Session 2A - Integrating Externalities in the Regulatory Process: How to Foster and Facilitate
Energy Efficiency and Renewable Energy Sources
Implementation of a Greenhouse Gas Abatement Program in New South Wales
Mr James Cox
Member, Independent Pricing & Regulatory Tribunal of New South Wales, Australia
This paper discusses a program for reducing the emission of greenhouse gases that has been
implemented by the state government of New South Wales in Australia. It also discusses lessons
that have been learned so far in the implementation of the program.
Although the Australian national government has not signed the Kyoto Protocols, some state
governments (including NSW) have taken action of their own. In particular, from 1 January 2003
NSW electricity retailers and certain other parties will be required to meet mandatory targets for
abating the emission of greenhouse gases from electricity production and use. These targets
require the emissions of greenhouse gas from electricity production and use to be reduced by 16%
per capita below 2000/2001 levels by 2007.
These benchmark participants will have to reduce their emissions of greenhouse gases to the preset benchmark levels, or pay a penalty per tonne of emissions above the benchmark level.
Benchmark participants can offset their excess emissions by surrendering abatement certificates
bought from low-emission electricity generators and other persons accredited as certificate
providers. Most certificates are tradeable.
The activities that allow persons to issue abatement certificates include:
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Reduction in the greenhouse intensity of electricity generation;
Activities that result in reduced consumption of electricity;
The capture of carbon from the atmosphere through growth of trees in forests, referred to as
sequestration.
Detailed rules regarding the creation of abatement certificates have been established by the NSW
government under legislation.
The Independent Pricing and Regulatory Tribunal of NSW is responsible for monitoring and
enforcing compliance with the scheme. Benchmark participants must submit an annual benchmark
statement to the Independent Pricing & Regulatory Tribunal of New South Wales (IPART)
confirming the number and details of abatement certificates surrendered to ensure that they have
met their benchmark.
IPART has also been appointed as Scheme Administrator by the Minister for Energy. This requires
IPART to:
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Accredit abatement certificate providers;
Oversee the administration of the registry;
Verify that greenhouse gas abatement activity has occurred;
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Monitor and report to the Minister for Energy on the compliance of accredited abatement
certificate providers with their obligations.
IPART, as Scheme Administrator, may conduct audits of abatement certificates or abatement
certificate providers, or require such audits to be undertaken.
IPART has taken a staged approach to the implementation of the program. This has been possible
because the first year’s target for benchmark participants is not onerous and because provision
exist within the legislation to enable the Scheme Administrator to backdate certificates relating to
abatement activity during 2003.
The staged approach has involved:
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The publication of documentation relating to the scheme, and holding seminars to explain the
scheme to interested parties;
The adoption of a limited model for the registry (excluding trading) and the choice of a
contractor to develop and operate the registry;
The development of an audit framework;
Undertaking a trial accreditation process with a limited number of applicants;
Choosing and training a panel of auditors to assist in assessing applications for accreditation
and auditing abatement certificates.
It is currently expected that applications for accreditations will be accepted from September 2003
and that the registry will commence operation in mid-September 2003. An update of the
experience to date, and lessons from implementation, will be presented to the Forum.