Commonwealth Numbered Regulations - Explanatory Statements
[Index] [Search] [Download] [Related Items] [Help]
RENEWABLE ENERGY (ELECTRICITY) AMENDMENT (PRODUCTION OF CLINKER) REGULATION 2015 (SLI NO 228 OF 2015)
EXPLANATORY STATEMENT
Selective Legislative Instrument No. 228, 2015
Issued by authority of the Minister for the Environment
Renewable Energy (Electricity) Act 2000
Renewable Energy (Electricity) Amendment (Production of Clinker) Regulation 2015
The Renewable Energy Target scheme (RET) is established by the Renewable Energy (Electricity) Act 2000 (the Act) and is supported by the Renewable Energy Target (Electricity) Regulations 2001 (the Regulations).
Section 161 of the Act provides 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 objectives of the RET are to:
* encourage the additional generation of electricity from renewable sources;
* reduce greenhouse gas emissions in the electricity sector; and
* ensure that renewable energy sources are ecologically sustainable.
The RET allows renewable energy power stations and owners of small-scale renewable energy systems to create certificates for each megawatt-hour of eligible renewable electricity they produce. Liable entities (mainly electricity retailers) are obligated to purchase certificates created by renewable electricity generators such as wind farms, solar farms, hydroelectric power stations, rooftop solar panels and solar water heaters. Certificates are surrendered annually to the Clean Energy Regulator (CER) to comply with the RET and avoid payment of a shortfall charge. This creates a market which provides financial incentives to increase the generation of renewable electricity.
The Act also provides for exemptions from the cost of the RET for emissions-intensive trade-exposed (EITE) activities. The provision of exemptions eases cost pressures on businesses undertaking EITE activities and improves the competitiveness of Australian industry.
Division 1A of Part 4 and Division 1A of Part 5 of the Act provide the legislative framework for the provision of exemptions from RET liability, while Part 3A and Schedule 6 of the Regulations prescribe the eligible activities and processes for applying for, issuing and amending exemptions, including the methodology for calculating the amounts of these exemptions.
Under Division 1A of Part 4 of the Act, an exemption is provided in the form of an exemption certificate issued by the CER to a business conducting a prescribed EITE activity. Each Exemption Certificate represents an amount of electricity, in megawatt-hours, to which RET liability will not apply in a given year. An EITE business can exchange this Exemption Certificate with its RET-liable electricity retailer in return for relief from the pass-through of RET costs. The RET-liable retailer reduces its liability by surrendering (to the CER) the Exemption Certificates it received from its EITE electricity customers.
Cement manufacturing includes three main industrial processes: the production of lime, the production of clinker and cement milling. The Regulations, under Part 27 and Part 28 of Schedule 6, only stipulate the first two stages of cement manufacturing (lime production and clinker production) as EITE activities. Consequently, the RET-liability is applied on the electricity consumed in final stage of milling which is responsible for around half of the overall electricity that is consumed in the cement manufacturing process and represents a considerable cost to business.
The Renewable Energy (Electricity) Amendment (Production of Clinker) Regulation 2015 (the proposed Regulation) implements the recent decision of the Commonwealth to extend the EITE assistance for the production of clinker to include the final stage of the cement manufacturing process.
The Regulation replaces the current electricity baseline of '0.0709 MWh per tonne' under item 679 of Schedule 6 of the Regulation with an higher number of '0.1252 MWh per tonne' that now takes into account the average electricity intensity associated with the downstream cement milling process.
In effect, the Regulation increases the overall amount of exemption awarded to clinker production under Part 27 of Schedule 6 by including an electricity baseline that reflects the electricity usage associated with both the clinker production and milling stages of cement manufacturing.
The Regulation also clarifies that cement milling (comminution with gypsum to produce cement) can occur as an associated activity that may be undertaken as part of the production of clinker. This approach retains the basis of allocation of the exemption on cement clinker and increases the activity baseline amount proposed in item 679 of Schedule 6 of the Regulations.
In developing the Regulation, the Commonwealth consulted with clinker manufacturers through the release of an exposure draft Regulation and collected electricity use data for establishing the new activity baseline (under item 679).
The Commonwealth also sought independent advice from a technical expert in developing the proposed electricity baseline and international benchmarking was undertaken to compare the proposed baseline with other similar baselines for clinker manufacturing and cement milling overseas.
Details of the Regulation are set out in the Attachment A.
A statement of the Regulation's compatibility with human rights is set out in Attachment B.
ATTACHMENT A
Details of the sections in the Renewable Energy (Electricity) Amendment (Production of Clinker) Regulation 2015
Section 1 - Name
1.1 This section provides that the title of the proposed Regulation is the Renewable Energy (Electricity) Amendment (Production of Clinker) Regulation 2015.
Section 2 - Commencement
1.2 This section provides for the Regulation to commence on the day after it is registered on the Federal Register of Legislative Instruments.
Section 3 - Authority
1.3 This section provides that the legislative authority for the proposed Regulation is the Renewable Energy (Electricity) Act 2000.
Section 4 - Schedule
1.4 This section provides that the Renewable Energy (Electricity) Regulations 2001 (the Regulations) is amended as set out in the Schedule.
Schedule 1
Item 1
New subclause (1A) to item 677 of Schedule 6 of the Regulations
This subclause clarifies that the production of clinker activity under item 677 of Schedule 6 of the Regulation may include the subsequent transformation of clinker into cement through milling (that is, through the process of comminution with or other additives), without requiring that such a process to be done as part of carrying out the EITE activity in all instances.
The intent of this subclause is to clarify on the face of the Regulation that clinker manufacturing would be eligible to claim an exemption on the basis of the activity baseline under item 679 of Schedule 6 of the Regulations whether or not a downstream milling process has been undertaken as part of the same production process. It does not result in cement milling being a separate EITE activity when carried out separately to the production of clinker under subclause (1).
It should also be noted that other EITE activities also have optional elements, such as item 659(2) of the Regulations for manufacture of carbon steel from cold ferrous feed. It is not intended for the addition of subclause 1A to necessarily result in an activity group (as defined in regulation 22A) where the milling is not part of the same production process (as required by paragraph 22C(9)(c)).
Item 2
Amendment to item 679 of Schedule 6 of the Regulations
This clause provides for the omission of the current electricity baseline of '0.0709 MWh per tonne' under item 679 of Schedule 6 of the Regulations and its replacement with an higher number of '0.1252 MWh per tonne' that takes into account the average electricity intensity associated with the downstream cement milling process. This has been determined by the Government based on data supplied by the industry consistent with the process for determining the electricity baselines of other EITE activities.
ATTACHMENT B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Renewable Energy (Electricity) Amendment (Production of Clinker) Regulation 2015
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 Legislative Instrument
The Renewable Energy (Electricity) Amendment (Production of Clinker) Regulation 2015 amends the Renewable Energy (Electricity) Regulations 2001 in order to extend the exemption from the Renewable Energy Target liability provided to the Emissions-Intensive-Trade-Exposed activity of clinker production to include the related activity of cement milling. It does this by increasing the activity baseline for the production of clinker in the regulations to account for the electricity associated with the cement milling process, and recognising that milling could be part of the clinker production process. These amendments are minor in nature and consistent with the amendments to the Act passed by Parliament.
Human rights implications
This Legislative Instrument does not engage any of the applicable human rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback