House of Representatives

Clean Energy (Consequential Amendments) Bill 2011

Explanatory Memorandum

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

Amendments to the National Greenhouse and Energy Reporting Act 2007

Outline of chapter

1.1 The consequential amendments to the National Greenhouse and Energy Reporting Act 2007 ( NGER Act) are in Schedule 1 of the consequential amendments bill. This Schedule is divided into two Parts:

·
Part 1 deals with amendments commencing at the same time as section 3 of the Clean Energy Bill 2011 commences (that is 28 days after the main bill and the Acts listed in Item 2 of the table in section 2 of the main bill receive Royal Assent). The relevant amendments in this Part are largely concerned with replacing references to the Greenhouse and Energy Data Officer (GEDO) with references to the Regulator.
·
Part 2 includes amendments to the NGER Act that commence on 1 July 2012.

1.2 This approach is adopted because the GEDO will cease to administer the NGER Act when section 3 of the Clean Energy Bill 2011 commences and the Regulator is established. Reporting obligations for entities liable under the carbon pricing mechanism will only commence from 1 July 2012.

Context

1.3 The NGER Act provides a national framework for the reporting and dissemination of information related to greenhouse gas emissions, energy consumption and energy production. Many liable entities that are controlling corporations will already be reporting under the NGER Act. To maintain the Government's commitment to the streamlining of reporting of greenhouse and energy data, including for liable entities, the NGER Act will require greenhouse gas emissions covered by the carbon pricing mechanism to be reported. Amendments to the existing NGER Act are required to support the carbon pricing mechanism.

1.4 The Government's policy is to establish a single regulator, the Clean Energy Regulator (the Regulator), to administer the carbon pricing mechanism, the Renewable Energy Target, the Greenhouse and Energy Reporting System, the Carbon Farming Initiative and the Australian National Registry of Emissions Units. The establishment of the Regulator is discussed further in the explanatory memorandum on the Clean Energy Regulator Bill 2011.

1.5 The introduction of amendments to the NGER Act due to the carbon pricing mechanism does not alter the effect of reporting provisions for controlling corporations under that Act as introduced in 2007. This is because the NGER Act will continue to have objects in addition to underpinning the carbon pricing mechanism including:

·
informing Australian government policy formulation and the Australian public,
·
meeting Australia's international reporting obligations,
·
assisting Commonwealth, State and Territory government programs and activities, and
·
avoiding duplication of similar reporting requirements in the States and Territories.

Summary of new law

Part 1: Amendments commencing on the same date as section 3 of the Clean Energy Bill 2011

Replacement of references to the Greenhouse and Energy Data Officer

1.6 Currently the GEDO is responsible for administration of the NGER Act and is established under section 49 of that Act. References to the Greenhouse and Energy Data Officer are replaced with references to the Regulator and provisions enabling the establishment of the GEDO are removed.

Publication

1.7 The requirement for written approval from the Regulator to allow the States, Territories and other persons to publish information is removed.

Disclosure

1.8 Disclosure provisions have been aligned with provisions included in the Clean Energy Regulator Bill 2011.

Part 2: Amendments commencing on 1 July 2012

Definitions

1.9 Key definitions are amended so that they apply consistently to liable entities across both the main bill and the NGER Act.

Registration

1.10 Registration under the NGER Act is required by entities that will have, or expect to have, reporting obligations due to the carbon pricing mechanism. These entities include:

·
liable entities, and
·
liable entities with an interim emissions number.

1.11 The names of persons who are registered under the NGER Act will be published on the National Greenhouse and Energy Register on the Regulator's website.

Deregistration

1.12 Entities are allowed to apply to deregister if they meet the requirements for deregistration under the NGER Act. An entity is deregistered once the Regulator takes the person's name off the National Greenhouse and Energy Register.

Reporting

1.13 As a result of the introduction of the carbon pricing mechanism, liable entities are required to report under the NGER Act.

1.14 Different reporting requirements may apply in different circumstances. This segment of the explanatory memorandum also discusses the differences in reporting requirements between the fixed and flexible charge periods.

Methodologies

1.15 The National Greenhouse and Energy Reporting (Measurement) Determination 2008 will be updated to allow for reporting by liable entities under the carbon pricing mechanism.

Audit

1.16 Audit provisions are included for entities liable under the carbon pricing mechanism. Entities with an emissions number exceeding a specified amount are required to have their emission reports audited prior to submission.

Public Disclosure

1.17 Emissions numbers will be published for all liable entities at the entity level. Additionally, greenhouse gas emissions and energy production data will be published for electricity generation facilities. This segment also covers other disclosure provisions.

Penalties

1.18 Penalties for provisions in the NGER Act that relate to carbon pricing mechanism obligations and liability have been increased to align with penalties under the main bill.

Operational reviews of the NGER Act

1.19 The Climate Change Authority is required to undertake periodic reviews of the NGER Act and its instruments. These will evaluate whether the objectives of the Act are being met, and must be performed at least every five years. The Minister may also commission a special review of the NGER Act and its instruments at any time. This review can evaluate the operation of the NGER Act and its instruments.

