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INTERIM COST RECOVERY IMPLEMENTATION STATEMENT

Ozone Protection and Synthetic Greenhouse Gas Program

2015-16

Cost recovery involves government entities charging individuals or non-government organisations some or all of the efficient costs of a specific government activity. This may include goods, services or regulation, or a combination of them. The Australian Government Cost Recovery Guidelines (the CRGs)1

set out the overarching framework under which government entities design, implement and review cost recovered activities.

1 The CRGs are available on the Department of Finance website (www.finance.gov.au).

Australian Government Environment Department of the Environment

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1. INTRODUCTION

1.1 Purpose of the CRIS

This CRIS is an interim update pending the finalisation of the review of the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (the Act) and consideration of the review recommendations by Government, scheduled for the second half of 2015. Following consideration by Government, a new CRIS will be developed to reflect the outcomes of the Review.

This interim CRIS provides information on how the Department of the Environment (the Department) implements cost recovery for the Ozone Protection and Synthetic Greenhouse Gas Program. It also reports financial and non-financial performance information for the Ozone Protection and Synthetic Greenhouse Gas Program and contains financial forecasts for 2015-16 and three forward years. The Department will maintain the CRIS until the activity or cost recovery for the activity has been discontinued.

1.2 Description of the activity

This CRIS documents the cost recovery arrangement for the service the Department of the Environment uses to implement the Act. The Act is the legislative mechanism under which Australia meets its obligations to phase-out ozone depleting substances (ODSs) under the Montreal Protocol on Substances that deplete the Ozone Layer (Montreal Protocol), and its obligations under the Kyoto Protocol, to limit greenhouse gas emissions by controlling the use of synthetic greenhouse gases (SGGs).

The purpose of the Act is to:

• implement the provisions of the 1985 Vienna Convention for the Protection of the Ozone Layer (Vienna Convention) and the 1987 Montreal Protocol;

• institute specific controls on the manufacture, import, export, distribution and the use of ODSs;

• encourage Australian industry to replace ODSs and achieve a faster and greater reduction in their use than provided for in the Vienna Convention and the Montreal Protocol to the extent that such replacements and achievements are reasonably possible within the limits imposed by the availability of suitable alternate substances and appropriate technology and devices;

• control the manufacture, import, export and use of SGGs that are used to replace ODSs to give effect to Australia’s obligations under the United Nations Framework Convention on Climate Change (UNFCCC); and

• promote the responsible use of ODSs and SGGs to minimise their effect on the atmosphere.

Those activities where the costs are able to be linked to individuals and companies are funded through licence (and permit) fees. Costs associated with activities providing broader benefits to licensee industries and the community in genereal are funded through levies as it is not possible to link these benefits to specific individuals and companies.

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The activities undertaken which are funded through licence and permit fees are:

Licensing

The Act applies consistent controls on the use of ODSs and the SGGs used to replace them to meet Australia’s legally binding requirements under the Montreal Protocol and Kyoto Protocol, including to minimise the emission of these substances to the atmosphere. The Act:

• prohibits the import, export or manufacture of chlorofluorocarbons, halons, carbon tetrachloride, methyl chloroform, bromochloromethane and hydrobromofluorocarbons, without either an essential use licence or a used substance licence;

• establishes a system of controlled substance licences and reporting requirements for the import, export or manufacture of hydrochlorofluorocarbons (HCFCs), methyl bromide, hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs), consistent with Australia’s obligations under the Montreal Protocol and the UNFCCC; and

• establishes a licensing system for the import of refrigeration and air conditioning equipment that contains a HFC or HCFC refrigerant (pre-charged equipment), thereby applying the same conditions and responsibilities for these substances when imported in equipment, as applying to the importation in bulk form.

End-use Regulations

The Act creates regulation-making powers to allow the Australian Government to develop end-use regulations on: acquisition; purchase; sale; handling; use; storage; and disposal of ODSs and SGGs.

End-use regulations under the Ozone Protection and Synthetic Greenhouse Gas Regulations 1995 (the Regulations) have been implemented for the use of ODSs and SGGs in refrigeration and air conditioning and fire protection industries. These Regulations assist Australia to meet its phase-out obligations under the Montreal Protocol. They also lead to reduced emissions of ODSs and SGGs through the establishment of minimum industry standards.

