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TRANSITION TO THE NEW CARBON REGULATORY MARKET
Jennifer Mee*
This article focuses on issues associated with transitioning to a national cap and trade emissions
trading scheme in Australia. This includes both impacts upon existing emitters not currently
subject to an emissions constraint, and impacts upon existing abators who receive credits (and
participants who buy them) under existing emissions abatement schemes.
Moving from a credit scheme to a permit scheme involves a fundamental change in the nature of
the commodity being traded and who derives value from it. This article explores the nature of the
differences, some of the possible impacts, the need for transitional provisions and some
transitioning possibilities.
It also explores some of the issues associated with compensation upon regime change, drawing on
doctrines relating to the compulsory acquisition of property (at common law and in constitutional
law) and substantive legitimate expectations (in administrative law).
1.
INTRODUCTION
Among the myriad of considerations that arise during the process of establishing and
implementing an emissions trading scheme for the first time in a jurisdiction are transitional
issues. The word “transition” literally describes a process of change, and in this sense can include
anything that needs to be done or considered in order to change from one regime to another. In the
lead-up to the commencement of an emissions trading scheme, this could include, for example,
decision-making on features of scheme design, implementing greenhouse measurement and
reporting (both for the purpose of obtaining data to inform decisions on scheme design and for the
purpose of implementing the scheme itself),1 establishing new institutions and processes (such as
registries and trading platforms), and short-term exceptions or special rules to smooth the impact
of change.
This article focuses on issues associated specifically with the phasing out of one or more regimes
and the phasing in of another. In this sense, the word “regime” is used to include not only specific
legislation or schemes, but also the absence of them. So, for example, one set of considerations in
moving to a cap and trade emissions trading scheme involves the impacts on emitters who were
not previously subject to any cap on greenhouse gas emissions. There is plenty of overseas
precedent for these issues, particularly in the methodologies of free permit allocation used by
various Member States of the European Union in the early stages of the European Union emissions
trading scheme.
*
1
Partner, Middletons.
See, for example, National Greenhouse and Energy Reporting Act 2007 (Cth), which establishes a single
national framework for reporting greenhouse gas emissions, abatement actions and energy consumption
and production by corporations from 1 July 2008. Data reported under this Act will form the basis of
emissions liabilities under emissions trading, and inform decision making during the establishment of the
national emissions trading scheme, including with regard to permit allocations and incentives for early
abatement action.
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In Australia, the position is more complex. In addition to issues associated with existing emitters
not subject to an emissions cap, there are also a number of existing credit-based schemes, at least
some of which are likely to be phased out upon the introduction of a cap and trade emissions
trading scheme. Moving from credit-based schemes to a permit-based scheme involves some
particular and complex transitional issues, which will be discussed in this article.
Following a brief introduction to the current Australian scene, this article is in two main sections.
The first explores some of the issues associated with moving from credit-based schemes to permitbased schemes, some of the possible impacts, the need for transitional provisions and some
transitioning possibilities. The second explores some of the issues associated with compensation
upon regime change, drawing on doctrines relating to the compulsory acquisition of property (at
common law and in constitutional law) and substantive legitimate expectations (in administrative
law).
2.
THE CURRENT AUSTRALIAN SCENE
It is likely that a national cap and trade emissions trading scheme (NETS) will be introduced and
operational in Australia by 2011.2 The key design features of that scheme are yet to be finalised.
There is otherwise no compulsory cap nor general legislative prohibition on greenhouse gas
emissions in Australia, nor is there any general carbon tax.
However, a number of tradeable credit schemes currently exist across various Australian
jurisdictions.3 Unlike a cap and trade emissions trading scheme, under which total emissions are
capped and tradeable emissions permits issued up to the value of the cap, credit schemes generally
involve rewarding emissions reduction (or similar) activities with credits. In general, these
schemes involve the establishment of a new commodity, being an intangible tradeable certificate
or credit. These credits can be created by persons who undertake relevant activities recognised by
the scheme and can be freely traded (thereby allowing the market to set their value). Ultimate
demand for these credits generally rests with electricity retailers, usually due to legislative
requirements to purchase and surrender a certain number of them.
2
3
On 10 December 2006 the former Prime Minister announced the establishment of the joint governmentbusiness Task Group on Emissions Trading. (This followed some earlier work by the National
Emissions Trading Taskforce established by the States and Territories in January 2004.) The Task
Group presented its report to the Prime Minister on 31 May 2007, recommending the establishment of a
national cap and trade emissions trading scheme, to commence by 2011 or 2012. On 3 June 2007, the
Prime Minister announced that Australia will move towards a domestic emissions trading system,
beginning no later than 2012. Subsequently, the Department of the Prime Minister and Cabinet’s paper
entitled Early Abatement Incentives Discussion Paper (September 2007) (Early Action Paper) indicated
that it was the Government’s intention for the legal obligation on liable parties to acquit permits equal to
their emissions to commence in 2011. On 3 December 2007, a new Government was sworn in by the
Governor-General. All indications from the new Government to date have been to continue the same
work and goals.
These include the Mandatory Renewable Energy Target (MRET) (Renewable Energy (Electricity) Act
2000 (Cth)), the Victorian Renewable Energy Target (VRET) (Victorian Renewable Energy Act 2006
(Vic)), the New South Wales Greenhouse Gas Reduction Scheme (GGAS) (Electricity Supply Act 1995
(NSW)), the Australian Capital Territory Greenhouse Gas Reduction Scheme (Electricity (Greenhouse
Gas Emissions) Act 2004 (ACT)), the Queensland 13% gas scheme (Electricity Act 1994 (Qld)) and
GreenPower (National Green Power Accreditation Program). A number of further schemes have been
proposed or announced.
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The particular activities for which credits may be created vary between schemes, depending upon
the particular objects of the scheme. For example, this may be electricity generation from
renewable energy sources,4 electricity generation from gas,5 “green” electricity generation,6 or
more general greenhouse gas reduction activities.7 Most of these schemes include the reduction in
greenhouse gas emissions in their objectives; many of them also have additional objectives such as
industry development or the promotion of particular technologies.8
Recognising that many of these schemes are primarily industry development schemes rather than
pure abatement schemes,9 the Discussion Paper dated 16 August 2006 by the National Emissions
Trading Taskforce established by the States and Territories (NETT), entitled Discussion Paper:
Possible Design for a National Greenhouse Gas Emissions Trading Scheme (NETT Discussion
Paper), considered that it would be possible for some of these10 to operate in parallel with a NETS,
but the ones that are focused primarily on greenhouse gas abatement would overlap substantially
with, and would need to be transitioned to, a NETS.11 The report of the Prime Ministerial Task
Group on Emissions Trading (PM Task Group) dated 31 May 2007, entitled Report of the Task
Group on Emissions Trading (PM Task Group Report), by contrast, recommended that all of these
4
5
6
7
8
9
10
11
For example, the Mandatory Renewable Energy Target (Renewable Energy (Electricity) Act 2000 (Cth)),
the Victorian Renewable Energy Target (Victorian Renewable Energy Act 2006 (Vic)), and various
similar proposed schemes in a number of other jurisdictions.
