April 2016
Measures to achieve Emissions Reduction and Efficiency and Effectiveness gains in the Ozone Protection and Synthetic Greenhouse Gas Management Programme
Stemming from the Review of the Ozone Protection and Synthetic Greenhouse Gas Management Programme, announced by the Minister for the Environment, The Hon Greg Hunt MP on 24 May 2014.
1
Contents
Overview
Section 1 – Emissions Reduction Measures
Area for reform: Australian HFC phase-down (PD1)
section 2 - Efficiency and Effectiveness Measures
Area for reform: Regulation of additional substances
Area for reform: Improvements to HCFC phase-out provisions
Area for reform: Improvements to HCFC phase-out provisions
Area for reform: Licensing – Import, export & manufacture
Minor Amendments – Increase low volume licence exemption threshold for HFC equipment
Minor Amendments – Maintain the low volume licence exemption threshold for HCFC equipment
Minor Amendments – Introduce enabling provisions for importing HFCs and HCFCs for uses considered to be essential
Minor Amendments – Allow renewal of import, export and manufacture licences
Minor Amendments – Reduce reporting frequency
Minor Amendments – Introduce levy thresholds
Minor Amendments – Remove penalty interest provisions on outstanding levy obligations
Minor Amendments – Specific Controls - Allow the use of methyl bromide for laboratory or analytical purposes
Minor Amendments – Specific Controls - Update methyl bromide licence conditions
Minor Amendments – Specific Controls – HCFC quota allocation
Minor Amendments – Specific Controls – HCFC quota calculation
Minor Amendments – Specific Controls – Regular domestic review of uses considered to be essential
Minor Amendments – Specific Controls – Streamline administration of Section 40 exemptions
Minor Amendments – Specific Controls – Feedstock exemptions
Minor Amendments – Specific Controls – Internal decision review mechanism
Minor Amendments – Specific Controls – Australian Government inter-agency data sharing
Minor Amendments – Specific Controls –Definitions
Minor Amendments – Specific Controls -Temporary imports and exports
Minor Amendments – Specific Controls – Date of import and requirement to hold a licence
Minor Amendments – Specific Controls – Bans on disposable cylinders
Minor Amendments – Specific Controls – Banning conversion to or retrofitting refrigeration and air conditioning equipment with a higher GWP substance
Minor Amendments – Restructure of the Act
Minor Amendments – Streamlining of exemption provisions
Minor Amendments – Approval of destruction facilities
Minor Amendments – Appropriate Delegations
Area for reform: Licensing – End-Use
Minor amendments – Format of end-use licence cards
Minor amendments – New structure for Restricted Handling Licences
Minor amendments – Allow for renewal of end-use licences/authorisations/permits
Minor amendments – Lengthen the duration of end-use licences/authorisations/permits to three years
Minor amendments – Clarify the Minister retains powers and functions despite appointing an industry board
Minor amendments – Allow for the making of Legislative Instruments in addition to the Regulations
Minor amendments – Licence conditions relating to the use of transfer equipment
Minor amendments – Remove inconsistencies between exemptions for criminal offences and civil penalties in the Regulations
Streamlining current permit system
Area for reform: Compliance and Enforcement
Compliance and Enforcement – Notice to produce
Compliance and Enforcement – Penalties for deliberate damage or destruction
Compliance and Enforcement – Infringement notices in domestic end-use
Compliance and Enforcement – Infringement notice amounts
Compliance and Enforcement – Penalise false representations for fire protection permits
Compliance and Enforcement – Requesting reasonable assistance during a search
Compliance and Enforcement – Gas discharge during sampling and testing
Compliance and Enforcement – Counterfeit goods
Compliance and Enforcement – Prohibited goods once past the border
Compliance and Enforcement – Suspending a licence
Compliance and Enforcement – Publish compliance actions undertaken
Compliance and Enforcement – Information sharing
Compliance and Enforcement – Penalties for breaches
Compliance and Enforcement – Allowable emissions
Compliance and Enforcement – powers to allow the disposal of seized and forfeited goods
Compliance and Enforcement – Enforceable undertakings
Area for reform: Cost Recovery
Cost Recovery- Licence fees and levies
Remove text of the Vienna Convention and the Montreal Protocol from the Act (Oth2)
Update the application of equipment bans to include individuals
Update references contained in the Regulations
Regulation making power for product stewardship schemes
1
Overview
This document sets out the measures recommended for implementation into the Ozone Protection and Synthetic Greenhouse Gas Management Programme, covering the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989, subordinate legislation and administrative policy.
The measures are intended to be implemented through legislative amendments in all cases except where specifically identified as being administrative policy changes only.
1
Section 1 – Emissions Reduction Measures
Area for reform: Australian HFC phase-down
The Australian Government has announced Australia will look to fast track work to reduce domestic hydrofluorocarbon (HFC) emissions by 85 per cent by 2036, as part of 2030 greenhouse gas emission reduction commitment. A phase-down of HFC imports in Australia will be ahead of a global commitment to a HFC phase-down under the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol).
