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Carbon pricing mechanism

 

Deliverable

Administration of the carbon pricing mechanism.

Provision of industry assistance arrangements under the carbon pricing mechanism, including the Jobs and Competitiveness Program and the Energy Security Fund Coal Fired Generators Assistance—Free Carbon Units.

Maintenance of the Liable Entities Public Information Database.

Snapshot

The carbon pricing mechanism puts a price on Australia's carbon pollution. It was introduced by the Clean Energy Act 2011 and applies to Australia's largest carbon emitters.

Under the carbon pricing mechanism, Australia's largest carbon emitters, called 'liable entities', must report and pay for the carbon emissions they produce each year. They must purchase and surrender one eligible emissions unit for each tonne of carbon dioxide equivalent emissions produced.

If a liable entity does not surrender enough units, it must pay a shortfall charge.

The carbon pricing mechanism applies to approximately 60 per cent of Australia's carbon emissions, including carbon emissions from electricity generation, stationary energy, landfills, wastewater and industrial processes and from fugitive gas emissions.

The carbon pricing mechanism covers a range of large business and industrial facilities.

Reporting of emissions and surrender of units

Liable entities must report on their interim and final emissions under the National Greenhouse and Energy Reporting Act 2007.

Generally, if a facility meets or exceeds the threshold of emissions covered by the carbon pricing mechanism, with a carbon dioxide equivalence of 25,000 tonnes in a financial year, the person responsible for the facility will be liable under the carbon pricing mechanism.

Liable entities must surrender one carbon unit for every tonne of carbon dioxide equivalent emissions that they have produced in a compliance year. If a liable entity does not surrender any or enough units, it must pay a unit shortfall charge.

The unit shortfall charge is set at 130 per cent of the fixed price for the relevant financial year multiplied by the number of shortfall units. The unit shortfall charge creates an incentive to surrender units under the carbon pricing mechanism rather than pay the higher unit shortfall charge.

2012–13 compliance period

Those liable entities with an interim emissions number for the 2012–13 compliance period were required to report and surrender sufficient emissions units to meet their provisional liability by 17 June 2013. A liable entity's provisional liability is equal to approximately 75 per cent of their emissions for the full 2012–13 year.

All liable entities were required to report a final emissions number for the 2012–13 compliance period by 31 October 2013. The 2012–13 compliance period runs from 1 July 2012 until 30 June 2013. Liable entities were required to surrender sufficient emissions units to meet their final liability by 3 February 2014.

The Clean Energy Regulator provided education and training support to clients during 2012–13. As a result, the 2012–13 compliance rate was very high: 100 per cent of liable entities required to do so reported their interim emission numbers and 100 per cent of liable entities reported their final emissions number. The total liability acquitted on time was 99.6 per cent.

Feedback from industry about the performance of our agency is consistently positive, particularly around the professionalism of the staff.

– Virginia Malley

Four liable entities did not meet the final deadline for 2012–13 and incurred a final unit shortfall charge. Fourteen liable entities incurred an estimation error shortfall charge as a result of reporting an interim estimate of 75 per cent of their 2012–13 emissions, in June 2013, which subsequently proved to be a low estimate compared to their full-year report in October 2013.

Table 3.1 summarises the results of the 2012–13 final surrender period.

Table 3.1: Results of the 2012–13 final surrender period under the carbon pricing mechanism
ActivityResult
Liable entities348
Total emissions numbers reported in tonnes of carbon dioxide equivalent greenhouse gases (includes emissions reported for the 2012–13 interim period in June 2013)284,836,587
Balance of unit liability (due by 3 February 2014 )71,705,218
Eligible emissions units surrendered71,251,256
Final unit shortfall453,962
Estimation error unit shortfall145,265

2013–14 compliance period

Liable entities with an interim emissions number for the 2013–14 compliance period were required to report and surrender sufficient emissions units to meet their provisional liability by 16 June 2014. A liable entity's provisional liability is equal to approximately 75 per cent of their emissions for the full 2013–14 year.

The compliance rate for the provisional 2013–14 period was very high: 99.5 per cent of total liability was acquitted on time. Three liable entities did not meet the provisional deadline for 2013–14 and incurred a provisional unit shortfall charge. Two of these liable entities were under administration.

Table 3.2 summarises the results of the 2013–14 provisional surrender period.

Table 3.2: Results of the 2013–14 provisional surrender period under the carbon pricing mechanism
ActivityResult
Liable entities that reported interim emissions numbers274
Interim emissions numbers reported in tonnes of carbon dioxide equivalent greenhouse gases203,616,557
Provisional unit liability (due by 16 June 2014)203,616,557
Eligible emissions units surrendered202,667,558
Provisional unit shortfall948,999

Outstanding shortfalls charges

For the 2013–14 compliance year, three liable entities (two of these liable entities had outstanding debts from 2012–13) incurred provisional unit shortfall charges totalling $29.8 million, and these debts plus late payment penalties of $0.1 million remained outstanding at 30 June 2014. The Clean Energy Regulator continues to work with these three liable entities to recover the outstanding shortfall charges and penalties for 2013–14, as well as recover all outstanding debts from 2012–13.

Establishing point of liability

Direct emissions

Under the Clean Energy Act 2011, the measures available to enable direct emitters to manage liability include liability transfer certificates that transfer liability for a facility from one liable entity to another, and a range of sharing options for joint ventures.

During 2013–14, the Clean Energy Regulator assessed ten applications from direct emitters seeking to transfer liability for facilities via liability transfer certificates. There were no new applications from joint venture participants seeking to share liability. Joint venture participants who shared liability in 2012–13 retained those arrangements in 2013–14.

