overview of australian carbon price mechanism

7/30/2019 Overview of Australian Carbon Price Mechanism

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30th April 2012

By Satyapal Singh

Overview of Australian Carbon Price Mechanism


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Regional GHG reduction Schemes

The New South Wales Greenhouse Gas Abatement Scheme (NGAS), a carbon

trading scheme introduced by the New South Wales Government in 2003, toreduce greenhouse gas emissions associated with the production and use of

electricity

The Qld 13% Gas Scheme or GEC Scheme (see GEC) introduced by the Australian

State of Queensland, to increase the proportion of electricity generated using gas

A Victorian Renewable Energy Target (VRET) which, since 2006, has been working

at a state level to increase electricity generation from renewable energy sources to

10% by 2016

The Greenpower scheme, a national voluntary scheme which allows consumers to

purchase all or part of their electricity requirements from a renewable energy

source such as a wind or hydro-electric scheme

The Victorian Energy Efficiency Target (VEET) schemeto improve residential energy

efficiency


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Australia's Climate Change Plan

The Government committed to reduce CO2e emissions by at least 5% below 2000

levels by 2020 and by 80% by 2050

To achieve the above said target , Govt. has following key elements:

A carbon price (a tax and then trading)

Renewable energy target ($10bn Clean Energy Finance Corporation, $3.2bn

Australian Renewable Energy Agency, Energy Security Fund)

Action on the land (Carbon Farming Initiative)

Energy efficiency (Low Carbon Communities program)


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GHG Emission by Sector in calendar year 2011

Source: Department of climate change and energy efficiency, Australia


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Governance of Climate Change Issues


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Clean Energy Regulator (CER)

Clean EnergyRegulator

CPM CFI RET NGERS

CPM : Carbon Price Mechanism

CFI: Carbon Farming Initiative Scheme

RET: Renewable energy Target Scheme

NGERS : National Greenhouse and Energy Reporting Scheme

The CER is an independent statutory authority established by the Clean Energy

Regulator Act 2011The CER is the Government body responsible for administering legislation that

reduces carbon emissions and increase the use of clean energy


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The Responsibilities of the CER

Assessing emissions data to determine each emitting entity's liability

Operating an emissions unit registry

Monitoring, facilitating and enforcing compliance with the carbon pricing

mechanism

Allocating units, including freely allocated units, fixed price units and auctioned

units

Administering the CPM, NGERS, RET and CFI

accrediting auditors for the CFI, the Carbon Pricing Mechanism and the NGERS, and


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Carbon Pricing Mechanism (CPM)


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About Carbon Price Mechanism (CPM)

Carbon pricing is form of a carbon tax or environmental tax levied on the carbon

content of fuels

Carbon tax to be introduced from 1 July 2012

The CPM will start at a fixed price of $23 a tonne in 2012-13, and then transition to

a flexible market price under a cap and trade scheme in 2015-16

In both the fixed and the flexible price period, liable entities will have to pay a pricefor every tonne of carbon pollution or the equivalent amount of certain other

greenhouse gas that is emitted

Liable entities will be required to report on their emissions; liable entities can meet

their liabilities by either surrendering units to meet the obligation, or paying a unit

shortfall charge


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Carbon Pricing: PhaseI (Jul 2012-Jun 2015)

Cap and

Trade

Mechanism


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Sector covered under CPM

It targets around 500 largest polluters (electricity and manufacturing direct

emissions and coal/LNG fugitive emissions)

With minimum carbon emission of 25,000 tons annually covered under carbon tax

regime

It covers approximately 60% of Australias carbon emission

Excluded from carbon taxing and trading:

Agriculture,

Smaller industrials and

All households


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Sectoral Distribution of Liable Entities

Power, 60

Waste Disposal, 190Mining, 100

NG Retailers,

40

Industrial

Process, 50


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Emission excluded from Carbon Pricing

Emissions from agriculture

Emissions from transport fuels

Fugitive emissions from decommissioned underground coal mines legacy

Emissions from the operation of landfill facilities (i.e. arising from waste deposited

before 1 July 2012)

Certain emissions from landfill facilities that have not accepted any waste since the

start of 1 July 2012

Emissions of synthetic greenhouse gases, except for perfluorocarbons emitted as a

result of aluminium production, and emissions from biomass, biofuel and biogas.


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Liable Entities under the CPM

A direct emitter and

Supplying natural gas or using large quantities of natural gas; or

Both

Covered Emission for liable entities

Carbon dioxide (CO2); Methane (CH4);

Nitrous oxide (N2O); or

Per fluorocarbons specified in the NGER Regulations and that are attributable to

aluminum production

Scope 1 emission are only liable entities


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Liable Entities Responsibilities?

Reporting under the NGER Scheme

Emissions number

Surrendering emissions units

Acquiring and surrendering emissions units to account for your liability; or

Paying a unit shortfall charge for the amount of your liability that you do not meet by surrendering

units

Eligible emission units

Carbon units

ACCUs

International emissions units

Certified emission reductions

Removal Unit


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Carbon Instruments

Free permits

Australian Carbon Credit Units (ACCU)

Emission Reduction Unit ( ERU)

Certified Emission Reductions (CERs)

But CERs generated from following activities will not be accepted: Nuclear energy projects

Destruction of HFC-23 and N2O

Large scale hydro


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Paying Unit Shortfall Charge

The unit shortfall charge is a number representing the difference between your

total liability and the amount you actually surrendered

Penalty :

During the fixed price period 130 per cent of the fixed price payable for carbon units of the vintage of

the carbon units not surrendered; and

During the flexible price period either an amount specified in regulations, or 200 per cent of the

benchmark average auction charge for the previous financial year


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Carbon Farming Initiative


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What is Carbon Farming Initiative (CFI) ?

CFI is a legislated offsets scheme that allows farmers and land managers to earn

carbon credits by storing carbon or reducing greenhouse gas emissions on the land.These credits can then be sold to people and businesses wishing to offset their

emissions

The CFI covers land based activities that reduce or avoid GHG emissions and/or

increase carbon storage or sequestration. This includes activities such as:

Reduced methane emissions from livestock, manure management and landfill waste Reduced emissions from fertilizers, rice cultivation, avoided deforestation, forest management,

savannah burning and crop residue burning

Increased carbon sequestration through reforestation, revegetation and improved soil management.

The CFI commenced operation since December 2011

Participation in the CFI is voluntary - farmers and landholders can choose whether

or not to be involved

Credits generated under the CFI that are recognized for Australias obligations

under the Kyoto Protocol can be sold to companies with liabilities under the carbon

price mechanism


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How does CFI works?

Planning aCFI Project

Step -1

Apply toJoin the

CFI

Open aregistryaccount

Step- 2

Apply for aproject(EligibleOffset

project)

Step -3

Undertakeapproved

project

Step -4Submitoffsets

and auditreports

Step- 5

Apply forcredits

Step-6

Creditsissued

Step - 7

ProjectClosure


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Renewable Energy Target Scheme


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RET Scheme

Until 2 April 2012 under the Department of Climate Change and Energy Efficiency

now administered by CER

RET splits into two schemes

Large Scale Renewable Energy Target (LRET)

Small Scale Renewable Energy Scheme (SRES)


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Large-scale generation certificate (LGC) Market


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Small-scale technology certificate (STC) Market


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overview of australian carbon price mechanism

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