12 December 2012 – With media focused on protracted sniping between Prime Minister Julia Gillard and the Opposition in the final week of Federal Parliament, legislation passed in the Senate, inking the linkage of Australia and Europe’s emissions trading systems went largely unnoticed.
But it’s a certain bet Anthony Hobley, a partner at the London office of global law firm Norton Rose, would have been watching with immense satisfaction from the sidelines when The Clean Energy Legislative Amendment (International Emissions Trading and Other Measures) Act 2012 and associated parcels of legislation were passed by the Senate, without amendments, by 34 votes to 28 on the evening of 26 November.
Hobley heads the firm’s global climate change and carbon finance team, specialising in climate change, carbon finance and clean energy law and was previously based in Sydney.
He is a frequent traveller to climate symposiums and conferences. In New Delhi recently, he was invited by the European Commission to speak on the investment in carbon development mechanism in India and in Budapest he chaired a session jointly with Prince Andrew at the British Embassy.
The demand for his expertise saw Hobley in Melbourne last month, giving a keynote address at the Carbon Expo about opportunities for greater global linking of emission trading schemes such as that between Australia and the EU, titled “Linking carbon markets – the new paradigm for international climate change action”.
Hobley delved into the broader economics and desirability of the linkage – who would set the price emission trading schemes for Australia, pricing achieved through linkage and specific legal and regulatory hurdles required to make the legislation a reality.
He also canvassed whether Australia would make similar links to schemes in other countries, the pros and cons of linking and political uncertainties around emission trading.
Hobley likens the linkage to a bilateral trading scheme. He says if Tony Abbott (who has promised to repeal the legislation), was elected as Prime Minister next year, the legislation would be extremely difficult to unwind.
The legislation is framed in such a way that it would still continue to function on its own and the transition, for instance, from fixed to floating carbon prices and the caps were straightforward.
The lawyer, often cited as a “climate thinker”, has a first-class honours degree in chemistry with physics and a Masters Degree in International Environmental Law from the University College of London.
He is well versed in the Australian and the EU schemes, having spent two years in the Sydney office of Norton Rose, shortly after it merged with Deacons in 2010. He returned to London in January this year.
He laughs about the irony of intending to only be in Australia a month to develop opportunities in the carbon trading sphere, when then Prime Minister Kevin Rudd abandoned the Carbon Pollution Reduction Scheme.
In London Hobley has advised the EU Commission on the preparation of its registries regulation for an EU-wide system of green house gas registries and is presently advising the EU Commission, investment banks, carbon funds, project developers and corporates in the carbon market on the regulation of greenhouse gas emissions from shipping.
He was instrumental in the design of the UKs pilot emissions trading scheme and in developing key aspects of the EU ETS.
In a nutshell, this new linkage legislation means Australian businesses liable for the carbon price will be able to buy permits under the European Union emissions trading system to use for compliance under Australia’s system.
It will happen in two stages. From 1 July 2015, Australian emitters will be able to surrender EU allowancesto meet up to half of their compliance obligations under Australia’s Carbon Pricing Mechanism .
From 1 July, 2018 EU emitters will be able to surrender Australian carbon units to fulfil their EU ETS liabilities – or as Hobley describes it, the schemes “will become fully fungible, creating a single market for allowances”.
Initially, Australian carbon units were subject to a $15 reserve for the first three years of the scheme and businesses surrendering international units in Australia were subject to a surcharge to ensure the cost was up to the reserve.
These provisions have now been repealed in the new legislation, allowing the price of Australian carbon units to move to reflect EU ETS unit prices, and ensuring Australian traders are not disadvantaged if electing to surrender international emissions units to meet their Australian carbon tax liability.
But the government still has the power to set a reserve price for each auction and to decide how the reserve price will be determined.
The links between Australia and the EU systems will create lower cost compliance opportunities, Hobley says
“This means businesses will be able to start pricing carbon units into investments such as infrastructure and energy.”
Hobley says many Australian companies and businesses have still to tune into the detail of the legislation and the impact it will have on them – in part because they became tired of preparing for the changes, only to see them abandoned at the last minute.
But he says they will have to get to grips with it, noting that under the scheme mooted by the Rudd government, the CPRS, liability rested at corporate level, whereas under the new regime, it rests at the facility level, an area, he says emitters will have to understand.
He also says they will also need to understand jobs and competitiveness package, and what carbon emissions intensity criteria will qualify for free permits.
Hobley says Norton Rose saw an opportunity in 2006 to build a global market, specialising in climate law and clean energy.
“It was very different then and there was excitement for new big things that did not pan out in the carbon markets,” he says.
But it was on the back of this global expansion and Australia mooting progressive plans for carbon and clean energy markets that he moved to Australia in 2010 to become involved in the development of those markets, which included the setting up of the Business for a Clean Economy umbrella group and doing advocacy around the Australian Clean Energy package.
He also used Australia as a base to work on climate schemes in Asian markets, including China and its Clean Development Mechanism transactions.
Hobley believes Australia will be able to have a really good shot at developing a global fund for clean energy finance – the equivalent of one in China or elsewhere.
“It will have to look at how you incentivise money to flow into low carbon schemes,” he says.
“Everyone is focused on climate finance – it is all very well setting up funds seeded with public sector money, but if you don’t have incentives for renewable energy schemes they won’t happen.
“You need the things that drive it such as solar and wind farms. There has got to be a revenue stream for long and steady returns.”
Hobley says commercial and residential property has to come into it in some way or form.
“How you incentivise the property market begins at the point of encouraging customers to use energy schemes and approved energy efficiencies, that have massive government grants,” he says.
“We have got to attract every dollar of public money 10 times over and spend it wisely to de-risk the projects otherwise there is little overall impact.”
Syndicated private transaction
Hobley was previously general counsel to the Carbon Funds and director of legal policy at boutique investment bank Climate Change Capital in London where he was involved in the biggest private syndication of a carbon transaction – a $100 million Euro fund in India.
He says he is presently working for a developing country government on scoping out options for its climate and clean energy legislation, advising on key investment procedures, including CDM and joint implementation mechanisms, which enable industrialised countries to undertake projects in developing countries.
He also manages to find time to be a board member of the Carbon Markets & Investors Association . He was chairman and one of the founders of the Carbon Markets Association which became the CMIA.
He has also been actively involved in creating organisations, including Green and Tonic, a London based network for sustainability professionals, The Verified Carbon Standards Association and is on Sean Kidney’s advisory board to the Climate Bonds Initiative.