Carbon pricing mechanism Progressive surrender period

1. Carbon pricing mechanismProgressive surrender period • Workshop #1 – Preparing for acquittal of liability • February 2013

2. Disclaimer • The presentation provides general information only. It has been developed by the Clean Energy Regulator to help persons understand their responsibilities under the law. Persons should refer to the Clean Energy Act 2011 (Clean Energy Act), the National Greenhouse and Energy Reporting Act 2007 (NGER Act), and their supporting Regulations, in their current form at the time of reading. Changes to the legislation may affect the information in this presentation. Ultimately, liable entities are responsible for determining their liabilities and obligations under the law, and for applying the law to their individual circumstances. This presentation is not intended to provide legal advice and is not a substitute for independent professional advice.

3. Workshop #1 Today’s agenda 1: Liability, registration, reporting 2: Acquitting liability overview 3: Liquid fuel opt-in scheme – Optional session

4. Acquitting liability overviewie of liability obligationsIntroduction • Overview • Timelines • Key messages • How to acquit your liability • CER assessment of liability position • Shortfall

5. 1. Overview • Interim Emissions Number (IEN) • Approximately 75% emissions • Surrender one eligible emissions unit for every tonne of carbon dioxide equivalent emissions (CO2-e) • Report in Emissions and Energy Reporting System (EERS) • Surrender and purchase in Australian National Registry of Emissions Units (ANREU) system

6. Scenario for Successful acquittal.

7. 2. TimelinesProgressive surrender period - planning • Work backwards from 17 June 2013 deadline • Think about your internal systems & your strategy • Feb - open an ANREU account • Mar - determine liability and register by 1 May • Apr - report interim emissions number • May/June - determine surrender strategy • acquire and surrender units • apply and pay for units before the deadline

8. 3. Key messages • To avoid shortfall a liable entity must: • hold an ANREU account to surrender and purchase units – APPLY NOW! • be registered to be able to report in EERS • acquire and surrender one unit for each tonne of emissions • report before you can purchase carbon units from CER • apply to purchase additional units in sufficient time to pay • ensure money is in CER bank account by 17 June 2013 • If in shortfall, a shortfall charge is due by 24 June to avoid interest

9. 4. How to acquit - ANREU • liable entity must have an ANREU account • to receive units from CER (ACCUs & free units) • to buy and sell units on secondary market • to surrender units • to apply to purchase units from CER • to view liability position (IEN less surrendered units) • start this process now • application form available on the CER website

10. 4. How to acquit – surrender strategy • Units can be acquired in one or all of the following ways: • Apply for free units from CER • Industry assistance programs • Apply for Australian Carbon Credit Units (ACCUs) from CER • Carbon Farming Initiative • Acquire units in secondary market • Purchase fixed price units (first year - $23 per unit) • Total IEN – Total number eligible surrendered units • Issued and automatically surrendered by CER

11. Purchase of carbon units – Payment Advice

12. Surrender strategy example • Example XYZ Pty Ltd: • Has ANREU account - issued 60,000 free carbon units • 30 April 2013 - PK Limited reports IEN = 100,000 • 15 May 2013 – surrenders 60,000 carbon units • 20 May 2013 – applies to purchase 40,000 carbon units • 10 June 2013 – makes EFT payment to CER for units • 17 June 2013 – payment received in CER account • 18 June 2013 – payment reconciled, units issued No shortfall

13. 5. CER Assessment of liability position • At 17 June 2013: • surrendered units = IEN successful acquittal • over surrender Regulator carry over surplus • shortfall charge due within 5 business days • not surrendering sufficient units by 17 June • funds not received in Regulator account by17 June • reporting lower IEN than required • shortfall charge 130% = $29.90 for each unit short Notice of assessment is sent to all entities after 17 June

14. Notice of assessment

15. 6. Shortfall • Provisional unit shortfall – 17 June 2013 • Final unit shortfall – 3 Feb 2014 • Estimation error shortfall – 3 Feb 2014 • If IEN is estimated on this year’s PEN and its less than 75% • Shortfall charge • Shortfall = total IEN – units surrendered by 17 June • 130 per cent of fixed price (first year - $29.90 per unit) • Due by 24 June, otherwise penalty interest of 20%pa applies Edit footer or source

16. 6a. Example estimation error shortfall 1) Using 75% last year’s PEN • No estimation error shortfall incurred in either case 2) Using estimate of PEN for 2012/13 • Estimation error shortfall of 5,000 units if Estimate B reported Edit footer or source

17. Summary • Acquit your liability by 17 June to avoid shortfall • Plan ahead: • Apply for ANREU account now • Register by 1 May • Report IEN by early May • Apply to purchase units allowing time for internal payment • Pay for units on time

18. Scenario for Successful acquittal.

19. Information sources & contacts • Clean Energy Regulator: • www.cleanenergyregulator.gov.au • Contact us: • Phone: 1300 553 542 within Australia • Email: reporting@cleanenergyregulator.gov.au • further information at March workshops