed activities and coal-fired electricity generators;
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monitoring, investigation, enforcement and penalties;
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administrative review of decisions; and
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reviews of aspects of the mechanism over time.
Statutory bodies The Clean Energy Regulator Bill 2011 sets up the Regulator, which is a statutory authority that will administer the mechanism and enforce the law.
The responsibilities of the Regulator include:

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providing education on the mechanism, particularly about the administrative arrangements of the mechanism;
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assessing emissions data to determine each entity's liability;
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operating the Australian National Registry of Emissions Units (the Registry);
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monitoring, facilitating and enforcing compliance with the mechanism;
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allocating units including freely allocated units, fixed charge units and auctioned units;
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applying legislative rules to determine if a particular entity is eligible for assistance in the form of units to be allocated administratively, and the number of other units to be allocated;
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administering the National Greenhouse and Energy Reporting System (NGERS), the Renewable Energy Target (RET) and the Carbon Farming Initiative (CFI); and
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accrediting auditors for the CFI and NGERS.
The Climate Change Authority Bill 2011 sets up the Authority, which will be an independent body that provides the Government with expert advice on key aspects of the mechanism and the Government's climate change mitigation initiatives.
The Government will remain responsible for carbon pricing policy decisions.
This Bill also sets up the Land Sector Carbon and Biodiversity Board which will advise on key initiatives in the land sector.
Consequential amendments The Clean Energy (Consequential Amendments) Bill 2011 makes consequential amendments to ensure:

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NGERS supports the mechanism;
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the Registry covers the mechanism and the CFI;
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the Regulator covers the mechanism, CFI, the Renewable Energy Target and NGERS;
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the Regulator and Authority are set up as statutory agencies and regulated by public accountability and financial management rules;
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that emissions units and their trading are covered by laws on financial services;
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that activities related to emissions trading are covered by laws on money laundering and fraud;
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synthetic greenhouse gases are subject to an equivalent carbon charge applied through existing regulation of those substances;
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the Regulator can work with other regulatory bodies, including the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC) and the Australian Transaction Reporting and Analysis Centre (Austrac);
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the taxation treatment of emissions units for the purposes of GST and income tax is clear; and
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the Conservation Tillage Refundable Tax Offset is established.
Procedural bills Those elements of the mechanism which oblige a person to pay money are implemented through separate bills that comply with the requirements of section 55 of the Constitution.
These bills are the Clean Energy (Unit Shortfall Charge-General) Bill 2011, the Clean Energy (Unit Issue Charges - Fixed Charge) Bill 2011, the Clean Energy (Unit Issue Charges - Auctions) Bill 2011, the Clean Energy (Charges-Excise) Bill 2011, the Clean Energy (Charges-Customs) Bill 2011, the Clean Energy (International Unit Surrender Charge) Bill 2011, the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Bill 2011 and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Bill 2011.
Related bills Other elements of the Government's Climate Change Plan are being implemented through other legislation. These are:

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the Clean Energy (Excise Tariff Legislation Amendment) Bill 2011 and the Clean Energy (Customs Tariff Amendment) Bill 2011, which imposes an effective carbon price on aviation and non-transport gaseous fuels through excise and customs tariffs;
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the Clean Energy (Fuel Tax Legislation Amendment) Bill 2011, which reduces the business fuel tax credit entitlement of non-exempted industries for their use of liquid and gaseous transport fuels, in order to provide an effective carbon price on business through the fuel tax system; and
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the Clean Energy (Household Assistance Amendments) Bill 2011, the Clean Energy (Tax Laws Amendments) Bill 2011 and the Clean Energy (Income Tax Rates Amendments) Bill 2011, which will implement the household assistance measures announced by the Government on 10 July 2011. These bills amend relevant legislation to provide payment increases for pensioners, allowees and family payment recipients and provide income tax cuts and establish new supplements for low- and middle-income households.

The bill needs to be read in the context, in particular, of the main bill.

Clean Energy (Consequential Amendments) Bill 2011

The consequential amendments bill includes consequential amendments and transitional provisions.

The consequential amendments include amendments to the National Greenhouse and Energy Reporting Act 2007, the Carbon Credits (Carbon Farming Initiative) Act 2011, and the Australian National Registry of Emissions Units Act 2011. Amendments to taxation legislation are also included, to accommodate the new carbon pricing mechanism, and to provide a refundable tax offset (RTO) for certain new depreciating assets used in conservation tillage farming practices. Amendments to the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 and associated legislation provide that importers and manufacturers of Kyoto Protocol synthetic greenhouse gases will be subject to the carbon charge by way of the existing levy structure.

The transitional provisions include provisions which are necessary as the result of amendments which will transfer the functions of the Greenhouse and Energy Data Officer under the National Greenhouse and Energy Reporting Act 2007, the Carbon Credits Administrator under the Carbon Credits (Carbon Farming Initiative) Act 2011, and the Renewable Energy Regulator under the Renewable Energy (Electricity) Act 2000, to the Clean Energy Regulator. These include provisions to enable staff transferring from the Office of the Renewable Energy Regulator or the Department of Climate Change and Energy Efficiency to start their employment on the same terms and conditions as they had prior to transfer. Similar provision is made for staff transferring to the new Climate Change Authority.

Structure of the explanatory memorandum

Amendments to the National Greenhouse and Energy Reporting Act 2007 are described in Chapter 1 of this explanatory memorandum.

Amendments to the taxation legislation in relation to the carbon pricing mechanism are described in Chapter 2.

Amendments to taxation legislation in relation to the conservation tillage refundable tax offset are described in Chapter 3.

Amendments to the Australian National Registry of Emissions Units Act 2011 are described in Chapter 4.

Amendments to the Carbon Credits (Carbon Farming Initiative) Act 2011 are described in Chapter 5.

Amendments to the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 are described in Chapter 6.

Amendments to other legislation are described in Chapter 7.

The transitional and application provisions are described in Chapter 8.

Date of effect and application

Part 1 of Schedule 1 and Part 2 of Schedule 2 will come into effect at the same time as section 3 of the proposed main bill.

Part 2 of Schedule 1 will come into effect on 1 July 2012. This is the date the carbon pricing mechanism will commence with a fixed charge for each tonne of carbon pollution put into the atmosphere each year.

Part 1 of Schedule 2 will come into effect on the later of the day after the Treasurer announces, by notice in the Gazette, that the States and Territories have agreed to the amendments, and the day that section 3 of the proposed main bill commences.

Part 3 of Schedule 2 will come into effect on 1 July 2015.

Schedule 3 will come into effect the day after the consequential amendments bill receives the Royal Assent.

Schedule 4 will come into effect the later of the day the consequential amendments bill receives the Royal Assent and the day section 3 of the Australian National Registry of Emissions Units Act 2011 commences.

Schedule 5 will come into effect the later of the day the consequential amendments bill receives the Royal Assent and the day section 3 of the Carbon Credits (Carbon Farming Initiative) Act 2011 commences.

Proposal announced

The measures are based on the Government's announcement of its Clean Energy Future Plan on 10 July 2011.

Financial impact

The financial impact statement is included in the main bill.

Regulation impact statement

The Regulation Impact Statement for the mechanism is available at http://ris.finance.gov.au. The RIS was prepared by the Department of Climate Change and Energy Efficiency and has been assessed as adequate by the Office of Best Practice Regulation.


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