The Australian Refrigeration Council (ARC) and the Fire Protection Association of Australia (FPAA) were appointed to administer the permit schemes in the refrigeration and air conditioning industry, and the fire protection industry, respectively.

The Regulations establish a competency based permit scheme for the refrigeration and air conditioning, and fire protection industries and limit access to ODSs and SGGs to authorised businesses and handling to licensed technicians.

The activities undertaken which are funded through import and manufacturing levies are:

International engagement

• Participation in international negotiations, monitoring of and reporting under the Montreal and Kyoto Protocols.

Ozone science

• Research into ODSs and SGGs, research scholarships, servicing the Ozone Science Group and methyl bromide quarantine and pre-shipment study.

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Phase outs and emission reduction programs

• Phase out programs for all ODSs and emission reduction programs for ODSs and SGGs

Halon management

• Storage and management of the Australia’s halon stock

National halon stock

• Administrative costs associated with the management of the national halon stock including the leasing and manageing an appropriate facility for holding the stock and the management of the stock

Other

• Storing and destruction of seized and forfeited goods • General policy related to ODSs and SGGs • Awareness raising directly related to regulatory activity

Importers, exporters and manufacturers of ODSs and SGGs are subject to licensing fees and import and manufacturing levies.

Businesses and technicians in the refrigeration, air conditioning and fire protection industries are subject to licence and permit fees.

Key stakeholders consulted in the development of the current cost recovery arrangements included:

• Motor Trades Association of Australia (MTAA)

• MTAA acknowledged and supported the ARC’s proposal to increase its fees in order to meet increased costs it faces

• Refrigeration and Air Conditioning Association (RACA)

• RACCA noted that whilst it would generally oppose fee increases, they did understand that fees must inevitably increase and that linking the fees to CPI was a fair method

• Air Conditioning and Refrigeration Wholesalers Association (ARWA)

• ARWA unanimously agreed with the proposed fee increases

• Automotive Air Conditioning, Electrical and Cooling Technicians of Australasia (VASA)

• VASA supported in principle the proposed permit fee increase on the proviso that there was no reduction, or preferably, an increase in the ARC audit regime

• National Electrical and Communications Association (NECA)

• NECA supported the proposed fee increase on the basis that fees had not increased since the scheme’s inception and the need for the ARC to maintain their service levels

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2. POLICY AND STATUTORY AUTHORITY TO COST RECOVER

2.1 Government policy approval to cost recover the activity

In 2003, the Australian Government authorised the Department to charge for licensing applications and an activity fee relating to ODSs and SGGs import or manufacture on a cost recovery basis. In 2004, the Australian Government authorised the Department to charge for permit activities relating to the refrigeration and air conditioning, and fire protection industries on a cost recovery basis (these authorisations were provided by the then Prime Minister, Treasurer and Minister for Finance).

2.2 Statutory authority to charge

The legal authority for the charging of:

• licence application fees for the import, export and manufacturing of ODSs and SGGs, is provided under section 14 of the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (http://www.comlaw.gov.au/Series/C2004A03755)

• permit fees for handling of refrigerants, extinguishing agents and halon is provided under Regulations 121 and 31 of the Ozone Protection and Synthetic Greenhouse Gas Management Regulations 1995 (http://www.comlaw.gov.au/Series/F1996B02085)

• import and manufacturing levies for ODSs and SGGs is provided under section 4 of the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995 (http://www.comlaw.gov.au/Series/C2004A04976) and section 4 of the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995 (http://www.comlaw.gov.au/Series/C2004A04976), respectively.

Subsection 65D(a) of the Ozone Protection and Synthetic Greenhouse Gas Management Act provides that it is a purpose of the Ozone Account set up in section 65B to receive money for reimbursing the Commonwealth’s costs associated with the administration of the Act and the Regulations. Subsection 65D(b-ca) provides that is it a purpose of the Ozone Account to pay or reimburse the Commonwealth’s costs associated with furthering programs (or information about programs) that address the phase out of ODSs, and emission minimisation programs for ODSs and SGGs; the Commonwealth’s costs associated with management of the National Halon Bank (NHB); and the Commonwealth’s costs associated with research relating to substances that deplete the ozone in the atmosphere or synthetic greenhouse gases.

