Archive for the ‘Emissions Trading (CPRS)’ Category
The Clean Energy Future bills passed the lower house last night, and passage through the Senate looks assured, so Australia will have a carbon price by mid 2012.
Late amendments benefit waste sector
One of the most significant late amendments to the bills related to emissions from landfill. This is relevant to a lot of our local government customers. Previously, the threshold for many landfill facilities was going to be 10kt because of proximity rules that only applied to this sector. Now the threshold will be 25kt like every other facility affected by the legislation. Because landfill operators will only be liable for emissions from waste disposed of from the start of the scheme (non-legacy emissions), many operators won’t be affected at all for the first few years of the scheme, and operators that implement good abatement strategies may be able to stay below the threshold indefinitely.
Also, landfill operators will have the opportunity to reduce 100% of landfill emissions using CFI offset-credits. So, for example, a landfill operator cold invest in a forestry project to reduce their liability. While this might help reduce the cost of the liability, the other significant benefit is the potential to provide cost certainty. Landfill facilities continue to produce emissions after the facility is closed because of the time it takes waste to decompose. This means operators have to increase gate prices now to fund the liability when the facility is closed and no longer able to generate revenue.
The carbon price will be driven by the market so anticipating the size of this future liability is difficult. By investing in an offset project that will generate a stream of offset credits over time, they can fix their carbon price in future years, and so more easily manage this future liability.
While most CFI offset projects are associated with the agriculture sector and land management, the waste sector itself can produce offsets from projects that reduce legacy emissions, for example by extracting methane from closed cells at their facility for flaring or power generation. They can then bank these offset-credits to reduce their future liability.
While the waste sector will be heavily impacted by a carbon price, these late amendments provide some new opportunities to reduce the impact.
Yesterday the Government finally released their plan to price carbon through their Clean Energy Future package. This package will see the Government tackle climate change by:
- pricing carbon
- encouraging renewable energy
- encouraging energy efficiency and;
- increasing the amount of carbon stored in the land (through the Carbon Farming Initiative)
Perhaps the most talked about and anticipated announcement was the detail supporting the price on carbon. From July 1, 2012 this new package will see about 500 of Australia’s top polluters pay a fixed price of $23 per tonne of CO2e emitted. This price will rise by 2.5% per annum for three years before becoming a market-driven Emissions Trading Scheme, with linkages to international markets.
For now, the Carbon Price will apply to stationary energy, industrial processes, fugitive emissions and non-legacy waste. Significant compensation has been announced for both households (approximately $4 billion per annum) and industry (approximately $3 billion per annum).
In addition to the carbon price, there is a strong focus on delivering cleaner energy through investment in new technologies and the closure of highly emissions intensive energy generation as well as further investment in renewable energy technologies.
It is expected that this package will deliver on Australia’s commitment to reduce pollution by 5% on 2000 levels by 2020, and 80% by 2050.
This new, long-term, trajectory is one of the most significant aspects of the package, representing a 2% decrease in emissions from today’s levels, while supporting a projected increase in the Australian population of over 13 million.
So what to make of the package?
There are a number of pros and cons of this package, which we will continue to see debated in the public domain in the coming months before it goes to Parliament in November. Whilst no-one would argue this current package is perfect, given the unsuccessful history we have of trying to address climate change (whether it be through an emissions trading scheme, a carbon tax, energy efficiencies or direct action) I think this package represents a compromise that will not only show the world that Australia is willing to do their bit to address climate change, but hopefully will also provide the momentum needed to shift Australia to a low emissions future.
For businesses, the package will mean something different for everyone. To understand its impact and prepare for a July 1 2012 start, businesses who believe they will be impacted should give careful consideration to the package with regards to their own operating environment. Unless you are directly liable, your main focus should be on energy use in your business.
With a planned start less than 12 months away it won’t be too soon to start such a review immediately. If needed, Greensense is able to assist with such a review and to develop any strategies to address any anticipated risks or cost increases.
Is the opposition to the carbon tax justified?
Prime Minister Julie Gillard is currently in Perth and has taken the opportunity to announce the federal government’s intentions to provide compensation to those households that are most likely to feel the brunt of the impending carbon tax.
The Federal Government intends to provide an estimated $5 billion a year in household assistance and it will be directed at low and middle income earners, with compensation likely to phase out for those households with a combined income over $150,000 p.a.
Julia Gillard said that compensation will be offered as a combination of tax cuts, family payment increases, and pension and allowances increases. Household assistance will also take account of different family circumstances, such as whether those affected by the proposed carbon tax are low to mid-income earners, or bringing up kids etc.
