The Australian Government has taken the first legislative step toward national emission trading by introducing the National Greenhouse and Energy Reporting Bill 2007 into Federal Parliament on 15 August 2007, that will make it mandatory to report certain emissions of greenhouse gases (GHG).
One of the stated purposes of the Bill is to eliminate inconsistencies and establish a single, standardised reporting framework through the Federal Government.
The Government estimates the emissions trading scheme will capture 70-75 per cent of Australia's total emissions.
Introduced amidst pressure from state and territory governments to establish a mandatory reporting scheme, the Bill sets the framework for, and is central to establishing a national emissions trading scheme.
Will there be a supporting regulatory framework?
The Bill introduces a central registry system, operated by a newly established Greenhouse and Energy Data Officer, for the annual reporting of:
- GHG emissions;
- energy production; and
- energy consumption.
The proposed central registry will be pivotal to Australia's emissions trading scheme. While the registry will initially record emission profiles for company participants, eventually it will also hold accounts, which record companies' 'emission credits' and 'offset credits', process credit transfers between participants (or trading), reconcile a company's carbon debt against its credit account, and prosecute participants for non-compliance with the scheme.
While the Bill would establish a reporting system for greenhouse emissions, and a central registry system, as a precursor to an emissions trading scheme, a good deal of relevant detail has been left to the regulations.
Australia currently has a fragmented series of mandatory and voluntary reporting systems at both state and federal levels for GHG emissions and energy consumption.
Who will be bound to report?
Company 'groups' that collectively exceed one of the thresholds for GHG emissions, energy production or energy consumption will be bound. The Bill uses a concept of controlling corporation, which will essentially be the company at the top of a corporate group hierarchy. Controlling corporations will be responsible for the reporting on behalf of facilities operated by subsidiaries, joint ventures and partnership companies. This collectively forms the company 'group'.
A facility is described as an undertaking or enterprise that involves the production of GHG, or the production or consumption of energy.
The controlling corporation will be the most senior company within a group and will have operational control of the companies within the group, if it has the authority over:
- operating policies;
- health and safety policies; and
- environmental policies.
What are the thresholds for reporting?
The Bill introduces various thresholds for GHG emitted, energy produced and energy consumed. If the company group collectively triggers any one of the proposed thresholds, the controlling corporation has a reporting obligation. Beginning 1 July 2008, the Bill establishes a series of thresholds that will be tightened over time. In addition to these 'tightening' thresholds, an 'entity that is a member of' the company group, will have to report where that entity has 'operational control' of a facility that reaches a specific facility threshold.
How will emissions, energy consumption and production be measured?
A significant issue for Australian companies will be to resolve whether they are obliged to report their 'emissions' and their energy 'produced' or 'consumed'. The definitions will be determined by the regulations and the methods for measurement will be determined by the Minister.
What are a controlling corporation's principal obligations?
Registration
A controlling corporation must apply to be registered with the scheme if it exceeds the prescribed thresholds by no later than 31 August in the financial year.
Reporting
A registered controlling corporation must provide a report in the prescribed form to the Greenhouse and Energy Data Officer. The report must detail for the relevant financial years, the group's:
- GHG emissions;
- energy production; and
- energy consumption.
The report must be based on the agreed methods determined under the Bill (still to be provided), and must be submitted within four months after the relevant financial year.
Specific obligations for chief executive officers
The Bill places particular obligations on chief executive officers (CEO) of any relevant controlling corporation to take all reasonable steps to prevent contravention of the controlling corporation's obligations. The onus will be on the CEO to show that these compliance systems are in place.
What should companies be doing now?
Companies potentially impacted by the proposed reporting scheme will need to:
- identify the relevant entities in their corporate group;
- identify their controlling corporation;
- identify whether, and in which phase, their corporate group is likely to be bound by the Bill;
- identify what emission and energy monitoring is currently conducted by their corporate group;
- consider the potential relevance of current industry guidelines on emissions measurement and monitoring;
- consider how any current monitoring could be rationalised, and made compliant with the proposed scheme;
- consider what steps and advice the company needs to take to ensure it is compliant; and
- monitor implementation of the Bill.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
