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CLEAN ENERGY AMENDMENT REGULATION 2012 (NO. 3) (SLI NO 100 OF 2012)

EXPLANATORY STATEMENT

Select Legislative Instrument 2012 No. 100

Issued by the Authority of the Minister for Climate Change and Energy Efficiency

Clean Energy Act 2011

Clean Energy Amendment Regulation 2012 (No. 3)

Section 312 of the Clean Energy Act 2011 (the Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the Act, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Act, together with the other Acts of the Clean Energy Legislative Package, establishes the carbon pricing mechanism as part of the Government's climate change plan, as set out in the document Securing a Clean Energy Future: the Australian Government's Climate Change Plan.

One of the objects of the Act is to put a price on greenhouse gas emissions in a way that supports jobs and competitiveness in the economy. Part 7 of the Act provides for the establishment of the Jobs and Competitiveness Program (the Program) to support jobs and protect the competitiveness of EITE industries from risks that those industries will be located in, or relocated to, foreign countries as a result of different climate change policies applying in Australia compared to foreign countries. The Program also provides support for industry, local communities and workers to have a smooth transition to a clean energy future.

Section 145 of the Act provides that the Regulations may formulate the details of the Jobs and Competitiveness Program (JCP) for the annual issue of free carbon units in relation to emissions-intensive, trade-exposed (EITE) activities as defined by the Program. EITE activities are industrial activities that produce a lot of carbon pollution but where the capacity of entities undertaking those activities to pass through costs is constrained where prices are set by global markets. The JCP was first established in amendments to the Clean Energy Regulations 2011 on 24 February 2012. Subsection 145(5) of the Act provides that in making a recommendation to the Governor-General about regulations that amend regulations made for the purposes of subsection 145(1) of the Act, the Minister must have regard to the following matters:

-         the aim and objects of this Part 7 of the Act;

-         the most recent report given to the Productivity Minister by the Productivity Commission in relation to an inquiry mentioned in section 155 of the Act;

-         the principle that changes that will have a negative effect on recipients of assistance under the Program should not take effect before the later of the following

o   1 July 2017; and

o   the end of the 3-year period that begins when the reduction is announced;

-         such other matters (if any) as the Minister considers relevant.

There are currently no relevant reports from the Productivity Commission.

The Clean Energy Amendment Regulation 2012 (No. 3) (the Regulation) amends the Clean Energy Regulations 2011 (the Principal Regulations) to include some additional EITE activities and to make some minor technical amendments. These EITE activities are the production of glass beads, sodium silicate glass, polymer grade propene and rolled aluminium. A summary of the key amendments made by the Regulation is provided at Attachment A.

A Human Rights Statement in respect of the Regulation is included at Attachment B.

Details of the Regulation are set out in Attachment C.

The Act does not specify conditions that need to be satisfied before the power to make the Regulation may be exercised in addition to the consideration of the matters in subsection 145(5) of the Act.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulation commences on the day after it is registered on the Federal Register of Legislative Instruments.

Consultation

The Department of Climate Change and Energy Efficiency has undertaken an extensive consultation process to establish the eligibility of EITE activities and develop Regulations to implement the Program.

The policy framework for determining the eligibility of EITE activities for assistance under the Program was originally developed in 2009 and has been used to establish the eligibility of activities with respect to assistance provided under the Renewable Energy Target (RET) scheme - Renewable Energy (Electricity) Act 2000. The process for assessing activities and defining the technical aspects of the activities, including setting assistance rates and allocative baselines, is outlined in the paper titled Establishing the eligibility of activities under the Jobs and Competitiveness Program.

The formal process for defining and determining the eligibility of an EITE activity involves a stakeholder workshop to formulate an appropriate activity definitions and boundary, and approval of the activity definition by the Minister for Climate Change and Energy Efficiency for the purposes of data collection. Audited data based on the approved definition is then submitted to the Government. If determined to be eligible, stakeholders in the relevant industry are consulted in regard to the drafting of the definitions to be included in the Regulations to ensure that the structure of the definitions generally reflects the conduct of the activities.

