White Paper to Draft Legislation – ERF

In case you have not heard: The Clean Energy Regulator survives – it was an error the government has corrected on 7 May 2014. What was intended was to say the Clean Energy Fund is gone. Thank you Greg Hunt for your courage in having that clarified.

It is also hoped you heard late Friday 9th May 2014 the Federal Government released its exposure draft legislation for the Emissions Reduction Fund. They want you to be quick in responding -Two weeks have been given for the review, with submissions due EST 12 noon, Friday 23 May 2014.

The key matter is the draft legislation rebadges the Carbon Credits (Carbon Farming Initiative) Act. And:

  • A broader range of activities can create “carbon abatement” and include avoidance activities
  • A broader definition of additionality is given
  • A broadening of the authority of the Clean Energy Regulator
  • Establishing the Emissions Reduction Assurance Committee
  • Establishing that a yet to be (re)named CFI audit legislation will carry through the audit and assurance through the existing CFI audit legislation.

Why hoped you heard – well we did not want you going to sleep on us because we are boring!

Those that see opportunity are, for instance:

Currently celebrating their 30th year – Energetics consult and offer fee for service activities, and they say:

  • Immediately assess the abatement opportunities you have to create emission reductions to sell into the ERF
  • Understand your risk profile for future capital investments – has this shifted?
  • Assume you need a shadow carbon price
  • Comment on the draft legislation.

Of course the issue for their advise is for you to work out – www.energetics.com.au.

Those that see tragedy are, for instance:

The Climate Spectator www.businessspectator.com.au say,

“Half-baked outline

The half-baked nature of this scheme is revealed on the very first page of descriptive text within the Explanatory Memorandum, where it states:

The Emissions Reduction Fund … will allow businesses, local governments, community organisations and individuals to undertake approved emissions reduction projects and to seek funding from the government for those projects through a reverse auction or other purchasing process.

Government ignores its own red tape cutting advice

I was shocked to find no regulatory impact statement accompanying the ERF legislation, comparing this scheme against alternatives and why it represented a superior cost-benefit case.

Amidst a bonfire of red tape, the government had assured us that they were going to force public servants to see regulation in a ‘new light’ by following a seven-step guide to evaluating new regulations.”

Then finish off saying “I wonder when we’ll see the detailed cost-benefit analysis for the ERF relative to other regulatory alternatives, such as a simple price on carbon emissions.”

For CO2Land org the ‘scary spice’ is the mechanisms can change at any time at the whim of government – regardless of the pain you the business offered or suffered. Again the need for consistent policy is far greater than the words spoken to date. We also tend to agree with one aspect of Energetics spiel – prepare your alternatives. Just in case. And, you don’t have long to comment.




The White – ERF paper

Have you read the Energy Reduction Fund White Paper released 24 April 2014? No, but I heard Hockey say the Clean Energy Regulator is gone – was the reply. Then another said: Isn’t Hunt the Minister. We replied yeah, but it was an interview for the news and you know what that means. But seriously, what does it mean?

The answer may have come from a company that markets itself as emphasising Climate Change Matters. No, not left wing, not opportunist. Just pragmatic of what is best for you to plan for what is ahead and how to best cope with it. So what can you do to cope? How do you position to be safe?

It is not really that simple. But at least it gives you a chance to prepare. So what is the greater risk? The hubris (excessive ambition, self-confidence) of the government, other parties not supporting the government position for the Direct Action Plan and appearing to support the repeal of the carbon pricing mechanism. Add to that those other parties that will not support either plan and you could say now and into the next senate period the legislation to support the Direct Action Plan will not pass the senate vote.

So the risk is prolonged regulatory uncertainty. But, prudent behaviour and textbook risk management says you must assess risk by anticipating that risk has associated alternatives.

What alternative? The bluster of government says the Energy Reduction Fund will be implemented and the related reverse auction process will commence 1 July 2014. Or, the Clean Energy Act – and the regulator stay put. Or, nothing happens – we blunder on and questions remain in terms of price liabilities. And, of course for business that is not good not good for spruiking ‘open for business’.

What methods would you use to profile your risk? I hear some say a scenario-based approach. But, is it really safe to say the stories lines are plausible because the causal relationships can be demonstrated? In these cases when scenario planning is integrated with a systems thinking approach to scenario development, it is sometimes referred to as dynamic. That is the point here the nature of dynamic is difficult to assess as certainty. Maybe good ‘old fashioned’ (Howard era) sensitivity analysis might be a better way to manage your risk profile. Nonetheless it would be remiss to say you can avoid the need to develop your position and become involved.

Assuming the Emissions Reduction Fund is on track as described in the White Paper: The reverse auction, with $300 million to spend, will begin on 1 July 2014. There are a set number of eligible type projects to participate. Methodologies can include a method to enable facilities reporting under NGERS to bid in the auction.

Baselines have a threshold, but what is different is the inclusion of ‘meaningful’. This differs from ‘generic’ and you need to have an understanding of the likelihood of what happens when or if you exceed the baselines. For example in July 2014 you are in one threshold and after 1 July 2015 above the line.

What is your safeguard position – it is up to you to get involved.

We will give you time to read the paper. But shortly, we might talk more on the bidding process.   If we decide to get involved!