Environment Update - New reporting Bill sets the foundations for an Emissions Trading System

On 15 August 2007 the Federal Government introduced the National Greenhouse and Energy Reporting Bill 2007 to Parliament. The Bill sets company-wide and facility-specific thresholds that will trigger the requirement to report greenhouse gas emissions and energy use, whilst providing company-level data to investors and the general public.

Purpose of the Bill

The Bill establishes a new reporting system, aimed at creating a national framework for reporting on greenhouse gas emissions, abatement actions and overall energy consumption and production by corporations. The rationale for its development stems from an increasing number of greenhouse gas and energy reporting programs at both the federal and state levels, with the aim of creating a single streamlined system. The system has been developed to underpin the Australian Emissions Trading System, which was announced in July 2007.

The new system is intended to eliminate duplicate reporting and ‘reduce red tape currently imposed by the patchwork separate state, territory and national reporting schemes’, according to the Environment Minister. However, from comments made at a recent stakeholder forum, business and industry are yet to be convinced that this system will streamline current reporting requirements. Although the Commonwealth maintains that it aims to ‘work cooperatively’ with states and territories, the Bill provides the Federal Government with an avenue to ‘cover the field’ and override state programs such as renewable energy target schemes already in place.

Who will be required to register?

Companies and facilities that emit more than a certain amount of greenhouse gas emissions, and/or use or produce more than a certain amount of energy will be required to report.

Only a ‘controlling corporation’ at the top of the corporate hierarchy will be responsible for reporting. A controlling corporation will either have subsidiaries or be a single corporation, but will not have a holding company incorporated in Australia. Joint ventures and partnerships are also covered under the definition, however, only one party to the venture or partnership will be responsible for reporting.

‘Facilities’ covers all activities involving the production of greenhouse gas emissions, or producing or consuming energy, however, the exact definition of a facility is yet to be determined.

What are the thresholds?

For companies, the thresholds for triggering the reporting requirements are shown below:

Companies that do not trigger the overall thresholds may still be required to report if one of their facilities emits 25,000 tonnes or more of greenhouse gases and/or produces/consumes 100 terajoules or more of energy. Companies will be encouraged to voluntarily report if they do not meet the initial thresholds, but may trigger them at a later date.

What information will be collected?

The Bill indicates that the totals of greenhouse gas emissions and energy produced and consumed by each corporation will be collected and made publicly available through the National Greenhouse and Energy Register. While the system is consistent with a proposal developed under the Council of Australian Governments, and is based on consultation with government and industry, there is still confusion as to precisely what additional information will be required to be reported and how much company-specific information will be disclosed to the public. The first reports are due to be made publicly available by 28 February 2010.

Disclosure of information

Information collected by the Register will also be distributed to Commonwealth Departments and Agencies for the purpose of publishing aggregated data about a corporation, with the proviso that it does not disclose ‘specific information’ about the corporation or a facility. Various consultants engaged by government may also access the data, as will state and territory governments, subject to confidentiality and security arrangements. However, the Bill is yet to specify the limits of distributing such information and precisely what information will be collected, creating apprehension for business and industry.

The Bill is intended to avoid duplication of reporting requirements, therefore, companies that fall under this Bill will no longer need to report on their GHG emissions or projects through any national environment protection measure (NEPM) under the National Environment Protection Council Act 1994 (Cth).

What does this mean for business?

From 1 July 2008, companies that trigger the threshold will be required to:

• Register with the National Greenhouse and Energy Register by 31 August 2009.
• Report to the Greenhouse and Energy Data Officer by 31 October 2009.
• Maintain records relating to their GHG emissions and energy production and consumption.
• Participate in auditing and compliance processes.

There are civil penalties for failing to meet due dates, with compliance, monitoring and enforcement being undertaken by the Greenhouse and Energy Data Officer (GEDO), created under the Bill. The GEDO has been vested with powers to issue infringement notices, apply for monitoring warrants and order external audits of businesses.

Businesses will be able to apply to register anytime from the beginning of the financial year for which they will first be required to report, until two months after the end of that financial year. Failure to register or report will incur penalties of up to $220,000, with penalties also applying for late registrations and inadequate reporting.

CEOs of corporations may be held liable where they have knowledge of, or are reckless or negligent as to, the company’s contravention taking place. Criminal penalties will also be enforced if secrecy provisions surrounding the disclosure of information are breached.

Businesses will therefore need to assess whether they will be required to report during the initial period, or at a later date, and put in place measures to accommodate this reporting.

What’s next?

The Bill is currently before the Senate Environment, Communications, Information, Technology and Arts Committee, which will release a consultation paper in September 2007, outlining the issues to be covered by the regulations. Business and industry will then have the opportunity to make submissions through informal reference groups.

For more information, go to the Australian Greenhouse Office’s website at: www.greenhouse.gov.au/reporting/

How can DLA Phillips Fox assist you?

The reporting and compliance obligations of the Bill are likely to create significant new challenges for business. We suggest that we may be able to assist you with the following:

• Reviewing company data prior to being lodged with the GEDO to ensure its content is not misleading, to eliminate the risk of a potential claim of misleading and deceptive conduct under the
  Trade Practices Act.
• Advising businesses on any enforcement proceedings brought by the regulator.
• Advising directors on their duties and liabilities arising out of information provided under this system.
• Advising businesses on the treatment of commercially sensitive or confidential information under the system.

For more information please contact:

Louise Hicks, Partner
Tel +61 3 9274 5459
louise.hicks@dlaphillipsfox.com

Alice Skipper, Solicitor
Tel +61 3 9274 5073
alice.skipper@dlaphillipsfox.com