Regardless of the outcome of the upcoming federal election, the reality of a “carbon-constrained” Australia is not too far in the future, with both major parties indicating their support for a national emissions trading scheme.

The pressure on both parties to commit to taking action continues to mount with the Intergovernmental Panel on Climate Change declaring last weekend that growth in global greenhouse gas emissions will need to halt by 2015 and fall from there if dangerous climate change is to be avoided.

Minter Ellison hosted a breakfast briefing for clients last week focusing on the potential legal implications, risks and opportunities arising from a national emission trading scheme. Speaking at the briefing were Nicole Green, a partner in Minter Ellison’s project and infrastructure group, Duncan McGregor, a partner in the environment and planning group and Craig Roussac, Investa Property Group’s general manager for sustainability, safety and environment.

As McGregor explained at the briefing, for many companies, greenhouse gas emission reporting and abatement have been, up until now, largely voluntary matters. However as greenhouse issues become increasingly governed by legislation a significant area of work for law firms is opening up.

There are now two competing proposed models for a national emissions trading scheme: AETS, which was developed out of the Prime Ministerial Task Group and is endorsed by the Coalition Government and NETS, which was developed by the states and territories and which the ALP has vaguely indicated that it will support.

Jason Johnston, a senior associate in Freehills’ environment and planning practice group, told Lawyers Weekly that the speed at which developments have taken place has caught a lot of companies by surprise.

“One very general [question] we get asked surprisingly often is to the effect of simply ‘what does all this stuff mean?’ … A lot of companies, perhaps understandably, were taking the Coalition Government’s lead for a long time, thinking that emissions trading schemes are foreign things, or pie in the sky, and unlikely to happen here and didn’t direct their thoughts toward it very much. Suddenly they find that not only is it going to happen, but the process of putting it back into place is actually occurring right now [and they] have got caught a bit back-footed,” he said.

Although neither model of emissions trading scheme is intended to come into force until at least 2010, the National Greenhouse and Energy Reporting Act 2007, which McGregor described at the briefing as the “framework legislation” for a national scheme, has already come into force.

The Act imposes an obligation on corporate groups and on companies engaged in certain activities to report their greenhouse gas emissions, energy production and energy consumption if they exceed certain threshold levels. Each year these threshold levels are reduced meaning that year-by-year an increasing number of companies will be caught by the Act.

Johnston explained that while the national emissions trading scheme will most likely only apply to a relatively small number of larger entities, the energy reporting Act has far greater scope, and law firms are already being asked to provide advice to clients regarding their reporting obligations.

According to McGregor, the practical effect of the Act in its present state is still very unclear. “There’s still a lot of uncertainty and more detail needs to be provided in the Regulations. Probably the greatest level of uncertainty at the moment is in relation to the methodology to be used in calculating emissions … The methodology that’s adopted will in part determine what level of emissions a company may have and may determine whether [a company] has a reporting obligation or not,” he said.

Johnston agreed: “Companies are having to prepare on the worst-case basis that they might be caught and it might [be the case that] when we see the accounting guidelines in greater detail, it turns out they’re not.”

However Johnston also believes that this uncertainly is giving law firms an opportunity to play a role in helping to nut out some of the important details of both the Act and the emissions trading scheme.

“Because so much of the detail has been left to the Regulations, there is quite a scope for advising and assisting clients in an advocacy role,” he said.

According to Johnston, one significant issue that is likely to be determined by the election is the extent to which Australia’s emissions trading scheme can be linked to other schemes internationally.

“The Labor Party’s commitment to sign the Kyoto Protocol pretty quickly [will] automatically supply linkages to the [protocol’s] mechanisms, and in particular, the clean development mechanism. I would foresee that we’ll be in a position to give advice to companies about participating in that,” he said.