House of Representatives

Explanatory Memorandum

Minister for Climate Change and Energy Efficiency, the Hon Greg Combet AM MP

General outline and financial impact

Background

Clean Energy Legislation

The Australian Government accepts the advice of scientists that greenhouse gas emissions are contributing to climate change and this poses great risks to our environment, our economy and our society.

That is why Australia is joining with the rest of the world in cutting carbon pollution dramatically over coming decades. The economies that accept this challenge are those that will be more competitive in the years ahead.

Delayed action is a false economy, raising the economic costs of action and risking worse impacts from the effects of climate change. As Australia produces more carbon pollution per head of population than any developed country in the world and is within the top 20 in terms of absolute emissions, we have no choice but to act strongly to reduce our levels of pollution.

A broad-based carbon price is the most environmentally effective and cheapest way to reduce pollution. A carbon price puts a price tag on carbon pollution.

The carbon price is now creating powerful incentives for all businesses to cut their pollution by investing in clean technology or finding more efficient ways of operating. It is now creating economic incentives to reduce pollution in the cheapest possible ways, rather than relying on more costly approaches such as government regulation and direct subsidies.

These incentives are now flowing through the economy. The carbon price makes lower-polluting technologies, especially clean energy technologies, more competitive and boosts investment in these technologies. In this way, introducing a price on carbon is triggering the transformation of the economy towards a clean energy future.

A cap and trade emissions trading scheme, as will be in force from 1 July 2015, places a cap on the amount of pollution that covered sectors can emit. That cap declines over time, allowing Australia to meet our emissions reduction targets. The carbon price is then set by the market as it determines the least cost ways of reducing carbon pollution.

The Clean Energy Legislative Package implements the carbon pricing mechanism and provides that it may be linked to credible overseas emissions trading schemes and to the Carbon Farming Initiative. It also provides for assistance to households and industry, to assist households with the impact of the carbon price, support jobs, protect the competitiveness of emissions-intensive trade-exposed industries and support energy security.

Further detail about the policy context of the Clean Energy Legislative Package is set out in the Explanatory Memorandum for the Clean Energy Bill 2011. ^[1]

Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012 and related bills

The:

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Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012;

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Excise Tariff Amendment (Per-tonne Carbon Price Equivalent) Bill 2012;

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Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012;

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Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012;

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Clean Energy (Charges-Excise) Amendment Bill 2012;

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Clean Energy (Charges-Customs) Amendment Bill 2012; and

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Clean Energy (Unit Issue Charge-Auctions) Amendment Bill 2012

make amendments to the CE Act, the ANREU Act, the NGER Act, the Fuel Tax Act, the Excise Tariff Act, the SGG (Import Levy) Act, the SGG (Manufacture Levy) Act, the CE (Unit Issue Charge-Auctions) Act, the CE (Charges-Customs) Act and the CE (Charges-Excise) Act that cover:

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arrangements to facilitate the linking of Australia's carbon pricing mechanism to other countries' emissions trading schemes, including the EU ETS;

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the removal of the price floor and repeal of the Clean Energy (International Unit Surrender Charge) Act 2011;

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consequential changes to the equivalent carbon pricing of liquid fuels and synthetic greenhouse gases;

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the streamlining of arrangements for relinquished carbon units;

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limits on issue of carbon units at auction without a pollution cap in place;

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the content of Measurement Determinations under the NGER Act;

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the treatment of natural gas under the carbon pricing mechanism; and

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the treatment of GST joint venture operators in the Opt-in Scheme.

On 28 August 2012 the Australian Government and the European Commission announced that the carbon pricing mechanism would be linked with the EU ETS.

Under this arrangement, Australian liable entities will be able to use European allowance units to meet up to 50 per cent of their liabilities under the carbon pricing mechanism from the commencement of the flexible price period on 1 July 2015. This ensures that Australian liable entities have access to a broader range of credible, low-cost abatement from an established market. This will allow for a smoother transition from the fixed price to a market based emissions trading scheme.

Full linking will also allow companies that operate in both Europe and Australia to access units which are fully transferable in both jurisdictions, making compliance simpler and making it easier to manage emissions across operations.

The EU ETS is a mandatory emissions trading system that operates across the European Union, covering all 27 EU member states, along with Norway, Iceland and Liechtenstein. Operating since 2005, the EU ETS is the world's largest emissions trading scheme, covering some 11,000 facilities. It has delivered cost-effective emissions reductions. In 2011, emissions had fallen 17.5 per cent below 1990 levels in the European Union.

