This year has seen transformative change for the CER, with the passing of legislation to reform the operation of the Safeguard Mechanism and introduce Safeguard Mechanism Credits (SMCs) and the completion of the Independent review of Australian Carbon Credit Units. These landmarks have provided new work for the CER going forward while we continue to progress the ongoing programs we administer and develop a range of initiatives to further accelerate carbon abatement for Australia.
The Regulator is a decision-making body and sets the direction for the agency’s work in administering the regulatory schemes for which it is responsible. It consists of a Chair and between 2 and 4 other Members.
Members of the Regulator are appointed under the CER Act by the responsible Minister and are required to have substantial experience or knowledge in fields relevant to CER. The Chair holds office on a full-time basis. All other Members hold office on a part-time basis.
In addition to the regulatory accountabilities, the Chair also serves as the agency head under the Public Service Act 1999 and is the accountable authority under the PGPA Act.
As part of the Climate Change, Energy, the Environment and Water Portfolio (the Department), CER’s primary outcome to government is:
Contribute to a reduction in Australia’s net greenhouse gas emissions, including through the administration of market-based mechanisms that incentivise reduction in emissions and the promotion of additional renewable electricity generation.
In addition, CER also supports a second government outcome in relation to biodiversity markets1:
Contribute to the sustainable management of Australia’s biodiversity through the administration of market-based mechanisms that incentivise the preservation and improvement of diverse ecosystems.
Our purpose derives from our statutory responsibilities and is summarised as accelerating carbon abatement for Australia. We achieve this by administering schemes and carbon markets that achieve emissions reduction and through the development of initiatives that help achieve accelerated abatement.
Many factors are driving the agency’s corporate plan over the coming 4 years. At a policy level, the CER is the administrator of one of the key planks of the government’s commitment to the 2030 emissions reduction target of 43% and net zero emissions by 2050 - the Safeguard Mechanism. We are also integral to the government’s National Hydrogen Strategy through ongoing development of the Guarantee of Origin scheme, that will provide certification of the emissions profile of low emissions products, commencing with hydrogen.
We also continue to administer the ACCU scheme, and we will maintain our focus on assuring high integrity within the creation of carbon credits and the public marketplace for carbon trading as the scheme interacts with the Safeguard Mechanism and the newly created SMCs.
We will also continue to drive our renewal of IT infrastructure and explore further opportunities for streamlining our processes, easing the regulatory burden on our participants and engaging with contemporary digital systems to achieve improved regulatory outcomes.
The Regulator has reflected carefully on the implications of these initiatives in the context of its purpose, objectives and associated planning tools. We acknowledge that its purpose and objectives have served, and will continue to serve, the agency well into the foreseeable future as they reflect and maintain the underpinning attributes of strong regulatory performance in the government context. New energy and greater clarity about the cultural values that underpin the agency’s regulatory function have been articulated in our regulatory principles and folded into the agency’s approach to risk management.
Our KPIs and deliverables have undergone extensive review to ensure we are strongly focused on the desired policy and participant outcomes rather than internal machinery of the CER. Where the Regulator’s legislated role has changed or we are pursuing additional activities over-and-above the administration of legislated schemes, changes have been made to the planning priorities as appropriate.
The integrity of the units administered under our schemes remains a core objective delivered through administration of the law and an effective compliance program.
We are an independent and respected body, trusted by government to effectively implement policy and to also assist in the development of new policy initiatives. These support the evolution of an effective and vibrant carbon market, Safeguard Mechanism and Guarantee of Origin to facilitate investment in low emissions technologies and help deliver the steeper emissions reduction trajectory to 2030.
We are responsible for administering:
The Australian Carbon Credits Unit Scheme (ACCU scheme) is a voluntary scheme that provides incentives for a range of organisations and individuals to adopt new practices and technologies to reduce their emissions. ACCU scheme activities contribute towards Australia meeting its international climate commitments.
The ACCU scheme is enacted through the Carbon Credits (Carbon Farming Initiative) Act 2011, and the Carbon Credits (Carbon Farming Initiative) Rule 2015.
The National Greenhouse and Energy Reporting (NGER) scheme is a single national framework for reporting and disseminating company information about greenhouse gas emissions, energy production, energy consumption and other information specified under NGER legislation.
The NGER scheme is established by the National Greenhouse and Energy Reporting Act 2007.
Under the NGER scheme, corporations that meet certain thresholds must report to the Regulator their emissions, energy production and energy consumption each financial year. This data informs government policy, programs and activities, and helps Australia meet its international reporting obligations.