3. COST RECOVERY MODEL

The cost recovery model has several components.

The licence and permit schemes are administered both within the Department (import, export and manufacture licences) and by two Industry Boards contracted by the

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Department, the ARC and FPAA (end-use permits). Application fees collected on and on behalf of the Department are paid into the Ozone Protection and Synthetic Greenhouse Gas Special Account where they are used to pay or reimburse the Department’s costs of administering the licence and permit schemes (including through the ARC and FPAA).

3.1 Outputs and business processes of the activity

Outputs delivered under the OPSGGs program are:

1. Issue and management of import, export and manufacturing licences

2. Issue and management of End Use permits and licences

3. Administration of the Export Refund Scheme

4. Administration of OPSGGs policy and legislation, ensuring Australia’s active participation and influence in the international arena, and ensuring Australia meets its international commitments

5. Implementation and management of phase-out programs as appropriate

6. Implementation and management of emission minimisation programs as appropriate

7. Conduct of research relating to ozone depleting substance and synthetic greenhouse gases

8. Management of the national halon stock through the National Halon Bank

Key business processes used to deliver the outputs are:

1. Issue and management of import, export and manufacturing licences

• Licence application assessment and issue (new licences, licence transfers, and licence surrenders). A process map for the licence application assessment, review and issue is provided at Attachment A.

• Maintain licence enquiry hotline, and respond to enquiries • Maintain licence enquiry email, and respond to enquiries • Manage manual licence applications • Ensure licence application fees have been paid before a licence

assessment commences • Review and action, as appropriate, licence fee waiver requests • Validate legal status of applicant • Check proof identity for applicant who are individuals • Conduct ‘fit and proper person’ review • Confirm goods/substances to be imported/manufactured are allowed

under the Act and Regulations • Delegate consideration and decision on application • Issue, transfer and surrender advice to applicant

• Redlines (the management of imports containing a schedule substance arriving in Australia without an appropriate licence, identified and held by the Australian Customs and Border Protection Service)

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• Assessment of the documentation to determine if the held items do hold a scheduled substance, including inspection and testing if necessary, that requires a licence or licence exemption, is a temporary import or is a prohibited item

• Notification of assessment and appropriate follow-up action which could include:

• Clearance and release of the item • A licence application • Seizure of the item • Degassing and then destruction of the item • Management of seized or forfeited goods

• Quarterly reporting assessment. A process map for the quarterly reporting assessment is provided at Attachment B.

• Maintain licence enquiry hotline, and respond to enquiries • Maintain licence enquiry email, and respond to enquiries • Provide notification to licensees of reporting deadline • Review, assess and accept quarterly reports submitted • Follow-up with licensees where submitted reports fail acceptance

criteria • Review, assess and accept resubmitted reports • Undertake monitoring and take compliance action as appropriate

• Licence application fee

• Maintain program revenue enquiry hotline, and respond to enquiries • Maintain program revenue enquiry email account, and respond to

enquiries • Allocate licence application fees to a licence application • Receipt and record application fee in financial and licence databases • Notify licence application assessment officers that fee has been paid

• Quarterly levy management (including debt management)

• Maintain program revenue enquiry hotline, and respond to enquiries • Maintain program revenue enquiry email account, and respond to

enquiries • Issue invoices to licensees for quarterly import or manufacturing levy

amounts payable • Provide monthly account statements to licensees • Manage overdue debts • Issue penalty invoices to late quarterly levy payment debtors

• Licence compliance program

• Liaise with Australian Customs and Border Protection Service for import data associated with import licensees

• Conduct an initial documentation review of licensees where import reporting varies from customs import data

• Refer any serious or suspected non-compliance issues to the

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Enforcement and Compliance team for action (including court actions) as appropriate

• Export refunds. A process map for the export refund assessment process is provided at Attachment C.