As part of this arrangement, the Government agreed that it would remove the price floor and restrict the quantity of eligible Kyoto units that liable entities can use to discharge their carbon pricing liabilities. These changes will reduce the complexity of the linking arrangement and facilitate the convergence of Australian and European carbon prices.

This means that from 1 July 2015 Australia's carbon price will reflect that of our second largest trading bloc, and be consistent with at least 30 other countries - including the United Kingdom, France and Germany.

It also means that the carbon price will be fixed for only three years, before becoming an internationally linked emissions trading scheme where the market sets the carbon price.

The amendment bills package makes provision for the linking of the Australian carbon pricing mechanism with overseas emissions trading schemes, including the EU ETS. The amendments are designed to enable the Government to make and implement arrangements to link with a variety of schemes, and are therefore designed to provide appropriate flexibility for the Government in implementing these technical arrangements.

The global carbon market is growing year by year with markets emerging across the globe.

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The EU ETS currently operates in 30 European countries.

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Emissions trading schemes are also operating in New Zealand, Switzerland and at the provincial level in Japan and in nine US States.

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In 2013, emissions trading schemes are legislated to commence in the US state of California and in the Canadian province of Quebec. China aims to commence pilot emissions trading schemes in seven provinces and cities.

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South Korea, Australia's fourth largest trading partner, has also legislated an emissions trading scheme which is set to commence in 2015.

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Market-based emissions reduction policies are also under consideration or development in Brazil, Chile, Columbia, Costa Rica, Jordan, India, Indonesia, Mexico, Morocco, South Africa, Thailand, Turkey, Ukraine, Vietnam and in the Canadian provinces of British Columbia, Ontario and Manitoba.

Under the linking arrangement, Australian liable entities may only use eligible Kyoto units to meet 12.5 per cent of their total liability. This will continue until at least 2020. Furthermore, the Government may, through regulations, introduce additional or alternative quantitative limits on the use of eligible international emissions units. This will provide the Government the flexibility to respond to changing international circumstances as needed.

However, the Government is conscious of the need to provide a stable market and investment environment. It is committed to provide at least three years' notice before new designated limits are introduced or changes to existing designated limits are due to take effect.

Under the linking arrangement, the price floor will no longer operate in the first three years of the flexible price period, thus facilitating the convergence of the EU and Australian carbon prices. This will be achieved by removing the requirement for a minimum auction reserve price for the financial years 2015-16, 2016-17 and 2017-18 from the CE Act, the CE (Unit Issue Charge-Auctions) Act, the CE (Charges-Customs) Act, and the CE (Charges-Excise) Act, as well as removing the requirement for a surrender charge on eligible international emissions units by repealing the Clean Energy (International Unit Surrender Charge) Act 2011.

In making these changes, it is also necessary to ensure that the equivalent carbon price paid by users of liquid fuels and synthetic greenhouse gases is more clearly reflective of the carbon price under the linking arrangements. To this end, the application of an equivalent carbon price is amended in the Fuel Tax Act, the Excise Tariff Act, the SGG (Import) Act and the SGG (Manufacture) Act to introduce a new concept: the 'per-tonne carbon price equivalent'.

The Regulator will determine and publish the equivalent carbon price within seven business days after the last day of each May and November (starting in May 2015), subject to a requirement that the maximum per-tonne carbon price equivalent is equal to the 6-monthly auction price.

Amendments to the ANREU Act ensure that linking can occur, even in the event that it is not possible to implement a direct registry link between the carbon pricing mechanism and an overseas emissions trading scheme. Indirect linking may be given effect by the Government issuing AIIUs to holders of an ANREU account, where these units are backed by foreign emissions units. The Government has also been given powers to open and operate an overseas registry account and to alter the way in which AIIUs are managed in the ANREU as circumstances necessitate.

There are also technical amendments to enhance the auction scheme. The limit on advance-auctioned carbon units is increased to 40 million units for carbon units whose vintage is 2015-16 that are auctioned in 2013-14 and 20 million units for other advance auctions where there is no carbon pollution cap number for that year. The final details of the auction arrangements are determined by the legislative instrument under section 113 of the CE Act which is expected to be made in early 2013 after further consultation with industry. The Government has decided that there will no longer be auctions of relinquished carbon units. Instead, if a carbon unit is relinquished, it is cancelled, and a new carbon unit will be auctioned.

