As the central element of the Australian Government’s Clean Energy Future plan, the Carbon Pricing Mechanism has created a new market worth $6.58 billion in its first year of operation, according to a new report by the Carbon Market Institute.
Liable entities that did not surrender any or enough eligible emissions units to comply with their interim emissions liability by 15 June 2013 faced a shortfall charge of 130% of the associated carbon liability surrender charge.
Four liable entities did not meet their compliance obligations. Gujarat NRE did not surrender any eligible emissions units and did not qualify for any free permits, while Queensland Nickel Pty Ltd and Penrice Soda Products Pty Ltd received free permits and yet did not meet the compliance obligation. These liable entities were charged a shortfall rate of $29.90, a combined shortfall payment of $16.5 million.
Introduced to deal with one of the most important environmental and economic challenges of our time – climate change – the Carbon Pricing Mechanism covered 372 entities in its first year across sectors such as stationary energy, industrial processes, emissions from landfills and fugitive emissions.
The first year of the Australian Carbon Pricing Mechanism established an active carbon market through government free allocations, liable entity purchases and project owner generation of approximately 286.6 million carbon units. Given the first compliance year has a fixed price of $23 per carbon unit, the Carbon Market Institute estimates the total value of the Australian carbon market at approximately $6.58 billion.
The first year of Australian Carbon Pricing Mechanism ran from 1 July 2012 to 30 June 2013. In total, 372 liable entities were included in the scheme on the basis that their annual National Greenhouse and Energy Reporting System (NGERS) scope 1 emissions were greater than 25,000 tonnes of carbon dioxide equivalent (CO2-e). Of these 372 liable entities, 258 of the largest emitters were required to surrender carbon units for 75% of their liability in the June 2013 interim surrender; 254 successfully acquitted their interim surrender requirements and four did not. The final ‘true-up’ surrender for this first compliance year, involving all 372 liable entities, will take place on 1 February 2014.
In the first year of the market, the Clean Energy Regulator issued free permits under the Jobs and Competitiveness Program (JCP). A total of 103.7 million free permits were issued under the JCP to 121 entities that included both liable and non-liable entities. The Australian Government also provided assistance under the Energy Security Fund to nine highly emissions-intensive coal-fired generators. This allocation of 41.7 million free permits relating to the first compliance year will be issued by the Clean Energy Regulator on 1 September 2013. Between the JCP and the Energy Security Fund approximately 145.4 million carbon units, more than half of the total market supply, will be freely allocated to market participants. At the fixed price of $23 per carbon unit, this government assistance equates to a notional value of approximately $3.34 billion.
In total more than 103 million free permits were issued under JCP in the first year of the scheme. In total 95% of them were issued to liable entities to help meet their compliance obligations and the rest to non-liable entities. The value of the permits in the first year was $23 per tonne, which provides a notional value of $2.2 billion of free permits issued to liable entities and $114 million free permits handed out to non-liable entities.