Other General Amendments

1.20 Other amendments align the NGER Act with the main bill. This will make understanding both the legislation and compliance regime simpler for entities with obligations under both pieces of legislation.

Comparison of key features of new and current law

New Law Current Law
Emissions, scope 1 (direct) and scope 2 (indirect) are defined separately The definition of emissions includes scope 1 (direct) and scope 2 (indirect) emissions
The statutory authority that is responsible for enforcing the NGER Act is the Regulator The statutory office that is responsible for enforcing the NGER Act is the Greenhouse and Energy Data Officer
Defines potential greenhouse gas emissions embodied in an amount of natural gas Potential greenhouse gas emissions are not included in the NGER Act
Reporting obligations associated with liabilities can apply to all legal entities defined as a 'person' Reporting obligations only apply to controlling corporations
Existing reporting obligations for controlling corporations have not changed. Reporting obligations for entities liable under the carbon pricing mechanism only relate to 'covered' scope 1 emissions Reporting obligations for controlling corporations relate to greenhouse gas emissions (scope 1 and scope 2), energy consumption and energy production
Operational control is amended to: include persons; allow for a declaration of operational control by the Regulator in relation to persons; and to allow for the nomination of operational control where no single person has the greatest authority Operational control and the Greenhouse and Energy Data Officer's ability to declare operational control only applies to members of a controlling corporation's group
Facility and activity definitions include carbon capture and storage and landfill facilities Facility and activity definitions do not explicitly include situations where there are no operations occurring (for example closed landfill facilities)
Liable entities will have to register and meet reporting obligations under the NGER Act Only controlling corporations that meet NGER Act thresholds are required to register and meet reporting obligations
Record keeping requirement is five years for the carbon pricing mechanism and the NGER Act Record keeping requirement is seven years for the NGER Act
Penalties for provisions that are relevant to the carbon pricing mechanism are increased to ensure consistency in penalties. Maximum penalty is 10,000 penalty units Penalties generally only apply to controlling corporations. Maximum penalty is 2,000 penalty units

Detailed explanation of new law

Amendments commencing on the same date as section 3 of the Clean Energy Bill 2011

Removal and replacement of references to the Greenhouse and Energy Data Officer etc.

1.21 References to the GEDO and a member of the staff of the Officer are replaced with references to the Regulator and officials of the Regulator . [Schedule 1, Part 1, items 106-108] [Schedule 1, Part 1, items 110-143] [Schedule 1, Part 1, items 147-153] [Schedule 1, Part 1, item 154] [Schedule 1, Part 1, items 158-192]

Publication

1.22 In addition to the existing ability to publish data if required to do so by law, States and Territories will also be permitted to publish information disclosed to them by the Regulator, provided that it is in an aggregate form. All provisions relating to the publication of information by the States, Territories and other persons are revised to remove the requirement for written approval from the Regulator. While the requirement for written approval is removed, existing secrecy provisions and data aggregation requirements remain in place . [Schedule 1, Part 1, item 153A]

Disclosure

1.23 In this chapter, public disclosure refers only to the publication of greenhouse and energy information in the public domain. Offences relating to the disclosure of 'protected information' to certain agencies, bodies and persons (other than by publication in the public domain) are dealt with under the Clean Energy Regulator Bill 2011. As such, section 26 in the NGER Act is repealed. Disclosure to the States and Territories continues to be provided for under section 27 of the NGER Act . [Schedule 1, Part 1, item 109] [Schedule 1, Part 1, item 146] [Schedule 1, Part 1, item 155]

1.24 Secrecy provisions in the NGER Act relate to information obtained prior to the commencement of the Clean Energy Bill 2011. Information obtained after commencement is covered by Part 3 in the Clean Energy Regulator Bill 2011. These amendments therefore differentiate between information obtained prior to and after the commencement of the Clean Energy Bill 2011. A provision is also included to clearly indicate that information disclosed under section 26 relates to information provided under a provision which has been repealed. However, upon commencement of the Clean Energy Regulator Bill 2011, all greenhouse and energy information, which is subsequently obtained by an official of the Regulator, will become 'protected information', and therefore subject to the Clean Energy Regulator Bill 2011 . [Schedule 1, Part 1, items 144-145A]

Definitions

Overview

1.25 This section outlines amendments to the NGER Act definitions as a consequence of the introduction of the carbon pricing mechanism. The intention is to incorporate new definitions, amend existing definitions and include definitions that will have the same meaning under both the Clean Energy Bill 2011 and the NGER Act.