Authority: Section 312 of the Clean Energy Act 2011


Attachment A

Summary and Policy Guidance on the Clean Energy Amendment Regulation 2012 (No. 3)

The Regulation amends Schedule 1 of the Clean Energy Regulations 2011 to:

-              determine the day on which the Regulator must, in response to a buyback request, cancel units and remove the entry for the units from the person's Registry account;

-              prescribe additional eligible emissions-intensive, trade-exposed (EITE) activities under Part 3 by providing the details and specifications of each activity, including the rate of assistance that applies to each activity and the relevant product produced in undertaking the activity which forms the basis of the issue of free carbon units;

-              outline the baselines in Part 4 for each additional EITE activity that are to be used in determining the amount of assistance for each applicant in relation to the emissions, electricity use and natural gas used as a feedstock for each EITE activity;

-              make some minor technical amendments to Part 5 to clarify the intent of the eligibility provisions as they relate to applications for free carbon units for the 2012-13 financial year where a person is a participant in a declared designated joint venture or a holder of a liability transfer certificate;

-              minor amendments to clarify the intended operation of the Regulations with respect to the calculation of free carbon units under Part 9 in relation to sub-threshold facilities and new facilities for which the maximum cap on allocations is to apply; and

-              make other minor technical amendments in relation to references to standards used to determine relevant product that results from undertaking specific EITE activities.

In accordance with subsection 145(5) of the Act, the Minister for Climate Change and Energy Efficiency has given regard to the aim and objects of Part 7 of the Act and the principle that changes that will have a negative effect on recipients of assistance under the Program should not take effect before the later of the 1 July 2017 or the end of the 3-year period that begins when the reduction is announced.

 

 


 

Attachment B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Clean Energy Amendment Regulation 2012 (No. 3)

 

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the Clean Energy Amendment Regulation 2012 (No. 3)

The Regulation is designed to include additional activities as eligible under the Jobs and Competitiveness Program (the Program) and minor technical amendments to improve the operation of the Program. The Program is a key component of the carbon pricing mechanism targeted at supporting industries that produce a lot of carbon pollution but are constrained in their capacity to pass through costs in global markets.

 

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

 

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

 

 

Greg Combet

Minister for Climate Change and Energy Efficiency

 

 


 

Attachment C

Details of the Clean Energy Amendment Regulation 2012 (No. 3)

PART 1 - PRELIMINARY

Section 1 - Name of Regulation

Section 1 provides that the title of the Regulation is the Clean Energy Amendment Regulation 2012 (No. 3) (the Regulation).

Section 2 - Commencement

Section 2 provides for the Regulation to commence on the day after it is registered on the Federal Register of Legislative Instruments.

Section 3 - Amendment of Clean Energy Regulations 2011

Section 3 provides that the Regulation amends the Clean Energy Regulations 2011 (the Principal Regulations) in the manner set out by Schedule 1.

SCHEDULE 1 - Amendments

Items [1] - Regulation 4.10

This item replaces regulation 4.10 to clarify the vintage year of the units that may be bought at particular buy-back period. For each item in the table in subregulation 4.10(3), the time period in which the buy-back period takes place corresponds to a particular vintage. For example, item one, the period is 1 September 2012 to 14 June 2013, the vintage year of the units which can be bought back is the eligible financial year starting 1 July 2012.

This item also inserts a new regulation 4.11 for the purpose of section 116 (3)(a) of the Act to stipulate the day on which the Clean Energy Regulator (the Regulator) must, in response to a request for buyback, cancel the units and remove the units from the person's Registry account.

Specifically, the Regulator will cancel the unit and remove the entry for the unit in the person's Registry account either when the Regulator is satisfied that the buyback request is complete (that is, made in accordance with subsection 116 (2) of the Act and is one to which subsection 116 (1) of the Act applies) or 5 days after the request is received, whichever is the earliest.

Item [2] - Schedule 1, Part 3, paragraphs 306(2)(a) and (5)(b)

This item makes a minor technical amendment to the description of the white titanium dioxide activity to clarify that to be eligible for assistance, the production of white titanium dioxide must conform to the standard issued by the American Society for Testing and Materials D476-00 as issued in 2005. This reflects the standard that was in force at the time the activity of white titanium dioxide was approved.

Item [3] - Schedule 1, after Division 37

Division 38 - Production of glass beads

Clause 338

Clause 338 provides that the production of glass beads is the physical and chemical transformation of recycled materials (such as cullet) and/or silicon dioxide (SiO2, silica), sodium carbonate (Na2CO3, soda ash) and other raw materials through a crushing (of any relevant recycled materials), sieving and firing process into saleable solid spherical glass beads where the refractive index is greater than or equal to 1.50 and the size is smaller than 2 millimetres (mm).