• Maintain export refund enquiry hotline, and respond to enquiries • Maintain export refund enquiry email account, and respond to

enquiries • Assess (and document) export refund application • Follow-up queries with applicant • Brief export refund delegate on the application assessment • Advise applicant of delegate decision • Make export refund payment to applicant if approved by delegate

2. Granting and administration of End Use permits and licences (undertaken on behalf of the Minister by the ARC and FPAA):

• receive applications and application fees for RAC industry permits;

• Manage manual licence applications • Manage online licence applications

• process applications within 30 day timeframe specified in the Regulations;

• issue RAC industry permits in accordance with the Regulations;

• Ensure permit application fees paid before licence assessment • Validate legal status of applicant • Check proof of identity for applicant who areindividuals • Conduct ‘fit and proper person’ review • Undertake a detailed assessment of the qualifications or

competencies of the individual to carry out RAC work • Assess that the individual or company has the equipment detailed by

the Regulations

• provide customer service support to members of the RAC industry and the general public

• Maintain licence enquiry hotline, and respond to enquiries • Maintain licence enquiry email, and respond to enquiries

• provide a program of communications and awareness activities aimed at encouraging compliance with the RAC industry permit scheme

• conduct eduation visits to check and assist permit holders with compliance with the regulations, including newsletters, media and website material to explain the requirements and any changes for the scheme.

3. Development of policy guidance and procedures to support the effective administration of the end-use licensing schemes over time, taking account of changing market and technological circumstances for the regulated industries.

4. Administration of OPSGGs policy and legislation

5. Implementation and management of phase-out programs as appropriate

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6. Implementation and management of emission minimisation programs

7. Conduct of research relating to ozone depleting substance and synthetic greenhouse gases

8. Management of the national halon stock through the National Halon Bank

3.2 Costs of the activity

The costs incurred in delivering the OPSGG program include:

• Direct costs – these are directly attributable to the implementation and administration of Act and related policy, including:

• Departmental employee expenses – including base salary, superannuation, leave entitlements, training

• Travel • Outsourced management of end use permit and licence scheme

• Indirect costs, including:

• Accommodation costs (for example, rent, maintenance, utilities) • Information technology costs • Human resources support • Other departmental support (for example, finance and legal support) • These costs are currently funded through direct appropriation by Government.

• Outsourced costs, including management of end use permit and licence scheme, through RAC and FPAA

• Capital costs relate to the import, export and manufacturing licence database, including:

• Depreciation • Operation and maintenance • Capital investment • These costs are currently funded through direct appropriation by Government.

The levels of activity are demand driven to a large extent, depending on the number of importers or manufacturings, the frequency of import or manufacture, exporters and businesses and technicians on the domestic scene. These can and do vary from year to year and within years. Costs are based on historical levels of activity and a general assumption of activities continuing at similar levels . Sensitivity of the cost estimates is influenced largely by economic and climatic conditions, with in more prosperous (and affluent) economic times and hotter seasons, increases in imports (and licensees) and growth in domestic suppliers and technicians to provide and maintain this growing volume of equipment.

Assumptions:

• Import, export and manufacturing licences. There will on average, be approximately 600 new licences annually, 10 licence transfers annually, and 10 licence surrenders

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annually

• Four types of licence can be issued under the Act:

• Controlled Substance Licence, which allows the holder to manufacture, import or export HCFCs, methyl bromide or SGGss;

• Essential Use Licence, which allows the holder to manufacture, import or export scheduled substances, which have been phased out, for essential uses approved through the Montreal Protocol;

• Used Substance Licence, which allows the holder to import or export recycled or used scheduled ODSs substances; and

• Equipment Licence, which allows the holder to import refrigeration and air conditioning equipment containing HCFCs or HFC refrigerants.

• There will be approximately 1,200 import licences valid annually

• End-use licences and permits. There are approximatelty 42,500 licences and permits expected to be issued in 2015-16.