Emissions

1.26 The definition of 'emissions' under the NGER Act encompasses scope 1 (direct) and scope 2 (indirect) emissions. Carbon pricing mechanism liability is attached to a subset of scope 1 emissions of greenhouse gas. The NGER Act is amended to take this into account through defining scope 1 emissions separately from scope 2 emissions . [Schedule 1, Part 2, item 282]

1.27 Definitions of a 'scope 1 emission' and a 'scope 2 emission' are included in section 10 of the NGER Act . [Schedule 1, Part 2, items 315-316]

1.28 Section 10 also allows for a scope 1 and a scope 2 emission to be defined in the NGER regulations . [Schedule 1, Part 2, items 333-339]

Greenhouse gas

1.29 The definition of 'greenhouse gas' applies for the purposes of both the Clean Energy Bill 2011 and the NGER Act.

1.30 The NGER regulations may also prescribe new greenhouse gases if required. It is intended that a new greenhouse gas would only be included in regulations if it becomes a gas that is agreed internationally to be included for the purposes of meeting Australia's international emissions reduction obligations . [Schedule 1, Part 2, item 323] [Schedule 1, Part 2, item 290]

Carbon dioxide equivalence

1.31 The definition of 'carbon dioxide equivalence' (CO2-e) in the NGER Act is amended to provide for calculating:

·
the carbon dioxide equivalence of an amount of greenhouse gas; and
·
the carbon dioxide equivalence of an amount of potential greenhouse gas emissions embodied in an amount of natural gas.

1.32 The carbon dioxide equivalence of an amount of greenhouse gas (metric weight) means the amount of the gas multiplied by a value specified in the regulations in relation to that kind of greenhouse gas. This value is the internationally accepted global warming potential for that gas . [Schedule 1, Part 2, item 278] [Schedule 1, Part 2, item 323]

Potential greenhouse gas emissions

1.33 'Potential greenhouse gas emissions' embodied in an amount of natural gas and its carbon dioxide equivalence are defined to allow for upstream reporting of emissions from natural gas . [Schedule 1, Part 2, item 309] [Schedule 1, Part 2, item 323]

Liable entities, controlling corporations and corporate groups

1.34 To the extent it underpins the carbon pricing mechanism; the NGER Act applies to all legal entities covered by the Clean Energy Bill 2011, through the definition of 'person' . [Schedule 1, Part 2, item 308] [Schedule 1, Part 2, item 299]

1.35 To reflect the approach under the carbon pricing mechanism to liability and operational control over a facility, the definition of 'groups', 'joint ventures' and 'trusts' under the NGER Act is amended and references to partnerships are removed. (For detail on the treatment of joint ventures, see Chapter 1 of the explanatory memorandum to the main bill) . [Schedule 1, Part 2, item 293] [Schedule 1, Part 2, item 297] [Schedule 1, Part 2, item 300] [Schedule 1, Part 2, item 319] [Schedule 1, Part 2, items 324-326]

1.36 A provision is included to avoid doubt that a controlling corporation's group may consist of the controlling corporation alone . [Schedule 1, Part 2, item 327]

1.37 To assist in the enforcement of obligations under the Clean Energy Bill 2011 and the NGER Act, a provision is included to define a foreign person . [Schedule 1, Part 2, item 288]

1.38 The definition of a non-group entity identifies any person that is not a member of a controlling corporation's group (essentially this encompasses individuals and any other entities that are not constitutional corporations) . [Schedule 1, Part 2, item 303] These entities only have obligations under the NGER Act because of obligations under the carbon pricing mechanism.

Operational control

1.39 'Operational control' is the concept used when determining the entity with NGER obligations and/or a liability under the carbon pricing mechanism for a facility. The operational control approach is adopted for the carbon pricing mechanism as it places obligations on the person that has the greatest ability to introduce and implement operational and environmental policies for a covered facility. In addition many entities have already begun organising emission reporting systems around the operational control approach as defined in the NGER Act.

1.40 The definition of operational control underpins both the Clean Energy Bill 2011 and the NGER Act through the expansion of operational control to all carbon pricing mechanism entities through its application to any person . [Schedule 1, Part 2, items 339A-347]

1.41 To support this inclusion and the carbon pricing mechanism's approach to liability, the definition of operational control in the NGER Act includes:

·
an operational control provision for the person who has the greatest authority over operational and environmental policies (section 11A); and
·
provisions that relate to circumstances where more than one person has authority over operational and environmental policies (sections 11B and 11C) . [Schedule 1, Part 2, item 307] [Schedule 1, Part 2, items 348-349]

1.42 Nomination of a person as the person with operational control under the NGER Act requires the nomination of a non-foreign person where possible. A definition for 'foreign person' is included in the NGER Act . [Schedule 1, Part 2, item 349] [Schedule 1, Part 2, item 288]

1.43 The Regulator may make a declaration in regard to operational control in relation to a non-group entity either on application by the non-group entity or at the Regulator's own initiative . [Schedule 1, Part 2, item 407] [Schedule 1, Part 2, item 411] The NGER Act previously provided for such declarations only in relation to constitutional corporations and members of their groups (section 55).

