Further developments as regards carbon markets position limits
- Category: Emissions trading
II. The Australian legal framework for carbon allowances position limits
When it comes to reviewing position limits regulations in the carbon market the important piece of legislation is also Australia’s Clean Energy Act 2011 (and specifically Part 12 titled ‘Notification of significant holding of carbon units’).
Under the Australian framework the controlling corporation of a group must notify the Clean Energy Regulator if the group has a significant holding of carbon units (I omit in this place the rule for non-group entities which a similar).
The said rule applies to a controlling corporation if the controlling corporation’s group begins to have a significant holding of carbon units with a particular vintage year; ceases to have such a significant holding or there is a change in the significant holding percentage.
The controlling corporation must, within 5 business days after becoming aware of the event, give the Clean Energy Regulator a written notice informing the Regulator of the event; and setting out the additional information as follows:
(a) the name and address of the controlling corporation;
(b) for each member of the controlling corporation’s group that, immediately after the event, holds one or more carbon units with the vintage year:
(i) the name and address of the member; and
(ii) details of the member’s holding of those carbon units;
(c) such other information (if any) as is specified in the regulations.
Part 17 Australia’s Clean Energy Act 2011 provides for pecuniary penalties for breaches of civil penalty provisions.
If the Clean Energy Regulator receives the above-mentioned notice it must publish on its website the name and address of the controlling corporation and:
(a) if the controlling corporation’s group has a significant holding percentage in relation to those units—the significant holding percentage; and
(b) if the controlling corporation’s group does not have a significant holding of those units—a statement to that effect.
The controlling corporation’s group has a significant holding of carbon units with a particular vintage year if the percentage worked out using the following formula is 10% or more:
Total number of carbon units with the vintage year held by the members of the controlling corporation’s group/Carbon pollution cap number for the vintage year x 100.
The said rules do not apply to a carbon unit with a vintage year that is a fixed charge year (the financial years beginning on 1 July 2012, 1 July 2013 and 1 July 2014).
It is striking that the basic requirement applying to significant holdings of emission allowances under the Australia’s Clean Energy Act 2011 is the obligation to notify the Regulator, which subsequently makes the appropriate publication on its website. It appears that the company achieving the level of significant holdings isn’t restricted from further increasing its position and isn’t forced by law to sell the excess. It seems therefore that the fundamental function of this piece of legislation in to safeguard the transparency of the carbon market and not to restrict companies from acquiring large volumes of carbon permits. Such a solution is in a glaring opposition to California approach in that regard.