Commonwealth of Australia Explanatory Memoranda

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CARBON FARMING INITIATIVE AMENDMENT BILL 2014

                     Explanatory Note to Amendment sheet 7586
                   Carbon Farming Initiative Amendment Bill 2014
                                Strategic Reserve
                           (Circulated by authority of Senator Xenophon)


The provisions set out amendments to the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI
Act) and the Australian National Registry of Emissions Units Act 2011 (ANREU Act) that provide
powers for the Commonwealth to establish a strategic reserve of emissions units. The purpose of
the strategic reserve is to purchase international emissions units to help Australia meet its
international climate change targets.

Division 1--Strategic reserve of emissions units

Carbon Credits (Carbon Farming Initiative) Act 2011
   The provisions establish a power for the Clean Energy Regulator (the Regulator) to enter into
   contracts to purchase strategic reserve units on behalf of the Commonwealth [Item 399C, part
   section 284B].

           Strategic reserve units are units issued in accordance with the Kyoto Protocol (Kyoto
           units). Certain types of Kyoto units may be excluded from the strategic reserve if they
           are listed in legislative rules [Item 399B, section 5 and Item 399C, section 284B].

   The Regulator may only purchase strategic reserve units if they are directed by the Minister
   [Item 399C, section 284B]. In giving such a direction, the Minister must have regard to:

           Australia's obligations under international climate change agreements;

           Australia's undertakings concerning the reduction of greenhouse gas emissions that
           Australia has given under international climate change agreements;

           the total amount of carbon abatement contracted by the Government under the
           Emissions Reduction Fund;

           Australia's current and future climate change targets; and

           ensuring the value for money of funds expended under the strategic reserve.

   The Regulator may not spend more than $500 million in purchasing strategic reserve units [Item
   399C, section 284B(5)].

   Legislative rules can set out requirements for the technical operation of the Reserve, including
   the treatment of units in the Registry to provide for consistency with Australia's international
   obligations, including international accounting frameworks [Item 399C, section 284D].

   The Regulator must publish in its annual report the total number of strategic reserve units that
   were purchased or sold by the Commonwealth and other information specified in legislative
   rules [Item 399C, section 284G].




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Division 2--Consequential amendments

Australian National Registry of Emissions Units Act 2011
   The Bill provides a power to the Commonwealth to open an account in a foreign registry to
   facilitate the purchase of international units [Items 399D-399E, section4 and section 86A].




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