House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Climate Change and Energy Efficiency, the Hon Greg Combet AM MP)

General outline and financial impact

Rationale for the Carbon Farming Initiative

The Carbon Farming Initiative

The rationale for the Carbon Farming Initiative is included in the explanatory memorandum for the Carbon Credits (Carbon Farming Initiative) Bill 2011 (the main bill).

On 14 August 2010, the Prime Minister announced an election commitment to establish the Carbon Farming Initiative (CFI) to give farmers, forest growers and landholders access to domestic voluntary and international carbon markets. This will begin to unlock the abatement opportunities in the land sector which currently make up 23 percent of Australia's emissions.

The Carbon Farming Initiative will include:

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A carbon crediting mechanism ('the scheme');

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Funding to fast track the development of methodologies for offset projects, including on-farm demonstration of biochar; and

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Information and tools to help farmers and landholders benefit from carbon markets.

The Carbon Credits (Carbon Farming Initiative) Bill 2011 fulfils the Australian Government's commitment to develop legislation for the scheme to provide long-term certainty to participants. It is described in a separate explanatory memorandum.

The Australian National Registry of Emissions Units

The background to the Registry is included in the explanatory memorandum for the Australian National Registry of Emissions Units Bill 2011 (the Registry bill).

The Registry serves two primary purposes:

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To be Australia's national registry for Kyoto units, which is required under the Kyoto Protocol; and

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To act as a registry for Australian carbon credit units (ACCUs) under the Carbon Farming Initiative.

The Registry will be maintained by electronic means by the Carbon Credits Administrator and will facilitate and track the issuance, holding, transfer, cancellation and retirement of units under the Carbon Farming Initiative. It will also act as Australia's national registry for Kyoto units.

The Carbon Credits (Consequential Amendments) Bill 2011

Introduction

The Carbon Credits (Consequential Amendments) Bill 2011 includes amendments which are consequential upon the passage of the Carbon Credits (Carbon Farming Initiative) Bill 2011 and the Australian National Registry of Emissions Units Bill 2011. It also contains transitional provisions and makes various amendments to the National Greenhouse and Energy Reporting Act 2007 .

The consequential amendments include amendments to the following Acts:

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Anti-Money Laundering and Counter-Terrorism Financing Act 2006 ;

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Australian Securities and Investments Commission Act 2001 ;

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Competition and Consumer Act 2010 ; and

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Corporations Act 2001 .

The consequential amendments bill also includes amendments to the National Greenhouse and Energy Reporting Act 2007 , including extending reporting transfer certificate arrangements.

Date of effect : Schedule 1 will come into effect at the same time as section 3 of the proposed Carbon Credits (Carbon Farming Initiative) Bill 2011. Schedule 2 will come into effect the day after the Bill receives the Royal Assent. Sections 1 to 3 and other parts of the Bill will commence on the day the Bill receives the Royal Assent.

Proposal announced : The Department of Climate Change and Energy Efficiency (DCCEE) consulted with stakeholders on options for scheme design from October 2010 to early February 2011.

The consultation process involved individual meetings and workshops in Canberra, Sydney, Adelaide, Melbourne, Perth, Brisbane, Darwin and some regional centres, as well as a period for formal submissions. Over 350 individuals attended meetings with DCCEE, representing almost 250 organisations.

A consultation paper on the proposed design of the scheme was released for public comment on 22 November 2010.

Approximately 280 submissions were received from a diverse range of stakeholders, including farmers, regional bodies and scientific organisations.

Stakeholder feedback was broadly positive though several stakeholders noted that scheme incentives would depend on linking to a carbon price mechanism.

Stakeholder concerns were addressed through a variety of approaches taken under the main bill. These include providing for regulations to reduce audit requirements for small projects. Administrative and compliance costs have been further reduced through streamlining audit provisions with audit requirements under the National Greenhouse and Energy Reporting Act 2007 under the Consequential Amendments bill.

Financial impact : The financial impact of the Carbon Farming Initiative and the Australian National Registry of Emissions Units is addressed in the explanatory memorandum for the main bill.