ATTACHMENT E – Regulatory Burden Measurement Costings

Contents

Attachment E-1: Emission reduction options

Attachment E-2: Management of new gases

Attachment E-3 - Approach to controlling HCFC imports post 2020

Attachment E-4 - Reduce regulatory burden on low volume importers

Attachment E-5 - CFC HCFC and Halon equipment thresholds

Attachment E-6 - Renewal of import, export and manufacturing licences

Attachment E-7 - Reduction in import, export and manufacturing reporting and levy payment frequency

Attachment E-8 - Introduce a power for the Minister to waive low value levy and penalty debts

Attachment E-9 - Streamlining SGG import and manufacture exemptions

Attachment E-10 - Provide an exemption to allow for the use of methyl bromide for laboratory and analytical purposes

Attachment E-11- Remove requirement for Methyl Bromide buyers to report on stockpiles

Attachment E-12 - Remove requirement for methyl bromide users to keep summary records of use

Attachment E-13 - Maximum allowable import quantity of methyl bromide

Attachment E-14 - HCFC quota flexibility

Attachment E-15 - Exempt feedstock uses of ozone depleting substances from the import levy

Attachment E-16 - Addition of internal review mechanism to Ozone Act

Attachment E-17 - Defining the import licensing scheme

Attachment E-18 - Restructure of import, export, manufacture controls

Attachment E-19 - End-use licensing provisions under the Ozone Regulations

Attachment E-20 - End-use reporting provisions under the Ozone Regulations

Attachment E-21 - Restructuring end-use licences under the Ozone Regulations

Attachment E-22 - Restructuring end-use licences under the Ozone Regulations

Attachment E-23 - Streamlining destruction facility approval

Attachment E-24 - Compliance and Enforcement

Attachment E-25 - National Halon Bank Arrangements

Attachment E-1:Emission reduction options

Instrument Title / Emission reduction options
Average annual regulatory costs (from business as usual)
Change in costs ($million) / Business / Community organisations / Individuals / Total change in costs
($ million)
Measure 6.1.2 (HFC phase-down) / $0.017,770 / $0.017,770
Measure 6.1.3 (HFC equipment bans) / $11.021 663 / $11.021 663
Measure 6.1.4 (maintenance and leak testing) / $471.997,994 / $471.997,994
Cost offset
($ million) / Business / Community organisations / Individuals / Total, by source
($ million)
Agency / $ / $ / $ / $
Are all new costs offset? (tick)
 Yes, costs are offset by savings from theOzone Act Review project (pending Board approval)
Total (Change in costs – Cost offset) = $.....

Background

The Australian Government is committed to reducing emissions to meet its Kyoto Protocol target of five per cent below 2000 levels by 2020. Australia’s target poses a challenge because emissions are projected to increase without further action. To meet the 2020 emissions reduction target, Australia needs to reduce its emissions by a cumulative 236 million tonnes carbon dioxide equivalent (MtCO2e) from 2013 to 2020.
Synthetic greenhouse gas (SGG) emissions accounted for around 1.5 per cent of Australia’s annual net CO2e emissions (excluding emissions from land use, land use change and forestry) in 2012. By gas types, HFC emissions account for 1.45 per cent, PFCs for 0.05 per cent and SF6 for 0.01 per cent of Australia’s total annual emissions in 2012. Reducing emission of these gases could contribute to Australia meeting its Kyoto Protocol targets.
Reduction of direct emissions from refrigeration and air conditioning (RAC) equipment is only part of the story. Refrigeration and air conditioning (RAC) equipment also consumes large amounts of energy which produce large amounts of indirect greenhouse gas emissions. For example, in 2012 there were approximately 45 million individual pieces of RAC equipment operating in Australia which consumed approximately 22 per cent of total energy produced, at an estimated cost of $14 billion dollars to the Australian economy. The total indirect greenhouse gas emissions from powering RAC systems is estimated at more than 10 per cent of Australian greenhouse emissions (57.1 MtCO2-e/year). When combined with direct emissions of SGGs, RAC equipment accounts for approximately 61.2 Mt CO2-e per annum or 11.1 per cent of Australian emissions reported in 2011-2012[1].
The Interim Report considers implementing a HFC phase-down to secure technology change which could be supported by:
  • Continuing the current emission reduction schemes (end-use licensing and product stewardship)
  • Improved handling practices for the servicing of mobile air conditioning
  • Banning import and manufacture of specified equipment containing a high-GWP gas
  • Requiring maintenance of refrigeration and air conditioning equipment
  • Requiring leak testing of refrigeration and air conditioning, and fire protection equipment
A cost benefit analysis is being undertaken for the range of options.

