Insight - Energy & Resources

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Climate Change  

New greenhouse gas and energy reporting requirements – from 1 July 2008

While other aspects of the federal government’s carbon trading policy may be behind schedule, reporting obligations under the new national greenhouse and energy reporting scheme will commence from 1 July 2008. The new reporting scheme has been heralded as the first major step in establishing the Australian Emissions Trading Scheme (AETS).

The new reporting system will affect approximately 700 large to medium companies, 300 of which will be reporting their energy production, consumption and greenhouse gas emissions for the first time.

Those companies most affected will be in the industrial, energy and mining sectors. However, companies in the commercial property sector, transport sector and car fleet owners, just to name a few, will also need to consider their reporting obligations.

The aims of the new scheme

The reporting scheme established under the National Greenhouse and Energy Reporting Act 2007 (Cth) has been set up to collect data in the lead up to creating an AETS. For example, the data will help better inform Government when deciding how the allocation of emissions permits will work.

For the first time, the public will have access to company level information on the energy production and consumption and greenhouse gas emissions performance of companies. The scheme is also seen as a way of reducing the administrative burden on many companies who may currently be reporting under multiple schemes.

Who has to report?

The obligation to register and report under the Act rests with the Australian ‘controlling corporation’ of a corporate group. The corporate group will include all subsidiaries and any facilities owned by joint ventures or partnerships where a corporate member is nominated as the responsible entity.

The corporate group will need to report if facilities, over which it has operational control, emit greenhouse gases or consume or produce energy, over specified annual thresholds.

The thresholds are set out in the table below.

The corporate group thresholds over the first 3 financial years reduce sharply so that the number of companies that need to report increases over the period. The facility level thresholds do not change. These thresholds have been set at a level which aims to capture a significant proportion of Australia’s greenhouse gas emissions.

Importantly, even if only one of the three corporate group thresholds is met, reporting on all three areas (energy consumption, energy production and greenhouse gas emissions) will be required.

However, if a corporate group has operational control over a facility that meets the facility threshold, but does not meet the corporate threshold, it need only report on that facility.

What is operational control?

A key concept under the Act is that of ‘operational control’.

A corporate group will need to report in respect of a facility if it can be said to have operational control. It will only have operational control if it has the authority to introduce and implement operating, health and safety and environmental policies. If more than one party has that authority, then the party with the greatest authority to introduce those policies will be said to have operational control.

It would be dangerous to assume that the owner of a facility will always have operational control. The National Greenhouse and Energy Reporting System Regulations Policy Paper (Policy Paper) lists a number of examples and suggests that the operator of a facility will generally be considered to have operational control in preference to the owner. While the issue of operational control may ultimately depend on the exact terms of contract with the operator, the following are default positions suggested in the Policy Paper:

• Pipeline sector – it will be the operator of the pipeline
• Electricity network transmission and distribution sectors – it will be the operator of the network
• Commercial property – guidelines will be issued where it is uncertain who has operational control (i.e. owner or building manager). The guidelines will use control over energy billing as a proxy for operational control
• Mining sector – in general, it will be the contract miner
• Transport – where there is uncertainty regarding operational control, fuel tax credit claims will be the proxy for operational control
• Car fleets – salary packaged cars are not expected to fall under the operational control definition of the Act.

What emissions and energy require reporting?

Greenhouse gases that must be reported are emissions of carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, specified hydrofluorocarbons and specified perfluorocarbons.

The meaning of emissions is not defined in the Act, but the Policy Paper suggests that emissions will include both direct (scope 1) and indirect (scope 2) emissions from consumption of purchased electricity, heat or steam. However, this does not equate to liability to hold permits for scope 2 emissions under a future AETS.

Energy is defined broadly as fuel, or any other energy commodity of a kind specified in the regulations, and will include fossil fuels, bio-fuels, electricity and solar, wind and water energy.

What do you need to do now?

Those corporate groups which will have to report in respect of the first reporting year ending 30 June 2009, must apply for registration by 31 August 2009 and submit their reports by no later than 31 October 2009.

Corporate groups, and particularly those not previously reporting under the many mandatory and voluntary reporting schemes, will need to:

• identify relevant assets over which they have operational control;
• determine whether any of the thresholds are likely to be exceeded on a corporate group basis or on an individual facility basis; and
• watch out for release of the regulations (expected soon) which will be crucial in determining exactly who and what must be reported.

Failing to act

There are serious penalties if there has been a failure to register, report and keep records or for providing false information. These penalties also extend to chief executive officers in certain circumstances. The maximum civil penalty under the Act is $220,000.