• Licences and permits issued under the Regulations are:

• Refrigerant Handling Licence, which allows the holder to handle controlled refrigerants in the refrigeration and air conditioning industry;

• Refrigeration and Air Conditioning Trainee Licence, which allows the holder to handle a refrigerant while undertaking training and/or assessment in a classroom setting and at the work place under supervision

• Restricted Refrigeration and Air Conditioning Licence, which allows the holder to recover and handle refrigerant while decommissioning equipment;

• Refrigerant Trading Authorisation, which allows the holder to acquire, possess and dispose of controlled refrigerants;

• Restricted Refrigerant Trading Authorisation, which allows the holder to recover, store and dispose of controlled refrigerants;

• RAC Equipment Manufacturing Authorisation, which allows the holder to acquire controlled refrigerants (other than Halon) for the use in manufacture of RAC equipment;

• Extinguishing Agent Handling Licence, which allows the holder to handle controlled extinguishing agents in the fire protection industry;

• Trainee Extinguishing Agent Handling Licence, which allows the holder to handle controlled extinguishing agents while undertaking training and/or assessment in a classroom setting and at the work place under supervision;

• Extinguishing Agent Trading Authorisation, which allows the holder to acquire, store or dispose of controlled extinguishing agents that

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are for use, or has been used, in fire protection equipment; and

• Halon Special Permit, which allows the holder to possess halon that is for use in fire protection equipment.

• There will be approximatelty 80,000 valid licences and permits annually

• Importing

• Quarterly import reporting numbers will be approximately 4,800 annually

• Manufacturing

• There will be no domestic manufacture of ODSs and SGGs

• Policy and international interactions and commitments

• Will continue at current levels of activity

Table 1: Cost breakdown for 2015-16 is provided in the following table.

Direct costs Indirect costs

Capital costs

Output 1 Import, Export and Manufacture Licences - Administration 1,935,023 563,363 195,000

Output 2 End use licencing and permits - Refrigeration and Air Conditioning and Fire Protection 7,310,127 381,430

Outputs 3 - 8 Policy, international interactions and commitments, phase out and emission mininisation programs, research, administration and NHB management 2,301,475 670,051

TOTAL 11,546,625 1,614,844 195,000

3.3 Design of cost recovery charges

Both licence (and permit) fees and levies are used to recover costs based on whether the benefits of particular services (costs) are able to be linked directly to individuals or are provided to industry and the community more generally.

Costs associated with the provision of services under this program are recorded under discrete cost centres within the Department’s financial management system and are readily identifiable.

Import and manufacture licence application fees are set under the Ozone Protection and Synthetic Greenhouse Gas Management Regulations 1995, with these also available on the Department’s web site.

Maximum levy rates are set within the respective levy acts (Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995 and Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995), with the rates applicable under the legislation available on the Department’s web site.

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Table 2: Charge rates and revenue estimates for 2015-16 are set out in the following table

Charge title Type Rate $

Estimated volume

Estimated total

revenue $

Business process

Import, Export & Manufacture Licences

Output 1: Import, Export and Manufacture Licences - Administration

Equipment Fee 3,000 725 2,175,000 Controlled substances - SGGs Fee 15,000 23 345,000

Controlled substances - HCFC Fee 15,000 6 90,000

Controlled substances - MB Fee 15,000 6 90,000

Used Fee 15,000 2 30,000 S 40 Fee 3,000 12 36,000

Sub-total 774 2,766,000

End-use Licences#

Output 2: End-use

Licence - Administration

Refrigerant Trading Authorisation (1 year)

Fee 221 222 49,062

Refrigerant Trading Authorisation (2 years)

Fee 442 8,672 3,833,024

Extinguishing Agent Trading Authorisation Fee 442 71 31,382

Refrigerant Handling Licence(1 year)

Fee 69 1,555 107,295

Refrigerant Handling Licence(2 years)

Fee 137 22,099 3,027,563

Extinguishing Agent Handling Licence (1 & 2 year)

Fee 131 - 263 1,110 193,416

Trainee Refrigerant Handling Licence Fee 28 8,702 243,656

Trainee Extinguishing Agent Handling Licence Fee 131 82 10,742

Halon Special Permit Fee 263 42 11,046 Sub-total 42,555 7,507,186

Import & Manufacture Levy Levy Various* NA 742,991

Outputs 3 – 8: Policy, international interactions and commitments, phase out and emission mininisation programs, research, administration and NHB management

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TOTAL 11,016,177

# End-use licence fees will be indexed annually *For:

• ODSs the levy is $3,000 per ozone depleting tonne • Methyl bromide the levy is $135 per tonne • SGGs the levy is $165 per metric tonne

4. RISK ASSESSMENT

The overall risk associated with the cost recovery of the Ozone Protection and Synthetic Greenhouse Gas Program is Medium

Revenues (and the associated level of activity) under this cost recovery arrangement are essentially driven by demand:

• The demand for licences by importers • The volume of ODS and SGG imports • The demand for end-use licences and permits

The risks to this cost recovery arrangement are that there is a significant and unexpected increase or decrease in the demand.