General Assumptions

  • 100% of the total regulatory burden is attributable to the Commonwealth given all of the proposed reforms will be implemented by the Commonwealth.
  • Default costing time frame is 10 years.
  • Is it assumed that the period these measures are costed over is 2017-2027.
  • The wage rate of $37.40/hr has been used, with a wage multiplier of 1.75.The wage rate for technicians is $150/hour (includes on-costs).
  • It is assumed that the refrigeration and end use licensing scheme continues under all options.
  • Where relevant, the costs associated with maintaining an import/export licence are:
3 hours and 45 minutes to complete licence application (finding and completing licence application, contacting the Department throughout the application process, obtaining certified identification documentation, time taken to pay the application fee)
60 minutes per quarter to complete quarterly reporting (30 minutes collecting inputs, 20 minutes to complete reporting on the Ozone Licensing and Report System (OLaRS), 5 minutes record keeping, 5 minutes to read the notification)
6 minutes per quarter for reading a notification that they will be receiving an invoice
30 minutes per quarter to pay invoices sent to the licence holder by the Department (includes receiving, processing and lodging payments).

Explanation of measure and relevant assumptions

HFC phase-down / Total regulatory cost p.a.
$17,770
Description of measure: HFCs would be phased-down using a quota system based on the current licensing scheme. A HFC phase-down schedule would be inserted, similar to the existing HCFC phase-out schedule. The quota allocation system would have two parts: quota allocation for existing importers and allowance for new entrants.
The regulatory burden on existing importers is expected to be low. Existing importers would be required to educate themselves on the new regulatory requirements; the Department would provide information on the changes. Very little change to their current business practices would be required as they already apply for a licence, pay levy and report their activities.
The regulatory burden on new entrants is expected to be higher than it is for existing importers. New entrants would be required to apply for a licence and quota. In order to apply for quota they would need to submit a justification on why they should be allocated quota and how much is required. This would likely be based on commercial relationships the new entrant had or was forming down the supply chain.
As these importers would be required to apply for and hold a SGG Controlled Substance Licence irrespective of this policy, the administrative costs associated with the licence administration have been disregarded.
Assumptions:
  • Quota would be allocated every second year: a total of 5 times during the RBM period.
  • 5 new entrants would apply for the quota each allocation period.
  • It takes each new quota applicant 3 hours to develop their justification for quota.
  • There are currently 28 importers who could be eligible as existing importers for quota allocation. It is assumed that all 28 apply for quota.
  • The costs associated with holding a licence are excluded as the measure does not introduce these requirements. These requirements would apply even if this measure was not implemented.
  • End use technicians may read education materials on the new regulations. It is assumed that this information is published in the CoolChange magazine produced by the Australian Refrigeration Council. As the technician would be reading this publication irrespective of this measure, it is assumed that the education costs are zero.
  • Customs Brokers will also need to be informed on the changes to the Ozone Act. It is assumed that this information and any additional training required would be done as part of their business as usual training and information updates that they would be reading irrespective of this measure. It is assumed that the education costs for this group of stakeholders is zero.