Production of glass beads is an emissions-intensive, trade-exposed (EITE) activity eligible for assistance at the highly emissions-intensive rate.

The activity as conducted during the period used to assess the eligibility of the activity involved the onsite crushing, sieving and firing of recycled materials (such as cullet). It is intended that other production processes to produce glass beads, including the onsite sieving and firing of silicon dioxide, sodium carbonate and other raw materials, would be considered to fit within the activity definition.

The activity description is not satisfied through the undertaking of the extraction and crushing of silica, production of sodium carbonate soda ash and other raw materials.

The inputs of the activity have been defined to include recycled materials (such as cullet) and/or silica, soda ash and other raw materials. The output of this activity is saleable glass beads. By-products of the activity include glass grains.

The activity does not include the upstream extraction or production of the input to the activity including the production of silica, crushing of silica, production of soda ash or sorting of cullet. The activity also does not include the downstream processing of glass beads (such as secondary coating). As such, the relevant facility is that where the glass beads are actually produced and does not extend to separate facilities which may conduct either extraction of silica, sorting of cullet, secondary processing or distribution of glass beads products but not the activity as described.

Subclause 338(4) outlines that the basis of issue is per tonne of solid glass beads on a dry weight basis that have a refractive index greater than or equal to 1.50 and are smaller than 2 mm. The measurement of the relevant glass beads should be measured according to the accepted industry practice for production that conforms to AS/NZS 2009:2006 Glass beads for pavement marking materials or other relevant industry standard, or the referenced standard as updated from time to time.

To be eligible for assistance, the glass beads must have been produced by carrying on the activity (as defined by clause 338) to be eligible as a relevant product. For example, if imported glass beads are blended with product produced from the activity, only the domestically produced glass beads would be included in the tonnes of the relevant product.

The glass beads must be of saleable quality (as defined by regulation 202). In particular, the tonnes of glass beads which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Division 39 - Production of sodium silicate glass

Clause 339

Clause 339 provides that the production of sodium silicate glass is the physical and chemical transformation of silicon dioxide (SiO2, silica), sodium carbonate (Na2CO3, soda ash) into saleable sodium silicate glass where the concentration of sodium silicate (Na2SiO3) is equal to or greater than 99 per cent with respect to mass.

Production of sodium silicate glass is an EITE activity eligible for assistance at the highly emissions-intensive rate.

The activity as conducted during the period used to assess the eligibility of the activity involved the mixing of high purity sand and soda ash in a high temperature furnace.

The activity description is not satisfied through the undertaking extraction and crushing of silica, production of soda ash and other raw materials.

The inputs of the activity have been defined to include silica and soda ash. The output of this activity is saleable sodium silicate glass.

The activity does not include the upstream extraction and crushing of silica, production of soda ash and other raw materials. The activity also does not include the downstream processing of sodium silicate glass, such as the production of sodium silicate liquid (water glass) or sodium silicate derivatives. As such, the relevant facility is that where the sodium silicate glass is actually produced and does not extend to separate facilities which may conduct either extraction of silica, sorting of cullet, secondary processing or distribution of sodium silicate glass products but not the activity as described.

Subclause 339(4) outlines that the basis of issue is per tonne of sodium silicate glass on a dry weight basis where the glass has a concentration of sodium silicate (Na2SiO3) equal to or greater than 99 per cent with respect to mass. The measurement of the relevant sodium silicate glass should be measured according to the accepted industry practice for production that conforms to ISO 1686:1976 Sodium and potassium silicates for industrial use - Samples and methods of test - General, ISO 1689:1976 Sodium and potassium silicates for industrial use - Calculation of the ratio : silicon dioxide/sodium oxide or silicon dioxide/potassium oxide, and ISO 1690:1976 Sodium and potassium silicates for industrial use - Determination of silica content - Gravimetric method by insolubiliszation, or the referenced standard as updated from time to time.

To be eligible for assistance, the sodium silicate glass must have been produced by carrying on the activity (as defined by clause 339) to be eligible as a relevant product. For example, if imported glass is blended with product produced from the activity, only the domestically produced glass would be included in the tonnes of the relevant product.

