Complying with regulatory obligations


Climate change and project approvals

Climate change impacts have for many years been accepted as a relevant consideration in the assessment of planning and environmental applications in Australia. Until recently, the focus of consent authorities has been primarily on the direct greenhouse gas (GHG) emissions of a project from owned and controlled sources (scope 1 emissions), with varying levels of scrutiny given to scope 2 emissions (emissions from purchased energy).

However, there is a growing trend for consent authorities to also require an assessment of scope 3 GHG emissions, being all indirect emissions of a company that occur in the company’s value chain, such as emissions generated by the burning of Australian coal overseas. Consent authorities are also increasingly requiring proponents to demonstrate that measures have been taken to reduce, mitigate or even offset these emissions.

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Inconsistent approaches to scope 3 emissions between states and territories

The Queensland courts have consistently held that scope 3 emissions are not a relevant consideration when assessing applications for environmental authorities for new mines, although scope 3 emissions have been considered relevant when determining whether the public right and interest will be prejudiced in the grant of a mining lease.

In contrast, a landmark decision of the NSW Land and Environment Court in February 2019 in relation to the proposed Rocky Hill coal mine held that a consent authority must consider scope 3 emissions, and cited climate change impacts as one of many reasons for refusing consent for the mine. The judge also noted the proponent’s failure to commit to taking any specific actions to mitigate and offset the climate change impacts of the development. Subsequent decisions of the NSW Independent Planning Commission (IPC) in the coal mining context have placed significant weight on scope 3 GHG emissions. The IPC has also set an almost impossibly high evidentiary burden for relying on the ‘market substitution’ and ‘carbon leakage’ principles, which have long been accepted by the Queensland courts (ie that coal that would have been produced by a proposed mine in Australia will be ‘replaced’ by a new mine in another country, with a net result that the same amount of coal is burned but the economic benefits transfer from Australia to the other country).

A recent Western Australian Government policy requires proponents of major projects to develop a GHG Management Plan to demonstrate how the project will address its scope 1 emissions in the context of the State’s aspiration of net zero emissions by 2050. The Western Australian Environmental Protection Authority has also released a GHG Guideline, pursuant to which it may request credible estimates of scope 1, 2 and 3 emissions over the life of a proposed development.

Environmental groups are increasingly pursuing novel avenues to challenge coal mining and other emissions intensive projects on the basis of climate change. In May 2020, a group of young activists commenced proceedings in Queensland seeking to prevent a new coal mine in the Galilee Basin on the basis that the project will violate their human rights. This is the first time in Australia that a mine has been challenged on human rights grounds, although similar actions have previously been brought overseas.

Federal environmental assessments

The Federal Department of Agriculture, Water and the Environment has recently provided guidance on when GHG emissions, including scope 3 emissions, will be relevant to an assessment under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act).

The Department has indicated that it may request information in relation to GHG emissions (scope 1, 2 or 3) where those emissions may have a direct or indirect impact on a protected matter under the EPBC Act, but that this will be determined on a ‘case by case basis’ depending on the specific circumstances of the proposed action, including its context, scale, magnitude and nature. The Department stated that there is not a trigger point in terms of the scale of the emissions and that the relevant legislative test under the EPBC Act is whether an impact is significant.

As at the date of this guide, the EPBC Act is under review. Submissions to that review, including from the Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development and a number of environmental groups, have called for GHG emissions be added as a trigger for the assessment of a project under the EPBC Act. The inclusion of a climate change trigger that would require EPBC Act approval for any ‘emissions-intensive activities' has also been proposed in a private member’s bill introduced into the Australian Parliament in February 2020.

Key risks and opportunities

It is unclear if the principles emerging from the Rocky Hill decision and subsequent NSW IPC decisions will be applied in other Australian jurisdictions, and to projects beyond the mining sector. It is clear, however, that proponents of all major projects will at least need to provide an assessment of the scope 1 and 2 GHG emissions of their projects, and demonstrate measures to reduce, mitigate and in some cases, offset those emissions. A failure to do so could potentially result in refusal.