1.44 The Regulator cannot declare that a member of a corporation's group or a non-group entity has operational control unless it is satisfied that the entity has substantial authority over operational and environmental policies. Further, in the case of an application by a member of a controlling corporation's group for a declaration of operational control, the controlling corporation must have consented to the application . [Schedule 1, Part 2, items 406-407]

Facility

1.45 The definition of a 'facility' applies to both the NGER Act and the Clean Energy Bill 2011. The Regulator may declare a facility on application by a controlling corporation or a non-group entity or at its own initiative . [Schedule 1, Part 2, items 328-330] [Schedule 1, Part 2, items 403A-405] [Schedule 1, Part 2, item 410]

1.46 The limitation of the definition of a 'facility' and 'greenhouse gas projects' to oil and gas extraction activities in the exclusive economic zone is removed so that the NGER Act can apply to emissions such as those from offshore carbon storage facilities under the sea bed . [Schedule 1, Part 2, items 291-292] [Schedule 1, Part 2, item 304] [Schedule 1, Part 2, item 331]

1.47 A definition for 'carbon capture and storage' is inserted into the NGER Act to ensure that the definition of 'activity' extends to carbon capture and storage . [Schedule 1, Part 2, item 275] [Schedule 1, Part 2, item 277]

1.48 To allow for the coverage of emissions from solid waste and other things such as stockpiling and storage the definition of 'activity' in relation to a facility is expanded . [Schedule 1, Part 2, item 275]

1.49 In addition, 'operation' in relation to a facility will be defined to include the subsistence of the facility. For example a closed landfill facility continues to emit greenhouse gas emissions and is therefore still considered to be in operation even though waste is no longer being received . [Schedule 1, Part 2, item 305]

1.50 Subsection 9(3) of the NGER Act currently provides that, for the purposes of paragraph 9(1)(a) of the NGER Act, the activity or activities constituting the undertaking or enterprise must not be attributable to more than one industry sector. The question as to which industry sector a facility belongs is used for statistical purposes only and not for determining what a facility is. As it is not relevant in this context, subsection 9(3) is repealed . [Schedule 1, Part 2, item 332]

Further amendments to definitions

1.51 The meaning of 'natural gas' will be defined in the National Greenhouse and Energy Reporting Regulations 2008. [Schedule 1, Part 2, item 301]

1.52 The terms listed below will be defined in the NGER Act by reference to the Clean Energy Bill 2011:

·
'eligible financial year' ; [Schedule 1, Part 2, item 281]
·
'emissions number' ; [Schedule 1, Part 2, item 283]
·
'financial control liability transfer certificate' ; [Schedule 1, Part 2, item 285]
·
'fixed charge year' ; [Schedule 1, Part 2, item 286]
·
'foreign country' ; [Schedule 1, Part 2, item 287]
·
'interim emissions number' ; [Schedule 1, Part 2, item 295]
·
'liable entity'; and [Schedule 1, Part 2, item 298]
·
'provisional emissions number' . [Schedule 1, Part 2, item 310]

1.53 Other terms will be defined in the NGER Act by reference to other Acts.

·
'Joint Petroleum Development Area' [Schedule 1, Part 2, item 296] is defined in the Petroleum (Timor Sea Treaty) Act 2003, while 'trustee' [Schedule 1, Part 2, item 320] and 'trust estate' [Schedule 1, Part 2, item 321] are defined in the Income Tax Assessment Act 1997.

1.54 A number of terms will have the meanings given by the Acts Interpretation Act 1901, as amended by the Acts Interpretation Amendment Act 2011 which commences prior to 1 July 2012.

·
'continental shelf';
·
'exclusive economic zone'; and
·
'territorial'.

1.55 A definition of 'approved by the Regulator' has been included to make it clear that where the Regulator has approved something, this means that it has done so in writing, for the purposes of the provision in which the term occurs. This also ensures that such a provision will attract the provisions in the Acts Interpretation Act 1901 concerning varying and revocation . [Schedule 1, Part 2, item 276]

Registration

1.56 The following liable entities are required to apply to register under the NGER Act:

·
Controlling corporations that meet a threshold under section 13 of the NGER Act are required to apply to register under the NGER Act by 31 August following the first financial year which triggers their registration requirement.
·
Liable entities are required to apply to register under the NGER Act by 31 August following the first financial year which triggers their registration requirement.
·
Liable entities with an interim emissions number are required to apply to register under the NGER Act by 1 May in the current eligible financial year if the person was not previously registered but is a liable entity (or is expected to be a liable entity) for the current fixed charge year. This registration requirement is intended to apply to persons who have an interim emissions number. This registration category applies during the fixed charge period to enable persons to register prior to making a progressive surrender.

1.57 Registration occurs under two separate Divisions of the NGER Act, Division 3 and Division 4 of Part 2. Only controlling corporations that meet a threshold outlined in section 13 of that Act are required to apply to register under Division 3 of Part 2. If a controlling corporation is already registered under that Division and subsequently becomes a liable entity, it will not be required to register again under Division 4. If a corporate group member, other than the registered controlling corporation, is a liable entity for a particular facility, it is required to register under Division 4 . [Schedule 1, Part 2, item 350] [Schedule 1, Part 2, item 352] [Schedule 1, Part 2, item 354] [Schedule 1, Part 2, item 356] [Schedule 1, Part 2, items 313-314]