For example, the Queensland 13% gas scheme (Electricity Act 1994 (Qld)).
For example, GreenPower. An approved GreenPower electricity generator must be based primarily on a
renewable energy source and must result in greenhouse gas emissions reduction and “net environmental
benefits” (National Green Power Accreditation Program p 33). In considering “net environmental
benefits”, impacts are considered within an ecologically sustainable development framework and include
greenhouse gas reduction, water and air quality, land use, impact on flora and fauna, impact on
cultural/natural heritage, visual and noise impacts, use and disposal of waste products and transport
(National Green Power Accreditation Program p 34).
For example, the New South Wales Greenhouse Gas Reduction Scheme (Electricity Supply Act 1995
(NSW)) and the Australian Capital Territory Greenhouse Gas Reduction Scheme (Electricity
(Greenhouse Gas Emissions) Act 2004 (ACT)). These schemes have the broadest coverage of the
existing Australian schemes, including electricity generation (including renewable energy and fossil fuel
efficiency), demand side abatement (reductions in electricity consumption at all user levels), reduction in
emissions from industrial processes by large electricity users (such as aluminium smelters), carbon
sequestration in the forestry sector, and the avoidance of fugitive emissions in the waste and mining
sectors through the capturing and combustion of landfill gas and waste coal mine gas.
For example, the objects of the Mandatory Renewable Energy Target are “(a) to encourage the additional
generation of electricity from renewable sources; and (b) to reduce emissions of greenhouse gases; and
(c) to ensure that renewable energy sources are ecologically sustainable” (Renewable Energy
(Electricity) Act 2000 (Cth) s 3). The objects of the Queensland 13% gas scheme are to: “(a) reduce the
growth in greenhouse gases associated with electricity use in the State; and (b) contribute to the
diversification of the State’s energy mix towards the greater use of gas in electricity generation; and (c)
encourage the development of new gas sources and gas infrastructure to meet the State’s future energy
requirements” (Electricity Act 1994 (Qld) s 135A).
National Emissions Trading Taskforce: Possible Design for a National Greenhouse Gas Emissions
Trading Scheme, 16 August 2006 (NETT Discussion Paper), p 182.
The Mandatory Renewable Energy Target (Renewable Energy (Electricity) Act 2000 (Cth)), the
Victorian Renewable Energy Target (Victorian Renewable Energy Act 2006 (Vic) and the Queensland
13% gas scheme (Electricity Act 1994 (Qld)) were suggested.
NETT Discussion Paper, op cit 9, p 191.
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existing credit schemes should be replaced by a single national emissions trading scheme.12
However, this seems to have been superseded by the Federal Government’s announcement on 23
September 2007 that it would introduce a National Clean Energy Target (CET), to replace existing
and proposed State and Territory renewable energy and certain other schemes with a single
national scheme.13 This would be largely modelled on the Mandatory Renewable Energy Target,14
although it would also be open to fossil fuel technologies that can generate electricity with an
emissions intensity below a certain threshold (for example, carbon capture and storage). The CET
is intended to complement the NETS initially, and to enable a smooth and efficient transition into
the NETS over the long term.
However, it is likely that the NSW and ACT Greenhouse Gas Reduction Schemes15 (GGAS) will
be abolished and transitioned into the NETS. This was the recommendation of both the NETT
Discussion Paper16 and the PM Task Group Report,17 and (more importantly) it is the clear
intention of the New South Wales Government, as already embodied in the NSW GGAS enabling
legislation.18 This article therefore focuses on particular issues associated with transitioning
GGAS to a NETS. Some of these issues may also be relevant to transitioning the CET into the
NETS in the long term.
3.
MOVING FROM A CREDIT SCHEME TO A PERMIT SCHEME
Moving from a credit scheme to a permit scheme involves a fundamental change in the nature of
the commodity being traded and who derives value from it.
For example, in the context of GGAS and a NETS:
1.
Commodity: Under a NETS, the primary commodity is a permit, whereas under GGAS the
primary commodity is a credit (NGAC).19
2.
Liable parties: Under a NETS, the primary liability (to acquire and surrender emissions
permits) is likely to be borne by emitters (such as coal-fired electricity generators). Under
GGAS, on the other hand, the liability (to acquire and surrender NGACs) is primarily borne
by electricity retailers.20
3.
Offsets: Although a NETS is also likely to include offsets (as a type of credit, representing
a reduction or removal of greenhouse gas emissions to counterbalance emissions elsewhere,
12
Prime Ministerial Task Group on Emissions Trading: Report of the Task Group on Emissions Trading,
31 May 2007 (PM Task Group Report), p 137.
Despite the Commonwealth Government’s announcement, the abolition of State schemes is of course a
matter for each of those States.
Under the Renewable Energy (Electricity) Act 2000 (Cth)).
Under the Electricity Supply Act 1995 (NSW) and the Electricity (Greenhouse Gas Emissions) Act 2004
(ACT) respectively.
NETT Discussion Paper, op cit n 9, p 191.
PM Task Group Report, op cit n 12, p 137.
See Electricity Supply Act 1995 (NSW) s 97KB.
“NGAC” under NSW GGAS stands for “New South Wales Greenhouse Abatement Certificate”. Under
GGAS, non-tradeable certificates known as “LUACs” (Large User Abatement Certificates) may also be
created. For simplicity this paper will refer only to NGACs.
Liable parties also include generators under direct supply arrangements to customers, other wholesale
electricity market customers, and various elective participants: see Electricity Supply Act 1995 (NSW) s
97BB.
13
14
15
16
17
18
19
20
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with the same value as an emissions permit), it is likely that these will only be permitted
from sectors not covered by the NETS. As the stationary energy sector is likely to be
covered by a NETS, a right to create NGACs under GGAS will not necessarily translate
into a right to create offsets under a NETS.