The sodium silicate glass must be of saleable quality (as defined by regulation 202). In particular, the tonnes of sodium silicate glass which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Division 40 - Production of polymer grade propene (polymer grade propylene)

Clause 340

Clause 340 provides that the production of polymer grade propene is the physical transformation of hydrocarbons that have a concentration of propene (C3H6, propylene) between 45 per cent and 85 per cent with respect to mass (inclusive) to polymer grade propene (C3H6, polymer grade propylene) that has a concentration of propene (C3H6, propylene) greater than or equal to 98 per cent with respect to mass.

Production of polymer grade propene is an EITE activity eligible for assistance at the highly emissions-intensive rate.

The activity as conducted during the period used to assess the eligibility of the activity involved the use of a propane/propene splitter to produce polymer grade propylene from refinery grade propylene.

The activity description is not satisfied through the undertaking of upstream manufacture and preparation of the refinery grade propene (refinery grade propylene) input stream.

The inputs of the activity have been defined to include refinery grade propylene. The output of this activity is saleable 100 per cent equivalent propene contained within polymer grade propene that has a concentration of propene greater than or equal to 98 per cent with respect to mass. By-products of the activity include liquefied petroleum gas (LPG).

The activity does not include the upstream manufacture and preparation of the refinery grade propene (refinery grade propylene) input stream. The activity also does not include the downstream processing of liquefied petroleum gas (LPG) and downstream processing of the polymer grade propene output succeeding the propane/propene splitting column including but not limited to the production of polypropylene. As such, the relevant facility is that where the polymer grade propylene is actually produced and does not extend to separate facilities which may conduct either the production of refinery grade propylene, secondary processing or distribution of polymer grade propylene products but not the activity as described.

Subclause 340(4) outlines that the basis of issue is per tonne of 100 per cent equivalent propene (C3H6, propylene) contained within polymer grade propene (C3H6, propylene) that has a concentration of propene greater than or equal to 98 per cent with respect to mass. The measurement of the relevant polymer grade propylene should be measured according to the accepted industry practice for production that conforms to ASTM D2163 - 07 Standard Test Method for Determination of Hydrocarbons in Liquefied Petroleum (LP) Gases and Propane/Propene Mixtures by Gas Chromatography and ISO 7941:1988 Commercial propane and butane - Analysis by gas chromatography.

To be eligible for assistance, the propene must have been produced by carrying on the activity (as defined by clause 342) to be eligible as a relevant product.

The propene must be of saleable quality (as defined by regulation 202). In particular, the tonnes of propene which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Division 41 - Production of rolled aluminium

Clause 341

Clause 341 provides that the production of rolled aluminium is the physical and chemical transformation of primary aluminium metal and/or secondary aluminium metal with alloying metals into coiled aluminium sheet with a concentration of aluminium equal to or greater than 90 per cent by mass, and with a thickness equal to or less than 6 millimetres (mm).

Production of rolled aluminium is an EITE activity eligible for assistance at the highly emissions-intensive rate.

The activity as conducted during the period used to assess the eligibility of the activity involved casting of primary aluminium into rolling ingots, and the hot and cold rolling of ingots into coiled aluminium sheet.

The activity description is not satisfied through the undertaking of mining of bauxite or refining of alumina or aluminium smelting.

The inputs of the activity have been defined to include both primary aluminium metal and secondary aluminium metal with alloying metals. The output of this activity is coiled aluminium sheet of saleable quality with a concentration of aluminium equal to or greater than 90 per cent by mass, and with a thickness equal to or less than 6 millimetres.

The activity does not include the production of primary aluminium metal. The activity also does not include melting or casting of secondary aluminium, or any further processing of aluminium metal beyond the activity boundary, including cleaning, coating or slitting of coiled aluminium, or additional rolling of aluminium coil to produce saleable aluminium foil with a thickness of 0.180 millimetres or less. As such, the relevant facility is a facility where the rolled aluminium is actually produced and does not extend to separate facilities which may conduct either alumina refining or aluminium smelting, or secondary processing or distribution of rolled aluminium products but not the activity as described.

Subclause 341(4) outlines that the basis of issue is per tonne of coiled aluminium sheet of saleable quality with a concentration of aluminium equal to or greater than 90 per cent by mass, and with a thickness equal to or less than 6 millimetres. Measurement of saleable coiled aluminium sheet should be conducted after the finishing processing is completed.

To be eligible for assistance, the rolled aluminium must have been produced by carrying on the activity (as defined by clause 341) to be eligible as a relevant product.

