find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Greyness not necessary on carbon pricing

Greyness not necessary on carbon pricing

The carbon price mechanism is likely to happen this time, and lawyers need to be ready, write Freehills consultant John Taberner and senior associate Michael Voros.

The carbon price mechanism is likely to happen this time, and lawyers need to be ready, write Freehills consultant John Taberner and senior associate Michael Voros


The Government has released its carbon price mechanism (CPM) details, planned to commence on 1 July 2012. The CPM would be the most significant economic and industry reform since the GST and it will have far reaching implications for the Australian economy, especially in carbon intensive sectors including electricity, oil and gas, major refining and manufacturing, and mining.


A primary issue for business is: will it happen this time? This is the latest chapter in a long and twisting story. While the CPM still poses a political minefield for a Government facing all time low poll results, the Government does have the numbers to pass the necessary legislation through Parliament. Any future rollback appears highly unlikely, and if it did happen would be after the CPM commenced.


The key for commercially advising clients is to understand the likely impacts for their businesses and therefore the risks and opportunities. This is not something easily gained, but only comes from an appreciation of the clients’ business and the CPM’s development. 


Lawyers need to understand where covered emissions will arise, who will bear the liability to directly pay the costs (by acquiring and surrendering permits), what indirect costs may arise (from an earlier point in the supply chain that have been passed through) and whether it is commercially appropriate for these direct and/or indirect costs to be passed through to customers (and if so the appropriate restrictions). 


The issues are greatest for the carbon intensive sectors, primarily the generation and supply of electricity and its carbon intensive fuels coal and gas. 


In our experience, specific carbon cost pass-through clauses are not common in other types of agreements. For example, for construction contracts the CPM impacts will generally be low and the principal will prefer contractors to factor in the estimated carbon price (like any business input) and bid on that basis, with fluctuations to be covered by the CPI mechanisms. 


CPM matters can be adequately addressed in new agreements prepared in light of the announced details. However, issues may arise under historic arrangements. The most at risk are the long term agreements prepared some time ago without any contemplation of an Australian carbon price. The CPM may come within any change of law or tax/impost clauses. Though notably the CPM proposal, despite regularly being called a ‘carbon tax’ in the media, is a not a true tax (as a government levy) but is an obligation to surrender permits.


More recent agreements (from at least 2006/2007 onwards) should have considered carbon issues. However, because of the chops and changes in the proposals, the drafting in these agreements may still be deficient for the final CPM (for example by being CPRS specific). Some agreements may also have simply been poorly drafted.


Where existing agreements address carbon issues in a suboptimal way it is in the parties’ best interests to commercially consider any acceptable amendments.


If that is not possible and greyness remains then litigation may inevitably occur. 

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017


Greyness not necessary on carbon pricing
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...