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Client Update: Review of climate change policies discussion paper

28 March 2017

In brief: Following the release of the terms of reference for the 2017 climate change policy review in December 2016, the Federal Government has recently released its climate change policy review discussion paper for public consultation. Partner Andrew Mansour (view CV), Senior Associate Emily Gerrard and Lawyer Holly Woodcroft report. 

How does it affect you?

  • Climate change affects different sectors in different ways. Given the breadth of the terms of reference and discussion paper, it will be open to affected stakeholders to put forward views and positions in relation to a broad range of compliance, incentive and innovative measures.
  • The Department of Environment and Energy is holding consultations with key stakeholders and submissions can be made on the discussion paper until 5pm AEST on 5 May 2017.
  • The discussion paper canvasses the importance of Australia's policies in achieving Australia's Paris Agreement commitments, while supporting sustainable business opportunities. This includes five yearly review options and a longer-term emissions reduction goal.
  • As it sets out emission-related policies by reference to particular sectors, the discussion paper is a useful overview of Australia's current policy and regulatory settings as they relate to your industry.

Background

The Federal Government committed to a policy review when it set Australia's 2030 emissions target in 2015. Further, the Emission Reduction Fund (ERF) safeguard mechanism (SGM) requires a review of the mechanism in 2017. A key component of the Federal Government's review is to examine whether Australia's regulatory and policy settings remain appropriate and will achieve Australia’s 2030 emissions target (26 to 28 per cent emission reduction below 2005 levels) and Paris Agreement commitments. The Government released its terms of reference for this year's review in December 2016 (see our previous Client Update). The discussion paper is the next step in the review process.

What does the discussion paper say?

The discussion paper is a high level 'scene setting' document. It provides an overview of emissions on a sector basis and outlines existing policies relevant to each sector. Following each sector analysis, the paper poses questions to guide submissions. The key sectors reviewed in the discussion paper are:

  • Electricity generation (noting the parallel Finkel Review into the policy, legislative and rule changes required to solve the 'trilemma' of energy security, reliability and affordability in the context of a transition to renewable energy generation);
  • Households, small to medium-sized enterprises and the built environment;
  • Transport; and
  • Land and agriculture.

The consultation questions are broad, reflecting the breadth of the review. In addition to economy-wide questions, for each sector the Federal Government invites submissions on:

  • the opportunities and challenges of reducing emissions in each sector;
  • the policy implications of those opportunities and challenges; and
  • particular concerns or opportunities in relation to jobs, investment, trade competitiveness and regional Australia associated with policies to reduce emissions.

While the discussion paper highlights the importance of certain emissions intensive industries such as resources, manufacturing and waste to the Australian economy, it recognises that if Australia does not meets its targets and falls behind other countries, there will be impacts on trade competitiveness.

The discussion paper also sets out its review of existing policies which support research, development, innovation and technology in relation to climate change and notes the potential for Australia to take advantage of international trading of emissions units if quality control risks can be overcome.

Conclusion

The discussion paper, like the terms of reference, is wide ranging and creates the potential for greater certainty in relation to the full spectrum of climate change regulatory and policy settings post-2020. This includes key issues such as:

  • whether and how Australia's cross-cutting regulatory measures such as the ERF and SGM may change; and
  • the extent to which international units should be capable of being used to meet domestic compliance (as well as whether Australia should look at exporting Australian Carbon Credit Units).

In this regard, the review provides a means to help shape Australia's international negotiation as parties to the Paris Agreement move to clarify and confirm accounting, linkage, and international carbon market mechanisms over the next 18 months through the Paris Rule Book.

Interested parties can make submissions until 5pm AEST on 5 May 2017 by following the steps outlined on the Department of the Environment and Energy website.

If you would like more information on the discussion paper or would like to make a submission, please contact Andrew Mansour or Emily Gerrard.

For further information, please contact:

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