4.
Revenue: Under GGAS, revenue flows to abatement certificate providers (ACPs) from the
sale of NGACs. Under a NETS, some current ACPs may have nothing to sell under the
NETS (although some may still nonetheless benefit by other means, such as through
increased wholesale electricity prices). Furthermore, under GGAS, the Government did not
receive any revenue for NGACs,21 whereas under a NETS, the Government will receive
revenue from auctioning emissions permits.22
In relation to offsets, it has been well accepted in designing a NETS that there is an inherent
difficulty in allowing offsets from the same sectors as the capped sectors, due to double counting
issues.23 For example, if renewable energy electricity generation displaces coal-fired electricity
generation, the reduction in emissions would be counted twice (once as excess permits on the part
of the coal-fired generation, once as offsets on the part of the renewable generator). Similar issues
would arise with energy-efficiency projects. As many of the activities for which NGACs may be
created under GGAS (such as lower emissions electricity generation and energy-efficiency
projects) relate to the same sectors proposed to be covered by the NETS (largely the stationary
energy sector), these may not be eligible for offsets under a NETS.
However, the impacts on stakeholders may not necessarily be as significant as might appear at first
glance. For example, the mere fact of moving from a credit scheme to a permit scheme does not
necessarily mean that the cost of permits will be absorbed by existing fossil-fuel electricity
generators, or that electricity retailers will face significantly different costs, or that current ACPs
will not receive equivalent benefits.
For example, it is likely that wholesale electricity prices will rise under a NETS, as coal-fired
electricity generators factor emissions permits into their costs of production and hence offer
prices.24 Consequently, electricity retailers will be affected by such price increases in their
electricity purchases. Similarly, low-emissions electricity generators can theoretically benefit
from receiving increased wholesale electricity prices, without the associated increased costs in
obtaining the number of emissions permits that coal-fired generators would be required to obtain.25
Recognising this, the NETT proposed that price signals in the electricity market would be the key
21
22
23
24
25
However, greenhouse penalties (for failure to surrender a sufficient number of NGACs) are payable to
the Government: Electricity Supply Act 1995 (NSW) s 97CA.
This is on the assumption that the Government will auction permits rather than allocate them all for free.
However, it may be that this revenue is “recycled” for related purposes, such as research and
development.
See, for example, NETT Discussion Paper, op cit n 9, pp 73-75. The PM Task Group Report (op cit, n
12, p 111) and Early Action Paper (op cit, n 2) similarly assume that offsets will only be available from
sectors not covered by the NETS.
A number of factors will govern the extent to which these costs can be passed through the market and
ultimately to the end-use customer. Another factor relevant to generator offer prices may be long-term
hedging contracts and/or long-term forward electricity contracts that reduce the practical significance of
the spot price for a certain portion of generation.
This is in addition to any separate benefit that those generators may have under the proposed CET.
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avenue through which a NETS drives investment in energy efficiency, small-scale (low-emission)
power generation and renewable energy projects.26
Therefore, it is possible for a credit scheme and a permit scheme to have similar impacts on
stakeholders. Theoretically the separate revenue streams received by a low-emissions generator
from the sale of electricity and credits (under a credit scheme) can be consolidated into one
revenue stream from the sale of electricity (under a permit scheme). Credits from outside the
covered sectors can continue to be created as offsets. Ultimately, the impact on end-use customers
could theoretically be the same.
3.1
The Need for Transitional Provisions
In order to move smoothly from GGAS (as a credit scheme) to a NETS (as a permit scheme), with
no adverse impacts on any participant, it would appear that at least the following theoretical
conditions would be required:
(a)
(b)
Abatement certificate providers: Current ACPs under GGAS would, under a NETS:
(i)
create offsets instead (with an equivalent value to NGACs); or
(ii) if a generator, benefit in a similar manner from the combined effect of increased
wholesale electricity prices and being liable to surrender fewer emissions permits; or
(iii) receive similar benefits through other complementary measures.
Benchmark participants: Current benchmark participants under GGAS (being those
parties liable to purchase and surrender NGACs, primarily electricity retailers) would,
under a NETS, bear an equivalent cost in their electricity purchases to the cost of NGACs
under GGAS.
However, a number of conditions would need to be present in order to achieve these outcomes,
including, for example:
(a)
Market value: That the market value of emissions permits (and offsets credits) under a
NETS will be the same as the market value of NGACs under GGAS.
(b)
Contracts: That there are no long-term forward contracts for the supply and sale of
NGACs or electricity.
(c)
Volume of abatement: That the volume of abatement recognised under GGAS for any
particular activity will be the same under a NETS.
(d)
Response to price signals: That the abator will be in a position to respond to price signals.
(e)
Pass-throughs: That there are no barriers to passing through any increased costs through
the supply chain and ultimately to end-users.
(f)
Complementary measures: That appropriate complementary measures will fill in the
gaps.
In practice, many of these may not be the case. This could potentially result in disproportionate
adverse financial impacts on particular parties. Some examples are discussed below.
26
NETT Discussion Paper, op cit n 9, p 75.
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3.1.1 Market value
The market value of permits under a NETS will of course depend to a large degree on key matters
of design such as coverage and caps. These decisions are yet to be made (with a broad range of
factors being relevant to such decisions), and could result in a significantly different market value
of commodities to that under GGAS.
3.1.2 Contracts
The electricity generation industry (particularly for renewable and small-scale generation) is
characterised by long-term forward supply or hedging contracts for electricity and green credits.
Therefore, for example, to the extent that price signals in the wholesale electricity market are
intended to drive investment or renewable energy or low-emissions generation, those generators
will not be able to take advantage of such signals until those contracts expire.
3.1.3 Volume of abatement
For current ACPs under GGAS who will be entitled to create offsets under a NETS, the rules
regarding which and how much abatement is recognised may not be the same. For example, it
may be that under a NETS, general “additionality” tests apply,27 whereas under GGAS, the volume
of abatement is generally calculated by reference to specific equations and methodologies.28
3.1.4 Response to price signals
Many current ACPs under GGAS are proponents of energy-efficiency projects, involving selling
(or giving away) energy-efficient products or services to end-use customers. These proponents
themselves will not be exposed to price signals in the electricity market, and it may be that their
customers (being end-use electricity customers) are not either (depending upon the net impact on
end-use customer prices). The NETT Discussion Paper notes that “in the field of energy
efficiency, there are well-documented cases where the financial incentives faced by different
groups (such as landlords and tenants, or builders and purchasers) might not be well aligned, at
least in the short term”.29
3.1.5 Pass-throughs
Many factors may inhibit cost pass-throughs, such as long-term contracts or price regulation.
