Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CLEAN ENERGY (UNIT SHORTFALL CHARGE - GENERAL) BILL 2011
CLEAN ENERGY (UNIT ISSUE CHARGE - FIXED CHARGE) BILL 2011
CLEAN ENERGY (UNIT ISSUE CHARGE - AUCTIONS) BILL 2011
CLEAN ENERGY (CHARGES - CUSTOMS) BILL 2011
CLEAN ENERGY (CHARGES - EXCISE) BILL 2011
CLEAN ENERGY (INTERNATIONAL UNIT SURRENDER CHARGE) BILL 2011
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Climate Change
and Energy Efficiency, the Honourable Greg Combet AM MP)
Table of contents
Glossary .................................................................................................. 4
General outline and financial impact ....................................................... 5
Chapter 1 Charges bills ............................................................... 11
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ACCC Australian Competition and Consumer
Commission
ASIC Australian Securities and Investments
Commission
Authority Climate Change Authority
Carbon pricing mechanism The carbon pricing mechanism set up by
the Clean Energy Bill 2011
CFI The Carbon Credits (Carbon Farming
Initiative) Act 2011 and the Carbon
Credits (Consequential Amendments)
Act 2011 which were passed by
Parliament in August 2011
Main bill Clean Energy Bill 2011
NGERS National Greenhouse and Energy
Reporting System
Regulator Clean Energy Regulator
General outline and financial impact
The 2011 Clean Energy Legislation Package
The:
· Clean Energy (Unit Shortfall Charge--General) Bill 2011;
· Clean Energy (Unit Issue Charge--Fixed Charge) Bill 2011;
· Clean Energy (Unit Issue Charge--Auctions) Bill 2011;
· Clean Energy (Charges - Customs) Bill 2011;
· Clean Energy (Charges--Excise) Bill 2011; and
· Clean Energy (International Unit Surrender Charge) Bill
2011
(collectively the charges bills) are part of the Clean Energy Legislation
Package, which sets up the carbon pricing mechanism (the mechanism) as
part of the Government's climate change plan, as set out in Securing a
clean energy future: the Australian Government's climate change plan.
The full policy context and background to the mechanism is set out in the
explanatory memorandum for the Clean Energy Bill 2011. A description
of the bills which will introduce the mechanism is set out below.
Table I: The Clean Energy Bill 2011 and related bills
Main bill The Clean Energy Bill 2011 creates the mechanism. It sets
out the structure of the mechanism and process for its
introduction. These include:
· entities and emissions that are covered by the mechanism;
· entities' obligations to surrender eligible emissions units;
· limits on the number of eligible emissions units that will
be issued;
· the nature of carbon units;
· the allocation of carbon units, including by auction and
the issue of free units;
· mechanisms to contain costs, including the fixed charge
period and price floors and ceilings;
· linking to other emissions trading schemes;
· assistance for emissions-intensive trade-exposed activities
and coal-fired electricity generators;
· monitoring, investigation, enforcement and penalties;
· administrative review of decisions; and
· reviews of aspects of the mechanism over time.
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Clean Energy Charges bills
Statutory The Clean Energy Regulator Bill 2011 sets up the
bodies Regulator, which is a statutory authority that will administer
the mechanism and enforce the law.
The responsibilities of the Regulator include:
· providing education on the mechanism, particularly about
the administrative arrangements of the mechanism;
· assessing emissions data to determine each entity's
liability;
· operating the Australian National Registry of Emissions
Units (the Registry);
· monitoring, facilitating and enforcing compliance with the
mechanism;
· allocating units including freely allocated units, fixed
charge units and auctioned units;
· applying legislative rules to determine if a particular
entity is eligible for assistance in the form of units to be
allocated administratively, and the number of other units
to be allocated;
· administering the National Greenhouse and Energy
Reporting System (NGERS), the Renewable Energy
Target (RET) and the Carbon Farming Initiative (CFI);
and
· accrediting auditors for the CFI and NGERS.
The Climate Change Authority Bill 2011 sets up the
Authority, which will be an independent body that provides
the Government with expert advice on key aspects of the
mechanism and the Government's climate change mitigation
initiatives.
The Government will remain responsible for carbon pricing
policy decisions.
