The Federal Government’s Carbon Pollution Reduction Scheme Bill 2009 released on 10 March 2009 outlines the government’s vision for its carbon pollution reduction scheme (CPRS).

In essence, the CPRS involves a cap and trade system whereby:

• persons, generally emitters, will be liable for their emissions of carbon dioxide equivalence of greenhouse gasses; and
• those liable persons will be required to surrender an Australian emissions unit for each tonne of carbon dioxide equivalence for which they are liable.

Our paper of 11 March 2009 outlined the key question of coverage; namely who would be liable for emissions under the scheme.  Click here for a full copy of the Carbon Pollution Reduction Scheme Bill 2009 paper.

Below we summarise the Bill’s vision for Australian emissions units – what are they, who will get them and what can be done with them?

Australian Emissions Units – General

Part 4 of the Bill deals with emissions units.  There are three general forms of emissions units:

• Australian emissions units (discussed below);
• Kyoto units; and
• Non Kyoto international emissions units.

The latter two elements arise as a function of the Bill being the government’s link into the international community’s response to global climate change, by allowing for international recognition of units.  Australian emissions units however are expected to be the more common form of emission unit to be utilised in the discharge of liability for Australian emissions.  These are discussed in more detail below.

Issue of units

Clause 83 of the Bill provides that Australian emissions units will be issued by the Australian Climate Change Regulatory Authority (Authority), on behalf of the Commonwealth.  Importantly, clause 92 makes it clear that units are only able to be issued in the event that a national scheme cap has been set for the year the units are to be issued.  As identified in our article or 11 March 2009, the Bill fundamentally requires that the Government must set a cap of emissions (clause 14) for particular years, which will correlate to the number of Australian emissions units able to be issued for that year.

Vintage

Australian emissions units must have a vintage (clause 85).  The term “vintage” in relation to units refers to the emission liability for a financial year to which that unit will relate (that is, an Australian emissions unit with a vintage year ending on 30 June 2011 will relate to emissions during that same financial year only).

Australian emissions for a vintage year may be issued at any time before or during that vintage year, but must not be issued after 15 December after the end of that vintage year (clause 86).  This means that for the proposed first vintage year of the Bill (the financial year ending 30 June 2011), Australian emissions units for that vintage year may be issued at any time up to 15 December 2011.

The requirement to assign a vintage for Australian emissions units ensures that liable persons are not able to save up emissions units for future financial years, or perhaps more likely, use future years emissions units in current years, as neither of these alternatives would be likely to result in a reduction in emissions.