27
28
29
The concept of “additionality” is about ensuring that abatement is additional to what would otherwise
have occurred. The NETT Discussion Paper breaks this down into three types: environmental
additionality, regulatory/legal additionality and financial/investment additionality. See further NETT
Discussion Paper, op cit n 9, pp 66-68. By contrast, there is no general additionality test under GGAS,
although the Scheme Administrator may impose conditions or seek undertakings regarding benefits
under other schemes (Electricity Supply Act 1995 (NSW) s 97DD, Electricity Supply (General)
Regulation 2001 cl 73HA).
See Greenhouse Gas Benchmark Rules, which set out detailed equations and methodologies.
Furthermore, for ACP electricity generators under GGAS who may not be entitled to create offsets under
a NETS, the volume of abatement currently recognised by GGAS may not simply equate to the amount
of electricity generated. (For example, for electricity generation from waste coal mine gas, 4.8 NGACs
can currently be created from each MWh of electricity generated, compared to around 0.94 for
renewable energy with zero emissions, due to the avoidance of fugitive methane in the former case.)
NETT Discussion Paper, op cit n 9, p 205.
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3.1.6 Complementary measures
Complementary measures may ameliorate the effect of some of these things. For example, the
majority of renewable energy generation relies on measures such as the Mandatory Renewable
Energy Target (MRET) or its State equivalents (likely to be consolidated into the CET) rather than
on GGAS (given the greater historical financial value of the former, and given that in general a
choice must be made between the creation of renewable energy certificates (under MRET) or the
creation of NGACs),30 so preserving the value of NGACs may not have much practical relevance
for these generators.31 However, the extent of CET’s coverage, and in particular whether it will
cover and provide similar benefits to other generation recognised by GGAS, is not yet clear.
Similarly, any energy-efficiency schemes that provide commercial incentives (rather than merely
regulatory requirements) to undertake reductions in end-use consumption may ameliorate the
effects on current ACPs undertaking demand side abatement energy efficiency projects (depending
on who was in a position to respond to those commercial incentives). However, proposed
measures in that regard are yet to be clarified.32
3.1.7 Transitional provisions
Depending on the outcome of factors such as those described above, there may be a number of
stakeholders who could be significantly exposed by the change from GGAS to a NETS, in the
absence of other protections (such as in the form of grandfathering under transitional provisions).
It is beyond the scope of this article to analyse the particular impacts on or considerations for each
stakeholder under GGAS. Of course, with some of these matters the risk could go either way – for
example, the market value of commodities under a NETS could be either lesser or greater than
under GGAS, depending on final scheme design, providing either better or worse outcomes
depending on whether the point of view is that of an ACP or a benchmark participant. The
situation is further complicated by forward contracting.
One function of transitional provisions is to ameliorate adverse impacts on stakeholders due to the
change from one regime to another, particularly in recognition of existing actions taken and
investments made in reliance on previous regimes. This might take the form of preserving existing
arrangements for a transitional period (grandfathering), or providing for various exemptions from
new arrangements for that period. Alternatively, it might take the form of compensation of some
kind in lieu of a transitional continuation.
3.2
Some Transitioning Possibilities
One possible form of transitional provision is to allow certain ACPs (particularly those who have
made significant investment on the faith of GGAS) to retain the right to create NGACs for an
30
31
32
Under GGAS, the conditions of accreditation and undertaking usually required by the Scheme
Administrator generally prohibit the creation of both renewable energy certificates (under MRET) and
NGACs in relation to the same “abatement” (as opposed to the same “generation”). This then still
allows both renewable energy certificates and NGACs to be created in recognition of the two distinct
greenhouse benefits of using these fuel sources: lower emissions in the combustion process, and the
avoidance of fugitive methane emissions.
In any event, these generators will receive the benefit of increased wholesale prices for electricity (to the
extent that they can take advantage of those price increases, taking into account their contracting
position) in addition to benefits under other schemes such as the CET.
On 10 December 2007, the NSW Premier issued a media release regarding a new Energy Efficiency
Strategy. However, from the information provided the proposed strategy does not appear to include
financial incentives akin to GGAS.
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appropriate transitional period. Of course, a right to create NGACs for a transitional period will
only be useful if there is a corresponding demand for NGACs, preserved at an equivalent market
value.
3.2.1 Maintenance of GGAS with reduced benchmark participant obligations
If benchmark participants’ obligations under GGAS were to be maintained to a reduced extent for
a transitional period, it would be necessary to ensure that those benchmark participants do not
suffer a corresponding disadvantage in a NETS (by facing the cost of these obligations in addition
to the cost of electricity spot price increases due to the introduction of a NETS), thus harming their
competitive position. If this were to be counterbalanced through some kind of compensation in the
NETS (such as through allocation of permits), the overall impact of this on the market would need
to be considered.
3.2.2 Use of NGACs as offsets in a NETS
Another possibility, that avoids subjecting benchmark participants to continuing obligations, may
involve allowing NGACs to be used as offsets under a NETS for a transitional period, or
alternatively allowing offsets to be created using the GGAS rules regarding volume of abatement
recognised.33 Either way it does not address the double counting issues; it simply provides a
transitional period under which double counting would simply be accepted as part of the scheme
design. (Note that this approach would address concerns arising from different volumes of
abatement being recognised under the two schemes, or from the inability of some ACPs to create
offsets at all, but it would not address concerns arising from a significantly different market value
of commodities between the two schemes.)
3.2.3 Free permit allocation
Another approach to transitioning involves free permit allocation. This has been proposed by the
Commonwealth government in its early action paper. It was also briefly considered by the
States/Territories Taskforce in the context of GGAS.34 Free permit allocation would avoid the
double counting issues associated with allowing NGACs to be used in a NETS, or allowing offsets
to be created from covered sectors, for a transitional period. It would also be neater in that it does
not involve ongoing administration of GGAS, in parallel with a NETS.
3.2.4 General comments
The allocation of free emissions permits may, therefore, be the most practical method. However,
issues associated with the appropriate transitioning mechanism, its implementation and effects are
complex and it is beyond the scope of this article to analyse these in detail. One matter to note for
present purposes is that, although the manner and extent to which GGAS is transitioned into NETS
is clearly a matter for the NSW Government, any transitioning mechanism will need to work in
collaboration with the NETS (for example, to provide for corresponding exemptions or permit
allocation rules and to avoid market distortions).
