The Australian Government released today the White Paper that outlines the final design of the Carbon Pollution Reduction Scheme and the medium-term target range for reducing carbon pollution.
This paper follows from the Green Paper (i.e. the Garnaut’s review report), released in July 2008, which canvassed options on the design on the scheme.
The report is presented in 2 volumes: Volume 1 describes the policy context and background of the carbon reduction scheme. Vol.1 alsoÂ describes the emission targets and the actual measures to achieve and uphold the targets. Volume 2 describes the assistance measures, tax and accounting issues and transitional aspects.
An immediate conclusion from the report is that the goal is toÂ cut emissionsÂ by 15% by 2020, but only if major economies agree to substantially restrain carbon pollution and advanced economies take on reductions comparable to Australia. If no pact is signed, Australia will unconditionally achieve a 5% cut in emissions, as compared with 2000 levels.
However, the Government confirmed its commitment to a long-term goal of reducing Australiaâ€™s greenhouse gas emissions to 60% below 2000 levels by 2050.
The Governmentâ€™s intention is to commence the Carbon Pollution Reduction Scheme on 1 July 2010. The Scheme, which will be a cap-and-trade type, will be Australiaâ€™s primary policy tool to drive reductions in emissions of greenhouse gases. The generic mechanics of the C&T scheme are:
(A) Emitters of GHG need to acquire a permit for every tonne of GHG that they emit.
(B) The quantity of emissions produced by firms will be monitored, reported and audited.
(C) At the end of each year, each liable entity will need to surrender a permit for every tonne of emissions that they produced in that year.
(D) The number of permits issued by the Government in each year will be limited.
(E) Firms will compete to purchase the number of permits that they require. Firms that value the permits most highly will be prepared to pay most for them, either at auction or on a secondary trading market. For some firms, it will be cheaper to reduce emissions than to buy permits.
(F) Certain categories of firms will receive an administrative allocation of permits, as a transitional assistance measure. Those firms could use the permits or sell them.
Some other aspects of the White Paper relevant to food chains are:
(1) As expected, the Scheme will not cover emissions from agriculture. The agricultural sector is characterised by thousands of small emitters and the calculation of emissions is complex, so it would not be practical at this stage to cover those emissions directly. However, agricultureâ€™s eventual inclusion in the Scheme is desirable, if it can be cost-effectively achieved.Commencing in 2009 the Government will undertake a work program to enable it to determine in 2013 whether or not to cover agriculture emissions from 2015.
(2) Emissions from on-site waste-water treatment are significant at industrial facilities that process goods with a high organic content (e.g. food processing plants). The Government has decided that Scheme obligations will apply to on-site waste-water treatment from the following nine industrial sectors:
â€¢ dairy production
â€¢ pulp and paper production
â€¢ meat and poultry processing
â€¢ organic chemicals production
â€¢ sugar production
â€¢ beer production
â€¢ wine production
â€¢ fruit processing
â€¢ vegetable processing.
A number of firms with waste water emissions are in the agricultural sector. Note that while agriculture emissions will not be covered from Scheme commencement, the sector is responsible for other emissions, such as transport, energy and waste emissions.
(3) The Government acknowledges that the Scheme may result in competitive distortions between facilities on either side of the threshold, particularly within the meat processing industry. However, rather than reducing the threshold to capture more treatment plants into the Scheme, the Government advocates for the use of abatement technologies by industrial food processors to reduce their emissions from waste water, potentially bringing facilities below the Scheme threshold. Entities in all industries will be eligible to apply to access the Climate Change Action Fund to implement new low emission technologies.
(4) Submissions from the agricultural industries expressed concern about the potential for land use change from agriculture to forestry. A shift towards less emissions-intensive activities, including farm forestry, is an intended consequence of the Scheme as it would reflect an efficient allocation of resources taking into account the carbon price. However, new forests are likely to be established on more marginal or less productive agricultural land and will not undermine food security.
(5) With the aim of promoting the rapid development of the carbon market, the Government will not place restrictions on who may hold permits. Permits may be held and traded by any legal or natural person (subject to verification of identity and measures to prevent criminal activity). There will be no restriction on foreign ownership of permits, apart from any that might apply under a law other than the Scheme legislation.
(6) Further, subject to the lodgement of any required deposit and having a registry account, universal participation will be permitted at auctions.
(7) On the basis of the industry level assessment conducted for the Green Paper analysis, if the Schemeâ€™s coverage is extended in 2015 to include agricultural emissions, there are several agricultural sectors that are likely to be eligible for emission-intensive trade-exposed industries (EITE) assistance including the production of beef cattle, sheep, dairy cattle, pigs and sugar cane.
(8) In regards to investment in energy efficiency and low emission technologies, there will be three sub-programs to provide grants and incentives for businesses and community groups to invest in energy efficiency projects and low emissions technologies, processes and products: The Small Business Capital Allowance (SBCA), the Community Organisation Capital Allowance (COCA) programs and the Innovation in Climate Change sub-program (ICC).
(9) The SBCA program will provide small business with assistance to invest in energy efficiency equipment (for example efficient hot water systems; improved insulation; efficient lighting, motors and drives; combined heat and power equipment; heating, ventilation and air conditioning; and refrigeration equipment) that meets established energy saving criteria. Detailed program guidelines and eligibility criteria for this measure will be developed in the first half of 2009.
(10) The COCA program will provide community organisations with assistance to invest in energy efficiency equipment that meets established energy saving criteria. Detailed program guidelines and eligibility criteria for this measure will be developed in the first half of 2009.
(11) The ICC program will provide competitive grant funding to contribute to the cost of innovative low emission technologies, production methods, supply-chain improvements or products, and energy savings projects with long pay back periods.The competitive funding rounds will begin in late 2009. Any cap to be placed on grants made under this program, co-contribution levels and program eligibility criteria will be determined in the first half of 2009. This program will complement the Governmentâ€™s existing range of energy technology specific funds such as the Renewable Energy Fund, Energy Innovation Fund, the National Low Emissions Coal Fund, Re-tooling for Climate Change and the Green Building Fund.