This Bill also sets up the Land Sector Carbon and
Biodiversity Board which will advise on key initiatives in the
land sector.
Consequential The Clean Energy (Consequential Amendments) Bill 2011
amendments makes consequential amendments to ensure:
· NGERS supports the mechanism;
· the Registry covers the mechanism and the CFI;
· the Regulator covers the mechanism, CFI, the Renewable
Energy Target and NGERS;
· the Regulator and Authority are set up as statutory
agencies and regulated by public accountability and
financial management rules;
· that emissions units and their trading are covered by laws
on financial services;
· that activities related to emissions trading are covered by
laws on money laundering and fraud;
· synthetic greenhouse gases are subject to an equivalent
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General outline and financial impact
carbon price applied through existing regulation of those
substances;
· the Regulator can work with other regulatory bodies,
including the Australian Securities and Investments
Commission (ASIC), the Australian Competition and
Consumer Commission (ACCC) and the Australian
Transaction Reporting and Analysis Centre (Austrac);
· the taxation treatment of emissions units for the purposes
of GST and income tax is clear; and
· the Conservation Tillage Refundable Tax Offset is
established.
Procedural Those elements of the mechanism which oblige a person to
bills pay money are implemented through separate bills that
comply with the requirements of section 55 of the
Constitution.
These bills are the Clean Energy (Unit Shortfall Charge--
General) Bill 2011, the Clean Energy (Unit Issue Charge -
Fixed Charge) Bill 2011, the Clean Energy (Unit Issue
Charge - Auctions) Bill 2011, the Clean Energy
(Charges--Excise) Bill 2011, the Clean Energy
(Charges--Customs) Bill 2011, the Clean Energy
(International Unit Surrender Charge) Bill 2011, the
Ozone Protection and Synthetic Greenhouse Gas
(Manufacture Levy) Amendment Bill 2011 and the Ozone
Protection and Synthetic Greenhouse Gas (Import Levy)
Amendment Bill 2011.
Related bills Other elements of the Government's Climate Change Plan are
being implemented through other legislation. These are:
· the Clean Energy (Excise Tariff Legislation
Amendment) Bill 2011 and the Clean Energy (Customs
Tariff Amendment) Bill 2011, which imposes an
effective carbon price on aviation and non-transport
gaseous fuels through excise and customs tariffs;
· the Clean Energy (Fuel Tax Legislation Amendment)
Bill 2011, which reduces the business fuel tax credit
entitlement of non-exempted industries for their use of
liquid and gaseous transport fuels, in order to provide an
effective carbon price on business through the fuel tax
system; and
· the Clean Energy (Household Assistance Amendments)
Bill 2011, Clean Energy (Tax Laws Amendments) Bill
2011 and the Clean Energy (Income Tax Rates
Amendments) Bill 2011, which will implement the
household assistance measures announced by the
Government on 10 July 2011. These bills amend relevant
legislation to provide payment increases for pensioners,
allowees and family payment recipients and provide
income tax cuts and establish new supplements for low-
and middle-income households.
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Clean Energy Charges bills
The bills need to be read in the context, in particular, of the Clean Energy
Bill 2011.
General Outline
The charges bills ensure compliance with section 55 of the Constitution.
Section 55 requires that laws imposing taxation deal only with imposition
of taxation and deal only with one subject of taxation. In addition, it
requires that laws that impose duties of customs and excise (themselves
laws imposing taxation) deal only with customs or excise.
A number of charges are payable as part of the mechanism. The charges
are imposed by a number of separate bills to ensure that any of the charges
which might be duties of customs or duties of excise or other taxation are
imposed separately from provisions not imposing taxation, that none of
the bills deals with more than one subject of taxation and that laws
imposing duties of customs or excise deal only with customs or excise.
The charges bills ensure that, even where the Commonwealth considers
that no separate bill is necessary, there can be no argument that there has
not been compliance with section 55.
Structure of this explanatory memorandum
This explanatory memorandum covers all six charges bills. It deals with
the common provisions of each together, and deals separately with any
specific issues.
Date of effect and application
The charges bills will commence when section 3 of the Clean Energy Bill
2011 commences (that is, when the mechanism commences).
