Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank Senator Xenophon for his comments and for his questions. On this side of the chamber we have very much appreciated the very constructive way in which we have been able to work with him through these policy issues both in opposition and now in government. I am pleased to be able to reassure Senator Xenophon that the government is firmly committed to reducing Australia's emissions to meet our target of five per cent below 2000 levels by 2020. Since coming to office, we have, in a very methodical fashion, step by step, implemented the Emissions Reduction Fund which is, of course, the centrepiece of the direct action policy to reduce Australia's emissions.

On 24 April 2014, the government released the Emissions Reduction Fund white paper. This was, as Senator Xenophon is aware, the result of significant consultation with business, and it set out three elements of the Emissions Reduction Fund.

The first element is the crediting of emissions reductions using the tried and tested approach of the Carbon Farming Initiative. The government has introduced to parliament the Carbon Farming Initiative Amendment Bill 2014 to expand the Carbon Farming Initiative approach beyond the land sector to the rest of the economy. This bill has already passed the House of Representatives and no doubt will be considered by the Senate sometime in the future.

The second element is the purchasing of emissions reductions by the government using a reverse auction approach. The 2014-15 budget set out $2.55 billion for the fund, with the full amount available to be committed from the commencement of the fund.

The third element of the government's policy is a safeguard mechanism, and the safeguard mechanism will be introduced to ensure that emissions reductions paid for by the Emissions Reduction Fund are not displaced by a rise in emissions elsewhere in the economy, which goes to the heart of the question, I believe, that Senator Xenophon was asking. The government has already made a number of significant policy decisions regarding the safeguard mechanism in the Emissions Reduction Fund white paper—in particular, that it will commence on 1 July 2015. The mechanism will cover facilities with direct emissions of 100,000 tonnes or more. For existing facilities, baselines will be based on absolute emissions based on existing data reported under the National Greenhouse and Energy Reporting Scheme over the period 2009-10 to 2013-14.

As set out in the white paper, the government continues to consult with business and other stakeholders on other aspects of the policy, including the treatment of new investment, large business expansions, the application of the mechanism to the electricity sector, and options to ensure effective compliance. The safeguard mechanism is a critical part of the Emissions Reduction Fund policy and, following consultations with business, the government will introduce legislation in 2015 to give effect to the safeguard mechanism for commencement on 1 July 2015. This commitment has been outlined in the Emissions Reduction Fund white paper, as well as the explanatory memorandum to the Carbon Farming Initiative Amendment Bill 2014, and by my good friend and valued colleague the Minister for the Environment in his second reading speech introducing the bill. The government will list the Carbon Farming Initiative Amendment Bill 2014 for debate in the Senate in the spring session this year.

I do acknowledge, as I did at the outset, Senator Xenophon's longstanding commitment to an effective climate change policy in Australia. I also acknowledge his appreciation of the imperative of an effective safeguard mechanism as part of the Emissions Reduction Fund policy. I look forward on behalf of the government to continuing to work with Senator Xenophon as we finalise the development of that safeguard mechanism.