Australia, Victoria, Forest Carbon Legislation

Australia
August 17 2010

In brief

• In the absence of a national Carbon Pollution Reduction Scheme, Victoria is launching a broad action plan to address climate change. The plan seeks to optimise Victoria's position in responding to the challenges and opportunities inherent in climate change.
• The White Paper includes a proposal to introduce a Climate Change Bill which will set a target of a 20% reduction in Victoria's emissions below 2000 levels by 2020.
• Businesses that emit greenhouse gases should familiarise themselves with the proposed amendments to the Environment Protection Act 1970 (Vic) and update their compliance programs.
• Investors in the renewable sector should consider the opportunities in solar energy projects and carbon sequestration projects supported by the White Paper and associated Climate Change Bill.

The Victorian Government has released a new White Paper on climate change entitled "Taking Action for Victoria's Future". The White Paper is a broad action plan, with 10 key policies. It demonstrates Victoria's intention to address climate change in the absence of a national emissions trading scheme.

The White Paper seeks to optimise Victoria's position in responding to the challenges and opportunities inherent in climate change. It sets Victoria ahead of the other States and Territories in terms of developing a relatively comprehensive legislative and policy response to climate change.

The White Paper indicates that the legislative changes proposed in the White Paper would be immediately reviewed if a national carbon price were introduced.

10 key policies

The Victorian Government released its Climate Change White Paper, outlining the State government's climate change policy, on 26 July 2010.

The White Paper sets out 10 key policies:

• legislating to cut Victoria's greenhouse pollution;
• moving towards a cleaner energy future;
• making Victoria the "solar State";
• supporting cleaner and more efficient homes;
• positioning Victoria to be a global leader in clean technology;
• creating new opportunities in agriculture, food and forestry;
• delivering innovative transport solutions;
• greening government;
• helping Victorians adapt to climate change; and
• strengthening our climate communities.

The essentials

The essential elements of the White Paper are:

• targets of:

  • cutting the State's greenhouse gas (GHG) emissions to 20% below 2000 levels by 2020 (equivalent to a 40% reduction on a per-capita basis);

  • a target of reducing GHG emissions from coal fired power stations by 28 million tonnes from the brown coal-fired electricity sector by 2020 (equivalent to closing two units of Hazelwood power station); and
  • increasing Victoria's electricity supply from large scale solar power to approximately 5% by 2020 (approx 2500 GWh) through a large scale solar feed-in tariff;
• a commitment to no new approvals for new coal fired power stations based on conventional brown coal technologies;
• $30 million to further assist the development of a carbon capture and storage hub in the form of the CarbonNet project in the Gippsland basin;
• new powers for the Victorian Environment Protection Authority (EPA) to regulate GHG emissions from industry, through changes to the Environment Protection Act 1970 (Vic);
• a target emission level for proponents of new coal-fired power stations of 0.8 tonnes of C02e/MWh;
• the establishment of a Victorian Carbon Exchange, to allow the general public and businesses to voluntarily offset their emissions by purchasing Victorian-based offsets;
• a 20% improvement in the energy efficiency of government buildings by 2018, on top of the 5% improvement expected by the end of 2011;
• increasing government GreenPower purchases from the current level of 25% of electricity purchases to 30% by 2015 and 50% by 2020; and
• raising the energy efficiency of Victorian homes to an average of a 5 Star Energy Rating by 2020.

Many of these initiatives will be brought into effect through the proposed Climate Change Bill 2010, which was introduced into Parliament on 29 July 2010 (the Bill). The Bill would, according to the White Paper, be reviewed immediately if a national carbon price were introduced, and would be subject to a routine review after 2015.

A white paper implementation plan will be released later this year following further consultation with the community and industry.

Emissions targets, policy development and adaption planning

The Bill introduces a legislative GHG emissions target of reducing Victoria's GHG emissions by 20% below the amount of Victoria's emissions in 2000, by 2020. The Minister is required to report biannually on progress in meeting this target, as part of a climate change science and emissions report.

The Bill also sets out:

• climate change policy objectives that the government is to consider in making government policy;
• requires the formulation of a Climate Change Adaptation Plan every four years, and specifies guiding principles for that Plan.

These changes attempt to consciously place climate change considerations at the forefront of government decision making. It remains to be seen whether these changes will result in real changes to the decision making culture of the Victorian Government.

Changes to the Environment Protection Act (EP Act)

The Bill contains a number of significant amendments to the EP Act. The key changes are:

• new GHG definitions;
• new powers for the EPA to regulate GHG emissions and standards;
• establishment of a voluntary Victorian Carbon Exchange; and
• establishment of Climate Covenants and a Climate Communities Fund.

Definition of GHGs

The Bill inserts a definition of GHG substances into the EP Act. The definition corresponds to wording in the National Greenhouse and Energy Reporting Act 2007. It also amends the definition of "waste" to include GHG substances.