1.58 Once a person has applied to register under the NGER Act, the Regulator must cause their name to be entered on the National Greenhouse and Energy Register (the Register). The Register will include the names of registered persons and the matters specified in the regulations, which may include information provided in reports submitted under the NGER Act. The intent is for a published version of the Register for each financial year to be made available on the Regulator's website by 28 February following the relevant financial year. For example, the 2012-13 Register must be published by 28 February 2014 and the 2013-14 Register must be published by 28 February 2015. The intent is for the published Register to, at a minimum, include names of persons registered for the previous financial year. Other information may be published at the Regulator's discretion. Publication of annual registers will help inform the Australian public as to whether and when an entity was registered under the NGER Act . [Schedule 1, Part 2, item 312] [Schedule 1, Part 2, item 353] [Schedule 1, Part 2, item 356]

1.59 A provision is included to ensure that greenhouse gas emissions, energy production and energy consumption are only counted towards meeting a specified threshold where the Minister has determined a method or criteria for measurement, as published in the National Greenhouse and Energy Reporting (Measurement) Determination 2008. This provision is intended to ensure that only recognised and measurable sources of greenhouse gas emissions and energy count towards meeting a specified threshold . [Schedule 1, Part 2, item 351]

Deregistration

1.60 Once registered, a person may apply to the Regulator to deregister. The Regulator must deregister the person provided that:

·
if they are a controlling corporation, they are unlikely to meet any of the thresholds in section 13 of the NGER Act for the financial year in which they apply and are not likely to meet one of those thresholds in the following two financial years,
·
they are not a liable entity for the financial year in which they apply and are not likely to be a liable entity in the following 2 financial years,
·
they do not hold a reporting transfer certificate, and
·
they have complied with their obligations under the Act . [Schedule 1, Part 2, item 356].

1.61 The Regulator may also initiate deregistration where a 'person' is no longer a legal entity (that is, it has ceased to exist). This provision is intended to cover instances where organisations do not apply for removal from the Register notwithstanding that they have ceased to trade and have no outstanding obligations under the Act . [Schedule 1, Part 2, item 356]

1.62 A person ceases to be registered in the NGER Act when the Regulator removes their name from the National Greenhouse and Energy Register . [Schedule 1, Part 2, item 355-356]

Reporting

1.63 As outlined above, reporting requirements under section 19 of the NGER Act will continue to apply to controlling corporations that met a threshold under section 13 of that Act and therefore are registered under Division 3 of Part 2 of that Act. The introduction of the carbon pricing mechanism will not alter the effect of reporting provisions for controlling corporations under that Act.

1.64 A provision is included to ensure that greenhouse gas emissions, energy production and energy consumption are only to be included in reports where the Minister has determined a method or criteria for measurement, as published in the National Greenhouse and Energy Reporting (Measurement) Determination 2008. This provision is intended to ensure that only recognised and measurable sources of greenhouse gas emissions and energy are included in submitted reports . [Schedule 1, Part 2, item 360] [Schedule 1, Part 2, items 367-369]

1.65 Additional reporting requirements outlined in this segment are introduced into the NGER Act to underpin the introduction of the carbon pricing mechanism, including obtaining covered scope 1 greenhouse gas emissions data from liable entities. Liable entities (registered under Division 4 of Part 2 of the NGER Act) are not required to report scope 2 emissions, energy consumption or energy production data (see new part 3A). It is intended to streamline reporting requirements for controlling corporations and liable entities . [Schedule 1, Part 2, items 357-359] [Schedule 1, Part 2, item 362] [Schedule 1, Part 2, item 367]

1.66 During both the fixed charge and flexible charge periods, liable entities under the carbon pricing mechanism are required to report to the Regulator by 31 October each year following the reporting (financial) year. The NGER Act requires reporting of matters relevant to liability under the carbon pricing mechanism as specified in the Regulations, including:

·
the calculation of their provisional emissions numbers,
·
the greenhouse gas emissions attributable to covered scope 1 emissions (if applicable),
·
the greenhouse gas emissions attributable to potential greenhouse gas emissions embodied in an amount of natural gas (if applicable), and
·
the calculation of their final emissions number (see new section 22A) . [Schedule 1, Part 2, item 367] [Schedule 1, Part 2, item 359]

1.67 It is intended that during the fixed charge period, a liable entity who has a progressive surrender obligation must also report information relating to its interim emissions number . [Schedule 1, Part 2, item 367]

Example 1.1 Existing reporter - not liable under the carbon pricing mechanismCompany A consumes 250 terajoules of energy and has direct emissions of 5,000 tonnes CO2-e in 2012-2013. It therefore will continue to have reporting obligations under section 19 of the NGER Act because it meets an energy threshold under section 13 of the NGER Act. It is not a liable entity under the carbon pricing mechanism.Company A's reporting requirements under the NGER Act will remain unchanged and it will not have any additional reporting obligations due to the carbon pricing mechanism.

