ENVIRONMENTAL LAW EXPERT MEETING: The European Position Towards Copenhagen – A Global Outlook Law Faculty, Maastricht University, 20 May 2009 AUSTRALIAN PERSPECTIVE Prof. Rob Fowler, Law School, University of South Australia

BACKGROUND: AUSTRALIA’S NET GREENHOUSE GAS EMISSIONS Australia’s Kyoto target: 8% above 1990 levels 2006: emissions were 5.2% above 1990 levels Emissions sources: Energy sector: 69.6% Agriculture: 15.6% LULUCF: 6.9% Industrial: 4.9% Waste sector: 2.9% GHG contributions to CO2-e emissions: CO2: 74.3% (428 Mt.) Methane: 20.5% (118 Mt CO2-e) Other: 5.2% (30 Mt CO2-e)

AUSTRALIA’S NET GREENHOUSE GAS EMISSIONS (cont.) Latest Emissions Projections (Feb. 2008) indicate 8% above 1990 levels for the Kyoto period ( ) Current projection to 2020 is 120% above 1990 level (“business as usual” scenario)

AUSTRALIA’S POLICY RESPONSE Ratified Kyoto Protocol Chairs “Umbrella Group” (including Canada, Japan, New Zealand, Norway, Russian Federation and Ukraine) in UNFCCC discussions Garnaut Inquiry : Final Report, Sept ppm CO2-e target “feasible” in Copenhagen 450 ppm CO2-e target “a desirable next step” Australian interim targets: 450 ppm: 25% below 2000 levels 550 ppm: 10% below 2000 levels If no “comprehensive agreement” in Copenhagen, 5% below 2000 levels

AUSTRALIA’S POLICY RESPONSE July 2008: Green Paper on the Carbon Pollution Reduction Scheme (CPRS) Proposed “cap and trade” ETS Annual caps to be set for a 5-year period and extended each year “indicative trajectories” to be announced at end of 2008 Annual caps to be set in 2010 after Copenhagen COP Offset credits to be allowed to be purchased from other ETS’s (but only CER’s under CDM, ERU’s under JI mechanism and RMU’s re LULUCF) Australian permits not to be sold into international market

AUSTRALIA’s POLICY RESPONSE – CPRS MARK I CPRS White Paper (“CPRS Mk. I”)released by Australian government December 2008 : see Legislation to be introduced to Federal Parliament in May 2009 with the aim of being passed by July 2009 and to commence operation in 2010 Proposed “cap and trade” system in which aggregate emissions of GHG’s are capped at a level consistent with the “environmental objectives” of the scheme Scheme to commence July 2010

AUSTRALIA – CPRS MARK I (cont.) Coverage: All 6 gases regulated under Kyoto Protocol Only 75% of overall GHG emissions (and therefore requires “complementary measures”) Will not cover agriculture before 2015 Does not cover land-clearing (considered too complex) In practice, 1000 entities will have mandatory obligations under the CPRS Note: voluntary emissions reductions by non- regulated parties will simply create more space within the cap for regulated entities to emit GHG’s

AUSTRALIA – CPRS MARK I (cont.) Carbon permits Can be traded and may be banked indefinitely Will be “financial products” under Corporations Act 2001 (Cth.) for purposes of regulation of trading activities by ASIC Constitute personal property Most permits (75%) to be auctioned Special provisions for “emissions-intensive trade- exposed industries” (EITE”s) to avoid “carbon leakage”: Administrative allocation of permits to eligible industries Will comprise up to 25% of total permits initially 60 – 90% discount provided re permits, depending on emissions intensity of eligible industries Coal industry currently ineligible for this assistance, but subject ot further negotiation

