On 21 February 2007, the Voluntary Carbon Credit Trading Bill 2007 (Qld) was introduced into the Queensland Legislative Assembly.
The Scheme
The Bill aims to create a voluntary, certificate based carbon credit trading exchange in Queensland as a way of combating greenhouse gas emissions. It is intended that the exchange will operate as a company under the Government Owned Corporations Act 1993 (Qld), with the majority of board members to be existing directors of Queensland Investment Corporation.
The Bill aims to:
- establish an entity to be responsible for the issue and trade of carbon credit certificates;
- establish a Carbon Credit Certificate Register to be managed by the Chief Executive Officer;
- specify the accreditation procedure for businesses;
- prescribe the procedure for buying and selling carbon credit certificates;
- permit advertising related to carbon credit certificates, except where such advertising is misleading or deceptive; and
- specify that the Corporation must take all necessary steps to promote its activities on a national and international level.
Accreditation
Under Part 2 of the Bill a new “Carbon Credit Trading Corporation” is to be established to provide accreditation on a voluntary basis to corporations and enterprises which reduce carbon emissions in the following ways:
- by the removal of carbon units from the atmosphere, including for example by sequestration such as forestry (and which could also include geo-sequestration);
- by the reduction of carbon emissions through the utilisation of alternative energy sources instead of using fossil fuels. (This could include power produced from low or zero emissions industries such as bio-fuels, wind, solar, geothermal and hydro-electric sources);
- by businesses that use fossil fuels as energy sources producing less carbon emissions compared to the relevant industry standard. (For example, traditional power stations being able to demonstrate that their per unit emissions are reduced by an amount exceeding any reductions achieved by the industry as a whole); and
- by any other means stated in the guidelines or prescribed by regulation.
Once accredited (ie., accredited as a business that removes or reduces carbon emissions), the Chief Executive Officer of the Carbon Credit Trading Corporation may issue carbon credit certificates to the entity. The Bill sets out an audit process for assessment of applications for accreditation under the scheme, and in respect of ongoing audits of existing accredited businesses to ensure that those accredited businesses are complying with the conditions of their accreditation.
Rationale
The scheme is structured on the basis that it will be voluntary in nature. The rationale underlying this structure is an assumption that, as the credits issued under the scheme will be tradable, the carbon credit certificates which are issued will have potentially significant value, which will in turn drive corporate behaviour by creating an incentive for companies to participate in the scheme and reduce emissions. Companies which participate in the scheme would also have the right to publicise that they have done so.
The intention of the legislation is to reward those industries that use technology innovation and other means to cut their emissions substantially more than their competitors and to assist and improve the economics of alternative energy sources and of sequestration. A further intended flow-on effect is to position Queensland as an Asia-Pacific centre for carbon credit trading and a leader in alternative energy, creating further stimulus to innovation with geo-sequestration, new forms of alternative energy and technologies to reduce emissions at a faster rate.
In the long term, the intention is for the Carbon Credit Trading Corporation to seek accreditation of Queensland carbon credits both interstate and internationally, creating a new export industry for the State. However, whether this aim is achievable will ultimately depend on the robustness of the certification process which underlies the scheme (which will be set out in guidelines to be prescribed under a regulation).
The Exchange Process
Under Part 3 of the Bill, the Carbon Credit Trading Corporation is established as the exchange (“Exchange”) for the purpose of trading carbon credit certificates (“Certificates”). Certificates issued to accredited businesses can be traded on the Exchange, and the holder of such certificates can be sold to another entity. Certificates can only be traded in “parcels” of a number prescribed under a regulation. The Exchange is required to control the sale in the manner prescribed under a regulation. Both the seller and the purchaser of each parcel of Certificates traded on the Exchange must pay the Exchange a fee prescribed under a regulation for the trade. The prices paid for Certificates must be published by the Exchange at intervals determined under a regulation.
A parcel of Certificates which is traded on the Exchange may subsequently be divided into individual certificates (each called a “retailed certificate”) which may be sold separately by an “approved entity” (being either a local government, a department , or another entity or class of entity approved under a regulation ). An approved entity proposing to sell a retailed certificate must “estimate or work out the amount of carbon units the person is likely to consume, or has consumed, in a particular period by using an energy source that the entity provides or to which the entity has a connection”. The approved entity must then give the person notice of the number of carbon units estimated and the price for the retailed certificates for the carbon units. The person may then choose whether or not to pay the approved entity the price to purchase the retailed certificates.
A person who holds a Certificate or who purchases a retailed certificate may advertise or promote that the person holds the Certificate or has purchased the retailed certificate.
Unless a Certificate is cancelled, it expires when the earlier of the following happens:
- it is purchased in the form of a retailed certificate under Division 6 of Part 3 of the Bill; or
- the end of 2 years after it is issued.
Implications
The Bill has implications for industry across Queensland, and particularly for those entities operating in the electricity generation and retail sectors.
We will monitor the development and passage of this legislation and provide further updates on its progress as they occur.
For more information please contact Andrew Bruton from TressCox Lawyers.
Andrew Bruton
Partner
Phone: 61 7 3004 3527
Andrew_Bruton@tresscox.com.au
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