After much debate, political gambling and counter-gambling, the Government's carbon pricing mechanism has, as widely predicted, passed a vote in the Lower House by the slimmest of margins, writes Anthony Hobley, global head of climate change and carbon finance at Norton Rose.
In Parliamentary terms, the passing of today's bill is not the end of the story. It still needs to pass a vote in the Upper House. Many might say we have been here before with the CPRS. But this time it is different. The Greens control the balance of power in the Senate and this time they have been part of the process which negotiated the final carbon package. This week's vote should therefore be a wake up call to those businesses that think Australia will not put a price on carbon.
If all goes according to plan, the legislation will be law by early December at the latest. Many in the business community are perhaps not as prepared as they should be - and that is quite understandable. There has for some time been sentiment in the business community that "I will believe it when I see it". As a result there is not a detailed understanding of the latest carbon pricing package and many businesses will need to come up to speed quickly.
Some may still be asking why bother? The Leader of the Opposition is widely ahead in the polls and has promised rather dramatically "in blood" to repeal the mechanism. For a number of reasons though, it would be a risky strategy for business to ignore the mechanism in the expectation that a future Government would repeal it.
From what we can see, it will be as difficult to repeal the legislation as it has been for the Government to get it through.
The mechanism has an effective 'auto pilot' built into it so it can operate without the Government of the day cooperating. This is achieved a few ways, most notably by a default cap mechanism built into the primary legislation. The legislation would therefore need to be amended, requiring approval of the Senate. Given the Senate is controlled by the Greens and will be this way for the next five-plus years, the likelihood of the legislation changing significantly is almost zero.
There are also practical and financial barriers to the mechanism being repealed once it is operational. The mainstream business community may also find it's not supportive of a move which would plunge them once again into the realms of uncertainty.
There will also be arguments that carbon units issued, sold or created via offset mechanisms are effective property rights, the removal of which would have to be compensated.
For now, businesses should be focused on getting their heads around the mechanism and what it means for them.