4.
COMPENSATION
As can be seen from the above illustrations, transitional provisions may have a compensatory
function. Compensation can take a number of forms other than money, including benefits (such as
33
34
A similar approach was proposed in the NETT Discussion Paper, op cit n 9, p 190.
NETT Discussion Paper, op cit n 9, pp 188-189.
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free emissions permits) or long-term or short-term exemptions from statutory requirements. It
does not necessarily need to result in the Government digging into the public purses but can
instead involve a spreading of impacts among stakeholders and the public at large.
Compensation considerations in the implementation of an emissions trading scheme are not new.
In the EU ETS, much attention was focused on free permit allocation, particularly in light of the
impacts on emitters who were previously not subject to any cap on greenhouse gas emissions. In
fact the majority of permit allocation was free, with very little use of auctioning, and
grandfathering was generally the preferred approach in such allocation.35
In Australia, the PM Task Group Report noted that “it seems desirable to use permit allocations as
a means of providing compensation”,36 and the Department of the Prime Minister and Cabinet’s
paper entitled Early Abatement Incentives Discussion Paper (September 2007) (Early Action
Paper) recommended:
(a)
an up-front, once and for all, free allocation of permits to firms suffering a disproportionate
(that is, significantly larger than average) loss of asset value as a result of the introduction
of an aggregate constraint on Australia’s emissions; and
(b)
that trade exposed, emissions intensive firms will be subject to transitional arrangements
whereby they receive free permits while their international competitors do not face a
comparable carbon constraint to that in Australia.37
There is therefore a clear policy direction that some form of compensation (in the form of free
permits) will be considered for existing emitters (presumably on the assumption that those emitters
may not be able to fully pass through their costs of compliance). A date of 3 June 2007 has
already been set as the cut-off date, being the date of the Federal Government’s announcement that
it would introduce emissions trading. Assets must have been in existence, or committed, by that
date in order to be eligible for compensation.38
The Early Action Paper also proposes that abatement activities in the covered sectors occurring
between 3 June 2007 and the commencement of the NETS may be eligible for “early action
credits”.
There has been less public policy discussion of compensation in the context of the abolition and
transitioning of existing credit schemes such as GGAS. The Early Action Paper was noticeably
silent on the issue, its only comment being that: “Further consideration and consultation will also
occur in relation to transitional arrangements for participants in existing mandatory programs such
as the Greenhouse Gas Abatement Scheme.”39 Similarly, the NETT Discussion Paper noted that
“The NSW Government would consider the impact of the transition from GGAS to the NETS,
including the implementation of complementary measures … to overcome non-financial barriers to
investment”,40 and that “Benchmark Participants [under GGAS] and their expected obligations in a
35
36
37
38
39
40
See, for example, R Betz, W Eichhammer and J Schleich, “Designing National Allocation Plans for EU
emissions trading – A First Analysis of the Outcome” (2004) 5 (No 3) Energy & Environment 375-425.
PM Task Group Report, op cit n 12, p 114.
Early Action Paper, op cit n 2, p 5.
Ibid, p 2.
Ibid, p 14.
NETT Discussion Paper, op cit n 9, p 187.
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transition to the NETS would be considered by the NSW Government”.41 No public discussion
paper on the issues has yet been released by the NSW Government.
Arguably, compensation issues are just as relevant, if not more so, to moving from a credit scheme
to a NETS, as they are to moving from no regulatory regime to a NETS. Under both scenarios,
there will be some stakeholders who have made significant long-term investments on the faith of
previous regimes. Where the investment was made on the faith of a regulatory regime (being a
credit scheme) that was specifically designed to encourage those investments, arguably there is
even more of an entitlement to compensation than where the investment was not so actively
encouraged (due merely to the lack of regulation). This could be particularly so where the credit
scheme was designed to be in place for a fixed period of time, but was subsequently prematurely
shortened.
4.1
Legal and Policy Issues
On a more detailed level, however, the questions of precisely who to compensate, for how much,
in what manner and at whose expense are not so easy to answer. Clearly there are some complex
legal and policy questions surrounding the issues of compensation in this context.
Rights to compensation have historically been recognised in the context of the compulsory
acquisition of property. The extent of such entitlements beyond clear-cut property acquisitions,
particularly in relation to the questions of what constitutes property and whether regulation may
amount to a constructive taking, is arguably less clear and more complex from a policy
perspective. For example, in answer to the question “Can environmental regulation amount to a
taking of common law property rights”, Professor Kevin Gray wrote:
“That is a straight question, and it deserves a straight answer. The trouble is that, in this
area, straight answers are in very short supply. … Our inquiry into this matter will take us
well ‘beyond environmental law’ into complex areas of political and philosophical concern.
We will be forced to look deep into the inner meaning of the ancient and extraordinary
institution that we rather loosely call ‘property’. We will have to define the social limits of
ownership. We will have to debate the correct political balance between individual and
community interests. We will be required to examine the interaction of human rights and
civic duties. Our inquiry will ultimately comprise an exploration of the implicit content of
citizenship. For, in discussing the subject of ‘regulatory taking’, we are doing neither more
nor less than working out a modern civic morality of property. In the process, we may have
to recognise that we are moving into an area where conventional understandings of property
have steadily decreasing coherence or utility.”42
4.1.1 Expropriation versus regulation
The Australian Constitution enshrines the right to fair compensation for the acquisition of
property.43 Well before that, the common law recognised such a doctrine, its source being traced
back to the guarantee of the Magna Carta.44
41
42
43
44
Ibid, p 181.
K Gray, “Can environmental regulation amount to a taking of common law property rights?” Beyond
Environmental Law Conference (Faculty of Law, University of Sydney), February 2007, p 1.
Section 51(xxxi).
Gray, op cit n 42, p 7.