Census data indicates that just one in ten Australian households earn more than $150,000 p.a. (the level that the proposed compensation will cut out) and that the average Australian family household has an income of around $85,000 p.a. Therefore, the good news is that the majority of us will receive some form of compensation to help reduce the effects that a price on carbon will have on utility prices such as electricity, gas, and, water, and other everyday products and services.
We should not lose sight of the reasons behind the introduction of a price on carbon, which is to help drive gains in efficiency and reduce greenhouse gas emissions in a bid to combat climate change. It’s not all about saving the environment, there is an excellent business case for increasing efficiency and decreasing waste. For example, BP recently set a goal of reducing its greenhouse gas emissions by 10% over 10-years. They achieved the target in 2-years and saved $750 million in the process! Dupont set themselves a reduction goal of 65% over 10-years. They’re almost there and have saved themselves $3 billion!
One of the criticism of the Carbon Tax is that by providing households with compensation you remove the motivation to change behaviour and reduce greenhouse gas emissions. This isn’t the case because the tax will cause the relative costs of more carbon intensive products and services to increase, giving people an economic incentive to choose a greener alternative. The tax also provides a strong incentive for businesses and households to become more energy efficient. For example, for households the carbon tax will reduce the payback time for investments in better insulation, more energy efficient appliances, and roof-top PV systems. These improvements will go straight back into household budgets, saving people money.
Whilst the precise design of the Carbon Tax is still to be confirmed, it will bear a close resemblance to the Carbon Pollution Reduction Scheme (CPRS) that the previous Rudd Government tried to introduce in 2009-10, except with a longer period of fixed-price permits (fixed price in that the price is set by the government, not the market, the cost of permits will still rise each year). Irrespective of the exact timeframes and the exact details, it is now a matter of when, not if, we will see the introduction of a price on carbon here in Australia.
Rather than see it as “tax”, we should use it as an opportunity to strive to increase our sustainability and even save money.
Following a deal with the Greens, Julia Gillard announced plans for a carbon tax today. The scheme will start in July 2012 with a full Emissions Trading Scheme to following in three to five years. Lets see if Labor can get it over the line this time around. There is some more information available on the Carbon Price Mechanism. The announcement is below:
CLIMATE CHANGE FRAMEWORK ANNOUNCED
The Prime Minister Julia Gillard today outlined the Government’s plan to cut pollution, tackle climate change and deliver the economic reform Australia needs to move to a clean energy future.
This is an essential economic reform, and it is the right thing to do.
The two-stage plan for a carbon price mechanism will start with a fixed price period for three to five years before transitioning to an emissions trading scheme.
The Government will propose that the carbon price commences on 1 July 2012, subject to the ability to negotiate agreement with a majority in both houses of Parliament and pass legislation this year.
A carbon price is a price on pollution. It is the cheapest and fairest way to cut pollution and build a clean energy economy. The best way to stop businesses polluting and get them to invest in clean energy is to charge them when they pollute.
The businesses with the highest levels of pollution will have a very strong incentive to reduce their pollution.
The Government will then use every cent raised to:
- Assist families with household bills
- Help businesses make the transition to a clean energy economy
- Tackle climate change
The Government will not shy away from this difficult but vital economic reform to move Australia to a clean energy nation.
The global economy is shifting.
Right now, Australia is at risk of falling behind the rest of the world. The longer we wait, the greater the cost to the economy, and the greater the cost to Australian jobs.
An initial fixed carbon price will provide businesses with a stable and predictable platform to transition to a ‘cap and trade’ emissions trading scheme that will be linked to international carbon markets.
This will give businesses time to understand their carbon liability and begin the transformation in a steady and purposeful way.
Today’s proposal is the result of hard work by the Multi-Party Climate Change Committee which has been meeting co-operatively, determined to help deliver this crucial economic reform.
The framework has been agreed by Government and Greens members of the Multi-Party Climate Change Committee (MPCCC). The other members, Mr Tony Windsor and Mr Robert Oakeshott, have agreed that the proposal should be released for community consultation.
The Committee will continue to discuss other important elements of the proposal including the starting level of the fixed price, any phasing in of sectors of the economy, and assistance for both households and industry.
The document outlining the proposed carbon price mechanism is attached.