Embodied emissions

Obligation transfer numbers are used to transfer carbon price liability for the potential greenhouse gas emissions embodied in certain fuels from the supplier of the fuel to the recipient of the fuel.

In 2013–14, following an amendment to the legislation, obligation transfer number arrangements were extended from covering natural gas to include liquefied petroleum gas and liquefied natural gas.

During 2013–14, the Clean Energy Regulator managed obligation transfer number applications and maintained the obligation transfer number register, which is published on the agency's website. The obligation transfer number register contains information regarding current and previous obligation transfer number holders, as well as gaseous fuel suppliers that have requested to be entered. At 30 June 2014, 129 obligation transfer number holders were listed on the register.

Liquid fuel Opt-in Scheme

The liquid fuel Opt-in Scheme commenced on 1 July 2013. The scheme allows large users of specified taxable liquid fuels to choose to manage their carbon price liability through the carbon pricing mechanism, rather than through the fuel tax or excise systems administered by the Australian Taxation Office. For 2013–14, 27 applicants were declared to be designated opt-in persons and had the same obligations as other liable entities under the carbon pricing mechanism.

Liable Entities Public Information Database

The Clean Energy Regulator published updates to the 2012–13 Liable Entities Public Information Database during 2013–14. At 30 June 2014, a total of 348 liable entities, representing reported total emissions numbers of 284,836,587, were listed on the database for 2012–13.

On 21 March 2014, the Clean Energy Regulator published the 2013–14 Liable Entities Public Information Database. The Clean Energy Regulator identified liable entities for the 2013–14 database by contacting entities listed on the 2012–13 database to check whether they had continued to be liable, adding new entities through the liable entity registration process, and approving liability transfers for 2013–14. At 30 June 2014, 371 entities were listed on the 2013–14 Liable Entities Public Information Database.

Information on the numbers and types of units surrendered by liable entities and any shortfall charges was also published on the database.

Jobs and Competitiveness Program

The Jobs and Competitiveness Program provides ongoing assistance to entities that face high carbon pricing mechanism costs and are constrained in their capacity to pass through these costs in markets. The program issues free carbon units to eligible applicants.

2012–13 compliance period

The Clean Energy Regulator received five Jobs and Competitiveness Program applications during 2013–14 (in addition to the 127 applications received during
2012–13). Of those, four were approved and one was pending decision at 30 June 2014. All were processed within legislated timeframes. In addition, four outstanding applications from 2012–13 (out of the 127 applications received during that year) were approved during 2013–14.

A total of 416,559 free carbon units were issued in 2013–14 in respect of the approved applications for the 2012–13 compliance period.

2013–14 compliance period

The Clean Energy Regulator received 128 Jobs and Competitiveness Program applications during 2013–14. Of those, 121 were approved, two were refused, and five were pending decision at 30 June 2014, and 90 per cent were processed within legislated timeframes. The applications that were processed outside of legislative timeframes generally involved case-specific and/or legislative complexities.

A total of 84,226,608 free carbon units were issued in the first allocation of free carbon units in respect of the approved applications. The second allocation will occur in 2014–15.

Energy Security Fund

The Energy Security Fund Coal Fired Generators Assistance—Free Carbon Units scheme (Energy Security Fund) provides assistance to highly emissions-intensive, coal-fired electricity generators. To receive free carbon units under the Energy Security Fund, an eligible electricity generator must pass an annual power system reliability test and give an annual clean energy investment plan to the responsible minister by 15 August each year. All eligible generators complied with those requirements during 2013–14.

The Clean Energy Regulator issued 41,705,000 free carbon units on 2 September 2013, apportioned on the basis of the annual assistance factor shown on each generator's certificate of eligibility. In accordance with legislation, the Clean Energy Regulator published details of the issue of free carbon units on its website.

Feature%20article%20-%20Integrated%20approach%20to%20client%20service

Feature Integrated approach to client service

One of the Clean Energy Regulator’s key objectives is to ‘ensure regulated entities are meeting their obligations, reporting correct information and receiving entitlements’. To achieve this objective when administering the carbon pricing mechanism and National Greenhouse and Energy Reporting Scheme, the agency applies an integrated approach to client service delivery.

The Clean Energy Regulator actively engages clients to improve voluntary compliance with these schemes. This integrated approach to client service delivery involves:

  • guidance material
  • education through face-to-face training and webinars
  • client and business reference groups
  • agency attendance at key industry association meetings
  • an account and case management framework.

A key element of the approach is providing targeted, timely and relevant information to clients and key industry associations. For example, in 2013–14 the agency conducted face-to-face training in six capital cities and hosted 18 webinars.

Active engagement with clients supports early identification of emerging issues faced by clients and industry sectors.

Feedback gathered from clients and key industry associations also influences the design of the Clean Energy Regulator’s systems and procedures, including the Emissions and Energy Reporting System, helping to ensure that they are user-friendly, enable compliance and reduce reporting burdens.

The Business Reference Group, which provides a forum for industry participants to discuss strategic aspects of the Clean Energy Regulator’s administration of emissions and energy schemes, has commended the agency’s approach to client management and the contribution it makes to clients’ ability to report on time.

The agency’s account and case management framework provides eligible clients with an account manager as a single point of contact to deliver streamlined service. The framework promoted compliance and received positive feedback in 2013–14.

Liable entities under the carbon pricing mechanism achieved 100 per cent compliance with end-of-year reporting obligations by 31 October 2013, and 99.6 per cent compliance with acquittal of final liability by 3 February 2014.

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