Measure: Introduce an HFC phase down under the Ozone Protection and Synthetic Greenhouse Gas Management (OPSGGM) legislation[1]. This would be a substantial measure, with the key features being:
- Phase-down schedule and steps: An 85percent phase-down of HFC imports commencing on 1January 2018 and reaching 85percent on 31 December 2036. The phase-down would have biannual reductions aligned with licensing periods under the OPSGGM Act.
- Baseline: Use the years 2011-2013 with total HFC consumption and 75 percent of HCFC consumption for the same period to inform the calculation of an appropriate baseline. This takes into account likely Montreal Protocol negotiations, and considers the likely Montreal Protocol baseline as the maximum setting.
- Starting point: The starting point for a HFC phase down is 8.0 Mt Co2e which is less than the 2011-2013 baseline. The reduced figure is due to a number of factors including changes within the industry and aberrations during and following the carbon tax period. Australian industry has agreed this starting point is consistent with current use.
- Phase-down mechanism: The measure proposes a reducing import quota system to achieve the 85percent phase-down. The quota system would be a hybrid of incumbent (grandfathered – existing importers) and balloted or Ministerial allocation. Incumbent quota would be calculated on the basis of past market share, and the remainder where participants apply for quota.
- Participants and quota: Total quota is initially split at 90 percent incumbent and 10 percent ballot quota, which is open to all applicants including new market entrants, or by Ministerial discretion. It will provide the capacity to change the incumbent/balloted split from 90/10 to a maximum incumbent percentage set at 95 percent, with the remaining 5 percent available for ballot in perpetuity. The intent of the phase-down mechanism and quota split is to achieve recognition for established participants and competitive fairness for all established and potential stakeholders.It is further recommended that provision is made for the Minister to retire quota where appropriate, such as identified after a scheme review.
- Efficient distribution – secondary market trading: Provide for secondary market trading (by allowing quota transfer) tofacilitate quota ending up in the hands of participants for who it provides the most value.
- Review: Provision is made for a review mechanism that allows for adjustments to quota allocation and the pace of the phase-down to ensure the policy objective is met and continues to be met. This would include regular review (for example, three yearly) as well as specific trigger points.
- Scheme coverage:
- HFC phase-down applies only to HFCs controlled under the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol. The other synthetic greenhouse gases (SGGs), perfluorocarbons, sulfur hexafluoride and nitrogen trifluoride, have limited use in Australia and will not be subject to a phase-down.
- The HFC phase-down applies to imports of “bulk” gas only and not gas contained in pre-charged equipment
- New and used HFC imports are differentiated and controlled by different mechanisms. Quota applies to new HFCs only, with used HFCs controlled by different means. Placing imported used HFCs on the Australian market would generally not be permitted unless it can be accommodated within existing quota.
- Provision is made for specific exemptions that can be periodically reassessed.
- Provision is made for complementary HFC equipment bans in line with review of the scheme. The equipment ban may be required for small split system air conditioners containing the high global warming potential refrigerant R410A, and automotive air conditioning systems using high global warming potential refrigerants.
Policy intent: To guide Australian industry through the phase-down of HFCs in a way that encourages transition to new technologies, respects the investment into the market by current importers, provides opportunity for competition through a fair mechanism to include new entrants and is at a pace Australian industry can manage.
1
section 2 - Efficiency and Effectiveness Measures
Area for reform: Regulation of additional substances
Australia has obligations under international treaties to control ozone depleting substances (ODS) and SGGs under the Montreal Protocoland the UNFCCC and its Kyoto Protocol respectively.
Measure: Amend the OPSGGM legislation to include HFC-41-10mee, PFC C10F18 and nitrogen trifluoride.
Policy intent: To include ODS and SGGs covered by current international obligations. Australia’s obligations under the Kyoto Protocol’s second commitment period, if ratified and once entered into force, will include these three SGGs not currently covered by the OPSGGM Programme.
Measure: Request importers to voluntarily report on specified substances, such as new ODS species not regulated under the OPSGGM Programme, being produced or sold.
Policy intent: Decisions by the Parties to the Montreal Protocol indicate that Parties should report on new ODS species being produced or sold in their territories, even where they are not controlled. Voluntary reporting is preferred over amending the legislation to require mandatory reporting of emerging substances. The Department has a good relationship and consistent communication with industry over a number of years, and a voluntary reporting scheme of emerging substances is expected to provide satisfactory data.
Area for reform: Improvements to HCFC phase-out provisions
Australia is phasing out imports of hydrochlorofluorocarbons (HCFCs) under the Montreal Protocol, under an accelerated phase out agreed with industry in the early 1990s. The Montreal Protocol imposes additional obligations to limit the use of HCFCs imported from 2020 to the servicing of existing refrigeration and air conditioning equipment.