Example 1.2 Existing reporter - liable under the carbon pricing mechanismCompany B is a controlling corporation that has previously registered and reported under the NGER Act because it has operational control over a facility with typical annual scope 1 (direct) emissions of 35,000 tonnes CO2-e. It therefore will continue to have reporting obligations under section 19 of the NGER Act because it meets the threshold under paragraph 13(1)(d) of the NGER Act. Its scope 1 (direct emissions) are fugitive emissions from an active mine site and are covered under the carbon pricing mechanism. It will therefore become a liable entity from 1 July 2012.Company B's existing reporting requirements under the NGER Act will remain unchanged and it will have additional reporting requirements due to the carbon pricing mechanism from 1 July 2012 onwards such as:

·
Scope 1 (direct) emissions covered by the carbon pricing mechanism
·
the calculation of its provisional emissions number
·
the calculation of its emissions number

Example 1.3 New reporting entity - direct emitterA local governing body is a liable entity from 1 July 2012 due to emissions from its landfill facility exceeding the facility threshold, but was not previously registered under the NGER Act on the basis that it was not a constitutional corporation. The local governing body will have reporting obligations relating to its emissions from 1 July 2012 onwards such as:

·
Scope 1 (direct) emissions covered by the Carbon pricing mechanism
·
the calculation of its provisional emissions number
·
the calculation of its emissions number

The local governing body will not have any other obligations under the NGER Act such as reporting of scope 2 (indirect) emissions, energy production and energy consumption as it is not a controlling corporation and is therefore not required to register under section 12 and Division 3 or report under section 19 of that Act.

Example 1.4 New Reporting Entity - Natural Gas RetailerCompany Z is a natural gas retailer and was not previously registered under the NGER Act. Under the Clean Energy Bill 2011, as a supplier of natural gas it has obligations to register and report as a liable entity under the NGER Act. Company Z will have reporting obligations relating to its emissions from 1 July 2012 onwards such as:

·
potential greenhouse gas emissions attributable to potential greenhouse gas emissions embodied in an amount of natural gas;
·
the calculation of its provisional emissions number; and
·
the calculation of its emissions number.

Financial control liability transfer certificates

1.68 Financial control liability transfer certificates are discussed in more detail in Chapter 1 of the explanatory memorandum to the main bill.

1.69 Financial control liability transfer certificate holders must provide a report to the Regulator relating to the greenhouse gas emissions, energy production and energy consumption from the operation of that facility relating to the whole, or part of the year for which it holds that certificate (see new section 22E). Similar to other liable entities, the holder of the financial control liability transfer certificate will also be required to report those matters relevant to it being the liable entity for that facility (see new section 22E) . [Schedule 1, Part 2, item 367]

1.70 Where liability has been transferred from an entity using a financial control liability transfer certificate, that entity will no longer have reporting obligations for that facility. This is relevant to liable entities that are required to register under Division 4 of Part 2 of the NGER Act (see the liability transfer certificate exemption paragraphs in clauses 17, 18, 20 and 21 of the main bill) . [Schedule 1, Part 2, item 361]

1.71 The effect of the financial control liability transfer certificate will also be to remove the facility from the controlling corporation's group such that the facility no longer contributes to the controlling corporation's threshold calculations. This provision does not apply to holders of a controlling group liability transfer certificate . [Schedule 1, Part 2, item 351A]

Example 1.5

Example 1.5

A financial control liability transfer certificate is issued to Entity B in relation to Facility 1.Facility 1 will be reported by Entity B as the holder of the financial control liability transfer certificate. Facility 1 will not form part of Corporation A's group for the purposes of meeting group thresholds under the NGER Act.

Transferring reporting obligations to a member of the corporate group

1.72 A provision is included to allow for the obligation to report to be transferred to a member of a corporate group, where both the controlling corporation and the responsible member jointly agree to the transfer. The responsible member must either have operational control over the facility or hold a corporate group Liability Transfer Certificate relating to the facility. The responsible member will be required to report all information relating to that facility in place of the controlling corporation.

1.73 In practice, this means that where an entity transfers reporting obligations within a corporate group, that facility will still contribute toward its greenhouse gas emissions, energy consumption and energy production totals for the purposes of calculating whether it meets a group threshold under section 13 of the NGER Act. However, the controlling corporation is not required to report information relating to that facility . [Schedule 1, Part 2, item 369] [Schedule 1, Part 2, item 363]

Example 1.6

Example 1.6

Subsidiary X (as the responsible member) is required to provide all relevant information to the Regulator.Facility 1 will continue to form part of Corporation A's group for the purposes of meeting a group thresholds under the NGER Act.

Methodologies

1.74 Emissions estimation methodologies under the carbon pricing mechanism are those set out under the National Greenhouse and Energy Reporting (Measurement) Determination 2008, which is made by the Minister under sub-section 10(3) of the NGER Act.

1.75 Provisions relating to methodology policy decisions are expected to be included in amendments to the National Greenhouse and Energy Reporting Regulations 2008 and the National Greenhouse and Energy Reporting (Measurement) Determination 2008 to ensure that specific methodologies exist to meet obligations under the carbon pricing mechanism.

Audit

Audit regime overview

1.76 Audits under the NGER Act can be broadly divided into three main categories, as follows:

·
mandatory pre-submission audits (see below),
·
compliance (undertaken where non-compliance is suspected), and
·
other (undertaken as monitoring general compliance as part of a broader risk minimisation framework).

1.77 Compliance and 'other' audits may be undertaken in relation to the compliance with, or investigation into, one or more aspects of the NGER Act or the regulations, for the following entities:

·
a registered corporation (including those which are liable entities);
·
a non group entity; or
·
an entity reporting under section 22X, that is not a registered corporation.

