first year of the australian carbon market · • the majority of liable entities reported that the...
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FIRST YEAR OF THE
AUSTRALIAN CARBON MARKET
LESSONS LEARNT
A survey of liable entities
Presentation to BPMR Seoul, Korea
27 September 2013
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AGENDA
• Aims of the survey
• Methodology
• Survey results and key findings
Internal capacity
LESSONS LEARNT
o Internal capacity
o Administrative and governance arrangements
o Carbon price impacts
o Investment in abatement and emissions reduction
o Emissions trading strategy
o Interaction with the Clean Energy Regulator
• Discussion
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AIMS OF THE SURVEY
• Capture the key issues faced by liable entities in the first year of the
scheme.
• Use the results to inform policy makers, the Clean Energy Regulator and
CMI of the key issues faced by liable entities in meeting compliance.
LESSONS LEARNT
• Understand the main competency gaps and identify areas for capacity
building.
• Understand best practice compliance.
• Initiate an annual survey.
• Deepen CMI’s connection with liable entities.
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METHODOLOGY
• Design survey.
• Research key contacts in liable entities.
• Send survey – 1 July 2013.
LESSONS LEARNT
• Undertake consultations – July.
• Analyse results.
• Write report – August 2103.
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• Survey Respondents – 82
• Liable Entities – 200+
• Consultations – 15
RESULTS
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INTERNAL CAPACITY
• Our organisation had pre-existing management capability to manage
our compliance and obligations under the Carbon Pricing Mechanism.
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INTERNAL CAPACITY
• Our organisation engaged external service providers to assist us in
meeting our compliance and obligations under the CPM.
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INTERNAL CAPACITY
• What type of professional services were engaged?
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INTERNAL CAPACITY
KEY FINDINGS
• There were two tiers of internal capacity amongst liable entities
• One tier had pre-existing internal capacity and previous engagement
with the CPRS, international exposure to carbon pricing etc.
• The second tier had some existing internal capacity (mainly through
NGERS reporting) and had to rely on external service providers.
• Policy uncertainty is impacting the commitment of liable entities to • Policy uncertainty is impacting the commitment of liable entities to
invest in internal capacity.
• It was acknowledged that the internal capacity required for a fixed price
period is different than what will be required under a flexible price
period.
• External service providers were used extensively by liable entities to
assist in meeting CPM requirements.
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ADMINISTRATION/COMPLIANCE
• Our organisation established new governance policies and carbon risk
management frameworks to comply with the CPM.
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ADMINISTRATION/COMPLIANCE
• Meeting compliance and obligations under the CPM created new
internal lines of communication, coordination and decision making.
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ADMINISTRATION/COMPLIANCE
• Our corporate board was involved and aware of our strategy to meet
compliance and manage our liability.
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ADMINISTRATION/COMPLIANCE
KEY FINDINGS
• The history of NGERS reporting has enabled liable entities to have in
place adequate controls and assurance of emissions data.
• Placing a dollar value on emissions has resulted in new internal lines of
communication, coordination and decision making, especially with the
CFO’s office. CFO’s office.
• New governance and risk management frameworks were developed that
involved the board and senior management.
• Two main approaches to governance – top down driven by the board or
CEO and or bottom up driven from operations responsible for energy
data.
• Compliance investment has been made, more changes would be costly.
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CARBON PRICE IMPACTS
• A strategy was developed to adequately pass through carbon price cost
impacts to customers.
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CARBON PRICE IMPACTS
• The introduction of the CPM has created new commercial business
opportunities for my organisation.
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CARBON PRICE IMPACTS
KEY FINDINGS
• Carbon costs impacts were modelled and pass through costs determined as a
priority.
- Supplier/customer contracts were revised.
- Strategies to communicate pass through costs were developed.
• Policy uncertainty has impacted the ability to model future carbon price
scenarios and their impacts.
Policy uncertainty has impacted the ability to model future carbon price
scenarios and their impacts.
• Factors other than the carbon price have a greater impact on
competitiveness.
• The identification of commercial opportunities by liable entities has been
limited.
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INVESTMENT IN ABATEMENT
• Having a carbon liability elevated the priority to assess internal emissions
abatement options.
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INVESTMENT IN ABATEMENT
• New investment has been committed to financing energy efficiency and low
carbon solutions.
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INVESTMENT IN ABATEMENT
• Our organisation has factored a carbon price into future investments.
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INVESTMENT IN ABATEMENT
KEY FINDINGS
• The majority of liable entities reported that the CPM elevated the priority to
assess internal abatement opportunities.
• One-third committed to new investment to energy efficiency and low carbon
projects.
• The focus is on energy savings rather than emission reductions.
• Policy uncertainty is limiting the appetite of liable entities to invest in
internal abatement projects, particularly for projects requiring large capital
outlays or medium to long term pay back periods.
• The long term expectation is that there will be some form of carbon pricing.
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TRADING STRATEGY
• We investigated and/or sourced domestic CFI credits to meet a component of
our first year’s liability.
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TRADING STRATEGY
• In anticipation of a flexible price emissions trading market, currently planned
for 2015, we have developed a carbon procurement and trading strategy.
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TRADING STRATEGY
• We have processes in place to track developments in international markets,
such as linkage to the EU ETS, that may impact the carbon price in Australia.
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TRADING STRATEGY
KEY FINDINGS
• The majority of liable entities have not looked closely at the CFI.
• Companies with larger liabilities had the scale to justify procurement of
ACCUs.
• Liable entities were focussed on compliance, not portfolio optimisation.Liable entities were focussed on compliance, not portfolio optimisation.
• For companies with large exposures, trading strategies are being developed
but not executed.
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INTERACTION WITH THE CLEAN ENERGY REGULATOR
• Our organisation had a clear understanding of expectations from the Clean
Energy Regulator in relation to compliance and timelines.
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INTERACTION WITH THE CLEAN ENERGY REGULATOR
• The Clean Energy Regulator has provided adequate information and support
to help meet our obligations under the CPM.
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INTERACTION WITH THE CLEAN ENERGY REGULATOR
KEY FINDINGS
• Overall experience very positive and appreciated the client focussed
approach.
• Initial teething problems, but eventually built up a good relationship and
response to queries was prompt.
• Workshops and stakeholder engagement was very important.
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LESSONS LEARNT
QuestionsQuestions
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LESSONS LEARNT
Thank You
Contact Details
PETER CASTELLAS, CEO Phone: 03 9245 0910
Email: [email protected]
LLOYD VAS, Phone: 03 9245 0930
Email: [email protected]
GABRIELLE CALLHAN, Phone: 03 9245 0960
Email: [email protected]