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At the other end of the scale, the common law has generally taken the view that mere regulation
(even if it interferes with a person’s property rights) does not require the payment of
compensation. Rationales for this include that environmental regulation results in the exchange of
individual property rights for improved civic rights to environmental welfare,45 that the privileges
of property ownership go hand-in-hand with social responsibility and limitations for the common
good, and that (from a pragmatic point of view) “the progress of civilised society would
effectively grind to a halt if every minor regulatory act of the state provoked an immediate
entitlement to a carefully calculated cash indemnity for the affected landowner”.46
Similar considerations were hinted at by the PM Task Group Report, which stated that: “In
considering who, and how much, to compensate we must emphasise … that the introduction of an
emissions trading constraint imposes an unavoidable cost on the whole economy”.47 In a similar
vein, the Australian Network of Environmental Defender’s Offices submitted to the NETT that
providing for compensation for regulatory measures would be likely to create precedents for other
sectors, result in an inefficient use of the limited resources devoted to protecting the environment,
make governments hesitate to regulate effectively for fear of financial repercussions and lead to
complex and costly litigation.48
Gray summarised these two common law doctrines, or rules of construction, as follows:
(a)
Expropriatory legislation is presumed (in the absence of an unequivocally expressed
contrary intent) to require the payment of compensation.
(b)
Merely regulatory legislation is presumed (in the absence of clear contrary intent) to
require no payment of compensation.49
He also noted that “Excessive limitation of user rights inevitably shades into expropriation”,50
although acknowledging that it is “unlikely that common law takings doctrine can catch anything
other than fairly rare and exceptional instances of regulatory intervention”.51
4.1.2 Property
In the context of transitioning to a NETS, while compensation issues will clearly arise as a policy
matter, it is doubtful whether there is any acquisition of property (actual or constructive).
In relation to existing emitters (such as fossil fuel generation), there will be no acquisition or
expropriation of any physical asset as a result of a NETS. Nor will there be a legislative
prohibition on existing operations, merely a price on those operations. It is also likely that the
caps would be set at a level to encourage efficiency of operations but not at such a level so as to
provide an incentive to close down operations altogether. For those reasons it may be difficult to
establish any acquisition of property giving rise to an entitlement to compensation.
Even if the caps were set at a level such that the only rational financial choice would be to close
down operations altogether, this does not necessarily lead to the conclusion that there is an
45
46
47
48
49
50
51
Ibid p 4.
Ibid p 5.
PM Task Group Report, op cit n 12, p 114.
Australian Network of Environmental Defender’s Offices, submission to the National Emissions Trading
Taskforce, 22 December 2006, pp 19-20.
Gray, op cit n 42, pp 6-7.
Ibid, p 10.
Ibid, p 11.
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effective sterilisation of property rights tantamount to constructive expropriation. For example, it
might be argued that there is no direct interference with the use of property, but merely an impact
on market conditions, and that it does not limit other uses of the land.
In relation to existing ACPs under GGAS, again there will be no acquisition or expropriation of
any physical asset, but if the revenue stream from NGACs is effectively abolished and not
replaced with something of equivalent value, again it may be that the only rational financial choice
would be to close down operations altogether. From this point of view the example is similar to
the one above. However, one significant difference is that in this example, something is being
taken away, which is rights under the GGAS scheme (which may include NGACs themselves and
current or future rights to create or rely on them). It might be argued that such rights are
themselves property, and to be considered in this context in addition to the impact upon the
physical assets or land upon which those assets are located.
As to whether NGACs or rights to them might be regarded as property, one often-cited House of
Lords formulation of property rights is as follows:
“Before a right or interest can be admitted into the category of property, or a right affecting
property, it must be definable, identifiable by third parties, capable in its nature of
assumption by third parties, and have some degree of permanence or stability.”52
The last requirement, “some degree of permanence or stability”, is an interesting one in the context
of a regulatory environment that is constantly changing. Might this imply that the more frequently
the legislature alters the nature or worth of such rights, the less likely it is that the rights will be
considered to be property (possibly giving rise to rights to compensation upon alteration)? If this
were the case, would it give the legislature a perverse incentive to frequently alter the rules?
Even if, on this test, NGACs could be regarded as property, in most cases the greatest loss upon
abolition of the GGAS scheme would not be of existing NGACs themselves but of current or
future rights to create or rely on them; rights that may not amount to proprietary rights.
4.1.3 Revocation or modification of statutory rights
Furthermore, the High Court has on a number of occasions considered that a statutory right could
be proprietary in nature but the Commonwealth could still retain the right to revoke or modify it
without the requirement to pay compensation.53 For example, in Commonwealth v WMC
Resources Ltd, McHugh J, in approving an earlier High Court decision (Health Insurance
Commission v Peverill), found that:
“Peverill is a clear authority for the proposition that, where the Parliament has created a
vested right of property under a head of power such as s 51(xxiiiA) of the Constitution, it
retains the power to amend, revoke or extinguish that right.”54
In addition, the common law doctrine which presumes that expropriation requires the payment of
compensation is at best a rule of construction. The High Court has dismissed the notion that there
is a common law protection against uncompensated expropriations of property that a State
52
53
54
National Provincial Bank v Ainsworth [1965] AC 1175 at 1248. See also Brad Wylynko, “On the Road
to Greenhouse Gas Emissions Trading” [2000] AMPLA Yearbook 359-376.
Health Insurance Commission v Peverill (1994) 179 CLR 226; Georgiadis v Australian and Overseas
Telecommunications Corporation (1994) 179 CLR 297; Commonwealth v WMC Resources Ltd (1998)
194 CLR 1.
Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 at 55.
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parliament (absent some constitutional limitation) cannot override.55 As there is no equivalent
constitutional provision at the State level, cases have held that States may acquire on any terms for
which they choose to provide in a statute, even though the terms are unjust.56 However, Gray
notes that “it is hugely questionable whether, save in extraordinary circumstances, state-authorised
confiscation accompanied by blatant denials of compensation therefore could long remain a
politically tenable stance”.57
4.1.4 Conclusion
It would therefore seem that there is not a strong legal basis for compensation upon the
introduction of a NETS and consequential abolition of schemes such as GGAS. Yet there seems
to be a clear expectation, including on the part of the Federal Government,58 that at least some
stakeholders should be entitled to compensation. Whether or not there is a legal requirement for
this is not necessarily the main issue. Certainty of laws (or alternatively, an assurance of
compensation) encourages investment, a key economic objective of Government. There are
therefore strong arguments in favour of compensation even where it is not legally required.
Against this, as discussed above, are strong arguments that this is not in the best interests of the
public and the environment.
4.2
Approaches in Other Statutory Frameworks
Although the GGAS scheme is silent on the issue, some statutory frameworks explicitly address
the question of the proprietary (or otherwise) nature of tradeable rights and whether or not
compensation is payable upon their extinguishment or reduction. Some selected examples are
given below.
