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Australia: Draft Legislation on Carbon Pollution Reduction

(Mar. 18, 2009) On March 10, 2009, the Australian government released draft Carbon Pollution Reduction Scheme legislation that will remain open for public comment until April 14, 2009. The legislation was developed on the basis of a Green Paper of July 2008 that solicited ideas on designs for the Scheme, and comes in the wake of the December 2008 White Paper “Carbon Pollution Reduction Scheme: Australia's Low Pollution Future,” the government's policy document on the Scheme's design. (Exposure Draft of the Carbon Pollution Reduction Scheme Legislation, (last visited Mar. 12, 2009).) If adopted, the Carbon Pollution Reduction Scheme Bill and five related bills – on consequential amendments, the climate change regulatory authority, general charges, excise charges, and customs charges – would put in place on July 1, 2010, a greenhouse gas (GHG) emissions trading scheme.

The aims set forth in the bill are:

1) to give effect to Australia's obligations under the Climate Change Convention and the Kyoto Protocol [cf. United Nations Framework Convention on Climate Change, (last visited Mar. 11, 2009)];

2) to support the development of an effective global response to climate change; and, in the long-term,

3) to take action directed at meeting Australia's targets of: reducing GHG emissions to 60% below 2000 levels by 2050, and to between 5% and 15% below 2000 levels by 2020; and to do so in a flexible and cost-effective way. (Id.)

The bill in its current form allows organizations “to use domestic carbon pollution permits (known as Australian emissions units, or AEUs) or eligible international units to satisfy their obligations under the emissions trading scheme” the latter “include credits created through projects approved under the Kyoto Protocol's Clean Development Mechanism.” (Murray Griffin, Australian Government Seeks Comment on Draft Bill for Emissions Trading Scheme, BNA DAILY REPORT FOR EXECUTIVES, Mar. 11, 2009, No. 45 DER A-29, Bureau of National Affairs online subscription database.)

Most AEUs would be regularly auctioned by the Scheme regulator, but free allocations would be given to internationally competitive, large emitters until similar carbon restrictions were faced by their competitors. Failure to fulfill its obligations under the Scheme would oblige organizations to pay a penalty and to make good on shortfalls in their permits. The draft Scheme allows unlimited banking of excess permits for future use and limited borrowing, and it sets forth a “price cap” for 2010-11 to 2014-15 of A$40 (about US$26) per metric ton in the first year of the scheme, to rise five percent each subsequent year. (Id.)