New powers to regulate GHG emissions

The Bill gives the EPA a major role in regulating, and encouraging action to reduce, GHG emissions. The Bill requires the EPA to consider climate change in developing policies, and in its decisions relating to works approvals and licences.

The EPA has a new power to develop regulations prohibiting or regulating GHG emissions and prescribing standards or conditions for their discharge.

The Minister has new powers to issue guidelines on how the EPA and other nominated decision-making entities are to take account of climate change in exercising their responsibilities.

Premier John Brumby has indicated that as a first step in exercising its new powers, the EPA would set an emissions intensity standard for new power stations (to give effect to the target set out in the White Paper of GHG emissions from new power stations of 0.8 tonnes per MWh). He also said the powers could be used for other purposes – such as setting standards for existing generators.

The Victorian Carbon Exchange

Changes to the EP Act will also provide for the establishment of the Victorian Carbon Exchange, to allow the general public and businesses to voluntarily offset their emissions by purchasing carbon offsets generated in Victoria. This is designed to create a market incentive (in the absence of the CPRS) for landholders and forest operators to create offsets through activities such as soil carbon sequestration, changed farming practices and new forest plantations.

The Exchange will also feature a voluntary vehicle registration offset program (motorists would pay an extra amount for carbon offsets when they register their vehicle, with the revenue directed to the Exchange).

Climate Covenants

Other changes to the EP Act would allow businesses to enter into voluntary Climate Covenants with the Premier and Minister – an approach modelled on the existing provisions for sustainability covenants.

Legislative recognition of carbon sequestration and soil carbon rights

Part 4 of the Bill prescribes a new regime dealing with carbon sequestered in forests, other vegetation and soils on both private and Crown land.

Forest carbon rights

The provisions applying to private land create "forest carbon rights", which are defined to include carbon sequestration rights, forestry rights and soil carbon rights.

Forest carbon rights are interests in land. These rights may created and transferred by the registered proprietor of the land, with the consent of any lessee. It is not possible for the land owner to create more than one kind of forest carbon right for any piece of land, because the Registrar of Titles is prohibited from registering more than one of each right.

Carbon sequestration rights

"Carbon sequestration rights" are exclusive rights to the economic benefits associated with carbon sequestered by vegetation, other than vegetation which has been harvested, lopped or felled. This does not include any rights to manage or access land (which are to be addressed in Forestry and Carbon Management Agreements – see below).

Forestry rights

"Forestry rights" are rights to plant, establish, manage and maintain vegetation on land and to take and deal with vegetation which has been harvested, felled or lopped and includes a right of entry for that purpose.

Soil carbon rights

"Soil carbon rights" are exclusive rights to the economic benefits of carbon sequestered underground, excluding carbon stored within plants. It does not include rights to manage or access land.

Forestry and Carbon Management Agreements

The Bill allows landowners to enter into Forestry and Carbon Management Agreements, with the owner of a forest carbon right (or any other .person). A Forestry and Carbon Management Agreement would impose management obligations in relation to carbon sequestration by vegetation or underground (such as preservation, enhancement or management of vegetation or soil).

The Bill also makes provision for financial securities to ensure compliance with an agreement.

Upon application by the landowner, these agreements can be recorded on the property title. Where it is recorded on the title it will run with the land and bind future owners.

Parties to the agreements can apply to VCAT to enforce the provisions of the agreement or to resolve disputes.

Crown land

The provisions dealing with carbon sequestration on Crown land allow the Government to declare specified land available for carbon sequestration and to invite expressions of interest to develop it for carbon sequestration purposes.

The Crown land provisions also provide for "Carbon Sequestration Agreements" between the Government and third parties. These can grant third parties carbon sequestration or soil carbon rights and provide access to Crown land to allow them to plant and maintain vegetation or "control and exploit" carbon sequestered within vegetation or soil.

The Bill allows the Government to require security as part of a Carbon Sequestration Agreement, including indemnities and insurance.

The Bill also sets out matters to which the Secretary must have regard in deciding whether or not to enter a Carbon Sequestration Agreement.

Opportunities for business

The White Paper is a sound attempt at responding to climate change in the absence of an emissions trading scheme, but remains a piece meal policy solution compared to the comprehensiveness of the CPRS. However, the raft of measures which Victoria proposes to introduce should create significant new opportunities for Victorian businesses in carbon sequestration, renewable energy (particularly solar) and energy efficiency.

Action points

• Victoria proposes to legislate a GHG target, and set climate change as a priority consideration in government policy and decision making.
• Greenhouse gas emitting businesses will be subject to increased regulation by the EPA, including enforcement action.
• The White Paper should create new opportunities for investment in carbon sequestration, including in forests and soil on private and Crown land, and in large and medium scale solar projects
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