Measure: Amend the legislation to include provisions to limit the use of bulk HCFCs imported from 2020 to the servicing of existing refrigeration and air conditioning equipment.
Policy Intent: To give effect to Australia’s obligations under Article 2F paragraph 6(a) of the Montreal Protocol.
Area for reform: Improvements to HCFC phase-out provisions
As a part of Australia’s phase out of hydrochlorofluorocarbons (HCFCs) under the Montreal Protocol, equipment bans for refrigeration and air conditioning equipment have been instituted to assist in reducing the demand for bulk gas. The use of HCFCs in most other products and equipment has already reduced to minimal levels.
Measure: Extend the HCFC equipment bans to include non refrigeration and air conditioning equipment– such as aerosols, blown foams, fire protection equipment and solvents.
Policy Intent: To support the phase out of bulk HCFCs. Provision to allow products essential for medical, veterinary, defence or safety purposes or similar would be included
Area for reform: Licensing – Import, export & manufacture
In order to meet its obligations under the Montreal Protocol, Australia is required to have an import, manufacture and export licensing system for ODS. The system is implemented through the OPSGGM Act. The licensing system applies regulatory measures to reduce ODS and SGG emissions, as well as facilitating Australia meeting its emission inventory reporting obligations for SGGs under the UNFCCC.
The OPSGGM Act has become increasingly complex due to amendments made over time in response to evolving international obligations and domestic policy needs. The structure of the OPSGGM Act is difficult to understand for users, increasing the risk of inadvertent non-compliance and hindering efficient administration. A number of areas for reform have been identified to improve the operation of the Act.
Minor Amendments – Increase low volume licence exemption threshold for HFC equipment
Importers of equipment charged with HFCs that fall under a low volume threshold are exempt from the requirement to hold an import licence. The appropriateness and level of the threshold has been reviewed.
Measure: Increase the exemption threshold for low volume importers of HFC equipment to ensure that only statistically significant gas imports are captured under the scheme. It is proposed to increase the threshold stipulated in the OPSGGM Regulations from 10 kilograms to 25 kilograms annually.
Policy Intent: Changing the qualifying criteria for this exemption would focus licensing requirements on larger importers, and remove the administrative burden on 400 importers of low levels of gas that do not significantly impact on emissions and Australia’s emissions inventory reporting.
Minor Amendments – Maintain the low volume licence exemption threshold for HCFC equipment
Importers of equipment charged with HCFCs that fall under a low threshold level are exempt from the requirement to hold an import licence. The appropriateness and level of the threshold has been reviewed.
Measure: Leave the low volume equipment threshold for HCFCs at a maximum of 10kg of gas (in total) in up to five pieces of equipment, only once every two years.
Policy Intent: An appropriate threshold should not encourage commercial import activity which would be counter to efforts supporting the phase out of bulk HCFCs, noting that most commercial import of HCFC equipment has already ceased.
Minor Amendments – Introduce enabling provisions for importing HFCs and HCFCs for uses considered to be essential
Currently, a limited range of banned gases can be imported into Australia for “essential uses” as identified by the Montreal Protocol. This applies to gases already banned in Australia, such as chlorofuorocarbons and carbon tetrachloride. This does not apply to:
- HCFCs which are being phased out entirely (by 2030), or
- HFCs which are likely to be phased down starting in the near future.
For regular circumstances, importers of bulk HFCs and HCFCs are required to hold an import licence, and in the case of HCFCs hold import quota too. If an HFC phase down is initiated, importers of HFCs will also require quota allocation. There are no provisions for importing HFCs and HCFCs for uses considered to be essential outside of those regular channels during and after the phase down/out of those gasses.
Measure: To provide a limited exemption from licensing and quota provisions for imports of HFCs and HCFCs for uses considered to be essential. This would apply during the respective phase-downs (for HFCs) and phase-outs (for HCFCs) of the gases, as well as the eventual ban on HCFCs.
Montreal Protocol parties are currently considering allowing essential uses of HCFCs and decisions in relation to HFC controls have not been made. Therefore, it is proposed to introduce enabling provisions only at this stage pending Parties to the Montreal Protocol making a decision on this type of exemption.
Policy Intent:Some niche importers require small quantities of scheduled substances for uses considered to be essentialand laboratory and/or analytical use. The requirement for high purity may mean that bulk gas imports (which are generally less pure) may not be suitable for purpose. There may also be defence or public safety requirements where non-flammable substances are required. The provision would allow for uses as yet unknown to be included in the scheme in a timely manner.
Minor Amendments – Allow renewal of import, export and manufacture licences
Under the current arrangements, licences expire at the end of two years and a licence holder must complete a full new licence application.
Measure: It is proposed to simplify licensing to allow licences to be renewed rather than expiring after two years. The licence will be rolled over into a new licence period and the licence number will remain the same. The proposal is that licence holders must submit a renewal application and pay the renewal fee before the 31st day after licence expires. If the licence is not renewed within 30 days after expiry, a new licence application is required.