At least in NSW and WA, the scope 3 emissions of a project (where relevant) should also be quantified and the overall contribution of the project to the ‘global carbon budget’ should be assessed. Proponents in other states should also expect greater scrutiny of scope 3 emissions in future, both from green groups / community objectors and consent authorities. Applicants for EPBC Act approval will need to provide information on GHG emissions, including scope 3 emissions, if requested by the Department.

Proponents can expect to incur greater costs in preparing their applications due to the additional assessment information that will need to be included regarding GHG emissions. It is also likely there will be significant additional costs to introduce measures to reduce, mitigate or offset emissions. In most cases, it will not be feasible to fully offset scope 3 emissions, which will be far greater than scope 1 and 2 emissions and are largely outside the control of proponents, often being generated by end-customers overseas.

There is an emerging risk that unique and unprecedented conditions of approval could be imposed to deal with climate change impacts. For example, the expansion of the United Wambo Coal Mine in NSW was approved subject to a condition limiting the export of coal only to countries that are signatories to the Paris Agreement or countries with emission reduction policies commensurate to those of Paris Agreement parties. This creates uncertainty for new projects, particularly in light of legislative proposals in NSW to prohibit the imposition of conditions seeking to regulate impacts occurring overseas. There are, however, opportunities for proponents who can provide a robust assessment of the climate impacts of a proposed project upfront and come up with new and innovative mitigation and offset strategies. There also appears to be an emerging trend in the NSW mining context that approvals for expansion and continuation projects are easier to procure than approvals for greenfield projects.

Asking the right questions

Before an application for consent is lodged for a project with material scope 1, 2 or 3 emissions, and preferably early in the planning phase for any new development, your organisation should consider:

  • What information and assessment of GHG emissions is currently required in the state or territory in which the application is being made?
  • Have the scope 1, 2 and 3 emissions of the proposal been adequately assessed and quantified? (Consideration of scope 3 emissions may be justified even if not currently required in the relevant state or territory at the commencement of the approvals process, given the rapid rate of change in this area and the long timeframes for environmental impact assessment and approval.)
  • What measures are being proposed to reduce, mitigate or offset the GHG emissions of the development, and does the application clearly outline your organisation’s commitment to implement these measures?
  • Are there synergies between the proposed development and existing operations and infrastructure which create efficiencies and justify the development despite its climate change impacts?
  • Where is the customer base for your end product and are those countries (if overseas) signatories to the Paris Convention? If so, could your organisation offer to accept a condition of approval limiting the export of your product only to signatory countries?
  • Will your organisation be seeking to rely on a market substitution or carbon leakage argument and, if so, has sufficient evidence of market substitution and carbon leakage been put forward in the planning application?
For more information, contact Bill McCredie | Naomi Bergman | Julieane Materu

Emissions regulation and liability – NGERs and the Safeguard Mechanism

NGER scheme

The National Greenhouse and Energy Reporting (NGER) scheme requires some companies to account for the scope 1 and scope 2 emissions they are responsible for. Scope 1 emissions are direct emissions for which a company is responsible, whilst scope 2 emissions are indirect emissions from the purchase of electricity. The NGER scheme is administered by the Clean Energy Regulator under the National Greenhouse and Energy Reporting Act 2007 (Cth). The NGER scheme applies to corporate groups that exceed statutory emissions, energy use or energy production thresholds. If a facility operated by a company in a controlling corporation’s corporate group exceeds a facility level threshold, the controlling corporation of the corporate group must register on the National Greenhouse and Energy Register.

If a corporate group exceeds a corporate level threshold, again the controlling corporation of the corporate group must register on the National Greenhouse and Energy Register.

The current thresholds for NGER registration are as follows:

Facility threshold: emission of 25,000 tonnes CO2 equivalent or more of greenhouse gases, production of 100TJ or more of energy, or consumption of 100TJ or more of energy per financial year.


Corporate group threshold: emission of 50,000 tonnes CO2 equivalent or more of greenhouse gases, production of 200TJ or more of energy, or consumption of 200TJ or more of energy per financial year.

Regardless of the trigger, once the controlling corporation is registered, that corporation will be responsible for preparing an annual report on the greenhouse gas emissions, energy production and energy consumption for the corporate group.