To whom the mandatory audit requirement applies

1.78 A person who is a liable entity for a financial year and who is required to provide a report under section 22A of the NGER Act and whose emissions number exceeds the number specified in the regulations is subject to mandatory audit provisions as set out in new section 74AA . [Schedule 1, Part 2, item 414]

1.79 The emissions number is the total of the person's provisional emissions numbers (if any) for the relevant financial year. This means that excess surrender numbers and make good numbers are not taken into account for the purposes of meeting the audit threshold.

1.80 It is expected that the emissions number which is initially prescribed will be 125,000, corresponding to covered scope 1 emissions of 125,000 tonnes of carbon dioxide equivalence. The Government will then consider the need to extend this requirement on the basis of initial experience, developments relating to international linking and the compliance burden on small entities.

Mandatory audit requirements

1.81 Any liable entity meeting the above criteria will be required to appoint an audit team leader who is a registered greenhouse and energy auditor . [Schedule 1, Part 2, item 414]

1.82 The liable entity must then arrange for that audit team leader to carry out an audit of its emissions report under section 22A, other matters relating to the report as prescribed in regulations, and compliance with the record-keeping requirement under section 22B.

1.83 The liable entity must arrange for the audit report to be provided to them setting out the results of the audit and the liable entity must give the Regulator a copy of this report on the day that the emissions report set out under 22A is submitted.

1.84 Regulations may specify the type of audit, the matters to be covered by the audit, the form of the audit and the kinds of details it is to contain.

1.85 Ensuring the accuracy of emissions reports will be vital in achieving the environmental objectives of the carbon pricing mechanism. Penalties are included to encourage prompt and effective auditing of emissions reports.

Other audit amendments

1.86 The NGER Act is amended to apply the existing external audit provisions to non-group entities and non-registered corporate group members who have agreed to take on a controlling corporation's reporting obligations for a facility . [Schedule 1, Part 2, item 414] [Schedule 1, Part 2, item 289]

Public Disclosure

1.87 The publication requirements relating to energy consumption are revised. Amendments provide for adjusted 'net' energy consumption information to be published to ensure that the published amount is representative for a registered corporation. The procedures for adjustment will be outlined in the Regulations. Publication requirements are extended to include information provided under Parts 3D and 3F, in addition to Part 3. [Schedule 1, Part 2, item 371]

1.88 The Regulator will publish, for each eligible financial year, a liable entity's total provisional emissions numbers, split according to the total covered scope 1 emissions of greenhouse gas and the total attributable to potential greenhouse gas emissions embodied in an amount of natural gas.

1.89 The above information is published at the entity level and not at the facility level . [Schedule 1, Part 2, item 375] [Schedule 1, Part 2, items 379-379A]

1.90 The Regulator will also publish on its website, information on greenhouse gas emissions and energy production data (totals and disaggregated) reported by designated generation facilities. Publication will apply to all facilities where the principal activity is electricity generation and where the facility is not part of a vertically-integrated production process (VIPP) . [Schedule 1, Part 2, items 378] [Schedule 1, Part 2, item 280] [Schedule 1, Part 2, item 381]

1.91 This means that facilities generating electricity for their own use or as a secondary activity will not have their emissions and electricity production data published. For example, landfill sites that generate electricity from landfill gas, sugar mills that generate electricity from sugar cane bagasse, or mining operations or smelting facilities that generate electricity for use on-site would not have their facility-level data published where the electricity generation capacity forms part of the larger facility. This information is intended to better inform markets and the community about the performance of electricity generators. Accordingly, designated generation facilities will not be able to apply to have their facility-level data withheld.

1.92 In addition, generation facilities that are part of VIPPs will not have their data published as these corporations are currently not required to report separate facility-level data for VIPP facilities and it is intended that only data which is already reported under the NGER Act will be published . [Schedule 1, Part 2, item 378] [Schedule 1, Part 2, item 280]

1.93 The Regulator can only publish information relating to reporting transfer certificate holders and financial control liability transfer certificate holders if the facility triggers a specified energy and/or emissions threshold. This provision facilitates consistency between public disclosure arrangements. Further, if an entity only held either of these certificates for part of a year, published data will be based on the proportion of time that the certificate holder was considered to have control . [Schedule 1, Part 2, items 375A-377A] [Schedule 1, Part 2, item 380]

1.94 Persons that are required to report under sections 22A, 22AA, 22E and 22X of the NGER Act may apply to the Regulator to request that information not be published if that information reveals, or is capable of revealing trade secrets or any other matter that has commercial value that would be or could be reasonably diminished if the information were disclosed about a specific facility, technology or corporate initiative relating to the corporation or the person . [Schedule 1, Part 2, items 384-385] However, designated generation facilities will not be able to apply to have their facility-level data withheld (see new part 24(1AF)) . [Schedule 1, Part 2, item 386]

1.95 The Regulator may delegate its registration powers relating to maintaining the Register to another person . [Schedule 1, Part 2, item 415]

Penalties

1.96 The penalty for breaching the secrecy provision is revised to include a financial penalty in addition to the possibility of imprisonment . [Schedule 1, Part 2, item 370]

1.97 Penalties for provisions in the NGER Act that relate to carbon pricing mechanism obligations and liability have been clarified where relevant and increased to align them with penalties under the main bill . [Schedule 1, Part 2, items 412-413]

1.98 Liable entities will be subject to penalties, including for continuing contraventions if they fail to comply with reporting requirements or if they fail to comply with external audit provisions . [Schedule 1, Part 2, items 387-390]

Operational Reviews of the NGER Act

Regular Reviews of the Act

1.99 The Climate Change Authority (Authority) will conduct periodic reviews on the operation of NGER Act and its instruments.

