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No you can’t bank the $10 permits …

June 6th, 2009 by Fabian

The subject of the proposed first compliance year, 2011–2012, came up in a recent conversation with a client. The latest plan treats the first year in a special way: an unlimited number of Australian Emissions Units (AEUs) will be made available at a fixed price of $10. For those campaigning for a carbon tax, they got one, but only for one year.

The client asked whether they would be able to purchase AEUs in 2011–2012 and bank them to acquit against their liability in future years. Our off the cuff answer was that that wouldn’t be possible, but it didn’t seem to be clearly spelt out in the legislation.

Now that the legislation has passed the lower-house, this is the subject of one of the amendments, and we now have confirmation:

Excess surrender of Australian emissions units with a vintage year beginning on 1 July 2011 [amendments 19 and 20]

2.15 Generally, surrender of excess Australian emissions units will generate an excess surrender number which is used by the liable entity in the following year (see clause 143).

2.16 Special provisions are needed to address surrender in relation to the financial year 2011–2012. Currently clause 143(3) of the CPRS Bill prevents an excess surrender number occurring where excess free Australian emissions units that have a vintage year beginning on 1 July 2011 have been surrendered.

Summary of amendments

2.17 The amendment to this clause has the result that no Australian emissions units with a vintage year beginning on 1 July 2011 can create an excess surrender number if more of these units are surrendered in relation to compliance for the first year of the scheme than the person’s emission number.

2.18 This covers Australian emissions units issued under the emissions-intensive trade-exposed assistance program, in accordance with Part 9 (which deals with coal-fired generation) and for a fixed charge of $10.

2.19 This will ensure that units issued for a fixed charge of $10 are not, in effect, carried over for use against a future liability, and is consistent with not allowing banking for this period. This changed is achieved by the omission of the word ‘free’.

Banking and borrowing rules are something we cover in detail in our Auction master-class.

Tags: cprs, legislation
Posted in Emissions Trading (CPRS) |