3 October, 2015
Recent announcements by the Australian Government relating to its policy on climate change have revealed some important new information – and potential opportunities – for business, although uncertainty still surrounds some key elements of the overall policy framework. Despite the recent change in leadership of the Government, we do not expect resultant changes to these announced positions in the short term.
On 11 August 2015, Australia announced its long awaited proposed emissions reduction target for the period beyond 2020 (known as its intended nationally determined contribution or INDC).
Australia is proposing to reduce it greenhouse gas (GHG) emission to 26-28% below 2005 levels by 2030.
The Australian government says its INDC offers a responsible contribution to a global problem, having regard to Australia's national circumstances, in particular our economic structure and population growth. The Government has, in particular, noted the significant contribution that resources and agriculture have to the Australian economy, along with our strong reliance on fossil fuels for energy.
The Government has indicated that the INDC will be met primarily through its Direct Action policy, including the Emission Reduction Fund and the Safeguard Mechanism, along with improvements in energy productivity. On 2 September 2015, the Government released exposure drafts of the legislative rules that will underpin the Safeguard Mechanism. These are expected to be finalised in the coming months for the mechanism to commence on 1 July 2016. The Government has also released further guidance on the auction rules for the second ERF auction, which will be held on 4-5 November 2015.
The announcement of Australia's INDC provides an indication of how Australia's climate change policy will develop in the coming months and years and raises a number of issues for businesses to consider. At the end of this alert, you will find our observations for business arising from the current state of play. Below, we explore in more detail some of the key issues for Australian and international companies that may be affected by Australia's emissions reduction target.
1. What is an INDC and how does Australia compare to other countries?
2. How will Australia achieve its INDC?
3. What are the key risks and issues for participating in the ERF?
4. Will I be caught by the new ERF Safeguard Mechanism?
5. Will there be opportunities to use international credits?
6. What if I already hold units in ANREU?
7. Are there opportunities for Australia to connect with international carbon markets?
8. What might happen if there is a change in government?
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For further information, please contact:
Martijn Wilder AM, Partner, Baker & McKenzie
martijn.wilder@bakermckenzie.com