Current policies will only drive a further 9% decrease in emissions from electricity generation to 2030

Source: Climate Analytics

The Safeguard Mechanism

In the absence of a carbon pricing mechanism in Australia, the Safeguard Mechanism remains one of the only tools at the Federal Government’s disposal to cap emissions. Any entity that operates a facility with scope 1 emissions of more than 100,000 tonnes CO2 equivalent per year is covered by the Safeguard Mechanism.

The Clean Energy Regulator sets emissions baselines for each facility covered by the Safeguard Mechanism. The person with operational control of that facility must keep the facility’s emissions at or below the emissions baseline. If the facility exceeds the baseline, the operator of the facility must purchase and surrender an amount of Australian Carbon Credit Units equivalent to the excess.

There are four main types of emissions baselines – reported baselines (which will cease on 1 July 2020), calculated baselines, production-adjusted baselines and benchmark baselines. An emissions baseline cannot be set below the threshold of 100,000 tonnes of CO2 equivalent.

The Clean Energy Regulator is required to publish information about all designated large facilities covered by the Safeguard Mechanism for each reporting year. In addition to keeping its emissions at or below its baseline, a company subject to the Safeguard Mechanism must also adhere to the general reporting and record keeping requirements of the NGER scheme.

Key risks and opportunities

The majority of large corporations that have been reporting under the NGER regime and have been operating under a Safeguard Mechanism baseline have, over time, become comfortable with these regulatory obligations and have developed the capabilities to measure and report their emissions.

However, it is frequently speculated that if the Federal Government adopted a more ambitious emissions reduction target, it would be underpinned and driven by amendments to the Safeguard Mechanism so that it covers more companies and imposes stricter baselines.

This is a key risk to large emitters in Australia. It also presents a key opportunity for those entities whose operations contain the potential for emissions abatement or sequestration. This is because a stricter Safeguard Mechanism will create a more robust carbon credit market in Australia which can create the opportunity for additional revenue streams.

Asking the right questions

  • Has your organisation undertaken diligence to establish whether its emissions, energy use or energy production trigger reporting under the NGER scheme? (Reporting can sometimes be missed where emissions and/or energy use occurs over many separate sites.)
  • If currently registered under the NGER scheme, is your organisation likely or unlikely to meet the relevant threshold in the future? If currently registered under the NGER scheme, have suitable arrangements been made with third-party suppliers to require them to provide relevant data to support your compliance?
  • Has your organisation undertaken diligence to establish whether the Safeguard Mechanism applies? If so, is it satisfied it can continue to meet its baseline?
For more information, contact Jillian Button | Patricia Saw | Dennis Smith

Energy efficiency schemes – retailer risk vs business and household opportunities

A number of states and territories have established schemes that provide electricity users with incentives to implement energy saving measures and which require electricity retailers to achieve energy saving targets.

These schemes are:

the NSW Energy Savings Scheme, which allows Accredited Certificate Providers to issue Energy Savings Certificates whenever businesses and households implement energy saving measures. Energy Savings Certificates can be sold to electricity retailers. Each year, electricity retailers must surrender enough Energy Savings Certificates to meet their energy savings targets (currently equivalent to 8.5% of the amount of electricity that retailer purchases for resale);


the Victorian Energy Upgrades Program operates in a similar way to the NSW Energy Savings Schemes. Accredited providers can implement energy savings measures that generate Victorian Energy Efficiency Certificates that can be sold to electricity retailers who can surrender the certificates to meet mandated energy efficiency targets;


the South Australian Retailer Energy Efficiency Scheme requires retailers to implement energy efficiency activities with households and businesses to achieve energy efficiency targets. Unlike NSW and Victoria, South Australia does not have a mechanism for trading energy savings certificates on the market. However, electricity retailers can subcontract their energy efficiency obligations to third-parties; and


the Australian Capital Territory Energy Efficiency Improvement Scheme is similar to the South Australian Scheme. Electricity retailers can engage Approved Abatement Providers to deliver energy savings measures to satisfy mandated targets.