Members of the public and interested parties who wish to provide input on this approach should contact: MPCCC@climatechange.gov.au, or write to:
The Multi-Party Climate Change Committee Secretariat
GPO Box 854
Canberra ACT 2601
Australia
A carbon price is back on the drawing board in Canberra. Julia Gillard’s (supposedly) multi-party committee is exploring options right now. But unless you are particularly optimistic, or are suffering short-term memory loss regarding Labor’s last inspiring attempt to get some legislation passed, its hard to see a scheme being in place before 2013.
I say supposedly multi-party, because members of the committee will be drawn from “those who are committed to tackling climate change and who acknowledge that effectively reducing carbon pollution by 2020 will require a carbon price”, which doesn’t include the Nationals or the Liberals.
Its not entirely clear if the opposition’s opposition to the committee is because climate change is “crap” or because they don’t accept the premise that pricing carbon is the way to go. Sophie Mirabella called it a “marxist plot” on Q&A, which gives us a reasonable insight into the Coalition’s point of view.
Meanwhile, I was inspired by this poster from a mass political rally in the US recently.
It’s been an exciting week in politics with Kevin Rudd deposed and the appointment of Australia’s first female Prime Minister.
Prime Minister Julia Gillard has said that she “will re-prosecute the case for a carbon price at home and abroad”, but that “rebuilding consensus” is a precursor to pricing carbon. This doesn’t give me any cause to think we will have an emissions trading scheme in the next couple of years, and if anything it suggests the Labor party might restart consultation and might consider a different policy direction entirely. A carbon tax, perhaps? After years of development and debate will the CPRS be abandoned?
Meanwhile, there is a renewed focus on energy efficiency. The Department of Climate Change was recently renamed ‘Climate Change & Energy Efficiency’. The (previous) Prime Minister established an energy efficiency taskforce and now new legislation has been passed for mandatory disclosure of building energy efficiency. Climate Works Australia, a non-profit ‘think tank’ found in their Low Carbon Growth Plan report that energy efficiency could save the Australian economy over $5 billion dollars by 2020. And the Energy Efficiency Council of Australia have just released their own report (PDF), which said that energy efficiency represented the “biggest, cheapest and fastest” way to cut greenhouse gas emissions and is now more urgent, “particularly with both major political parties delaying a carbon price”.
Perhaps while Julia Gillard is rebuilding consensus on a carbon price, we’ll see some new policies developed to further encourage energy efficiency?
It looks like Labor has shelved plans for an emissions trading scheme for the time being.
At the same time Republican Lindsey Graham withdrew his support for a similar bill in the US over immigration politics, effectively scuttling ‘cap and trade’ in the US until at least the next congress.
It’s been a long time since the US passed their Climate Change Bill through Congress but, so far, no progress has been made getting a similar bill through the Senate. There are some parallels with the passage of the CPRS here.
On Monday a new US Climate Change Bill is due to be presented to the Senate, proposed jointly by Democrat John Kerry, Republican Lindsey Graham and independent Joe Leiberman.
This is going to be the last real chance to get a bill passed before the US mid-term elections and the trio have been working hard to get bipartisan and industry support for the Bill. The outcome of the debate on this Bill is important for Australia for two reasons.
Firstly, the prospects for improving on the Copenhagen Accord will be bleak without meaningful US action. While the US has made a reduction commitment under the accord, as has Australia, we still need to see what policy the US will use to achieve the target.
Secondly, both major parties in Australia are keen to be seen to be in-line with US policy. With a Federal election looming, the outcome of debate on this bill in the US could influence policy here — or at least election posturing.
There have been claims in the media here that ‘cap and trade’ is dead and this means the US will move to a direct action model, in line with Coalition policy. On the other hand, we’ve recently had President Obama’s comments on the 7:30 Report that “you have to put a price on carbon of some sort”, in line with Labor policy.
We should know more details on the Bill this week and have a good idea of its prospects soon enough, but no one is suggesting it will pass easily, and most are suggesting it will fail. If the Bill does fail, does that mean the US won’t meet its reduction target? Does it mean ‘cap and trade’ is dead? And what does it mean for Australia?
I recently attended a presentation by from Frank Litz, a Senior Fellow from the World Resources Institute (WRI). He said that research still to be published by WRI has found that the US could still meet their reduction target without a national ‘cap and trade’ system. There are two reasons why. Firstly, there is already a regional emissions trading scheme in the US and there are two more in development. The Regional Greenhouse Gas Initiative is underway and covers the electricity sector in 10 mid-Atlantic states. The Western Climate Initiative will cover 11 Pacific states across the US and Canada and the Midwest Greenhouse Gas Reduction Accord will cover 7 more US states. It is clear that even without a national ‘cap and trade’ system, emissions trading will be a major driver of abatement in North America.