Minor and technical amendments to the CE Act and the NGER Act provide the Minister with the power to determine methods to measure amounts of designated fuels and methods to adjust liabilities relating to potential greenhouse gas emissions. Minor amendments to the CE Act also clarify the treatment of GST joint venture operators in the Opt-in Scheme.

Lastly, more flexibility is provided around how the supply and use of natural gas is treated under the CE Act. These amendments help to maintain competitive neutrality by supporting the complete coverage of natural gas under the carbon pricing mechanism.

Date of effect:

Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012

Sections 1, 2 and 3 commence on the date the bill receives the Royal Assent.

Schedule 1, Parts 1 and 3, which make general amendments to the ANREU Act and the CE Act, will commence on the day after the bill receives the Royal Assent.

Schedule 1, Part 2, which makes amendments relating to fuel to the CE Act and the NGER Act, will commence on 1 July 2013. The amendments to the NGER Act made by this Part apply to reports relating to the 2012-13 financial year and all subsequent years.

Excise Tariff Amendment (Per-tonne Carbon Price Equivalent) Bill 2012

Schedule 1 takes effect immediately after the commencement of Part 1 of Schedule 1 to the Clean Energy Amendment (International Emissions Trading and Other Measures) Act 2012.

All other sections of the bill take effect the day the bill receives the Royal Assent.

Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012

Schedule 1 takes effect immediately after the commencement of Part 1 of Schedule 1 to the Clean Energy Amendment (International Emissions Trading and Other Measures) Act 2012.

All other sections of the bill take effect the day the bill receives the Royal Assent.

Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012

Schedule 1 takes effect immediately after the commencement of Part 1 of Schedule 1 to the Clean Energy Amendment (International Emissions Trading and Other Measures) Act 2012.

All other sections of the bill take effect the day the bill receives the Royal Assent.

Clean Energy (Charges-Excise) Amendment Bill 2012

Schedule 1 takes effect at the same time as Part 1 of Schedule 1 to the Clean Energy Amendment (International Emissions Trading and Other Measures) Act 2012.

The remainder of the bill takes effect the day the bill receives the Royal Assent.

Clean Energy (Charges-Customs) Amendment Bill 2012

Schedule 1 takes effect at the same time as Part 1 of Schedule 1 to the Clean Energy Amendment (International Emissions Trading and Other Measures) Act 2012.

The remainder of the bill takes effect the day the bill receives the Royal Assent.

Clean Energy (Unit Issue Charge- Auctions) Amendment Bill 2012.

Schedule 1 takes effect at the same time as Part 1 of Schedule 1 to the Clean Energy Amendment (International Emissions Trading and Other Measures) Act 2012.

The remainder of the bill takes effect the day the bill receives the Royal Assent.

Proposal announced:

The Acts which make up the Clean Energy Legislative Package passed the Senate on 8 November 2011 and variously received the Royal Assent in late November and early December 2011.

The measures in the Clean Energy Legislative Package are based on the announcement on 10 July 2011 and the publication of Securing a clean energy future: The Australian Government's climate change plan.

On 5 December 2011, the Government announced that it had agreed with European Union Commissioner for Climate Action, Ms Connie Hedegaard, terms of reference for discussions on linking the carbon pricing mechanism and the EU ETS. At this time, the Minister for Climate Change and Energy Efficiency, the Hon Greg Combet AM MP, said that:

'Now that Australia's carbon price is the law, the Australian Government will focus on linking our scheme to international carbon markets and other emissions trading schemes.

Expanding international carbon markets is good for the environment and good for economic growth. It allows global emissions to be reduced in the most cost-effective and efficient way.' ^[2]

On 28 August 2012, the Government announced arrangements to link the carbon pricing mechanism to the EU ETS.

Those amendments which make minor and technical amendments concern the operation of measures previously announced as part of the Clean Energy Legislative Package and, therefore, have not been the subject of any further specific announcements.

Financial impact:

These amendments are not anticipated to have a financial impact.

Summary of regulation impact statements

Interim partial link between the EU ETS and the Australian carbon pricing mechanism

Impact:

The Regulation Impact Statement (RIS) for linking the carbon pricing mechanism with the EU ETS is available at http://ris.finance.gov.au. The RIS was prepared by DCCEE and has been assessed as adequate by the Office of Best Practice Regulation.