The rolled aluminium must be of saleable quality (as defined by regulation 202). In particular, the tonnes of rolled aluminium which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Division 42 - Production of chlorine gas and sodium hydroxide (caustic soda) solution

Clause 342

Clause 342 provides that the production of chlorine gas and sodium hydroxide solution (caustic soda solution (NaOH(aq))) is the chemical transformation of sodium chloride solution (NaCl(aq), brine) to chlorine (Cl2(1,g)) and sodium hydroxide solution (caustic soda solution (NaOH(aq))) that has a concentration of sodium hydroxide (NaOH) of 14 per cent or more.

Production of chlorine gas and sodium hydroxide solution (caustic soda) solution is an EITE activity eligible for assistance at the highly emissions-intensive rate.

Subclause 342(2) provides for the ratio of sodium hydroxide to chlorine, with the production of sodium hydroxide (NaOH) being 1:1.13 times the production of chlorine (Cl2). Subclause 342(3) states the following chemical reaction must be involved in the chemical transformation:

The activity as conducted during the period used to assess the eligibility of the activity involved the electrolysis of a brine solution using membrane cell technology to produce hydrogen and chlorine gases and sodium hydroxide solution (NaOH(aq), caustic soda solution). In this process, the conditions of the concentration of sodium hydroxide (NaOH) being equal to or greater than 14 per cent with respect to mass and the stoichiometric ratio means that sodium hydroxide (NaOH) production is 1:1.13 times the production of chlorine (Cl2) by mass were both met. The hydrogen gas produced was either used as a feedstock for the downstream production of hydrochloric acid, as a fuel to generate steam or vented to atmosphere.

It is intended that alternative processes of the diaphragm or mercury cell (where environmental legislation permits the use of this technology) to produce chlorine gas and sodium hydroxide solution would be considered to fit within the activity description.

The activity description is not satisfied through the undertaking of the production of brine, nor is it satisfied by undertaking the downstream processing of the chlorine gas or sodium hydroxide solutions.

The inputs of the activity have been defined to include sodium chloride solution or brine in concentrations as needed for the production process. The outputs of the activity are chlorine (Cl2) and sodium hydroxide solution (NaOH(aq), caustic soda solution) where the concentration of sodium hydroxide (NaOH) is equal to or greater than 14 per cent with respect to mass. The final chlorine product may be in a liquid or gaseous form.

The activity does not include the upstream extraction, mining and processing of salt or the production of the brine solution. Further, the activity does not include the downstream manufacture of products produced from the chlorine and sodium hydroxide solution, or the processing of any by-products from the production of this activity.

Subclause 342(4) outlines that the basis of issue is a tonne of 100 per cent equivalent sodium hydroxide solution on a dry weight basis. The measurement of the sodium hydroxide might be in regard to the American Water Works Association standard B501-08 (ANSI/AWWA B501-08) or an Australian/International equivalent.

To be eligible as a relevant product, the 100 per cent equivalent sodium hydroxide must be:

*         on a dry weight basis;

*         not recycled back into the EITE activity (such as a stream of sodium hydroxide solution recycled back into the chemical treatment step); and

*         contained within sodium hydroxide solution that is produced by carrying on the EITE activity.

The sodium hydroxide must have been produced by carrying on the activity (as defined by clause 342) to be eligible as a relevant product. Products produced from the sodium hydroxide solution such as sodium hypochlorite are not considered to be relevant products however it is expected that the tonnes of sodium hydroxide reported might include some tonnes of sodium hydroxide which is further reacted to produce alternative products.

Division 43 - Production of fused zirconia

Clause 343

Clause 343 provides that the production of fused zirconia is the physical and chemical transformation of zircon (ZrSiO4) by:

(a)        the removal of silica (silicon dioxide (SiO2)) using a reductant such as carbon; and

(b)        heating the zircon to its fusion point;

to produce fused zirconia (zirconium dioxide (ZrO2)) that has a concentration of zirconium dioxide (ZrO2) equal to or greater than 96 per cent.

Production of fused zirconia is an EITE activity eligible for assistance at the moderately emissions-intensive rate.

The activity as conducted during the period used to assess the eligibility of the activity involved the removal of silica from zircon by reacting zircon with a source of carbon in an electric arc furnace and heating it to its fusion point at temperatures of around 2,800°C.