Also, the President has significant power to regulate emissions through existing legislation, such as the Clean Air Act. The Environmental Protection Authority has recently issued a finding that greenhouse gas emissions endanger public health and welfare with the support of the White House and following a ruling from the Supreme Court. This means they can begin to put in place performance standards on major emission sources such as vehicles, factories, and power plants. Other agencies such as the Department of Energy and the Department of Transport also have powers that could be used by the President to regulate emissions.
It’s important to distinguish this kind of ‘direct action’ from that proposed by the Liberal Party. The Liberal Party’s policy is to make direct investments in offsets and some renewable energy production and to provide grants to companies to reduce emissions. The policy placese no limit on emissions and makes no attempt to regulate emission sources.
Some people have gone further and suggested that the US EPA might have the power to implement a national emissions trading scheme under existing laws. But even without using existing laws there are some reasons to think the US will have a national scheme soon and if not during this congress, then probably in the next one. And if the US puts a price on carbon, Australia is pretty sure to follow suit.
One of the reasons there is doubt that the Kerry-Graham-Leiberman Bill will get enough support this time around is the looming mid-term elections, rather than insurmountable opposition to such a scheme. The Bill will need Republican support to pass and there is a view that after Obama’s success with Health reform, the Republicans don’t want to give the Democrats another high-profile win. Also, President Obama has indicated that the Financial Reform Bill is a higher priority and he also has a highly political Supreme Court nomination to deal with before the mid-terms. So climate change might not get the attention it deserves.
Direct regulation by the EPA is very unpopular with industry and is seen as a more expensive way to achieve emissions reductions. So we can expect to see renewed pressure from industry for a national trading scheme if and when they become subject to more stringent regulation of emissions. Again, there are echoes of the situation in Australia, where industry is calling for more certainty.
What does this all mean for Australia and our upcoming Federal election?
Right now neither of the major parties has a strong or popular position on climate change, but both parties will hope to get some political mileage from the outcome of debate on this bill. If the US bill does get up then it will provide strong support for Labor’s policy and may see Rudd want to make even more of climate change as an election issue. Despite his failure to pass the CPRS Bill and the disappointment of Copenhagen, he is back talking about emissions trading now and definitely sees it as an area where he has stronger credentials than the Coalition.
Tony Abbott seems quite happy to make up new policies on the run, so what he will do is anyone’s guess. If the Bill fails it should be good news for him because the media will interpret this as a trend away from emissions trading towards direct action. However, President Obama will still want to show international leadership on climate change and demonstrate to partners that the US is taking action to meet its commitment under the Copenhagen Accord ahead of COP16 in Mexico. He will probably draw to attention to the trading schemes that are already underway in the US and use his executive powers to start regulating emissions with new performance standards.
This kind of action is quite different to what the Coalition is proposing, which lets polluters off the hook entirely. And the US will probably get a national emissions trading scheme, sooner or later.
Pollytics Election Simulation April 5th 2010 (blogs.crikey.com.au/pollytics/)
Business planning for emissions trading in Australia has been challenging. The hope now is we’ll get some certainty with the next federal election.
If you’re looking for some insight into the outcome of the next election, the pollytics blog written by poll analyst Scott Steel is worth reading. He runs election simulations from the results of newspaper polling. He’s just published the results of his Q1 2010 simulation, which forecasts that Labour will be returned with a larger majority.
He also analyses the probabilities from the betting market. As of Friday the 9th, the implied probability of Labour winning the election is 74%.
What does this mean for the prospects of the emissions trading scheme starting on schedule? Labour is in power now but hasn’t been able to pass their CPRS legislation. Even with a larger majority in the Lower House, they will probably still need minor party support in the Senate. That is, unless they can call a joint-sitting of parliament.
Election guru Antony Green has recently published an article on the prospects of a double-dissolution election. The whole article is worth a read, but I’ll quote his conclusion:
“Political logic points to a double dissolution after July 1, most probably in August or early September. The Government has constitutional justification for a double dissolution, and is building up its political justification based on Senate obstructionism. It has the timing opportunity of holding a double dissolution without losing a year from its term and polls that gives it a chance to remake the Senate. All the logic points to the Rudd government taking its chance.”
There is still a lot of uncertainty and your business plans should consider a number of possible scenarios. However, there is a very real chance that emissions trading will be introduced on schedule, so if you are liable you should be well on your way to getting ready to go.