Proposal announced
The measures are based on the Government's announcement of its Clean
Energy Future Plan on 10 July 2011 as set out in Securing Australia's
clean energy future: the Australian Government's climate change plan.
Financial impact
The financial impact statement is included in the explanatory
memorandum for the Clean Energy Bill 2011.
Regulation impact statement
The Regulation Impact Statement (RIS) for the mechanism, entitled
Australia's plan for a clean energy future, is available at
http://ris.finance.gov.au. The RIS was prepared by the Department of
Climate Change and Energy Efficiency and has been assessed as adequate
by the Office of Best Practice Regulation.
8
General outline and financial impact
9
Chapter 1
Charges bills
Outline of chapter
1.1 This chapter explains the:
· Clean Energy (Unit Shortfall Charge--General) Bill 2011;
· Clean Energy (Unit Issue Charge--Fixed Charge) Bill 2011;
· Clean Energy (Unit Issue Charge--Auctions) Bill 2011;
· Clean Energy (Charges--Customs) Bill 2011;
· Clean Energy (Charges--Excise) Bill 2011; and
· Clean Energy (International Unit Surrender Charge) Bill
2011.
Context and summary of new law
1.2 The mechanism includes a number of charges payable by liable
entities to meet their liabilities for emissions. The charges bills ensure
compliance with section 55 of the Constitution.
Detailed explanation of new law
Imposition of charges
Unit Shortfall Charge
1.3 The Clean Energy (Unit Shortfall Charge--General) Bill 2011
imposes unit shortfall charge as a tax so far as it is not a duty of customs
nor a duty of excise. [Clause 8]
1.4 The unit shortfall charge will encourage liable entities to
surrender units instead of paying the charge. There will be no compulsion
to surrender units but the unit shortfall charge will be payable if
insufficient units are surrendered.
Unit Issue Charge
1.5 The Clean Energy (Unit Issue Charge--Fixed Charge) Bill 2011
and the Clean Energy (Unit Issue Charge--Auctions) Bill 2011 impose as
a tax the charges for issue of carbon units (whether fixed fee or auctioned)
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Clean Energy Charges bills
so far as the charges are taxation, but not duties of customs or duties of
excise, within the meaning of section 55 of the Constitution. [Clause 8]
1.6 The Commonwealth does not consider that the issue charges are
taxation because taxation is necessarily compulsory and it will not be
compulsory to surrender units.
1.7 However, a separate bill imposes those charges so far as they are
taxation to ensure that there can be no argument that there has not been
compliance with section 55. So far as the issue charges are not taxation,
they will be payable under clauses 100 and 111 of the main bill.
1.8 The Commonwealth does not consider that, if the issue charges
are taxation, a law imposing both the fixed charge and the auction charge
would deal with more than one subject of taxation. However, separate
bills impose the different charges to ensure that there can be no argument
that there has not been compliance with section 55.
Customs and Excise
1.9 The Clean Energy (Charges--Customs) Bill 2011 imposes the
unit shortfall charge and the issue charges so far as they are duties of
customs. [Clauses 8, 9] The Clean Energy (Charges--Excise) Bill 2011
imposes the unit shortfall charge and the issue charges so far as they are
duties of excise. [Clauses 8, 9]
1.10 It is not clear that the unit shortfall or issue charges would be
duties of customs or duties of excise. Imposition of the charges by a
separate bill so far as they are duties of customs or duties of excise
ensures that there can be no argument that there has not been compliance
with section 55 of the Constitution.
International Unit Surrender Charge
1.11 The Clean Energy (International Unit Surrender Charge) Bill
2011 imposes as a tax the charge for surrender of an eligible international
emissions unit during the eligible financial years beginning on 1 July
2015, 2016 and 2017. [Clause 8]
Rate of charges
Unit Shortfall Charge
1.12 The Clean Energy (Unit Shortfall Charge--General) Bill 2011
imposes charge on a unit shortfall for a financial year, so far as it is not a
duty of customs nor a duty of excise, at the following rates:
· If the year is a fixed charge year, the charge is 130 per cent
of the fixed charge for that year. [Clause 8]
· If the year is a flexible charge year, the charge is 200 per cent
of the benchmark average auction charge for the previous
year or, if another amount is specified in regulations, the
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Chapter 1: Charges bills
other amount. The other amount cannot be more than 200 per
cent of the benchmark average auction charge for the
previous year. [Clause 8]
Unit Issue Charge
1.13 The Clean Energy (Unit Issue Charge--Fixed Charge) Bill 2011
and the Clean Energy (Unit Issue Charge--Auctions) Bill 2011 impose
charge on the issue of carbon units, so far as the charges are taxation and
not duties of customs or excise, at the following rates: [Clause 8]
· The fixed charge is the amount for which the unit is issued as
set out in clause 100 of the main bill.