The activity description is not satisfied through the undertaking of mining and concentrating (including wet and dry concentrating and electrostatic separation) of zircon. However, the fact that a batch of fused zirconia does not have a level of purity equal to or greater than 96 per cent does not mean that the activity is not conducted at times when the purity is equal to or greater than 96 per cent in other batches.

The inputs of the activity have been defined to include any grade of zircon and a source of carbon such as coke or coal.

The output of this activity is saleable fused zirconia (zirconium dioxide, ZrO2) with a level of purity equal to or greater than 96 per cent. Silica fume is also produced as a by-product of the process.

The activity does not include the upstream extraction (mining) and separation of zircon from other minerals or the downstream crushing and milling of cast fused zirconia. As such, the relevant facility for the application is that where the fused zirconia is actually produced and does not extend to separate facilities which may conduct downstream or upstream processing but not the activity as described. Generally, it is expected that where these processes are carried out at separate facilities would not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9).

Subclause 343(4) outlines that the basis of issue is per tonne of fused zirconia with a purity equal to or greater than 96 per cent. The tonnage of the relevant fused zirconia should be measured according to ordinary measurement rules applicable in the industry.

To be eligible for assistance, the fused zirconia must have been produced by carrying on the activity (as defined by clause 343) to be eligible as a relevant product. For example, where imported fused zirconia is blended with product produced from the activity, only the domestically produced fused zirconia would be included in the tonnes of the relevant product.

The fused zirconia must be of saleable quality (as defined by regulation 202). In particular, the tonnes of fused zirconia which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Item [4] - Schedule 1, subclause 401(1), table, after item 1.26

This item inserts into the table in Part 4 of Schedule 1 allocative baselines for assistance that relate to the activities prescribed by item 5 which are categorised as highly emissions-intensive activities. The baselines are for the direct emissions and electricity use for each of the activities in clauses 338 to 342. The baselines have been established as the weighted industry average of the emissions and electricity intensity of the activities, based on historical data submitted by the entities undertaking the activity during the base period, consistent with the principles of the JCP outlined in Establishing the eligibility of activities under the Jobs and Competitiveness Program. The formula for calculating the number of free permits in Part 9 of Schedule 1 to the Regulations applies the baselines as outlined in the table.

Item [5] - Schedule 1, subclause 401(1), table, after item 2.10

This item inserts into the table in Part 4 of Schedule 1 allocative baselines for assistance that relate to the activity of fused zirconia production which is categorised as a moderately emissions-intensive activity as prescribed by item 5. The baselines are for the direct emissions and electricity use for this activity in clause 343. The baselines have been established as the weighted industry average of the emissions and electricity intensity of the activity, based on historical data submitted by the entities undertaking the activity during the base period, consistent with the principles of the JCP outlined in Establishing the eligibility of activities under the Jobs and Competitiveness Program. The formula for calculating the number of free carbon units in Part 9 of Schedule 1 to the Regulations applies the baselines as outlined in the table.

Item [6] - Schedule 1, clauses 504 to 506

Item 8 replaces regulations 504, 505 and 506 which provide for who may be an eligible person to apply for free carbon units under the JCP. The clauses replace the eligible person provisions to provide flexibility in the operation of the eligibility provisions as they relate to situations in the first year of the carbon price, 2012-13, where an application for a liability transfer certificate or a declared designated joint venture may not be in force on 30 June 2012.

Under sections 71 and 88 of the Clean Energy Act 2011, a declaration of a designated joint venture made by the Clean Energy Regulator (the Regulator) and a liability transfer certificate issued by the Regulator are considered to be in force on a start day specified by the Regulator and that day must be within the same financial year as the declaration is made or the certificate is issued. In some cases, a liability transfer certificate may not be issued or a declaration of a designated joint venture may not be made by the Regulator before the end of June 2012. This amendment allows that a holder of a liability transfer certificate that is issued in the financial year 2012-13, or participant to a mandatory designated joint venture or a declared designated joint venture that is declared in 2012-13 to be an eligible person to apply for free carbon units in respect of a facility that undertakes the eligible activity if the certificate or the declaration is in force on 1 July 2012 (that is, the specified start day).

Clauses 504 and 506 provide for situations in the first year of the carbon price where a person wishes to be the holder of a liability transfer certificate and apply for free carbon units, but the liability transfer certificate has not been issued in time for it to be in force by 30 June 2012. The clauses allow for the person to be eligible to apply if the application for a liability transfer certificate has been issued by the Regulator and is in force on 1 July 2012.