High GWP equipment ban / Total regulatory cost p.a.
$11 021 663
Description of measure: Impose an import and manufacture ban on mobile air conditioning equipment containing gas with a global warming potential (GWP) >150 in 2017 and imposing ban on supermarket equipment containing gas with GWP >2,500 in 2020. As the gas in alternative equipment will not be covered by the Ozone legislation, importers will no longer have to hold a SGG Equipment Licence. This is a reduction in their regulatory burden.
This measure does not limit the import of bulk gases currently used to service these equipment types. Bulk gases can continue to be imported and existing equipment can continue to be serviced until it reaches the end of its natural life.
The international market is transitioning to low or no-GWP alternatives in these two equipment types. The transition is well advanced in the supermarket sector with commercially viable alternatives already being used in the market. There is no difference in capital costs between high GWP equipment and lower GWP alternatives (Phase Down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector, September 2012, SKM Enviros).
For passenger vehicles, there is expected to be a strong shift towards low GWP alternatives driven largely by the European Union’s ban on introducing mobile air conditioning units charged with gases >150 in 2017. Early shifts away from high-GWP in this sector can also be seen in the American, Japanese and Korean car manufacturing markets in response to policies that will have a similar result.
The dominant gas used in Australia for passenger vehicles is currently R134a. The Expert Group estimate that by 2020 alternative technologies will have entered the market with R134a being used in approximately 60% of the market. By 2025, this number drops to zero (HFC Consumption in Australian in 2013 and an Assessment of the Capacity of Industry to Transition to Nil and Lower GWP Alternatives, April 2014, Expert Group).
As this sector is currently undergoing transition to alternatives, there is a small difference in capital costs between high GWP equipment and lower GWP alternatives. For small mobile air conditioning units in passenger vehicles there is estimated to be a 5% increase in capital costs of the system (not the whole vehicle) (Phase Down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector, September 2012, SKM Enviros). This estimate was made before the technology was fully developed and as such is likely to be on the high side of the actual capital cost increase. There is also a second wave of alternative gases and alternative technologies which will force down the price of new generation gases or new generation equipment since 2012.
Assumptions:
  • As the RBM period of 2017-2027 is assumed, all years would be included for MAC importers and only seven years for supermarket equipment containing gas with GWP >2,500.
  • The current numbers of licence holders is accurate for when the bans are imposed on MAC. Unlike the importers of bulk gas, it is assumed that importers of MAC only import this type of equipment as they generally are automotive specialists.
  • There are approximately 260 licensed importers of mobile air conditioning equipment (February 2015) who will no longer need to have a licence
  • There are approximately 200 licensed importers of equipment containing HFC-404A, which is primarily used in the supermarket sector (February 2015).
  • The number of licence holders for supermarket equipment decreases in advance of the ban by 25% leaving 150 licensed importers in 2020. It is assumed that half of these importers would also import other types of equipment under their licence. Therefore 75 importers would no longer have to hold a licence.
  • 335 importers will no longer have to hold a licence. Each importer will save approximately 7.15 hours a year in administrative duties no longer required to acquire and maintain licence.
  • It is assumed that as the ban relates directly to their business, all 335 stakeholders will read the information material. It is assumed it take an importer 6 minutes to read the education material (single page letter from the Department). This is a one-off cost.
  • Customs Brokers will also need to be informed on the changes to the Ozone Act. It is assumed that this information and any additional training required would be done as part of their business as usual training and information updates that they would be reading irrespective of this measure. It is assumed that the education costs for this group of stakeholders is zero.
  • End use technicians may read education materials on the new regulations. It is assumed that this information published in the CoolChange magazine produced by the Australian Refrigeration Council. As the technician would be reading this publication irrespective of this measure, it is assumed that the education costs are zero.
  • There is no difference in cost between the capital cost of supermarket equipment containing gases with GWP >2500 and equipment that contains lower GWP refrigerant gas. This is based on modelling done in the European Union to measure the capital cost of reducing HFC consumption (Phase Down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector: Final Report, September 2012, SKM Enviros). The new generation of equipment is also more energy efficient, providing a continuing saving to consumers during the life of the system.
  • There were approximately 20 000 pieces of supermarket equipment imported in 2014.
  • There is a small difference in cost between the capital cost of a mobile air conditioning unit and equipment that contains lower GWP refrigerant gas. For the compliance cost for mobile air conditioning units the following assumptions have been made:
  • There is a 5.0% increase in the capital cost of air conditioning systems in passenger vehicles that have low GWP refrigerant and air conditioning systems in 2017. This falls by 1% each year to reflect the wider market acceptance of alternative systems (see table below). This is a conservative assumption as it is likely that the capital cost for this equipment has already fallen since 2012.