AUSTRALIA – CPRS Mk I (cont.) Caps and emissions reduction targets Caps to be set at least 5 years in advance First cap to be announced in 2010, after Copenhagen COP Relevant targets are: 2050: 60% reduction from 2000 levels 2020: 5 – 15% reduction from 2000 levels, depending on outcomes of Copenhagen COP Government claims 2020 targets equate to 34-41% reductions on a per capita basis after allowing for 45% population growth in Australia between 1990 and 2020 Exposure draft legislation to give effect to CPRS Mark I released for comment March 2009

AUSTRALIA – CPRS MARK II 4 th May 2009: Australian government announces key changes to proposed CPRS Mark I: Start delayed by one year to July 2011 One-year fixed period for carbon price: A$10/tonne CO2 for Global recession buffer for “EITI’s” – additional reductions in permit price Funding to be provided for energy efficiency measures by eligible industries Australian Carbon Trust: to include Pledge Fund for individuals and households to buy and retire carbon pollution permits under the CPRS (A$25.8 million) – through voluntary, tax deductible contributions

AUSTRALIA – CPRS MARK II (cont.) Revised targets and scheme caps: Commitment to 25% reduction from 2000 levels by 2020 “if agreement is reached in Copenhagen to stabilize GHG levels at 450ppm CO2-e” Will also take into account purchase by households, businesses and community organizations of accredited GreenPower above 2009 levels in setting scheme caps 15 May 2009: CPRS legislative package introduced into the Federal Parliament : 6 new Bills 4 Bills amending existing legislation

CPRS MARKS I and II COMPARED 2020 commitments CPRS MARK I – (15% below 2000) CPRS MARK II (25% below 2000) Global Target ppm CO2-e450 ppm CO2-e (peak by2020) Advanced economies 15-25% below 1990 (aggregate) Comparable commitments At least 25% below 1990 (aggregate) Comparable commitments Major developing economies Substantive, measurable, reportable & verifiable commitments and actions 20% below BAU Nominated peak years Finance and technology Strong international financing & technical cooperation framework Mobilization of greater financial resources, including from major developing countries Carbon market Deeper & broader carbon markets Fully functional global carbon markets Coverage Progress towards inclusion of forests (REDD) & land sectors Inclusion of forests (REDD) & land sectors Other Low carbon development pathway Ratification review process after Copenhagen

AUSTRALIA – EU COMPARISON 2020 COMMITMENTS AUSTRALIA: CPRS MARK II EU: COM(2009) 39 Unilateral target 5% 20% 2050 Target 60% below % below 1990

AUSTRALIA – EU COMPARISON (cont.) 2020 COMMITMENTS AUSTRALIA: CPRS MARK II (25% below 2000) EU: COM(2009) 39 (30% below 1990) Global Target 450 ppm CO2-e (peak by2020) Limit temp. rise to less than 2 degrees C Advanced economies At least 25% below 1990 (aggregate) Comparable commitments 30% below 1990 levels (aggregate) comparable contributions Major developing economies 20% below BAU (aggregate) Nominated peak years 15 – 30% below BAU national low carbon development strategies by end 2011 (except LDC’s) Finance and technology Mobilization of greater financial resources, including from major developing countries innovative additional international financing sources double global energy R&D by 2102 (x 4 by 2020) Carbon market Fully functional global carbon markets OECD-wide carbon market by 2015, expanding to all major emitters by 2020 Coverage Inclusion of forests (REDD) & land sectors Aviation & shipping by 2011 OR under UNFCCC national targets; HFC’s included Other Ratification review process after Copenhagen National adaptation strategies

ISSUES & OUTCOMES FOR COPENHAGEN Defining a global target: stabilization v temperature goal 550 ppm v 450 ppm v 350 ppm CO2- e Definition of “advanced/developed” and “major developing” economies Criteria for determining “comparable” commitments on the part of “advanced/developed” economies : EU proposals Acceptance of firm targets by major developing economies Additional financing mechanisms Nature & extent of global carbon market Forests (REDD) and land-use sectors Aviation and shipping Future of Kyoto “flexible mechanisms”