These state-based schemes sit alongside the Federal Government’s Emissions Reduction Fund. For example, in NSW, projects that access the Emissions Reduction Fund are not entitled to participate in the Energy Savings Scheme.

Key risks and opportunities

Currently, the state-based energy efficiency schemes generally present:

  • opportunities to businesses that wish to become an accredited provider to accrue and sell energy efficiency certificates;
  • limited opportunities to businesses and households that could benefit from energy efficiency measures installed by accredited providers; and
  • a limited risk to electricity retailers who are under an obligation to purchase and surrender certificates under state-based schemes.

However, a National Energy Saving Scheme (NESS) has been under consideration for some time. A NESS was investigated by the Federal Government in 2015 and was most recently recommended by the Climate Change Authority in 2017. Depending on the nature and details of any such national scheme, a NESS could present opportunities for businesses to partner with accredited providers to implement energy efficiency measures throughout their operations, and it may be possible to split profits derived from the generation of energy savings certificates.

Asking the right questions

  • Are there any energy saving opportunities that your organisation can implement to take advantage of a scheme?
  • Is there any appetite in your business to explore the possibility of partnering with an accredited provider to take advantage of any of these opportunities, and potentially split profits from the generation of certificates?
For more information, contact Felicity Rourke | Patricia Saw | Dennis Smith

Carbon farming and the Emissions Reduction Fund / Climate Solutions Fund

The legislative regime for the generation of carbon credits from voluntary emissions reduction projects (otherwise known as ‘carbon farming’) in Australia was first established in 2014.

This regime allows land owners and managers to earn Australian Carbon Credit Units (ACCUs) by undertaking emissions avoidance or sequestration projects that comply with approved methodologies. There are currently more than 30 approved methodologies, including those relating to:

  • agricultural practices and vegetation management;
  • increasing energy and fuel efficiency in public, commercial and industrial settings; and
  • abatement projects in the mining, oil, gas, transport sectors, waste and wastewater sectors.

The Climate Solutions Fund (CSF) is a fund established by the Federal Government to support emissions reduction projects in Australia and to drive the Government’s aim to reduce emissions 26–28% below 2005 levels by 2030.

The CSF was originally established as the Emissions Reduction Fund (ERF) in 2014 with an initial $2.55B in funds. The ERF has since been rebranded as the CSF and has been provided with an additional $2B in funds, which is intended to extend the CSF for a further 15 years.

Funds in the ERF/ CSF are used by the Federal Government to enter into contracts to acquire ACCUs directly from individuals and businesses undertaking emissions reduction projects. Contracts are awarded via a reverse auction system. ACCUs can also be sold into the voluntary market.

1

increasing investment in renewable energy generation and battery storage projects;

2

improving energy efficiency in the areas of transport and infrastructure (eg by transitioning government fleet vehicles to electric alternatives);

3

establishing funds or grants to support projects that contribute to reducing carbon emissions. For example, Queensland has invested $500M to establish the Land Restoration Fund, which will support the land sector in Queensland to undertake carbon farming projects and South Australia has developed a Blue Carbon Strategy to encourage protection and restoration of coastal ecosystems; and

4

climate change adaption.

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Total ACCUs issued annually, compared with cumulative total, as at 30 June 2019

Source: CER's 2018–19 annual report, p 39

The CSF was originally established as the Emissions Reduction Fund (ERF) in 2014 with an initial $2.55B in funds. The ERF has since been rebranded as the CSF and has been provided with an additional $2B in funds, which is intended to extend the CSF for a further 15 years.

Funds in the ERF/ CSF are used by the Federal Government to enter into contracts to acquire ACCUs directly from individuals and businesses undertaking emissions reduction projects. Contracts are awarded via a reverse auction system. ACCUs can also be sold into the voluntary market.

Key risks and opportunities

These projects are an opportunity for individuals and businesses to generate new income streams through the generation and sale of ACCUs. ACCUs are priced higher than many other types of international carbon credits, and their price has remained relatively stable.

New methodologies are developed by the Government from time to time, and it is open to individuals or businesses suggesting new methodologies or taking part in working groups.

