BIG BUSINESS is not waiting for the Federal Government to decide on carbon trading, with some companies, and law firms, already heavily involved in the speculative purchase of greenhouse emission abatements.
Rio Tinto Aluminium, with the legal assistance of Minter Ellison, has undertaken a world first in purchasing native plant clearing permits from Queensland landowners in order to protect the vegetation for the next 120 years.
Minters partner Allison Warburton advised on the ‘Minding the Carbon Store’ project, in a transaction unlike any she had been involved in before. It was unique because “even though there is no statutory requirement for the credits — and the Government hasn’t announced any initiative — big business is starting to move”, she said.
Despite the lack of a broad-scale carbon constraint, carbon tax, or carbon price in Australia, Warburton said big energy and resource companies, such as Rio Tinto, are “seeing the writing on the wall”.
And despite some state and Federal Government initiatives, such as the federal renewable energy certificate scheme and the NSW greenhouse gas abatement scheme, there is still a feeling of uncertainty in the absence of a clear national plan on climate change.
As Lawyers Weekly reported on 24 November, Baker & McKenzie’s Martijn Wilder acknowledged a federal carbon trading system was “inevitable”, and that government uncertainty was “creating a lot of difficulty at the moment”.
Warburton agreed, suggesting that companies, mindful of the likely increase in the importance and value of emissions trading in the future, are posed many obstacles on the road to greener business practices.
“[Firstly] you have to convince your management that there is sense in taking out [what is a form of] insurance,” she said. “You have to say, ‘look, we’re going to make this investment, there’s no immediate return, it’s speculative — but we’re doing it because we think a carbon price is coming’.”
A further difficulty lies in the need to exercise caution when initially embarking on carbon emissions projects, for no company would want to invest in something that won’t translate to credits in future schemes announced by government, she said.
“You have to be very careful about picking something that is going to be eligible, and documenting it in such a way that you will likely meet any eligibility criteria, which might apply in the future,” she said. “This would include making sure that you have calculated, in accordance with internationally accepted principles, how much CO2 is going to be abated, and that your record-keeping is acceptable internationally.”
Rio Tinto said the project was a response to the federal Australian Greenhouse Office “Greenhouse Friendly” initiative, and constituted the single largest transaction of greenhouse abatements under that program.
“Our contractual obligations lock us into coal-fired power for the foreseeable future. We know the external political and operating environment is going to change, so we need to look at how we’re going to offset those emissions we’re committed to by virtue of our contractual arrangements,” Rick Humphries, manager of Rio Tinto Aluminium’s climate change program, said.
“The Government has recently started talking about emissions trading and the price on carbon, but we have no real certainty whether this particular exercise will be covered by some future scheme.”
Humphries acknowledged that business understood the high element of risk in projects such as this one, “but there’s a lot of value in it in terms of building capacity and knowledge around biosequestration, and really getting to understand what could be a major way to hedge our risk going forward”.
The release of documents such as the Stern Report have business increasingly thinking about climate change, which will only build the pressure placed on the Government.
“I think now business is starting to take this much more seriously than it had say, a year, or six months ago, and that obviously will have a bearing on the Government’s willingness or otherwise to implement various programs,” he said.
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