The department manages the risks by monitoring and reviewing both revenue and activity (and associated resource) levels on a monthly basis. This allows the department to identify any such issues in a timely manner and allow reallocation of resources as required, within the resourcing constraints of the Department. Further, the availability of the special account which receipts revenues and funds expenditures, and retains cash balances for the program, provides some scope and flexibility to manage fluctuations in revenue and expenditure both within and from year to year.

5. STAKEHOLDER ENGAGEMENT

Key stakeholders consulted in the development of the current cost recovery arrangements included:

• Motor Trades Association of Australia (MTAA) o MTAA acknowledged and supported the ARC’s proposal to increase its fees in

order to meet increased costs it faces • Refrigeration and Air Conditioning Association (RACA)

o RACCA noted that whilst it would generally oppose fee increases, they did understand that fees must inevitably increase and that linking the fees to CPI was a fair method

• Air Conditioning and Regrigeration Wholesalers Association (ARWA) o ARWA unanimously agreed with the proposed fee increases

• Automotive Air Conditioning, Electrical and Cooling Technicians of Australasia (VASA)

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o VASA supported in principle the proposed permit fee increase on the proviso that there was no reduction, or preferably, an increase in the ARC audit regime

• National Electrical and Communications Association (NECA) o NECA supported the proposed fee increase on teh basis that fees had not

increased since the scheme’s inception and the need for the ARC to maintain their service levels

The Department in its conduct of the Ozone Act Review has consulted broadly with stakeholders, including:

• Calling for submissions to the Review • Holding Technical Working Group meetings with industry represented by relevant

peak bodies to discuss issues raised by stakeholders, the Department or the peak bodies themselves

• A draft interim Act Review report will be issued for public comment prior to the finalisation of the report

• Industry (through peak bodies) will be consulted on any changes to the cost recovery arrangements resulting from the Review that will impact on level of Departmental resource levels dedicated to the OPSGG cost recovery activities and the impact on fees and levies. Peak bodies included:

o Victorian Automobile Chamber of Commerce o Australian Industry Group o Fire Protection Association of Australia o Plastics and Chemicals Industry Association of Australia o Refrigerant Reclaim Australia o Automotive Airconditioning, Electrical and Cooling Technicians of Australia o Australian Institute of Refrigeration, Air Conditioning and Heating o Air conditioning and Mechanical Contractors Association o Air conditioning and Refrigeration Equipment Manufacturers Association o Refrigerants Australia o Methyl Bromide Users o Australian Refrigeration Association

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6. FINANCIAL ESTIMATES Table 3: Financial estimates to 2018-19

Budget year Forward estimates 2015-16

$ 2016-17

$ 2017-18

$ 2018-19

$

Expenses = X 13,356,469 13,356,469 13,356,469 13,356,469

Revenue = Y 11,016,177

9,150,550 11,016,177

9,150,550

Balance = Y – X -2,340,292 -4,205,919 -2,340,292 -4,205,919

Cumulative balance -2,180,637 -6,386,556 -8,726,848 -12,932,767

Explain materiala variance

A number of factors contribute to the budgeted financial results: • Departmental overheads were not factored into the cost recovery

arrangements • Shortcomings in the administration of the activities conducted

under the Act have been strengthened considerably • The National Halon Bank currently operates at a considerable loss The majority of licences and permits issued are of two year duration which can skew the revenues and therefore accentuate annual balances from year to year

Explain balance management strategy

Overheads are currently funded by the Department from annual appropriations, with the balance of annual shortfalls (negative balances) funded from special account balances pending the finalisation and consideration by the Government of the OPSGGM Act review. Following the current (2015) OPSGGM Act review, which is canvassing a range of issues that will impact on both revenues and expenses, an updated CRIS will be prepared to reflect the outcome of the review with a view to achieving a balance between revenues and expenses.