In addition, in May 2020 the Federal Government agreed to investigate and implement a range of mechanisms to enhance and incentivise participation in the CSF / ERF, including:

  • allowing for the earlier release of ACCUs for some types of projects which have significant upfront costs, instead of having to wait until the emissions abatement has occurred;
  • creating a new carbon credit which can be granted where a facility covered by the Safeguard Mechanism reduces their emissions below their baseline (see Page 17 for the Safeguard Mechanism); and
  • other incentives such as co-investment programs and fixed-price purchasing for small projects.

The key risks arise from political volatility in climate change policies. Although the scheme is a survivor of the previous government’s carbon pricing mechanism, and a functioning high-quality carbon farming scheme is likely to have a place in the policy suite of any government on either side of the political spectrum, it still relies on a market for emissions which is generated from policy cycle to policy cycle and is not underpinned by a long-term mandatory emissions market.

Emissions reduction projects are often land-based, and it has been speculated that the devastating bushfires in NSW and Victoria may have damaged or destroyed many emissions reduction projects funded through the ERF/ CSF. The risk posed by bushfires to land-based projects highlights the importance of considering the effect of natural disasters in the drafting of contracts (eg under force majeure provisions).

Landholders throughout every state and territory have signed up to over 730 different carbon projects.

Source: Green Collar

Asking the right questions

  • What emissions avoidance or abatement methodologies are relevant to your organisation’s assets and operations?
  • Is your organisation interested in creating a carbon farming project, either to generate additional income or to offset its own emissions (particularly those under the Safeguard Mechanism – see Page 18)?
  • Where emissions abatement activities are going to be undertaken jointly (eg by a principal/ landowner and its contractor/operator):
  • how does your contract deal with the splitting of risk and revenue?
  • do existing contracts require amendment to allow you to undertake this project?
  • What expertise will your organisation need to draw upon to develop this project?
  • Will your organisation seek to enter into a contract with the Federal Government for the sale of ACCUs
  • as a guaranteed revenue stream, or does your organisation have the interest and resources to sell ACCUs on the voluntary market?
For more information, contact Jillian Button | Patricia Saw

In search of consistency: state schemes and policies

State and territory governments are increasingly willing to take action separate to the Federal Government to address climate change through state schemes, policies and, in some cases, legislation. This represents a change in approach at the state and territory level over the past decade, as climate change issues, particularly controls on greenhouse gas emissions, were traditionally seen as a national issue best addressed by the Federal Government.

All states and territories are now working towards a target of net zero emissions by 2050 (or earlier) and a majority have adopted a target of renewable energy consumption of 50% or greater by 2030. However, only four jurisdictions have enacted specific climate change legislation which captures these targets and other commitments. In other jurisdictions, the commitments remain aspirational and subject to policy change.

State and territory climate policies continue to evolve. In 2019, there were a number of significant developments, eg the WA Government released its Greenhouse Gas Emissions Policy for Major Projects. There are also a number of reviews and public consultations concerning various climate change strategies and policies underway, which means there will be further change in this space in 2020.

The relationship between the federal and state / territory governments will also be important to monitor closely. In January 2020, the Federal Government announced a $2 billion partnership with the NSW Government that includes (amongst other things) funding for NSW-based emissions reduction initiatives and new generation projects. The Prime Minister has raised the prospect of further ‘energy deals’ with other state and territory governments. The states and territories have proposed a number of measures to achieve their climate change commitments. Key areas of focus include:

‘If the states act decisively and act together on setting emissions targets, they can reduce pollution through an alternative route. Let’s call it the Princes Highway to climate action.’

Jono La Nauze, Chief Executive of Environment Victoria, ‘The Princes Highway to climate action’, The Age (1 February 2020)

Key risks and opportunities

There is a risk that if state and territory governments ‘go it alone’ on climate change, this will create inconsistent policy between the federal and state / territory governments and between individual states and territories. This could result in increased or duplicative regulatory burden for companies in some states or territories compared with others and stifle investment and innovation in jurisdictions with less favourable policy settings.

