What emission types are in and out?

'Scope 1' emissions

Entities are liable as direct emitters under the carbon pricing mechanism if they operate facilities that exceed the threshold for 'scope 1' emissions covered by the mechanism. Scope 1 emissions are defined in the National Greenhouse and Energy Reporting Regulations 2008 to mean the release of greenhouse gas into the atmosphere as a direct result of an activity or series of activities (including ancillary activities) that constitute the facility. For example, the emissions produced when coal is combusted at a power station are scope 1 emissions.

For more information, see who is liable?

Covered emissions

A liable entity's liability for covered emissions will only include scope 1 emissions under the carbon pricing mechanism. Broadly, covered emissions are scope 1 emissions where:

  • the greenhouse gas is released into the atmosphere as a direct result of the operation of the facility
  • the greenhouse gas is released in Australia
  • a method or criteria for measurement has been provided to measure those emissions under the NGER Act, specified in the National Greenhouse and Energy Reporting (Measurement) Determination 2008 made under the NGER Act, and
  • the greenhouse gas is not one of the excluded types of emissions (see below).

Entities only have liability for a facility if it has 'covered emissions'. The carbon pricing mechanism covers approximately 60 per cent of Australia's carbon emissions including from electricity generation, stationary energy, landfills, wastewater, industrial processes and fugitive emissions.

These are scope 1 emissions of:

  • carbon dioxide (CO2)
  • methane (CH4)
  • nitrous oxide (N2O), or
  • perfluorocarbons specified in the NGER Regulations and that are attributable to aluminium production.

Covered emissions are measured in carbon dioxide equivalence (CO2-e). The equivalence measure allows the global warming potential of each greenhouse gas to be standardised relative to carbon dioxide.

Entities are not liable for 'scope 2' emissions—emissions released into the atmosphere as a direct result of one or more activities that generate electricity, heating, cooling or steam consumed by the facility, but do not form part of the facility.

For instance, an entity is not liable for the use of electricity if it was not generated as part of the facility. The electricity generator is liable for the emissions it produces in generating the electricity.

Emissions that are not covered emissions from the operation of a facility

Entities are not liable for following emissions from the operation of a facility:

Emissions from agriculture
Agricultural emissions are not covered by the carbon pricing mechanism. However, the Carbon Farming Initiative allows farmers and other land managers to earn carbon credits by storing carbon or reducing greenhouse gas emissions on the land. The exclusion of soil-related emissions is limited to emissions that arise from, or that are produced in, soil. Emissions that result from carbon capture and storage, or emissions that can be attributed to the operation of a landfill facility are not exempted.
Emissions from particular fuels which are excisable or subject to customs duty
Liquid petroleum fuel, liquefied petroleum gas, liquefied natural gas and compressed natural gas subject to excise or customs duty are not treated as covered emissions when these fuels are combusted in the operation of a facility. For more information see treatment of fuel and transport.
Fugitive emissions from decommissioned underground coal mines
Fugitive emissions from decommissioned underground mines are not covered emissions. A definition of decommissioned underground mines for these purposes has been included in regulations under the NGER Act.
Legacy emissions from the operation of landfill facilities (that is, arising from waste deposited before 1 July 2012)
Legacy emissions from landfill facilities are not included in a landfill facility's liability. However, legacy emissions do count for the purpose of determining whether a landfill facility exceeds emission thresholds. For more information, see landfill and waste.
Certain emissions from landfill facilities that have not accepted any waste since 1 July 2012
Landfill facilities which no longer accept waste and closed before 1 July 2012 are excluded from the carbon pricing mechanism. For more information, see landfill and waste.
Emissions of synthetic greenhouse gases, except for perfluorocarbons emitted as a result of aluminium production
Emissions of synthetic greenhouse gases (hydrofluorocarbons, perfluorocarbons and sulphur hexafluouride) are excluded from the carbon pricing mechanism. This does not apply to emissions of perfluorocarbons emitted as a result of aluminium production. These emissions will be subject to an equivalent carbon price under the Ozone Protection and Synthetic Greenhouse Gas Management legislation.
Emissions from biomass, biofuel and biogas
Emissions from the combustion of biomass, biofuels and biogas are exempt. Carbon dioxide produced from these sources is part of the natural carbon cycle and does not count towards Australia's emissions obligations. Other greenhouse gases from the combustion of these sources are a minor source of emissions and are excluded for administrative simplicity.

Embodied emissions

An entity can be liable for the potential greenhouse gas emissions embodied (embodied emissions) in an amount of gaseous fuel. These entities are gaseous fuel suppliers or OTN holders.

From 1 July 2012, natural gas and non-transport CNG is covered under the carbon pricing mechanism, while from 1 July 2013, liquefied petroleum gas and liquefied natural gas for non-transport use is covered under the carbon pricing mechanism.

A gaseous fuel supplier will be liable for the embodied emissions in the gaseous fuel it supplies to another person (recipient) unless an OTN is quoted by the recipient of the gaseous fuel. Where an OTN is quoted by the recipient of the gaseous fuel, the OTN holder will be liable for the embodied emissions in the gaseous fuel supplied.

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