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Sustainabiility Insight - December 2008 [Adobe Acrobat PDF - 455.15 KB]

Sustainability Insight

December 2008

Carbon Pollution Reduction Scheme – White Paper released

Details of the Federal Government’s much anticipated Carbon Pollution Reduction Scheme (CPRS) were announced earlier this week with the release of the White Paper. The CPRS will commence nationally on 1 July 2010 and will affect around 1,000 Australian entities in a major effort to move to a low pollution economy.

The White Paper sets out the Government’s policy on:

• the medium term target range for greenhouse gas (GHG) emissions;
• the design structure of the CPRS ‘cap and trade’ system; and
• assistance to specific industries, business, motorists and households. 

Reducing GHG emissions – the targets

In the lead up to finalising the details of the CPRS, the Government set a long term target to reduce Australia’s GHG emissions to 60% below 2000 levels by 2050 (2050 Target). The 2050 Target covers all GHG emissions, not just those subject to the CPRS.

The White Paper sets a medium term target to reduce GHG emissions to a range of between 5% and 15% below 2000 levels by the end of 2020 (2020 Target). The higher end of the 2020 Target (15%) is conditional upon other major economies committing to similar targets.

Coverage under the CPRS

The aim is for the CPRS to apply to the larger emitters, being facilities that have direct GHG emissions of 25,000 tonnes or more of carbon dioxide equivalent a year.

The GHGs caught under the CPRS are emissions of carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, specified hydrofluorocarbons and specified perfluorocarbons. These are the same GHGs as those covered by the National Greenhouse and Energy Reporting Scheme (NGER Scheme) which commenced on 1 July 2008. See our Energy & Resources Insights of June 2008 ( link ) and August 2008 ( link) on the NGER Scheme.

GHG emissions from the following sectors will be covered by the CPRS:

• stationary energy
• transport
• industrial processes
• waste
• fugitive emissions

Agriculture will be included in the CPRS in the future but not before 2015.

Scheme caps  

The CPRS will have caps limiting the total amount of GHG emissions liable entities are permitted to emit every year. The Government will outline the caps at least 5 years in advance with the caps for the first 5 years to be announced in early 2010.

Acquiring and surrendering of permits

Liable entities will need to acquire and surrender a permit for every tonne of GHG emissions generated in a year. The total number of permits available will be equal to the scheme cap. If, for example, the cap limits emissions to 200 million tonnes of carbon dioxide equivalent in a year, there will be 200 million permits issued for that year.

The permits will be tradeable and will not have an expiry date (allowing permits acquired in one year to be surrendered in later years). The price of the permits will be set by the market, subject to a cap of $40 per tonne until 2015. The Government has indicated that the likely opening permit price will be $25 per tonne. The Government intends to auction permits on a monthly basis. Initially, approximately 70% of the permits will be auctioned with the rest to be allocated as free permits.

Emissions-Intensive Trade-Exposed industries

The Government has made provision for assistance to Emissions-Intensive Trade-Exposed (EITE) industries in the form of free permits.

90% of the GHG emissions for the most emissions-intensive EITE industries will be covered by free permits. 60% of the GHG emissions for moderately emissions-intensive EITE industries will also be covered by free permits.

The reasoning behind providing assistance to EITE entities is to prevent these entities relocating overseas.

Electricity Sector Adjustment Scheme

The Government will provide direct assistance to the coal-fired electricity generation sector through a new fund called the Electricity Sector Adjustment Scheme (ESAS). The Government will issue up to 130.7 million permits over the first 5 years of the CPRS through the ESAS.

CPRS legislation

The Government has committed to the following timetable for the CPRS legislation: