From: eNews, LTA ANZ
Sent: Friday, 29 May 2015 12:43 PM
To: Jones, Helen (Legal)
Subject: Carbon Extra 319: RET politicking goes on; Most ERF proejcts not new; ASIC ERF licence guide
A deal to cut the legislated 2020 renewable energy target (RET) by 8,000GWh may yet fall apart over the Federal Government insisting on listing native forest wood waste as a renewable energy source in a Bill tabled this week.
The Renewable Energy (Electricity) Amendment Bill (REE Bill) tabled on May 27 by environment minister Greg Huntreflected bipartisan agreement on reducing the legislated target from 41,000GWh to 33,000GWh. The Bill would axe the destabilising two-yearly reviews of the RET scheme by the Climate Change Authority (CCA) and exempt emissions-intensive, trade-exposed (EITE) industries from compliance with the scheme, as Hunt agreed with Opposition climate change spokesperson Mark Butler last week.
It would overturn Labor's 2011 change to RET regulation 8, which removed native forest biomass as an eligible energy source. But the Bill would also shift the regulation's definition of eligible woody biomassinto the legislation, and significantly changed the definition.
The explanation of Hunt's Bill referred to the definition of eligible woody biomass as "protections". It would introduce the term "ecologically sustainable forest management principles" into the RET legislation. To be eligible to earn renewable energy certificates under the RET the Bill said the biomass must have been harvested primarily for a purpose other than for biomass for energy. The biomass must be either a by- or waste product of a govt-approved harvesting operation that meets a new "high-value test", or a by-product of an operation based on ecologically sustainable forest management principles. The harvesting operation must be covered by a regional forest agreement or meet equivalent ecologically sustainable forest management principles "to the satisfaction of the minister", the explanatory memorandum said.
The REE Bill's new "high-value test" would ensure the forestry operation's primary purpose was sawlog, veneer, poles, pile, girder, carpentry or craft wood, or oil product production and that it derived most of its financial value from those products.
Senators will decide Bill's fate
The govt shifting the RET's legal definition of woody biomass came as a surprise to many, including the clean energy industry, after the drawn-out negotiations between the major parties meant to seal a bipartisan deal on the scheme's future was finally forged last week. Most had expected the govt would table a separate regulatory amendment to reintroduce native-forest wood biomass into the RET.
The govt's move generated a clash between Labor and Greens MPs. New Greens leader Senator Richard Di Natale demanded Labor "abandon its deal to cut the RET, which was introduced to parliament today and allows for the burning of native forests". Labor Opposition climate change spokesperson Mark Butler rejected as "completely false Di Natale's suggestion Labor's deal with the govt was designed to allow native forest biomass back into the scheme in return for dropping the CCA's biannual reviews. Labor "does not support burning native forests as a renewable energy source" and would move to amend the Bill, Butler said. "We opposed it in govt and we oppose it now," he said.
That means the Bill's fate rests on the govt securing the needed Senate six cross-bench votes for it to pass as is. Alternatively, the govt may be hoping Labor will cave into industry and forestry union pressure and pass it without amendment, Carbon Extra sources said. Hunt has not yet delivered the Bill's second reading and his office has not responded to Carbon Extra's question.
RET regs will prevent EITE windfall, govt says
The Bill's (above) 100 exemption for EITEs from having to comply with the RET scheme would introduce new electricity intensity baselines for EITE activities, the explanatory memorandum said.
More flexible' RET regulations
That created a risk some EITE firms may receive "assistance that exceeds the cost impact of the RET on these EITE activities". The govt would consult on the detail of amended regulations "to address this risk", it said. Therefore, the REE Bill (above) would allow "more flexible" regulations "in terms of how they may characterise or describe the amount of an exemption certificate".
Clean Energy Regulator (CER) CEO Chloe Munro this week confirmed most of the carbon abatement contracted after the first emissions reduction fund (ERF) auction last month would come from projects already operating under the former Federal Government's carbon farming initiative (CFI).
The CER spent about $660m of the ERF's total $2.55bn funds on the first auction, paying on average $13.95 per tonne/CO2-e for a total of47m tonnes of abatement.
Under questioning inSenator Estimates this week, Munro said 107 of 144 projects underERF contracts had transitioned from the CFI. The 34.4m tonnes of carbonabatement they would deliver represented 72% of the total abatement contracted from the first auction, she said. The remaining 37 projects were new. Opposition climate change spokespersonMark Butler saidthatmeant the govt had effectivelypaid $66t/CO2-e for "only 10m additional tonnes of carbon abatement".
Newly updated federal regulatory guidance takes into account the "broader scope" of emissions reduction fund (ERF) project types, new participants and "anticipated" aggregated structures that "may emerge".
The Australian Securities & Investments Commission's (ASIC) latest Regulatory Guide 236 (RG 236) also affirms who "may need" Aust financial services licences (AFSLs) under the Federal Government's revised carbon markets regime. In March, after negative reaction, the govt split its plans to exempt some ERF participants from having to hold AFSLs (Carbon Extra 20/03/15).
ASIC's updated RG 236, released on May 20, confirmed Australian carbon credit units (ACCUs) and eligible international emissions units (EIEUs) were financial products.
Providing information on ACCUs or EIEUs to another person could constitute financial product advice in some circumstances, the guide said. Eg, where the information was intended to influence their decisions on regulated emissions units or "could reasonably be regarded as being intended to have such an influence". Providing financial product advice could relate to an ERF project or to people seeking to produce EIEUs through developing or operating international offset projects. It could include advice given to voluntary emissions offsetters "on approaches to, or strategies for, acquiring or disposing of regulated emissions units". Providing advice to entities covered by the govt's proposed safeguard mechanism to help them make decisions about acquiring or disposing of regulated emissions units could also constitute financial product advice.
The guide noted other emissions-related financial products included derivatives over emissions units and interests in managed investment schemes involving carbon abatement activities or emissions units. Carbon abatement contracts themselves were not financial products, RG 236 said. That meant people did not require AFSLs to provide advice about those contracts or deal in them.
ASIC in an online statement said it had worked closely with the federal environment department and the Clean Energy Regulator (CER) to "anticipate a variety of different structures of ERF aggregated projects that may emerge". However, ASIC said it would "monitor the need to more closely align its guidance to emerging and evolving ERF practices".
Carbon Extra sources say it's likely the next ERF auction, expected later this year, will see bids based on the scheme's method for aggregated energy efficiency projects. The legal technicalities, including ASIC's final position on who needed AFSLs, had stalled market players forging the multiple contracts involved in preparing aggregated projects for bid.
Editor: Deborah Nesbitt. Email: firstname.lastname@example.org. Managing Editor: Helen Jones. Twitter: @CarbonExtraTR.