Main points:

The introduction of a partial link between the EU ETS and the carbon pricing mechanism will provide Australian liable entities with immediate access to credible international units for compliance via the world's largest carbon market for the first three years of the flexible price period. Liable entities will also retain access to Kyoto units.

This arrangement will improve the overall stability and ongoing credibility of the carbon pricing mechanism, as well as avoid potential complexity associated with the implementation of price floor arrangements. A link may also lower transaction costs for entities with liabilities under both schemes. It will also support the development of global carbon markets and ultimately, global action on climate change.

Recipients of assistance in the form of free permits, such as entities receiving assistance under the Jobs and Competitiveness Program may receive a higher effective rate of assistance due to price differentials between carbon units and eligible Kyoto units.

On the other hand, the domestic carbon price will be affected by decisions taken in Europe to support the price of European allowance units, while for a small number of businesses the change in the treatment of international units may create additional low-level administrative costs.

Further impacts of these arrangements on the domestic carbon price and the cost of compliance will depend on prevailing market prices for Kyoto units and European allowance units once the carbon pricing mechanism commences its flexible price phase. Under the carbon price projections in the 2012-13 Budget, drawn from the Strong Growth, Low Pollution modelling report, there would be no impact on domestic carbon prices of establishing a partial link to the EU ETS under these interim arrangements. This is because the international carbon price is projected to be above the price floor and because the projections assume a single international unit price and do not distinguish between Kyoto unit and European allowance unit prices.

If the market prices of Kyoto units and European allowance units differ, with European allowance units trading at a premium to Kyoto units, the Australian domestic carbon price would be expected to equal the prevailing European allowance unit price, as the proposed quantitative sub-limit on the use of Kyoto units implies that some liable entities would need to use European allowance units for compliance purposes. The average cost of meeting a given domestic carbon liability would also be less than the Australian carbon price because all liable entities would be able to use lower cost Kyoto units for a portion of their liability, rather than meeting their full liability through the surrender of carbon units and European allowance units valued at the Australian carbon price.

On balance, the advantages of providing liable entities with access to another secure source of international units, greater effective assistance to recipients of free permits and reduced administrative complexity outweigh these costs. Therefore, it was decided that the Government would establish a partial link between the carbon pricing mechanism and the EU ETS, including not implementing the price floor and introducing an additional quantitative sub-limit on the use of eligible Kyoto units for compliance with obligations under the carbon pricing mechanism. This sub-limit percentage should be set such that some European allowance units are used for compliance, while retaining access to Kyoto units.

Carbon Auction Schedule, frequency and collateral

Impact:

The Regulation Impact Statement (RIS) for auctions of carbon units is available at http://ris.finance.gov.au. The RIS was prepared by DCCEE and has been assessed as adequate by the Office of Best Practice Regulation.

Main points:

From 1 July 2015 the carbon pricing mechanism will transition to an emissions trading scheme and the carbon price will be set by the market through auctions. The auctions will sell carbon units for a particular 'compliance year'. Generally, most carbon units will be sold in their compliance year, however, some will be sold in advance of the compliance year, and some after it. A carbon unit auction limit applies to the amount of units from a compliance year that can be auctioned in an earlier year. It is aimed at preventing over-allocation before the pollution cap is known for a given compliance year.

The carbon unit auction limit will be increased from 15 million to 40 million for 2015-16 units auctioned in 2013-14, and 20 million for all other advance auctions before a pollution cap is set. Increasing this limit provides additional flexibility for the auctioning of units.

Increasing the carbon unit auction limit is not expected to have a financial impact.

Statements of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Statement of Compatability with Human Rights - Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Clean Energy Act 2011 ( the CE Act) to:

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give effect to the arrangement to link Australia's carbon pricing mechanism and the EU ETS by removing the price floor for carbon units (items 66, 67, 89 and 90) and limiting the use of Kyoto units for compliance purposes under the CE Act (items 34, 35, 38, 79 and 81);

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provide for the calculation of an equivalent carbon price that reflects liable entities' cost of compliance under a linked arrangement (items 40 and 82-86);

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increase the limit on advance-auctioned carbon units (items 58-60);

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prevent units being issued at auction more than three years in advance of their vintage year (item 61);

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change the treatment of relinquished carbon units (items 30, 33, 62-65, 68-72 and 87);

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change the treatment of GST joint venture operators in the Opt-in Scheme (items 54-57);

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allow regulations to be made to determine how specific circumstances relating to the supply and use of natural gas are treated under the CE Act (items 28, 37, 39, 41-53 and 88).

This bill amends the Australian National Registry of Emissions Units Act 2011 ( the ANREU Act) to:

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enable European allowance units to be held in the Australian National Registry of Emissions Units (ANREU) and used for compliance purposes under the CE Act (items 4, 5 and 11);

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in the event that a direct link with a foreign emissions trading scheme is not possible, to enable the Clean Energy Regulator (the Regulator) to issue Australian-issued international units (AIIUs) which correspond to foreign emissions units withdrawn from circulation within the relevant foreign registry, and which can be used for compliance purposes under the CE Act (items 1, 9, 11, 16 and 17).

This bill amends the Fuel Tax Act 2006 to adjust the calculation of the equivalent carbon price to ensure that it remains clearly equivalent to the effective carbon price faced by liable entities under the carbon pricing mechanism (item 93).

This bill amends the National Greenhouse and Energy Reporting Act 2007 to provide the Minister with the power to determine methods to measure and adjust amounts of designated fuels for the purpose of ascertaining potential greenhouse gas emissions (items 105-106).

This bill repeals the Clean Energy (International Unit Surrender Charge) Act 2011 to remove the charge payable on the surrender of eligible international emissions units under the CE Act (item 107).

Human rights implications

Right to privacy

The bill engages the right to privacy in four respects:

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The bill enables the making of regulations which could require certain persons who receive natural gas to provide personal information, in the form of an 'own-use notification', to the supplier of the gas (items 52-53). The personal information would encompass information identifying the person, information as to whether the person intends to consume natural gas supplied to the person, and other prescribed information. It is anticipated that notices would ordinarily be given by bodies corporate, rather than individuals. The notices are intended to enable identification of the liable entity in relation to the supply of gas. This purpose is both reasonable and consistent with the objectives of the International Covenant on Civil and Political Rights (ICCPR). A statement of compatibility with human rights, including the right to privacy, would be prepared in relation to any regulation made under this regulation-making power.

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The bill provides for the publication of information about any relinquishment requirements that apply to a person in relation to an AIIU, and any non-compliance with those requirements, either on the Liable Entity Public Information Database (LEPID) (if the person is a liable entity) or on the Regulator's website (if the person is not) (item 22). A court may order a person to relinquish AIIUs if the person has been convicted of a dishonesty offence and the court is satisfied that the issue of the units was directly or indirectly attributable to the commission of the offence (item 23, proposed section 66C of the ANREU Act). The provisions mirror existing provisions around the publication of compliance information in relation to carbon units (sections 190-192 of the CE Act), and are intended to promote transparency in the operation of the carbon pricing mechanism and confidence in its integrity. The nature of the information to be published is precisely defined and the publication requirement does not involve the exercise of any discretionary powers. The publication of this information is therefore considered reasonable and consistent with the objectives of the ICCPR.

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The bill enables the making of regulations which could require the Regulator to publish on the Regulator's website information relating to the registered holder of prescribed international units (item 20). The regulation-making power is intended to promote transparency in the operation of any linking arrangement with a foreign registry. A statement of compatibility with human rights, including the right to privacy, would be prepared in relation to any regulation made under this regulation-making power.

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The bill also enables the making of regulations which could require a person to notify a matter to the Regulator (item 17, proposed section 48E of the ANREU Act). This could involve the disclosure of personal information to the Regulator. Any information disclosed to the Regulator would be subject to the secrecy provisions in Part 3 of the Clean Energy Regulator Act 2011 and could only be disclosed by the Regulator in the circumstances provided for in that Part. A statement of compatibility with human rights, including the right to privacy, would be prepared in relation to any regulation made under this regulation-making power.

Right to fair hearing

The bill engages the right to a fair hearing.

Proposed Part 6B of the ANREU Act (item 23) would deal with the relinquishment of AIIUs. Proposed section 66C would enable an appropriate court, on application made by the Director of Public Prosecutions (DPP) or the Regulator, to order the relinquishment of AIIUs if it was satisfied that the issue of the AIIUs was directly or indirectly attributable to the commission of a specified dishonesty offence under the Criminal Code or a corresponding dishonesty offence under foreign law (whether or not the conviction for that offence was secured before or after the commencement of the section). An appropriate court, for this purpose, would include the court that convicted the person of the Criminal Code offence, the Federal Court or the Supreme Court of a State of Territory.