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7A. FINANCIAL PERFORMANCE Table 4: Financial results 2010-11 to 2014-15

2010-11 $

2011-12 $

2012-13 $

2013-14 $

2014-15 (estimated

actual) $

Expenses = X 3,799,248 8,208,385 13,781,939 9,977,237 11,214,997 Revenue = Y 2,469,141 11,387,360 9,554,550 12,837,902 10,892,508 Balance = Y – X -1,330,107 3,178,975 -4,227,389 2,860,665 -322,489 Cumulative balance -1,330,107 1,848,868 -2,378,521 482,144 159,655

Explain materiala variance

A number of factors have contributed to the financial results over the five year period: • Expenses have increased with increases in demand for cost

recovered servces • Administration of the legislation was strengthened over the period,

particularly to manage the introduction and repeal of the equivalent carbon price

• The majority of licences and permits issued are of two year duration which can skewthe revenues and therefore accentuate annual balances from year to year

Explain impact on balance management strategy

The cumulative balance presented is for the reported financial years only. Any deficit has and will be met from the balance of the Ozone Protection and Synthetic Greenhouse Gas Special Account

a As defined by AASB1031 and Division 12 – Materiality and Disclosure of the Finance Minister’s Orders.

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7B. NON-FINANCIAL PERFORMANCE

Outcome measures:

The import, export and manufacture licensing system has enabled Australian to comply with its Montreal Protocol obligations to phase out ozone depleting substances and to have in place a licensing and quota system. Australia’s obligations and outcomes are reported annually to the United Nations Environment Program.

The end use permit scheme in the refrigeration and air conditioning and fire protection industries has contributed to Australia meeting its Kyoto Protocol obligations by reducing direct emissions of synthetic greenhouse gases and reduced indirect emissions from electricity consumption by improving the energy performance of refrigeration and air conditioning equipment. The Department of the Environment has commissioned a study to calculate the emission reduction achieved through the end use schemes. This study will be available in the second half of 2015.

Output Measures:

Outputs under this activity are generally not targets, rather a reflection of “demand” in accordance with the requirements of the ozone legislation, for example:

• Import licences required for the import of ozone depleting substances or synthetic greenhouse gases

• Quarterly reporting – compulsory reporting of imports 4 times per annum for all holders of a current licence

• Levy payments based on volumes of gases imported

• Domestic licences required for handling or trading in ozone depleting substances or synthetic greenhouse gases

• Export refund are valid in relation to export of synthetic greenhouse gases which meet the requirements of the Act and for which a licensee applies

Input Measures:

The Department is implementing a number of efficiencies related to import licensing including the automation of assessment of the majority of quarterly reports and related invoicing which will impact on resource level requirements. The department has also included a number of other administrative and operational efficiency options in the for the interim Act review report which will be released for public consultation in September 2015, and these and the implications of other Act amendments will be taken into account in determining resource reqirements when developing a new CRIS following consideration of the Act review recommendations by Government.

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8. KEY FORWARD DATES AND EVENTS

The key forward dates and events for the cost recovered activity are:

• Forward estimates are next scheduled to be updated in December 2015

• The Act Review Interim Report is due to be released for public consultation in September 2015

• The Act review report and recommendations are due to be provided to the Minister for the Environment in November 2015, with consideration of the recommendations and financial implications by the Government in early 2016. An updated CRIS will be developed in response to the Government consideration.

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9. CRIS APPROVAL AND CHANGE REGISTER Date of CRIS change

CRIS change Approver Basis for change

30/06/2015 Certification of the CRIS

Department of the Environment

Implementation of new cost recovery implementation statement template

30/06/2015 Agreement to the CRIS Department of the Environment

Implementation of new cost recovery implementation statement template

December 2015 Update of financial estimates

Department of the Environment

Changes in assumptions (e.g. at Additional Estimates)

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Attachment A

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Attachment B

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Attachment C