Three key implications for Australian businesses 5 min read
Climate legislation introduced by the Government to implement Australia's net-zero commitments received assent on 13 September. On 14 September, the Climate Change Act 2022 (Cth) (Climate Act) and the Climate Change (Consequential Amendments) Act 2022 (Cth) (Consequential Amendments Act) commenced.
While the Climate Act may appear symbolic in nature, it establishes a new policy platform and could have implications for the proponents of new projects in the resources and transport sectors in Australia. In this Insight, we summarise the Act and its key implications for Australian businesses.
A look at the Act
Legislated targets
For the first time, Australia will have legislated, economy-wide emissions reduction targets of:
- reducing net GHG emissions to 43% below 2005 levels by 2030; and
- reducing net GHG emissions to zero by 2050.
Importantly, the 2030 GHG emissions reduction target is to be implemented as an emissions budget covering the period of 2021 to 2030, in addition to being assessed as a point target. The targets are to be interpreted consistently with both the Paris Agreement and Australia's formal Nationally Determined Contribution (NDC) submitted on 16 June this year. The Act also includes a 'floor' in that a new or adjusted NDC must be a more ambitious target than the NDC immediately preceding it.
Climate reports
The emissions reduction target is coupled with a new accountability regime to track progress against the targets.
Under the Climate Act, the Minister for Climate Change and Energy is required to prepare and table an annual climate change statement, having regard to advice from the Climate Change Authority. The Minister's statement is required to address a number of matters, including (among other things) Australia's progress towards achieving the GHG reduction targets, the effectiveness of federal and state policies to achieve the targets and risks to Australia from climate change impacts.
The Climate Change Authority is also required, at least once every five years, to advise the Minister on the targets it considers should be included in an NDC. The advice must also include (among other things) advice on the social, employment and economic benefits of any new or adjusted targets and the physical impacts of climate change on Australia.
The Climate Act provides for periodic reviews of the Act, the first occurring in five years and subsequent reviews occurring within 10 years after completion of the previous review.
What does this mean for Australian businesses?
The Climate Change Act has three key implications for Australian businesses: as a guide to new policy, in flow-through legislative changes and on future project approvals.
A guide to new policy
As a legislated requirement for the Government, the emissions target will play a substantial role in new and updated government policy development. Aided by annual progress reports by the Climate Change Authority, it is likely that policymakers will take care to ensure they can explain how policy changes assist (or at least do not prevent) Australia from achieving its emissions targets.
Flow-through legislation
The Climate Act is supported by important 'flow-through' changes set out in the Consequential Amendments Act, which embeds Australia's GHG emissions reduction targets and the Paris Agreement into existing federal legislation. The Consequential Amendments Act does this by including the GHG emissions reduction targets into the objectives and functions of a number of federal agencies such as the Clean Energy Finance Corporation, Northern Australia Infrastructure Facility, Infrastructure Australia, Export Finance Australia, the Australian Renewable Energy Agency and the Climate Change Authority.1
As a result, decisions taken by these bodies must now take into account the impact on Australia's emissions targets, which will give significant financial clout to the Paris commitments.
Impacts on new projects
Currently, the Minister for the Environment and Water (Environment Minister) is not required to consider climate change impacts in her decision regarding whether or not to approve the taking of a controlled action under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act). While the Climate Act and the Consequential Amendments Act do not amend the core environmental approval framework under the EPBC Act, it is now open to the Environment Minister to have regard to the emissions budget and targets in the Climate Act.
Case studies
In considering whether an increase in strategic litigation will result from the implementation of the emissions budget and GHG reduction targets in the Climate Act, learnings can be drawn from the Victorian Climate Change Act 2017 and the UK Climate Change Act 2008.
Under the Victorian Climate Change Act 2017, climate change considerations are embedded into government decision-making. The Victorian Act has been used most notably by a not-for-profit environmental organisation, Environment Victoria, in alleging that the Environment Protection Authority of Victoria failed to properly consider climate change when reviewing operating licences of three Victorian coal-fired power plants. This case is still pending.
The UK Climate Change Act sets a long-term emissions reduction target of net zero by 2050 (based on 1990 baseline levels). Notably, in the case of R (on the application of Friends of the Earth Ltd and others) v Heathrow Airport Ltd2 (Heathrow), applicants alleged that the relevant decision-maker had breached his duty of care in failing to take into account the Paris Agreement when developing a national policy framework. While the relevant legislation imposed a duty to consider climate-related matters, this case illustrates the increasing trend for applicants to include climate-target arguments in their legal challenges.
In our view, the line of argument adopted by the applicants in the Environment Victoria and Heathrow cases would not be available in respect of an EPBC Act decision. Primarily, this is because in the Victorian and UK settings the relevant decision-makers were subject to a mandatory duty to consider certain matters relating to climate change and the Paris Agreement. Under the EPBC Act, this basket of considerations is discretionary.
What's next?
Proponents of new projects in Australia should expect a suite of future policy and legislative measures in this area to implement the targets set out in the Climate Act. Already-announced measures include the 'Safeguard Mechanism' reforms, which seek to more heavily regulate large-scale emitters in the industrial and resource sectors, and the Rewiring the Nation policy which intends to modernise the energy grid.
It is not yet clear what measures will be taken in the transport, property, agricultural and other sectors. However, a sector-based approach will likely be employed to satisfy the newly implemented national targets.
Footnotes
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Specifically, the pieces of legislation amended by the Consequential Amendments Bill are: Australian Renewable Energy Agency Act 2011; Building Energy Efficiency Disclosure Act 2010; Carbon Credits (Carbon Farming Initiative) Act 2011; Clean Energy Finance Corporation Act 2012; Clean Energy Regulator Act 2011; Climate Change Authority Act 2011; Export Finance and Insurance Corporation Act 1991; Greenhouse and Energy Minimum Standards Act 2012; Infrastructure Australia Act 2008; National Greenhouse and Energy Reporting Act 2007; Northern Australia Infrastructure Facility Act 2016; Offshore Electricity Infrastructure Act 2021; Renewable Energy (Electricity) Act 2000; Science and Industry Research Act 1949.