Proposed section 66F would impose an administrative penalty for non-compliance with this relinquishment requirement and proposed section 66G would impose an administrative penalty for late payment of the section 66F penalty. The penalties would be a debt due to the Commonwealth and could be recovered by the Regulator, on behalf of the Commonwealth, by action in a court of competent jurisdiction (proposed section 66H). The late payment penalty could in certain circumstances be remitted by the Regulator.

These provisions mirror the relinquishment regime that applies in relation to carbon units issued under the CE Act (see sections 210, 212 and 213 of the CE Act).

Proposed section 66C does not specify any particular process the appropriate court must follow when dealing with the application for a relinquishment order. Instead, the ordinary rules and procedures of the relevant court would apply. For example, if the application was made to the Federal Court, the DPP or Regulator, as the case may be, would need to file an originating application in the court and serve it on the relevant person (rule 8.01 of the Federal Court Rules 2011). A similar requirement applies in relation to each appropriate court ^[3] . An application could not, therefore, be considered by the court without the relevant person having been notified of the proceeding. Further, it is expected that the court would apply ordinary judicial standards to its consideration of the application, including by providing the relevant person an opportunity to be heard. Nothing in proposed section 66C purports to interfere with the court's power to apply these standards.

The proposed sections 66F and 66G penalties would be imposed by operation of the ANREU Act, rather than being determined by a court. However, recovery of the penalties would be through a court of competent jurisdiction, meaning that the relevant person would be notified of the recovery proceedings in accordance with the rules of the relevant court and would be given an opportunity to contest those proceedings in accordance with the ordinary judicial process. Nothing in proposed sections 66F or 66G purports to interfere with this process.

Indeed, underlying each of proposed sections 66C, 66F and 66G is the premise that the appropriate court itself provides the best guarantee of a fair hearing. This is the specific human rights safeguard built into the proposed relinquishment regime.

Minimum guarantees in criminal proceedings

The bill does not engage the right to minimum guarantees in criminal proceedings.

While the application for a relinquishment order is derivative of a criminal proceeding, it is not itself a criminal proceeding. Nor is it a quasi-criminal proceeding, in the sense of being a civil regime which subjects a person to a high penalty that is intended to be punitive or deterrent in nature. A penalty is imposed in respect of the relevant criminal offence by the court that tried the offence. The relinquishment order simply ensures that units that should not have been issued (because their issue was vitiated by the commission of that offence) are removed from circulation within the ANREU (or, in the event that the person no longer holds those units, that an equal number of equivalent units are removed). The order thereby serves the purpose of maintaining the integrity of the carbon pricing mechanism and its objective of placing a price on greenhouse gas emissions so as to enable Australia to meet its greenhouse gas emissions targets.

Proposed sections 66F and 66G would impose monetary penalties for non-compliance with a relinquishment order. Proceedings for the recovery of these penalties, however, are not criminal proceedings. Nor should they be viewed as quasi-criminal proceedings. Any monetary penalty is, of course, designed to have a deterrent effect. It would be unprincipled, however, to say that this in itself means that the penalties should be viewed as quasi-criminal penalties (or that the failure to relinquish the required number of units should be viewed as a quasi-criminal offence).

In the case of proposed section 66F, the amount of the penalty is determined by multiplying the number of unrelinquished units by 200 per cent of the price for the issue of carbon units (proposed section 66F(2)). The rationale for this figure is that under a linked arrangement, it can be expected that the price for the issue of carbon units (at least in the flexible charge years) will track the price of eligible foreign emissions units (including those used to back the issue of an AIIU). The penalty, therefore, is set at approximately twice the expected costs of compliance with the relinquishment order. A penalty set at this rate provides a clear incentive for compliance with the relinquishment order. It is not so high, however, as to be punitive, or criminal, in nature.

Proposed section 66G sets the amount of late payment penalty at 20 per cent of the outstanding amount. An administratively-imposed late payment penalty set at this rate is a common feature of Commonwealth legislation ^[4] . A late payment penalty set at 20 per cent provides a clear incentive for compliance with the section 66F penalty. It is not so high, however, as to be punitive, or criminal, in nature.

In any event, the Regulator would have a discretion to remit the late payment penalty where it considered that the person had acted reasonably or that there were special circumstances that make it reasonable to remit some or all of the amount (proposed section 66G(2)). A refusal to remit would be subject to merits review by the Administrative Appeals Tribunal (item 26). This power of remission also indicates that the late payment penalty should not be viewed as a quasi-criminal penalty.