This scheme provides the accounting basis for the operation of:The Safeguard Mechanism applies to facilities that emit more than 100,000 tonnes of carbon dioxide (CO2) equivalent in a year. It sets legislated targets, known as baselines, on the net greenhouse gas emissions of covered Safeguard facilities. There are around 215 Safeguard facilities, across the mining, manufacturing, transport, oil, gas and waste sectors. These facilities produce around 28% of Australia’s greenhouse gas emissions. The Safeguard Mechanism was first legislated in 2014 and has been in place since 2016.
The reforms to the Safeguard Mechanism will reduce emissions at Australia’s largest industrial facilities and maintain their international competitiveness as the world decarbonises. The reforms apply a decline rate to facilities’ baselines so that they are reduced predictably and gradually over time on a trajectory consistent with achieving Australia’s emission reduction targets of 43% below 2005 levels by 2030 and net zero by 2050. These reforms, including the introduction of SMCs, will play a key role over the next 4 years in reducing emissions at the high intensity end of the market, and CER will continue to focus on supporting the new policy objectives of the Safeguard Mechanism.
The Renewable Energy Target (RET) was designed to reduce emissions by encouraging additional renewable generation in the electricity sector.
The RET is underpinned by the Renewable Energy (Electricity) Act 2000 (REE Act) and sunsets at the end of 2030.
The Large-scale Renewable Energy Target was met in 2021, however, CER maintains an important role in quantifying and assuring both Large-scale Generation Certificates (LGCs) and Small-scale Technology Certificates (STCs) for every megawatt hour of power generated within those categories. The RET creates demand for these certificates by requiring liable entities to surrender an amount of certificates in proportion to the electricity they acquire in an assessment year. This creates a market which provides a continuing financial incentive to both large-scale renewable energy power stations and the owners of small-scale renewable energy systems. It is expected that renewables captured under the RET will continue to play a significant role in Australia’s efforts to reduce emissions.
Our change program, which began in 2020, will provide entirely new pathways for low emissions technology development and a major enhancement of the market structure for trading emissions offsets. These changes are a critical step in ensuring our emissions reduction frameworks in Australia are ready for greater integration into global markets and technology sharing. They include:
- A Guarantee of Origin (GO) certificate scheme to enable Australian businesses to sell verified low emissions products including hydrogen and renewable energy, domestically and to the world. We are collaborating with the Department to implement trials and inform scheme design.
- An Australian Carbon Exchange to accelerate the emergence of an online exchange traded market for emissions offsets. We will work with a partner, or partners, to implement this initiative, which may include the provision of trading, clearing and settlement services, product and market design, market development, education and implementation services, and the provision of a register of offset units to complement the current ‘over the counter’ market.
- The Corporate Emissions Reduction Transparency (CERT) report offers a standardised framework for NGER companies, who choose to participate, to report net emissions and show progress towards their climate commitments. The pilot CERT report was published on our website on 7 July 2022.
- The Nature Repair Market Bill, when passed by Parliament, will develop a nature repair market to encourage investment in biodiversity and drive environmental improvements across Australia. It will enable the CER to issue Australian landholders with tradable biodiversity certificates for projects that protect, manage and restore nature.
We operate the following registries and systems to enable market participants to securely and conveniently report, receive entitlements, acquit liabilities and trade:
- the Emissions and Energy Reporting System (EERS)
- the Australian National Registry of Emissions Units (ANREU), as created by the Australian National Registry of Emissions Units Act 2011, and
- the Renewable Energy Certificate (REC) Registry.
We deliver our schemes by:
- issuing entitlements worth around $4 billion annually, including:
- issuing ACCUs under the ACCU scheme to organisations and individuals for approved projects that reduce greenhouse gas emissions
- issuing LGCs and STCs for each megawatt hour of renewable energy generated or displaced (no longer required from the grid)
- facilitating and approving eligibility for entry to our schemes, including registration of projects and accreditation of power stations
- collecting, analysing, assessing, providing and publishing emissions and energy data to inform the RET, government policy and the Australian public, and to support Australia’s emissions and energy data needs, and meet international reporting obligations
- providing education and information to current and potential scheme participants
- monitoring, facilitating and enforcing compliance by scheme participants
- accrediting greenhouse and energy auditors to undertake audit activities, and
- working with other Commonwealth, state and territory law enforcement and regulatory bodies.
Footnotes
1 At the time of drafting this document the Nature Repair Market Bill 2023 is under consideration by Parliament. The relevant Key Performance Indicator in the current Portfolio Budget Statement can only be measured once legislation is passed.