Norton Rose Group - Government announces deal on CPRS

Government announces deal on CPRS
24 November 2009

Summary

At a press conference this morning, the Government announced the details of the deal that Labor had put on the table for the Opposition’s consideration, in relation to the CPRS legislation. This deal is the culmination of a number of weeks of “good faith” negotiations between Senator Penny Wong and Ian Macfarlane, following the announcement of the Opposition’s request for changes on 18 October.

The deal includes:

Permanent inclusion of the global recession buffer (GRB) for the emissions intensive trade exposed (EITE) industries. The GRB was initially intended to cease after 5 years of operation. This means assistance for EITE industries who meet the lower threshold will qualify for 66 per cent assistance, and those meeting the higher threshold will qualify for 94.5 per cent assistance (see our legal update for details of these thresholds). It is intended that the assistance level will reduce at an annual level of 1.3 per cent.
Primary food processing will receive assistance equating to $150 million over 5 years through the Climate Change Action Fund.
Agricultural emissions have been permanently excluded from the CPRS. Originally, the Government indicated that it would make a decision in 2013 as to whether to include agriculture, with a view to agriculture being included from 2015. Voluntary emissions reporting trials will commence in 2011 to allow the sector to better understand and manage its emissions.
The Government has indicated that it is likely that the agricultural sector will be able to generate offsets, thus being able to create free permits like the forestry sector. Other sectors not covered by the CPRS, for example, legacy waste and emissions from closed landfills may also be able to create domestic offsets.
Increased assistance will be provided to the coal sector, which equates to a total of $1.5 billion. The assistance will take two forms: Coal Sector Adjustment Scheme, to provide transitional assistance to the most emissions-intensive coal mines through free permits; and Coal Sector Abatement Fund, to provide funding for coal sector abatement projects.
Extra financial assistance of $4 billion will also be provided to the electricity sector, making a total package of $7.3 billion. The Electricity Sector Adjustment Scheme will also be extended from five to ten years.
The Government is also proposing to provide additional assistance of $1.1 billion through a Transitional Electricity Cost Assistance Program to various businesses, such as mining and oil and gas extraction, to help them deal with increased electricity prices.
The Government has confirmed that voluntary action by households and business will be counted, and will create a new mechanism to take voluntary action into account when setting reduction targets.

This deal is currently being considered by the Opposition party room, and the intent is that a vote will take place on the CPRS legislation before Parliament breaks for the Christmas recess on Thursday. The Government has indicated that it is willing to extend the sitting hours of Parliament, in order to provide more time for debate on the legislation.

If you would like further detail on the Government’s proposed amendments to the CPRS and how they may impact on your activities or operations, please contact a member of our Climate Change team.