Next week will see the closing days of debate on the CPRS legislation for this year and our last chance to secure an emissions trading scheme before the COP15 conference in Copenhagen in a weeks time.
However, the media is largely focused on Turnbull’s future as the leader of the Liberal party. He thinks that the Liberal party must have a policy on climate change and that it should support the introduction of an emissions trading scheme. This was their policy going into the last election and they have already endorsed the reduction target commitment of between 5% to 25% that Australia will be taking to Copenhagen. Without an emissions trading scheme in place, Australia will have no mechanism to achieve these cuts.
Turnbull’s position has put him on a collision course with the arch-conservatives within the party led by Nick Minchin. This group have taken the in-fighting into the open with a mass resignation late last week and calls for a second leadership spill. Turnbull is not seeking any appeasement with the climate change denialists within his party and is continuing to fight both for leadership and for the passage of the CPRS legislation. Here he is commenting on Nick Minchin in an interview with Laurie Oakes yesterday:
“[T]hey do not believe that climate change is real, they do not believe that humans are causing it and they do not want to do anything about it. Nick Minchin made that very clear in the Four Corners programme as did a number of his acolytes. What he is trying, what he is is a climate change denier. He stands for doing nothing on climate change. He said a majority of our party room do not believe that humans have any impact on climate change. Now that is a view contrary to the opinion of the vast majority of Australians, contrary to the opinion of every government in the world, and every major political party in the world. Now, if Nick Minchin wins, if he wins this battle, he condemns our party to irrelevance, because what he is saying on one of the greatest issues and challenges of our time, one that will affect the future of the planet and the future of our children and their children, Nick Minchin is saying ‘do nothing’. He wants us to be the ‘do nothing on climate change’ party and he has been, he’s on the record about that, and when he talks about a delay or a deferral, what that means is denial.”
Even if Turnbull can retain the support of most of his party and hold-off the attacks from the ‘Minchin-ites’ the chances of the legislation successfully passing through the Senate tomorrow seem slim. Debate on the bill was very slow on Thursday and there are a large number of amendments still to be debated. Both the far-left and the far-right within Parliament are opposed to the legislation. The Greens because they see it as too generous to industry and the Nationals and elements of the Liberals because they don’t believe in climate change. Here is Penny Wong trying to call out the far-right for filibustering on Friday:
“What is perverse is the unacceptable risk that this generation of right wing politicians are seeking to impose on future generations of Australians. What is perverse is the blatant and wilful disregard of the scientific evidence. Perhaps most perverse is the way in which Senator Joyce and others in this chamber will do and say anything to avoid action on climate change and have played procedural games and filibustered over the time that this debate has been on in this Senate, from back in June until now—simply demonstrating yet again that they are so extreme that, even when they believe there is a risk that the majority of this chamber will support action on climate change, they will not accept it. They will do anything in order to avoid taking action on climate change. I do believe that is perverse.”
What those seeking to delay the legislation are hoping to achieve is unclear. If you are on the far-right and you doubt the science of climate change — perhaps believing the ridiculous views of some skeptics that there is a vast scientific conspiracy on the subject — then you are missing the point that this is now beyond the science. Every major country in the world — from the US to China — is trying to reduce the carbon-intensity of their economies.
While our dependence on coal — both for export-earnings and domestic electricity generation — will make this transformation difficult for us, delaying the transformation is simply delaying the inevitable and is putting our future long-term prosperity at risk. What’s more, for the far-right of politics and the industry groups they support, the current bill before Parliament may be the most generous offer they get.
The far-left’s opposition to the current bill is more understandable, but probably just as silly. The CPRS does appear to reward polluters and it does lock-in — for the time being — a national reduction target as low as 5%. The Green’s advocacy for action on climate change is welcome. For example here is Christine Milne arguing for a larger reduction target on Friday:
“The fact is that the atmosphere does not really care. We are not talking here about what is politically achievable but about what the science—the chemistry and physics—deliver for us: what the earth can bear.”
However, the Greens, in voting against the CPRS legislation, have taken an idealistic and uncompromising position which provides no politically acceptable alternative. It might be have been the case that with their support the original CPRS legislation — perhaps with some of the amendments they are now seeking such as increased support for developing countries — might have been passed earlier this year. As it is now we have a bill further away from their policy ideal, with more support for the coal industry, and Australia no closer to meeting any reduction targets at all.
In any case, the Greens are mostly irrelevant to the current debate and we should be watching for the position that the majority in the Liberal party take tomorrow morning — and perhaps Joe Hockey in particular — for any insight into how tomorrow’s debate will proceed.