4.2.1 US Acid Rain Program
The US Acid Rain Program (one of the first emissions trading schemes in the world, although of
sulphur dioxide emissions) provides that: “An allowance allocated under this subchapter is a
limited authorisation to emit sulphur dioxide in accordance with the provisions of this subchapter.
Such allowance does not constitute a property right. Nothing in this subchapter or in any other
provision of law shall be construed to limit the authority of the United States to terminate or limit
such authorization.”59
4.2.2 NSW Protection of the Environment Operations Act
Section 293 of the Protection of the Environment Operations Act 1997 (NSW) allows the
Environment Protection Authority to develop tradeable emissions schemes and green offset
schemes. Section 294(1) provides that: “The Crown does not incur any liability (including
liability for compensation) for any loss (including a loss in entitlements or in the value of
entitlements) incurred as a consequence of any of the following: (a) the implementation,
alteration, suspension or termination of a scheme referred to in section 293 or of any part of such a
scheme, (b) the alteration, suspension, cancellation or forfeiture of any rights or entitlements
under such a scheme.”
55
56
57
58
59
Ibid, p 9.
See, eg, P G Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382.
Gray, op cit n 42, p 9.
See Early Action Paper, although only in the context of existing emitters.
US Code Title 42, s 761b(f).
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4.2.3 NSW Water Management Act
Under the Water Management Act 2000 (NSW), by contrast, there is a limited right to
compensation for certain reductions in water allocations. Section 87(1) provides that: “A holder of
an access licence … whose water allocations are reduced as a consequence of the variation of a
bulk access regime may claim compensation for loss suffered by the holder as a consequence of
that reduction.” However, s 87(9) sets out limitations on this right.
4.2.4 Queensland Water Act
Similarly, s 986 of the Water Act 2000 (Qld) provides that an owner of a water allocation is
entitled to be paid reasonable compensation by the State if a change to a water resource plan
reduces the value of the allocation, and the change is made within 10 years after the water resource
plan is approved.
4.2.5 Future NETS scheme
The NETT Discussion Paper proposed that emissions permits would be property rights, and that
compensation would be payable for their removal. It stated:60
“It is proposed that permits be structured so as to give their holders firm property rights.
This means that the holder of a permit has a clear right to emit. It also implies that any
decision by governments to take away permits should be accompanied by compensation.
Failure to structure permits in this fashion would increase the uncertainty for holders of
permits, as well as for those wishing to purchase permits. The value of permits would be
reduced, all other things being equal, because there would be less certainty that they could
subsequently be used. This would transfer significant risk to the holders of permits, who
would find it more difficult to make decisions about long-lived investments.”
The Prime Ministerial Task Group on Emissions Trading, by contrast, does not explicitly address
this question, although the Report in a number of places refers to “tradable property rights”.
It may well be that a future NETS scheme will specifically address issues of property rights and
entitlements to compensation, as those issues might subsequently arise, for example, in the context
of altering scheme caps previously set.
4.3
Legitimate Expectations and Reliance
The policy arguments in favour of protecting the position of stakeholders under existing credit
schemes who have incurred substantial expenditure on long-term investments, or have entered into
long-term contractual arrangements, in reliance on an expectation that financial support would be
available from credits under that scheme, have some similarities to the doctrines of estoppel under
private law, or the doctrine of substantive legitimate expectations under public law.
The doctrine of substantive legitimate expectations is to some extent the public law equivalent of
the doctrine of estoppel. Lord Hoffman in R v East Sussex Country Council; Ex parte Reprotech
(Pebsham) Ltd stated that: “There is of course an analogy between a private law estoppel and the
public law concept of a legitimate expectation created by a public authority, the denial of which
may amount to an abuse of power.”61
60
61
NETT Discussion Paper, op cit n 9, p 120.
[2002] UKHL 8 at 34.
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The leading English case on this doctrine is the case of R v North and East Devon Health
Authority; Ex parte Coughlan.62 In that case, the Court of Appeal of England and Wales
recognised that reneging on a representation, promise or practice without adequate justification can
be an abuse of power that is judicially reviewable. The applicant in that case, Coughlan, was a
tetraplegic, doubly incontinent and required constant nursing aid. She had been moved to a
nursing facility, Mardon House, from an earlier home, on the promise that Mardon House would
be her home for life (or until she wished to move to alternative accommodation). Subsequently,
the North and East Devon Health Authority decided to close Mardon House, based on a new
policy that preferred to move patients away from institutional settings and into community
settings. However, the effect of this was that patients were moved away from free services.
Coughlan sought judicial review of the decision to close Mardon House. The court found that the
Authority had reneged on its promise without adequate justification and decided that the decision
was substantively unfair.
This does not necessarily mean that an authority will always be bound by its undertakings. The
undertaking must be within power, and there may be circumstances in which it is not in the public
interest to honour the undertaking.
One element of this doctrine is that the representation must have been made to a limited number of
people, rather than the public at large.63
Unlike private law estoppel, detrimental reliance is not a necessary component of the doctrine. In
Bibi v Newham LBC,64 Schiemann LJ stated that: “To disregard the legitimate expectation because
no concrete detriment can be shown would be to place the weakest in society at a particular
disadvantage. It would mean that those who have a choice and the means to exercise it in reliance
on some official practice or promise would gain a legal toehold inaccessible to those who, lacking
any means of escape, are compelled simply to place their trust in what has been represented to
them.”65
This line of authority has not been well accepted in Australia, primarily due to concerns with the
separation of powers. In Re Minister for Immigration and Multicultural Affairs; Ex parte Lam,66
the High Court held that expectations by a person about future administrative action, however
legitimate, could only generate rights to procedural fairness if they are to be disappointed, not to
have those expectations fulfilled. They considered that otherwise the courts would start to become
involved in assessing the merits of the decision, which is not the role of judicial review.
The doctrine of substantive procedural fairness is a principle of administrative law (concerning the
executive arm of government), not constitutional law, and there is no suggestion that these
principles bind the legislature in any way (unlike, for example, principles within the Australian
constitution regarding compensation for the acquisition of property). However, a comparison with
this area of law is instructive as it may resonate with the reasonable concerns of stakeholders, and
give an indication of what citizens might reasonably expect from a government that encourages
certainty of investment.
62
63
64
65
66
[2000] 2 WLR 622.
Ibid, at 655.
[2001] EWCA Civ 607.
Ibid, [55].
(2003) 195 ALR 502.
