1. September 2012 MUSA September 2012 Australia’s carbon pricing mechanism

2. Carbon pricing and reporting 1 July 2008 Due 31 Oct annually 1 July 2015 National Greenhouse & Energy Reporting Act (NGER) ‘Cap and Trade’ emission trading scheme Annual NGER reporting The journey so far 1 July 2012 Start date: Fixed Carbon Price $23 per tonne 8 November 2011 Legislation passed Senate

3. Carbon pricing: overview 3 Start date Fixed price period Transition to Emissions Trading Scheme (ETS) Coverage Coverage issues Fixed price of $23/tonne CO2-e from 1 July 2012 (akin to a tax) 3 years to 1 July 2015 (indexed 2.5% annually) From 1 July 2015 price is ‘flexible’ with a cap Energy, industrial processes, fugitive emissions & non legacy waste (post 1 July 2012) and some transport Fuels/Transport: Domestic aviation, shipping, rail and non-transport use of fuels will be covered via fuel tax credits/excise adjustments or an Opt-In for permits Household transport fuels, light vehicle business transport and off-road fuel use by the agriculture industries excluded Heavy transport likely included from 1 July 2014 Offsets and international linkages No international trading during the fixed price period Carbon Farming Initiatives credits can be used in the fixed price period to meet up to 5% of an entity’s carbon liability

4. Carbon pricing: overview Who is liable? Emissions thresholds: 1.Facility: 25,000 tonnes CO2-e (most Scope 1 emissions, but excluding fuels and other non-priced Scope 1 emissions). 2.Approximately 500 companies will be directly liable for the carbon price. The entity with ‘Operational Control’ is generally liable (similar to NGER) Entity with ability to introduce and implement operating, health and safety and environmental policies for the facility Joint ventures and corporate groups Unincorporated Joint Ventures - if no one organisation has operational control emissions liability allocated between JV participants in proportion to their interest in the facility. 4

5. Carbon pricing: overview Transport fuels – a complex area On-road On-road business use of transport fuels in light vehicles will not be subject to a carbon price Use of fuel in heavy on-road vehicles will not be subject to a carbon price initially From 1 July 2014 use of fuels in heavy on-road vehicles will be subject to a carbon price. Off-road Use of fuels in off-road applications will be subject to a carbon price through reduced fuel tax credits (equivalent to the carbon price) Aviation, marine and rail transport Use of fuels in aviation, marine and rail transport will be subject to the carbon price through either increased excise or reduced fuel tax credits (equivalent to the carbon price) Opt-in Scheme From 1 July 2013 companies will be able to opt-in to the carbon pricing mechanism and purchase permits rather than pay via the fuel-tax system 5

6. Carbon pricing: overview Clean energy assistance and opportunities 6 Government funding to industry for innovation and energy efficiency Assistance to emission intensive trade exposed heavy industry via free permits

7. Carbon pricing: overview Compensation to industry Emission-Intensive Trade-Exposed (EITE) industries - receive assistance of $9.2 billion over the three years 2015. This assistance will be in the form of free permits set at two assistance levels – 94.5% or 66%, and grants to increase energy efficiency Steel industry - $300 million over five years will be given to the steel industry to encourage innovation and efficiency in the sector. On top of EITE assistance. Coal - $1.3 billion Coal Sector Jobs package over six years to assist the most emission-intensive coal mines (gassy coal mines) Energy Security Fund - payment for the closure of approximately 2,000 megawatts; and transitional allocation of free permits and cash estimated at $5.5 billion over six years Manufacturing - A $1.2 billion Clean Technology Program - assist manufacturing industries improve energy efficiency and reduce emissions through grants and research and development incentives

8. Carbon reporting: National Greenhouse and Energy Reporting Act 2007 (NGER) Register 1 st year 30 Jun 2009 2 nd year 30 Jun 2010 3 rd year 30 Jun 2011 Facility thresholds Carbon emissions (direct and indirect) Energy consumption 25kt CO2-e 100 TJ 25 kt CO2-e 100 TJ 25 kt CO2-e 100 TJ Corporate Group thresholds Carbon emissions (direct and indirect) Energy consumption 125kt CO2-e 500TJ 87.5kt CO2-e 350TJ 50kt CO2-e 200TJ Register31 Aug 200931 Aug 201031 Aug 2011 Reporting due31 Oct 200931 Oct 201031 Oct 2011 Government publishes data 28 Feb 201028 Feb 201128 Feb 2012 Regulatory reporting requirement since 2009 Data underpins the carbon pricing mechanism Reporting based on the concept of ‘Operational control’ CEO required to sign-off on NGER Report Reporting obligations are independent of carbon pricing mechanism 8

9. Carbon price - Key impacts Issue Direct liability Direct emitters of covered emissions Indirect impacts: Supply chain inputs are all likely to increase electricity transport (rail/ship transport) (or direct if control them) other fuels on-road transport fuels excluded (heavy vehicle likely included from 2014) Revenue & earnings impacts Can cost increases be passed through? Carbon clauses in contracts What does it mean for margin 9

10. Actions to consider IssuesActions Assess energy and emissions profile Examine your systems and processes for capturing and reporting emissions and energy use Assess your current NGER reporting decisions (operational control) Can you identify any energy efficiency opportunities? Model sensitivity to increases in the price of key inputs The impact of price increases along the business value chain should be modelled to determine the sensitivity of your operations to price increases: impact of carbon price on aviation fuel model impact of likely heavy-vehicle inclusion from 2014 Other material impacts Review existing agreements Carbon pass through - review existing supplier and customer contracts to determine the extent to which carbon prices can be ‘passed-through’ right now Consider relationships with contractors (both from a pricing and reporting perspective) Consider opportunities and alternatives Are energy efficiency opportunities more attractive? Can alternate fuels be used (eg. No carbon price on biodiesel) Is Sustainability strategy aligned with business strategy? 10

11. How Deloitte can help? Emissions and energy measurement Assess the systems and processes used to collect emissions and energy data to improve robustness and increase efficiency Provide assurance over emissions and energy data in NGER reports →Gives comfort over the baseline emissions and energy data Modelling of key price impacts Model the impact of price increases along the business value chain – including direct and indirect supply chain impacts Considering the timing implications and issues from the staggered transport provisions →Provides guidance over likely price impacts and assists decision making and strategic response Access to available government funding Advice on accessing any available Government funding through programs – such as Clean Energy Package, Clean Technology Package or existing R&D mechanisms →Assist to maximise any available government funding New opportunitiesIdentify energy efficiency opportunities. Are they more attractive? Assess opportunities for investment (eg. CleanTech) Review sustainability strategy to align with business strategy? →Assist in taking advantage of opportunities while covering off on the risks 11

12. Contacts Cheryl Crase Director Assurance and Advisory Tel+ 0402 968 881 ccrase@deloitte.com.au © 2010 Deloitte Touche Tohmatsu

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