But this is all politics and this will all be a distant memory very soon. Australia will soon have an emissions trading scheme, the economy will soon begin a massive transformation in earnest, climate change will grind inexorably forward, the environment will change, and we will do our best to adapt. Our 20th-century fossil-fuel driven society will one day be a distant memory.
These changes, that the conservatives on the far-right fear so much, will not see complete social or economic collapse, but nor will they bring about an eco-utopia that those on the far-left might wish for. The challenge for our political leaders is to take the long-view and to chart a course that we can start today and that will sustain us in the future.
I have my fingers crossed. I hope that we take a step forward tomorrow with the passage of the CPRS legislation and that we take great strides forward next week in Copenhagen.
The government has released the details of proposed changes to the CPRS to obtain Coalition support. The detail includes more transition support for emissions intensive trade exposed industry, electricity generators and coal mines.
East Perth Power Station. Setting a trend for coal-fired power generation in Australia?
Unsurprisingly, the proposed CPRS legislation was rejected in the Senate yesterday in what was a sad day for the environment and Australian politics.
In 2007, Rudd was voted in with a campaign that promised an Emissions Trading Scheme. Even before this Howard had announced his government’s support for an ETS. Here we are, nearly 2 years later following significant community and industry consultation and the chance to show some leadership in the global response to climate change, and our political parties can’t get past the bickering to pass the law or even to enter into meaningful negotiations.
So what now? The Government has two options: Negotiate changes to the bill to gain further support; or do nothing and table the bill in November with the aim of triggering an early election before taking it to a joint sitting. Either way, both approaches will take time – one of the most precious resources in the climate change response.
So what can you do? Rather than wait out the politics, why not use this time wisely to prepare? A cost of carbon is inevitable in some shape or form. Now is the ideal time to start educating your workforce, conduct a risk assessment and develop a long-term strategic response to climate change.
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 amendments2.17 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.
Greensense, in partnership with tradeslot, recently completed a CPRS Auction Masterclass for Horizon Power. The recently announced delay to the start of the Carbon Pollution Reduction Scheme (CPRS) has given liable organisations the opportunity to better prepare themselves participation in the scheme. The sessions focused on the background to the CPRS, the supporting legislation, the format of the auction, the alternative permit and abatement options, the roles that will be required and different auction strategies that may be adopted. The day ended with a simulated online auction.
Feedback from Horizon Power was extremely positive. The session gave them an opportunity to explore the impact of the auction process, the data required to effectively participate and greater insight into the scheme and how it will fit into their overall carbon management and emissions trading strategy.
With the original timeframes for the CPRS, many organisations were struggling to effectively prepare themselves, but the current delay has allowed the time to have a more strategic approach to emissions trading. These sessions are a great way of kicking off this process. If you are interested in having a tailored CPRS auction simulation in your organisation then contact Greensense.
From The Australian: Rudd signs off on emissions trading scheme compromise.
The highlights:
- Start delayed for 12 months
- Carbon permits will cost $10 per tonne of carbon in 2011-12
- Emissions reduction target of up to 25 per cent of 2000 levels by 2020 (subject to a broad global agreement)
- Additional support for Emissions Intensive Trade Exposed Industries — a “Global Recession Buffer”
- Establishment of the “Australian Carbon Trust” to better support voluntary action
The Australian Carbon Trust seems to have two parts; the Energy Efficiency Savings Pledge Fund and the Energy Efficiency Trust.
The Energy Efficiency Savings Pledge Fund will take the form of a web site that enables individuals to buy and surrender CPRS pollution permits (AEUs) by making ‘pledges’. These pledges will be tax deductible. It will be interesting to see what effect this has on the existing voluntary offset market.
The Energy Efficiency Trust will provide funding for businesses to undertake energy efficiency projects. “For example, the Trust could identify lighting improvements in a business that would cost $2 million to undertake. The Trust would cover this $2 million cost, with the business contributing nothing upfront. The business would then pass the energy cost savings from the lighting improvements back to the Trust at a commercial rate until the full $2 million with interest is paid back to the Trust. Once the upfront capital is paid back, the business keeps the ongoing cost savings.”
The Energy Efficiency Trust will be run in conjunction with The Carbon Trust, a UK-Government funded business that runs a similar scheme for the UK Government.
The legislation for the CPRS will be introduced when parliament resumes later this month. Given the changes above, it seems likely that it will be supported by the Coalition, but not the Greens, which will mean the Government will also need the support of independents Nick Xenephon and Steve Fielding.