Other provisions

The other amendments made by the bill deal with the rules relating to the auction of carbon units, including the charges payable in respect of the auction and when the auction can occur (items 58-72, 87-90), limits that apply to the surrender of certain international emissions units (items 34, 35, 38, 79 and 81) and the charges that apply in relation to their surrender (item 107), the persons who can participate in the Opt-in Scheme (items 54-57), the rules relating to liability for natural gas (items 28, 37, 39, 41-53 and 88), the determination of an equivalent carbon price under a linked arrangement (items 40 and 82-86) and the method of measuring covered emissions (items 105-106). These amendments deal with the architecture of the carbon pricing mechanism and do not engage any applicable human rights.

Conclusion

The bill is compatible with human rights because it either advances human rights, does not engage those rights or, to the extent that it may limit human rights, those limits are reasonable, necessary and proportionate.

Statement of Compatability with Human Rights - Clean Energy Amendment (Charges-Excise) Amendment Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Clean Energy (Charges-Excise) Act 2011 to remove the price floor for carbon units (in so far as the charge payable in respect of the issue of a carbon unit is a duty of excise).

Human rights implications

The bill does not engage any of the applicable rights or freedoms. This is because the bill is concerned only with the rate of the duty of excise imposed by the Clean Energy (Charges-Excise) Act 2011.

Conclusion

The bill is compatible with human rights as it does not raise any human rights issues.

Statement of compatability with Human Rights - Clean Energy Amendment (Charges-Customs) Amendment Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Clean Energy (Charges-Customs) Act 2011 to remove the price floor for carbon units (in so far as the charge payable in respect of the issue of a carbon unit is a duty of customs).

Human rights implications

The bill does not engage any of the applicable rights or freedoms. This is because the bill is only concerned with the rate of the duty of customs imposed by the Clean Energy (Charges-Customs) Act 2011.

Conclusion

The bill is compatible with human rights as it does not raise any human rights issues.

Statement of Compatability with Human Rights - Clean Energy (Unit Issue Charge-Auctions) Amendment Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Clean Energy (Unit Issue Charge-Auctions) Act 2011 to remove the price floor for carbon units (in so far as the charge payable in respect of the issue of a carbon unit is a tax but is neither a duty of excise nor a duty of customs).

Human rights implications

The bill does not engage any of the applicable rights or freedoms. This is because the bill is only concerned with the rate of the tax imposed by the Clean Energy (Unit Issue Charge-Auctions) Act 2011.

Conclusion

The bill is compatible with human rights as it does not raise any human rights issues.

Statement of Compatability with Human Rights - Excise Tariff Amendment (Per-tonne Carbon Price Equivalent) Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Excise Tariff Act 1921 to ensure that its imposition of an equivalent carbon price on certain fuels not covered by the Clean Energy Act 2011 is consistent with compliance costs once the carbon pricing mechanism is linked to a foreign emissions trading scheme.

Human rights implications

The bill does not engage any of the applicable rights or freedoms. This is because the bill is only concerned with the rate of the tax imposed by the Excise Tariff Act 1921.

Conclusion

The bill is compatible with human rights as it does not raise any human rights issues.

Statement of Compatability with Human Rights - Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995 to ensure that its imposition of an equivalent carbon price on the importation of certain synthetic greenhouse gases not covered by the Clean Energy Act 2011 is consistent with compliance costs once the carbon pricing mechanism is linked to a foreign emissions trading scheme.

Human rights implications

The bill does not engage any of the applicable rights or freedoms. This is because the bill is only concerned with the rate of the tax imposed by the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995.

Conclusion

The bill is compatible with human rights as it does not raise any human rights issues.

Statement of Compatability with Human Rights - Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012

This bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the bill

This bill amends the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995 to ensure that its imposition of an equivalent carbon price on the manufacture of certain synthetic greenhouse gases not covered by the Clean Energy Act 2011 is consistent with compliance costs once the carbon pricing mechanism is linked to a foreign emissions trading scheme.

Human rights implications

The bill does not engage any of the applicable rights or freedoms. This is because the bill is only concerned with the rate of the tax imposed by the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995.

Conclusion

The bill is compatible with human rights as it does not raise any human rights issues.

Greg Combet

Minister for Climate Change and Energy Efficiency