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Extent of Compensation
If it is accepted that some provision will be made for compensation, to existing emitters and/or
ACPs, and whether in the form of free permit allocation or some other form, the question is then
the appropriate extent of compensation.
4.4.1 Existing emitters
For existing emitters, the Early Action Paper indicated that compensation will be available for
those firms with assets in existence on 3 June 2007 facing disproportionate loss in asset value.
However, the paper does not discuss the extent of compensation nor how it will be calculated.
This was touched on previously in the PM Task Group Report, which suggested an approach
whereby the free permits would have a collective value broadly equivalent to the excess loss of
value – that is, the amount by which the loss exceeds a benchmark loss. To use the example given
in that report, say that an electricity generator owns assets with a market value of $1 billion (the
net present value of expected future income flows), and whose net income loss after the
introduction of a NETS will be $200 million (a 20% reduction). If modelling were to show that
economy-wide losses amount to 5%, free permits could be allocated to compensate for any
proportion of loss in excess of this amount.67
4.4.2 Existing abators – investments made on the faith of a credit scheme
If the aim of compensatory provisions is to protect the life of investments made on the faith of a
credit scheme such as GGAS, arguably the appropriate measure of compensation is the value of
the revenue stream from NGACs until the earlier of the life of the scheme and the life of the
investment.
If this approach were taken, one question is what constitutes the life of the scheme. For example,
when the NSW GGAS was initially introduced in 2003, its life was until 2012.68 With the
commencement of the Electricity Supply Amendment (Greenhouse Gas Abatement Scheme) Act
2006 (NSW), the scheme was extended until 2021 and beyond, until the establishment of a
national emissions trading scheme. Section 97KB of the Electricity Supply Act 1995 (NSW) now
provides as follows:
“97KB Termination of operation of Part on establishment of national scheme for
reduction of greenhouse gas emissions
(1)
The Governor may, by proclamation published in the Gazette, terminate the
operation of any or all of the provisions of this Part.
(2)
A proclamation may be made only if the Minister has certified to the Governor that
the Minister is satisfied that New South Wales is, or will be, a participant in a
scheme that:
(a) has been or will be established (either nationally or in this State and at least one
or more other States or Territories), and
(b) is designed to achieve outcomes that include the reduction of greenhouse
gas emissions associated with the production and use of electricity and
67
68
PM Task Group Report, op cit n 12, p 114.
See Electricity Supply Amendment (Greenhouse Gas Emission Reduction) Act 2002 (NSW).
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encouragement of participation in activities to offset the production of
greenhouse gas emissions nationally or in the participating jurisdictions.
(3)
The termination of the operation of the provisions concerned takes effect on the day (not
being a day earlier than the day on which the proclamation is published in the Gazette)
specified in the proclamation.
(4)
The day specified in the proclamation must not be a day that is earlier than the day on which
New South Wales becomes, or will become, a participant in the scheme concerned.
(5)
Regulations may be made for or with respect to the effect of the termination of any provisions
on rights conferred or obligations imposed under this Part.
(6)
Without limiting subsection (5), regulations may specify conditions that must be complied
with in respect of termination of a provision.”
The extension of GGAS was “intended to provide certainty to the market and industry that
investment in low greenhouse-intensity generation and other abatement projects would continue to
have a value beyond the end of the current scheme in 2012, if agreement on a NETS is delayed”.69
However, in practical terms it provides industry with very little certainty regarding the life of
GGAS, or how transitional provisions will deal with existing projects or long-term forward
agreements. On the one hand it might be argued that the scheme extension was introduced
precisely for the purpose of ensuring that investment decisions were not halted. On this basis, it
might be argued that for the purpose of assessing compensation, the life of the scheme should be
considered to be 2021 (at least for the purpose of investment decisions made after the
announcement of the scheme extension.) On the other hand it might be argued that as it has
always been clear that GGAS would terminate upon the introduction of an emissions trading
scheme, hence scheme participants were not entitled to rely on the scheme being in place until
2021.
4.4.3 Existing contracts
Another policy question is what provision should be made in relation to existing forward contracts
for credits that might become frustrated by the abolition of a credit scheme such as GGAS, or for
other existing contracts that inhibit a party’s ability to respond to new price signals (for example,
electricity purchasing or hedging contracts). Rationales in this regard would be around preserving
existing arrangements and expectations (rather than frustrating them). In doing so the position of
both parties to the contract will need to be considered (in that preserving a benefit for one party
may be preserving a detriment for another), as would the relative contracting positions of
competitors (eg benchmark participants under GGAS).
Any grandfathering regime by reference to the length of an existing contract should ideally clarify
with legal precision the treatment of options to renew or extend, renewals and extensions by
mutual agreement, assignments and novations, variations, renegotiations, price reviews and other
review opportunities.
The above points are just a few examples of the complexity of the issues surrounding not only who
should receive any type of compensation but also surrounding calculating the appropriate extent of
it in any particular case.
69
NETT Discussion Paper, op cit n 9, p 187.
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CONCLUSION
In moving towards a NETS, attention will need to be directed towards, among other things,
compensatory transitional provisions. Impacts upon both existing emitters not currently subject to
an emissions constraint, and existing abators who receive credits under existing emissions
abatement schemes (and on participants who buy them), will need to be considered. The
allocation of free emissions permits may be the most practical way to achieve this.
There is plenty of overseas precedent for considering the impacts on existing emitters. There is
less precedent for considering the impacts on participants under existing credit schemes. This will
be a particular challenge for Australia given the proliferation of credit schemes that have grown up
prior to the introduction of an emissions cap. Moving from credit-based schemes to a permitbased scheme involves some particular and complex transitional issues, as it involves a
fundamental change in the nature of the commodity being traded and who derives value from it.
In the absence of certain conditions, there may be disproportionate adverse financial impacts on
particular parties, which compensatory transitional provisions would be designed to address.
The legal basis for compensation is not so clear. The traditional trigger of an acquisition of
property will not necessarily be present. Nonetheless, there are some complex policy issues
associated with compensation as a result of environmental regulation. At the centre of the debate
is the trade-off between individual and collective welfare, and the extent to which individuals
should be required to make sacrifices at their own expense for the common good. The legitimate
expectations of stakeholders, and the way in which the law has traditionally dealt with those
issues, may also be a relevant factor from a policy perspective.
Ultimately, the objective of ensuring that Australia has and maintains a reputation for a good
climate of investment certainty, where investors may confidently rely on either certainty of laws or
an assurance of compensation, may be the most significant policy driver.