However, the evolving landscape at the state and territory level offers companies the opportunity to engage with government to ensure that policies and schemes meet relevant industry needs. There is also an opportunity to access state schemes relevant to particular industries or businesses, eg energy efficiency schemes (referred to on Page 19) and Queensland’s Land Restoration Fund.

Asking the right questions

  • Is your organisation’s strategy aligned with the general policy adopted by the states and territories of achieving carbon neutrality by 2050 (and, where relevant, any interim targets)? If not, is there a plan in place to align strategy with these targets?
  • Should your organisation consider adopting measures to enable it to operate effectively in an environment where policy measures were implemented to achieve carbon neutrality by 2050? Ie measures which would mimic the effect of the domestic implementation of the Paris Agreement’s 1.5°c – 2°c warming target?
  • What is the impact of current and proposed state policies and targets on your organisation’s assets, project proposals and operations?
  • Is your organisation comfortable that it is engaging with regulators and policymakers appropriately on the practical implications of proposed policies and schemes?
  • Do the state and territory schemes create opportunities for your organisation, eg to generate offsets?
For more information, contact Eve Lynch | Darcy Doyle | Jillian Button | Patricia Saw

Consumer laws – ‘green’ marketing

Consumers and investors are increasingly conscious of climate change risks, and more demanding of businesses to adopt sustainable business practices. This has led to an increase in ‘green marketing’, which includes statements about environmental sustainability, carbon neutrality, recycling or impact on the environment. As a result, there has been growing regulatory scrutiny of, and enforcement against, potentially misleading environmental claims.

Courts have recently considered a number of cases brought by the Australian Competition and Consumer Commission (ACCC) relating to environmental claims. These cases, by analogy, are illustrative of the court’s likely attitude to similar claims being made in relation to climate-related risks or carbon neutrality. Recent actions include:

ACCC v Volkswagen AG: In December 2019, the Federal Court ordered Volkswagen AG to pay $125 million in penalties for making false representations to the Federal Government about compliance with Australian diesel emission standards. This is the highest penalty ordered by the court for contraventions of the Australian Consumer Law.

ACCC v Woolworths Limited: In March 2018, the ACCC brought proceedings against Woolworths Limited alleging that environmental representations, in particular the label ‘Biodegradable and Compostable’, made on the packaging of its disposable cutlery and dishes products were false or misleading. The Federal Court dismissed the ACCC’s allegations. The ACCC has appealed this decision.

ACCC v Woolworths Limited: In March 2018, the ACCC brought proceedings against Woolworths Limited alleging that environmental representations, in particular the label ‘Biodegradable and Compostable’, made on the packaging of its disposable cutlery and dishes products were false or misleading. The Federal Court dismissed the ACCC’s allegations. The ACCC has appealed this decision.

would pay more

for eco-friendly products

Key risks

The penalties for breaches of the Australian Consumer Law are significant. The ACCC’s decision to appeal the findings in ACCC v Kimberly-Clark Australia Pty Ltd and ACCC v Woolworths Limited demonstrate its willingness to hold businesses to account for environmental representations made about their products and services.

Some common traps businesses may make in making environmental claims include:

  • making broad, vague or general environmental statements such as ‘safe for the environment’, which could have more than one meaning without further explanation. Unqualified statements can be misleading if they do not adequately explain the environmental benefits of the product or service;
  • overstating the environmental benefit. Representing that a product has significant environmental benefits (eg ‘now with 50% more recycled content’) may be misleading if the benefit is actually negligible (eg the product was previously only 1% recycled content);
  • overstating the level of scientific acceptance; and
  • failing to consider the whole product life cycle when making claims. For example, a claim that a product is carbon neutral may mislead consumers if it only relates to the carbon produced in the manufacture of the product and not its actual use and operation. Businesses should make clear if the claimed benefits relate only to one part of the product (eg packaging, content, production process etc).

