Voluntary action—accounting for GreenPower and the voluntary cancellation of renewable energy certificates As outlined in Section 7.3.3, the Authority considers types of voluntary action should be recognised as additional to the national target—voluntary cancellation of domestic emissions units, GreenPower purchases and the voluntary cancellation of renewable energy certificates (RECs) created under the RET. Only GreenPower purchases and the voluntary cancellation of RECs need to be considered when calculating caps. Voluntary cancellation of domestic units reduces caps directly; in contrast, GreenPower purchases and the voluntary cancellation of RECs reduce emissions from electricity generation, which is covered by the caps. The Authority has made a best estimate of GreenPower purchases and voluntary REC cancellations over the period, and deducted 16 Mt CO2-e from the budget. Government purchase of international units While the carbon pricing mechanism allows liable entities to buy and use certain international units, the government could also purchase international units directly. The Authority recommends government purchase under the proposed new policy arrangements to help meet the recommended target (Chapter 12). This is not necessary under the carbon pricing mechanism as liable entities would buy the units instead. The Authority has therefore assumed no government purchase in its recommended caps. 13.4 Managing uncertainty in emissions estimates All estimates in the previous section are based on projected future levels of emissions. Actual emissions will inevitably be higher or lower than these estimates. If actual emissions are higher than estimated, Australia’s emissions could exceed the national budget to 2020. If actual emissions are lower, Australia would more than meet its budget to 2020, and the surplus units could be carried over and used after 2020. The Authority’s objective is to recommend caps to meet the 2020 budget, so its primary concern is whether actual emissions would be higher than estimated. If there is a material risk that uncovered emissions would be higher, the Authority could incorporate a buffer to guard against the risk. This approach has some support among stakeholders. In the past, national emissions projections have tended to be too high rather than too low. For example, the Authority found that emissions projections for the first commitment period of the Kyoto Protocol overestimated emissions from uncovered sectors by 13 per cent on average. Further, future emissions drivers are reasonably well understood and represented in the models used. This suggests uncovered emissions are unlikely to be higher than estimated in the Authority’s modelling. Emissions trends could vary if policies affecting uncovered emissions change; however, the Authority has made a best estimate based on existing legislative
Voluntary action (GreenPower and voluntary cancellation of renewable energy certificates) –16 Government purchase of international units 0 Available for caps 1,108 Note: All figures in Mt CO2-e. Totals may not sum due to rounding. Uncovered emissions include CFI estimates. Source: Climate Change Authority, on data from Treasury and DIICCSRTE 2013, Department of the Environment 2013, GreenPower 2013 and the Clean Energy Regulator Recommendation R.13 Carbon pollution caps for each of the first five years of the flexible-price period under the carbon pricing mechanism of: Year 2015–16 2016–17 2017–18 2018–19 2019–20 Cap (Mt CO2-e) 234 228 222 215 209