1.100 The Authority must publish the report of a review on its website and give the report to the Minister, who must table copies in each House of the Parliament. The report may set out recommendations to the Government, which includes a cost benefits analysis of that action.

1.101 The Minister must, on behalf of the Government, prepare a response to each of the Authority's recommendations as soon as practicable after receiving the report. It is expected that the document will outline the Government's reasons for each response.

1.102 The first of these reviews must be completed between July 2016 and December 2018 and subsequent reviews must be completed within five years of the last review . [Schedule 1, Part 2, item 415A]

Special Reviews of the Act

1.103 The Minister may cause the Authority to conduct a special review of the operation of the NGER Act and its instruments.

1.104 The Authority must give the report of a review to the Minister and must publish the report of a review on its website as soon as practicable thereafter. The Minister must table copies of the report in each House of the Parliament. The report may set out recommendations to the Government, which includes a cost benefits analysis of that action.

1.105 The Minister must, on behalf of the Government, prepare a response to each of the Authority's recommendations as soon as practicable after receiving the report. It is expected that the document will outline the Government's reasons for each response . [Schedule 1, Part 2, item 415A]

1.106 The major difference between a special review and a regular review is that the regular reviews are undertaken periodically, while a special review is undertaken at the request of the Minister as required.

Other General Amendments

Record Keeping

1.107 Record keeping requirements in the NGER Act require all reporting entities and other relevant persons to retain records for five years, in line with standard taxation record keeping . [Schedule 1, Part 2, items 364-366] [Schedule 1, Part 2, item 368A]

Object of the NGER Act

1.108 The objects of the NGER Act are amended to reflect the interaction between the NGER Act and the Clean Energy Bill 2011. The second object of the NGER Act is to underpin the Clean Energy Bill 2011 by imposing various registration, reporting and record-keeping requirements. These requirements, as outlined above, apply to liable entities . [Schedule 1, Part 2, items 261A-265]

Constitutional basis

1.109 Where the NGER Act underpins the Clean Energy Bill 2011 the former relies on the same legislative powers as the latter . [Schedule 1, Part 2, items 266-268]

Extension and limitation with regard to exclusion of some State and Territory laws

1.110 Section 5 of the NGER Act provides for the exclusion of specific State or Territory laws (or a part thereof) that apply to persons if that law provides for the reporting or disclosure of information relating to greenhouse gas emissions, greenhouse gas projects, energy consumption or energy production and is listed in the regulations as a law, or part of a law, to which the section applies. An exemption to the application of this provision in relation to laws providing for the reporting or disclosure of information related to greenhouse gas emissions is made for local governing bodies and authorities of a State or Territory. This limitation recognises that the Commonwealth does not wish to limit State and Territory laws (or a part thereof) from requiring reporting and disclosure of information related to greenhouse gas emissions by these entities to the States and Territories.

1.111 The purpose of section 5 is to support the streamlining of greenhouse and energy reporting by enabling corporations to meet the reporting requirements of multiple programmes through a single framework, created under the NGER Act.

1.112 No regulations have been made under this section to date and the Government is continuing to work cooperatively with State and Territory governments to transition towards a single reporting system across all jurisdictions . [Schedule 1, Part 2, items 269-272]

Crown to be bound

1.113 In line with usual practice, while the Crown is bound by the NGER Act, the Crown is not subject to a pecuniary or criminal penalty . [Schedule 1, Part 2, item 273] This protection does not apply to an authority of the Crown.

Territorial boundary

1.114 The application and extensions of the NGER Act is the same as those of the Clean Energy Bill 2011, including extensions to the exclusive economic zone and continental shelf (as defined in the Acts Interpretation Act 1901, as amended by the Acts Interpretation Amendment Act 2011), and to the Joint Petroleum Development Area. The application of the NGER Act to foreign ships is also defined in the same manner as in the Clean Energy Bill 2011 . [Schedule 1, Part 2, item 274] [Schedule 1, Part 2, item 294] [Schedule 1, Part 2, item 322]

1.115 Executive officers of bodies corporate are liable under the NGER Act in line with the Clean Energy Bill 2011 . [Schedule 1, Part 2, item 284] [Schedule 1, Part 2, items 391-403]

Decisions that are reviewable by the Administrative Appeals Tribunal

1.116 Decisions by the Regulator not to register and not to deregister a person are reviewable by the Administrative Appeals Tribunal . [Schedule 1, Part 2, items 408-411]


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