The Gillard Government’s highly awaited carbon price/emissions trading scheme has finally been announced and lawyers are breathing a sigh of relief.

According to the lawyers ALB spoke to, the Clean Energy Package addresses some of the big issues unresolved by the previous government’s Carbon Pollution Reduction Scheme (CPRS) while introducing a new range of complimentary measures. “It’s a much better policy response than the CPRS,” said Tim Power, head of the climate change practice at Freehills. “This is not just a carbon pricing regime; there are lots of complimentary elements as well.” Grant Anderson from Allens Arthur Robinson agrees, adding that the proposed scheme addresses some of the flaws in the CPRS. For example, under the old scheme liability was held by theultimate Australian holding company of the subsidiary that operated the emitting facility, the new scheme means that the liability will be imposed directly on the subsidiary.

Martijn Wilder, partner and head of the global environmental markets practice at Baker & McKenzie, says the package is far more significant than the previous proposal.  “It’s not just about an emissions trading scheme, it’s about pushing forward investment in the renewable energy sector,” he said. DLA Piper partner Charmian Barton says the Federal Government has endeavoured to make the policy simpler than its predecessor. “But until we see the draft legislation and how it’s going to operate in practice, it’s hard to say how simple it will be,” she added.

While some elements of the announcement came as no surprise, there were a few unexpected additions. “The changes to the tax threshold were quite a surprise,” said Anthony Hobley, global head of climate change at Norton Rose, who was also impressed by the announcement that A$15bn would become available for clean energy, renewable and clean technology development through the Clean Energy Finance Corporation and other new bodies. “This investment is three times larger than what the UK announced and will go a long way in attracting talent and investment in the sector,” he said. Wilder says the money will act as a “stick” encouraging additional work in the area. “I don’t think anyone was expecting that amount of money. This will allow Australia to play catch up with the rest of the world,” he said. 

The inclusion of international carbon credit trading is also a welcome addition to the scheme, but Anderson is cautious as although it is a benefit for business, it could cast doubt over the final impact of the regime if companies can simply buy carbon credits from overseas. However, this aspect will not come into play until 2015 and will be capped at 50% per entity. Other prominent concerns with the scheme include the rolling five year cap on emission targets starting in 2014 and the exclusion of the aviation industry. According to Hobley and Anderson, five years of targets is not enough for business to properly prepare. Hobley also thinks the aviation sector, which will have a fuel excise, might be wondering if it would be better off in the main scheme instead.

One thing is for certain though:  the Clean Energy Package is set to boost the workloads of lawyers across a number of practices in the coming months. “We have a lot of projects which have been waiting for this announcement to come to fruition, and now they can proceed,” said Wilder. Advising clients on their liability, restrictions, obligations, assistance eligibility and funding options is also set to keep the fraternity busy, both here and abroad.

Price:
Carbon price of $23 a tonne starting July 1, 2012, rising by 2.5% in 2013-14 and 2014-15
Floating price from July 1, 2015
Price floor of $15 a tonne (indexed), ceiling of $20 above the expected international price (indexed).

Pollution target:
5% reduction by 2020 as default position, new target of 80% reduction by 2050
First 5 years’ caps announced in 2014 budget, extended every year by one year

Investments:
Steel Transformation Plan: $300 million for “innovation” in steel manufacturing
Coal Sector Jobs Package: $1.26 billion over six years to assist with emissions from gassy mines
Clean Technology Program: $1.2 billion to support low-emissions manufacturing
Energy Security Fund: to pay for closure of up to 2000MW of highly-emissions intensive generation capacity by 2020, provide $5.5 billion in free permits and cash to the sector to 2016-17, establish an Energy Security Council
Clean Energy Finance Corporation: to invest $10 billion over five years from 2013-14 in renewables and low emissions technologies (not Carbon Capture and Storage)
Australian Renewable Energy Agency to oversee $3.2b in renewables funding, in addition to any dividends from Clean Energy Finance Corporation

Industry compensation:  $9.2 billion in compensation
94.5% of free permits for industries with average baseline of a minimum 2,000t CO2-e/$m revenue or 6,000t CO2-e/$m value added
66% of free permits for industries with average baseline of a minimum 1,000t CO2-e/$m revenue or 3,000t CO2-e/$m value added
50% for LNG industry
Assistance to be scaled back 1.3% pa
Assistance to apply for at least six years
Productivity Commission to review assistance in 2014-15

Coverage:
Stationary energy, industrial processes, fugitive emissions, emissions from non-legacy waste
Agriculture not covered, light commercial and household transport not covered
Other transport to face reduced business fuel tax credits outside agriculture, aviation to face higher excise;

International permit use not permitted until 2015; maximum of 50% of international permits can be used by an entity.