  • The average cost of a car air conditioning unit is $1,000 (based on data from Phase Down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector: Final Report, September 2012, SKM Enviros).
  • There were approximately 920 000 passenger vehicles with air conditioning systems charged with R134a in 2014. It is assumed that the size of the market remains the same over the modelling period.
  • Based on the transition away from mobile air conditioning using R134a, the number of cars that are expected to be imported using low GWP alternatives each year is set out in the table below:
Year / Increase in capital cost (%) / Number of passenger vehicles imported containing low GWP gases / Difference in cost between existing and alternative technology
2017 / 5 / 920 000 / 50
2018 / 4 / 782 000 / 40
2019 / 3 / 644 000 / 30
2020 / 2 / 552 000 / 20
2021 / 1 / 414 000 / 10
2022 / 0 / 276 000 / 0
2023 / 0 / 184 000 / 0
2024 / 0 / 119 000 / 0
2025 / 0 / 0 / 0
2026 / 0 / 0 / 0
2027 / 0 / 0 / 0
Measure 6.1.4 : Maintenance and leak testing of equipment / Total regulatory cost p.a.
$471,997,994
Description of option: Require equipment owners to undertake routine maintenance of select classes of commercial refrigeration and air conditioning equipment based on the charge size in t CO2e as follows:
  • Charge size >5 t CO2-e must be undertaken every 6 months
  • Charge size >50 t CO2-e must be undertaken annually
  • Charge size of >500 t CO2-e must be undertaken every 6 months.
This schedule is consistent with the European Union’s F-Gas regulation. It has been assumed that many equipment owners already undertake regular maintenance. The frequency of this activity is set out in Table 2 below. Where the levels of current maintenance exceeds what would be required under the regulation it has been assumed that this level is maintained (e.g. no reduction in behaviour).
Maintenance requirements do not compel an equipment owner to fix any leaking or broken equipment and therefore stopping the ongoing emission of SGGs. Equipment leaks are not currently covered by the current emissions ban in the Ozone Act (s45B). In order to compel the equipment owner to not only leak test but also to fix the leak, the emissions ban would be amended to make it an offence for an owner to knowingly continue to use leaky equipment.
Assumptions:
  • There are 1.8 million pieces of equipment owned by 1.8 million commercial entities (in reality owner numbers will be lower but the cost impact is insignificant as the costs are centred on equipment numbers not owner numbers).
  • It is assumed that 50% of equipment owners already undertake equipment maintenance across all categories of equipment. It is assumed that 50% of equipment owners would need to implement a maintenance regime.
  • The number of pieces of equipment remains the same over the RBM period and are as below:
  • Refrigerated cold food chain equipment with remote condensers:
  • Annual leak test: 119,050
  • Six monthly leak test: 22,800
  • Automatic leak detection and six monthly leak test: 700
  • Refrigerated cold food chain equipment – supermarket systems (independents only):
  • Six monthly leak test: 800
  • Medium air conditioning units (commercial only):
  • Annual leak test: 740,950
  • Six monthly leak test: 6650
  • Large air conditioning units (chillers):
  • Annual leak test: 450
  • Six monthly leak test: 11,700
  • Automatic leak testing and six monthly leak test: 1700
  • Large mobile air conditioning
  • Annual leak test: 34,900
  • There is a transition cost for all equipment owners of 0.5 hours to read and understand new requirements (consistent with Jacobs CBA).
  • It takes each owner 0.5 hours to order maintenance to be undertaken and make appropriate records; and 0.5 hours to order leak testing to be undertaken and make appropriate records
  • An automatic leak detection system costs $1,500 to purchase.
  • It costs $500 to have an automatic leak detection system installed.
  • It is assumed that it takes about 2.5 hours to undertake maintenance activity. This includes leak testing and repairing leaks if necessary. $100 of parts is used to fix leaks. It is assumed no new parts are used to maintain equipment.
  • End use technicians may need to undertake additional training to be competent in this area. No cost is attributed to this as the technician would be undertaking training irrespective of this measure as part of the end use licensing scheme.
  • End use technicians may read education materials on obligations for equipment owners. It is assumed that this information published in the CoolChange magazine produced by the Australian Refrigeration Council. As the technician would be reading this publication irrespective of this measure, it is assumed that the education costs are zero.

Accountable Authority to approve regulatory burden costings based on their net value (costs or savings) / This costing
(tick)
Delegate / Limit of delegation
Executive Board or Deputy Secretary / Above $2 million / 
Head of Deregulation Unit (SES Band 1) / To $2 million / 
Director of Deregulation Unit (EL 2) / To $500,000 / 
Approved By
Responsible Policy Officer / [Name and position of approver (SES Band 1)]
Accountable Authority / [Name and position of Accountable Authority as per table above]
Signature
(Accountable Authority) / [Signature of Accountable Authority or Dep Sec if EB approves – scan to PDF and file]
Date

Attachment E-2: Management of new gases

Instrument Title
Average annual regulatory costs (from business as usual)
Change in costs ($million) / Business / Community organisations / Individuals / Total change in costs
($ million)
Measure 7.1.1 / $23 / $0.000 023
Measure 7.1.2 / $725 / $ / $ / $0.000 725
Cost offset
($ million) / Business / Community organisations / Individuals / Total, by source
($ million)
Agency / $ / $ / $ / $
Are all new costs offset? (tick)
 Not required (measure is either zero cost or a saving)
 Yes, costs are offset by savings fromOzone Act Review (pending Board approval)
 No
Total (Change in costs – Cost offset) = $.....

Background