Asking the right questions

Before making environmental claims, an organisation should consider the following questions:

  • Does your organisation rely on environmental claims as part of its marketing strategy?
  • If so, what is the overall impression given to the consumer by the environmental claims?
  • Are the representations appropriately qualified?
  • Is there evidence to support the environmental claims being made? Have the claims been independently audited or verified? Is there a scientific authority that can be used to justify the basis of the claim?
  • Do the claims overstate the level of scientific acceptance?
  • Have you considered the whole product life cycle?
For more information, contact Robert Walker | Annie Cao

Competition law – staying on the right side of collaboration vs cartel’

In the light of the mounting pressure on businesses to address climate change risks, there is growing impetus to collaborate on effective ways to approach climate change management. Although well intentioned, collaboration between businesses on sustainability standards and practices can raise competition law concerns and expose the corporation (and individuals involved) to significant criminal and/or civil penalties if not managed appropriately.

Coordinating on industry-wide standards or practices may contravene Australian competition law if it amounts to cartel conduct or an otherwise anti-competitive arrangement. Cartel conduct involves agreements to fix prices, restrict supply or acquisition, allocate markets or customers, or rig bids. It is prohibited regardless of the effect on competition or the purported beneficial goal. Examples of conduct that may pose competition law risks include agreements between competitors to:

  • restrict the acquisition of products or services from companies based on their emissions profile or environmental track record;
  • limit the supply of products or services that involve environmentally unsustainable practices; and
  • implement common industry standards or a code of practice.

Australia has a process through which corporations can seek authorisation for conduct that would otherwise breach Australian competition laws. The ACCC will authorise conduct if it is satisfied the likely public benefit from the conduct outweighs the likely public detriment. Public benefit can include increased economic efficiency and environmental benefits (eg reduction of greenhouse gas emissions).

Examples of arrangements that have been authorised by the ACCC include:

New Energy Tech Code (NETCC): In December 2019, the ACCC authorised the NETCC, which sets minimum standards that suppliers of ‘New Energy Tech’ products (eg solar panels, energy storage systems) must comply with when interacting with customers. The ACCC granted authorisation because it considered there to be a public benefit in providing higher standards of protection for consumers in their dealings with New Energy Tech vendors and finance providers.

Joint tender of green energy: In March 2016, the ACCC authorised Melbourne City Council and 13 other entities, including three other local councils, two tertiary education institutions and two banks to establish a joint electricity purchasing group to pool their energy demand and jointly tender for green-electricity supply arrangements.

Greenhouse gas emission limitation arrangements: In September 1998, the ACCC granted authorisation to the Association of Fluorocarbon Consumers and Manufacturers Inc to limit the importation of hydrochlorofluorocarbon gases and cease the importation or manufacture of disposable containers of hydrochlorofluorocarbon and hydrofluorocarbon gases.

Key risks

There are examples of the ACCC taking cartel enforcement action in this area. In 2013, the ACCC took action against laundry detergent suppliers and Woolworths for allegedly colluding to cease supplying standard concentrate detergent and simultaneously moving to the supply of ultra-concentrate detergent. Despite the environmental benefits of this action, the ACCC prosecuted the conduct due to concerns it would deny consumers a variety of choice. Some of the alleged participants admitted that their involvement amounted to cartel conduct. In relation to one of suppliers, PZ Cussons, the ACCC was ultimately unsuccessful in establishing a breach of the competition rules.

Asking the right questions

Corporations looking to cooperate with other businesses on sustainability issues should first seek legal advice before engaging in these discussions. If discussions with competing businesses take place, appropriate controls should be implemented. For example, the discussions should follow a written agenda, minutes of the discussions should be kept and competition law guidelines should be put in place. Before engaging in these discussions, you should consider the following:

  • Does the legal team have sufficient visibility over the sorts of engagements which your sustainability and technical teams may be having with other industry members or market participants?
  • If no, do you have processes and procedures in place to inform your sustainability and technical teams of the risks that such engagement poses?
  • Do any such discussions involve competitors or potential competitors?
  • Will they involve discussions around pricing, restricting supply or acquisition of certain products or services, allocating markets or customers, or bid rigging?
  • What is the intended outcome of these discussions? Could it lead to the alignment of commercial strategies?
  • If so, has legal advice been sought? Have you considered whether ACCC authorisation is needed?
For more information, contact Robert Walker | Annie Cao
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