Government passes industrial allocation Bill

Every year, the Government provides free emissions units to businesses that carry out any of 26 EITE activities. This industrial allocation is designed to reduce the risk of the production of these businesses moving overseas to countries with less strict emissions pricing regimens.

Over the last decade, many EITE firms have reduced the amount of emissions and energy use from their production. That means they have lower emissions costs and are now receiving more credits than they need.

Allows updates to settings that were resulting in over-allocation of emissions units to emitters

The Climate Change Response (Late Penalties and Industrial Allocation) Amendment Bill (the Bill) allows updates to settings that were resulting in over-allocation of emissions units to emitters. 

Introduces a 5–10 year review and update window for allocative baselines

The Bill also introduces a 5–10-year review and update window for allocative baselines. Allocative baselines are the rates at which an activity receives an allocation for the products it manufactures. Each allocative baseline represents the emissions per unit of product made (eg, an allocative baseline of 1.5 means that there are 1.5 tonnes of CO2-e associated with every 1 tonne of product made).

Retains eligibility thresholds 

In a change from the previous iteration of the Bill, the Government will retain the current thresholds used to test whether an industry or activity should be eligible for industrial allocation.

This change addresses concerns that updating the eligibility thresholds using a recent carbon price would make it easier for some businesses to receive industrial allocation.

The Bill now maintains the same eligibility for receiving free credits. It also introduces additional criteria for new activities to become eligible for free allocation.

The Government will soon notify businesses that are eligible for industrial allocation about collecting their emissions data. This data will enable allocative baselines to be updated in 2024.

Makes changes to late penalty payments

The Bill also makes changes to penalties for late payments by small forestry participants. Small foresters are classified as forestry participants that are required to surrender fewer than 25,000 emissions units on average per year.

The revised penalty will take effect from 1 January 2025. This will allow sufficient time to provide guidance to participants on how the penalty will work in practice.