Preparing for the carbon price

Preparations for Australia’s carbon pricing mechanism shifted into high gear on 2 April when the Clean Energy Regulator came into being.

The Clean Energy Regulator is an independent statutory authority established by the Clean Energy Regulator Act 2011, bringing together the administration of the new carbon pricing mechanism, along with the existing National Greenhouse and Energy Reporting Scheme, Carbon Farming Initiative, Australian National Registry of Emissions Units and the Renewable Energy Target.

From 2 April, our twin aims were to maintain continuity of service to clients of the existing schemes and to achieve a smooth start for the carbon pricing mechanism, which applies from 1 July 2012. This includes providing relevant information about how the mechanism will work to those entities that are likely to be covered by it. Our website is being regularly updated with new material and is the first port of call for information on any of the schemes we administer.

The carbon pricing mechanism applies to Australia’s largest producers of carbon emissions. It will cover approximately 60% of Australia’s carbon emissions including from electricity generation, stationary energy, landfills, wastewater, industrial processes and fugitive emissions.

Information collected through the National Greenhouse and Energy Reporting Scheme provides the basis for assessing liability under the carbon pricing mechanism. Liable entities will be required to acquire and surrender one carbon unit for every tonne of carbon emissions they produce, or pay a shortfall charge.

For the first three years there is no limit on the number of units and the carbon price is fixed. In 2012-13, it is $23 per tonne; in 2013-14, it will be $24.15 per tonne; and in 2014-15, it will be $25.40 per tonne.

From 1 July 2015 onwards, the number of units issued each year will be capped by the government and the price will be set by the market. The Clean Energy Regulator will auction the carbon units. Liable entities will be able to meet their liability by surrendering carbon units acquired through the market or other eligible units, such as those created under the Carbon Farming Initiative. They can also reduce their liability by changing their processes to cut their emissions.

The other schemes we administer create incentives through the operation of a market. The Renewable Energy Target provides a financial incentive for investment in renewable energy sources through the creation and sale of certificates. The Carbon Farming Initiative allows land managers to earn carbon credits which can then be sold to those wishing to offset their emissions.

The Australian National Registry of Emissions Units was established as the secure electronic system to accurately track the ownership of emissions units issued under the Kyoto Protocol. It is being updated to cover units created under the Carbon Farming Initiative and carbon pricing mechanism.

We will continue building relationships with potential liable entities to ensure they understand how the schemes work and what they need to do. As well as direct consultation, we have a program of information seminars and technical workshops and we publish guidance on our website - including our Guide to Carbon Price Liability and our Compliance, Education and Enforcement Policy.

The Clean Energy Regulator also has a role in providing transitional assistance to certain industries. This includes providing free carbon units to eligible applicants under the Energy Security Fund to highly emissions-intensive, coal-fired generators, and to emissions-intensive, trade-exposed industries through the Jobs and Competitiveness Program.

All the schemes we administer work together to encourage business competitiveness and reduce Australia’s carbon emissions in the most cost-effective way.

www.cleanenergyregulator.gov.au

*Chloe Munro commenced as Chair and Chief Executive Officer of the Clean Energy Regulator on 2 April 2012. Prior to that, she was the Chair of the National Water Commission, the Independent Non-executive Chairman of AquaSure, the consortium building Victoria’s desalination plant and a Non-executive Director of Hydro Tasmania. From 2004 to 2009, Munro was an Executive Director at Telstra. This followed eight years in executive leadership roles with the Victorian public sector. Her early career spanned the public, private and not-for-profit sectors in New Zealand, Kenya and the UK.