· The auction charge is the amount the buyer was willing to
pay for the unit at the auction, which was accepted by the
Regulator to form a contract for purchase of the unit. This is
subject to a possible price floor. For units with a vintage year
beginning on 1 July 2015, 2016 and 2017, the price floor is
set at $15, $16 or $17.05 respectively, subject to regulations
setting a greater amount. However, this price floor will apply
only if regulations are in force under the Clean Energy
(International Unit Surrender Charge) Bill 2011 setting a
charge for surrender of an eligible international emissions
unit during the relevant financial years. In the absence of
these regulations, and for other vintage years, a reserve
charge may be set by regulations.
Customs and Excise
1.14 The Clean Energy (Charges--Customs) Bill 2011 imposes
charge on a unit shortfall and on the issue of carbon units so far as the
charges are duties of customs. The Clean Energy (Charges--Excise) Bill
2011 imposes charge on a unit shortfall and on the issue of carbon units so
far as the charges are duties of excise. The charges are the same as the
equivalent charges which are not duties of customs or excise. [Clauses 8
and 9]
International Unit Surrender Charge
1.15 The Clean Energy (International Unit Surrender Charge) Bill
2011 imposes charge for surrender of an eligible international emissions
unit during the eligible financial years beginning on 1 July 2015, 2016 and
2017.
1.16 The charge will be the amount ascertained in accordance with
regulations made under the bill. The amount cannot exceed $15, $16 or
$17.05 for a surrender in the years beginning 1 July 2015, 2016 or 2017
respectively. [Clause 8] The regulations can provide for exemptions from
the charge in circumstances ascertained in accordance with the
regulations. [Clause 9]
13
Clean Energy Charges bills
Common provisions
1.17 Each bill provides for its short title, that is the title stated above
and by which the Acts will generally be identified. [Clause 1]
1.18 The formal provisions of each bill will commence on the day on
which the bill receives the Royal Assent. The substantive provisions of
each bill will commence at the same time as the substantive provisions of
the main bill commence (see clause 2 of the main bill). [Clause 2]
1.19 Each bill contains definitions of terms used in the bill. Most of
the terms are defined to have the same meaning as in the main bill. [Clause
3]
1.20 Each bill binds the Crown in right of each of the States, the
ACT, the Northern Territory and Norfolk Island. However, the bills do not
bind the Crown in right of the Commonwealth. [Clause 4] The
Commonwealth cannot impose a tax on itself. However, it is intended that
the Commonwealth be made notionally liable for any liabilities it incurs
under the mechanism (see clause 306 of the main bill).
1.21 Consistently with the main bill, each bill extends to every
external Territory [Clause 5], and to Australia's exclusive economic zone,
the continental shelf and the Joint Petroleum Development Area. [Clauses 6
and 7] The terms `exclusive economic zone' and `continental shelf' will
have the meanings given by the Acts Interpretation Act 1901 as amended
by the Acts Interpretation Amendment Act 2011 (which is expected to
commence prior to the charges bills).
1.22 Each bill will have no effect to the extent, if any, to which it
imposes a tax on property of any kind belonging to a State (where
`property of any kind belonging to the State' has the same meaning as in
section 114 of the Constitution). [Clean Energy (Charges--Customs) Bill 2011,
Clean Energy (Charges--Excise) Bill 2011, clause 10] [ Other bills, clause 9]
1.23 Each bill gives the Governor-General power to make regulations
prescribing matters required or permitted by the bill to be prescribed.
[Clean Energy (Charges--Customs) Bill 2011, Clean Energy (Charges--Excise) Bill
2011, clause 11] [Other bills, clause 10]
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