Clause 504 provides that a person with operational control of a facility is eligible to apply for free carbon units if there is no liability transfer certificate or designated joint venture in relation to the facility.  In the financial year commencing 1 July 2012, a person with operational control over a facility on 1 July 2012 is eligible, as long as a liability transfer certificate or a designated joint venture was also not in force on this same date. This is determined at the time the application is made under the Jobs and Competitiveness Program and excludes any liability transfer certificates or designated joint ventures which may become applicable after the date of when application is made. In addition, the person with operational control will not be eligible if applications have currently been made for liability transfer certificates or designated joint ventures.  In all other financial years, a person with operational control over a facility will be eligible as long as a liability transfer certificate or a designated joint venture was not in force.

In subsequent years, a person with operational control over a facility on 30 June of the previous financial year is eligible, as long as a liability transfer certificate or a designated joint venture was also not in force on the same date.

Clause 505 provides that a person who participates in a declared or mandatory designated joint venture is eligible applicant for assistance as long as the person has a participating percentage of greater than zero. In the financial year commencing 1 July 2012, the person will need to be a participant on 1 July 2012, whereas in all other financial years the person will need to be a participant on 30 June of the previous financial year.

Clause 506 provides that the holder of the liability transfer certificate in relation to the facility is an eligible applicant for assistance. In the financial year commencing 1 July 2012, the liability transfer certificate will need to be in force on 1 July 2012, whereas in all other financial years the liability transfer certificate will need to be in force on 30 June in the previous financial year.

Item [7] - Schedule 1, paragraph 708 (1) (e)

Item 7 amends the provisions in relation to applications that relate to facilities that do not have a liability under the carbon price. In particular, the item clarifies that an application in relation to a sub-threshold facility is only required to include a report setting out scope 1 emissions from the operation of the facility as under subregulation 708(2) if the applicant does not choose to use Method 2 in relation to calculation of the sub-threshold adjustment. Under Method 2, the adjustment that would apply is to reduce allocations for direct emissions to zero. Alternatively, under Method 1an adjustment is made for the direct emissions that a facility has but is not liable for due to the facility not meeting the liability threshold of 25,000 tonnes carbon dioxide equivalent.

Items [8] to [12] - Sub threshold adjustments

Item 8 inserts an additional condition to the method for calculating the emissions that are attributed to a facility to specify that, for the purposes of the maximum cap provisions, the direct emissions baseline is not reduced as a result of using Method 2 in the sub-threshold provisions.

Item 9 amends subregulations 912(2) and (3) to give greater clarity on how the choice between method 1 and method 2 applies. Method 1 applies by default; however an applicant may specify in an application for free carbon units that method 2 will apply instead.  This is intended to clarify situations where an applicant may not know that it will be sub-threshold and therefore does not specify which methodology would apply. This item also clarifies criteria for what is considered sub-threshold for the purposes of the Jobs and Competitiveness Program, and to remove criteria for an applicant electing for method 2 to apply. Item 10 is a consequential amendment relating to references to the amended subregulations 912(2) and (3).

The amendments specify that it is the financial year prior to the year the application relates to that is relevant for the threshold test mentioned in section 20 to 25 of the Act and the provisional emissions number.  These amendments also clarify that, for method 1 to apply, an applicant may have a provisional emissions number (PEN), but not in relation to the facility. The intention is to ensure that only facilities that produce emissions which are not covered by the carbon pricing mechanism as a result of not meeting the threshold test would be covered under these provisions.

The amendment removes restrictions which apply to applicants using Method 2 to calculate assistance, meaning that it is not necessary for an applicant using Method 2 to predict conclusively whether it will be sub-threshold in the financial year to which the application relates. If the applicant believes that it will be sub-threshold in the current financial year it may elect to apply method 2. If it does not, then method 1 would apply by default and assistance will be adjusted in the subsequent financial year.

Subregulation 912(5) has been amended so that an applicant who switches from method 2 to method 1 does not face a reduction in allocations relating to the previous financial year in the year in which the application was made, as allocations have already been reduced using method 2.

Subregulations 912(8) and (9) have been amended so that an application who switches from method 1 to method 2 does not have its method 1 adjustment in relation to the previous financial year reduced to zero.

 

 

 


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