1 June 2012 ­­– A national framework to improve energy efficiency in homes and businesses is expected to be rolled out by 1 October.

The Greenhouse and Energy Minimum Standards legislation to Parliament last month after agreement between the Australian Government, the New Zealand Government and states and territories.

Key changes to the bill following 20 stakeholder submissions include:

  • Alignment with the building Code of Australia to avoid discrepancies. Following recommendations that the GEMS program should be aligned with the Building Code of Australia have led to agreement that the GEMS program will not be a “de facto” building code but considers there are benefits in enabling Australia’s energy efficiency program to establish labelling and potentially minimum performance standards, for individual product types that affect energy consumption and greenhouse gas emissions.  The GEMS program focus on mandatory consumer information and standards for individual product types contrasts with the Building Code’s predominant focus on structural systems, and voluntary labelling schemes. Despite the difference in focus, the GEMS determinations will be aligned with the Building Code to avoid discrepancies.
  • a default period of 12 months between a determination being made and commencing
  • As a way to balance risk and business impact,  most cases, products imported before a new determination comes into effect may be sold indefinitely, by all suppliers.  In no circumstances can products imported or manufactured after a determination comes into effect be supplied if they do not comply with the new determination.
  • Criminal penalties, which are limited to fines rather than imprisonment, will be retained as a potential remedy as they provide an effective deterrence and sanction for serious contraventions of the Act by bodies corporate and individuals.

Climate Change and Energy Efficiency Federal Parliamentary Secretary Mark Dreyfus said the GEMS  was forecast to result in energy savings worth $5.2 billion dollars in 2020.

“Energy savings  was one of the simplest ways for households and businesses of all sizes to save money through smarter energy use and reduce dangerous greenhouse gas pollution,” Mr Dreyfus said.

“GEMS will accelerate the roll out of more efficient household appliances, commercial equipment and industrial machines and replaces seven state and territory legal frameworks with a single, consistent national law and regulator,” he said.

GEMS will incorporate the Equipment Energy Efficiency Program (E3) that set has minimum energy performance standards for more than 20 years and removed inefficient products from the market.

“It will provide the public with information to identify and demand better products using the familiar yellow and red Energy Rating Label – an effective incentive for manufacturers to keep improving the efficiency of their products.

“The E3 program has been one of the quiet achievers of Australia’s emissions mitigation efforts and GEMS will expand on that work.

“It’s projected to deliver more than 20 per cent of Australia’s emissions abatement in 2020 and forecast to help save households and businesses some 32,000 GWh of energy compared to business as usual. This equates to approximately $5.2 billion in energy savings in 2020.”

Following are responses to key issues raised by stakeholder submission to the Greenhouse and Energy Minimum Standards (GEMS) Bill

In August 2011, the Department of Climate Change and Energy Efficiency released the draft Greenhouse and Energy Minimum Standards Bill for consultation and comment by interested stakeholders.  The consultation process attracted approximately 100 attendees to discussion forums in Sydney and Melbourne and approximately 20 written submissions.

Statutory notice period

  • Current State and Territory laws relating to energy efficiency and labelling requirements commence on the day they are made.  In developing the GEMS Bill, Australian jurisdictions considered there were benefits in allowing a statutory notice period between the date on which a GEMS determination is made and the date on which it comes into force.  The draft Bill proposed a three-month statutory notice period between the date on which a GEMS determination is made and the date on which it comes into force.
  • A number of submissions recommend a longer notice period, with 12 months and 36 months being the two most common recommendations for an appropriate notice period.  The recommendations for longer notice periods are predominantly found in submissions from stakeholders in the refrigerator and heating/cooling appliance sectors.
  • Australian governments acknowledge the requests for a longer statutory notice period, noting that while no notice period currently exists there are benefits in ensuring businesses and other stakeholders know in advance the date on which new legal obligations will commence.
  • The revised Bill will establish a default period of 12 months between a determination being made and commencing, although the commencement date itself will be specified in the text of each GEMS determination.
  • A determination may specify a longer or shorter time before commencement, to allow flexibility.  All stakeholders will be able to submit reasons for longer or shorter notice periods during consultation on each new GEMS determination.

Controlling stockpiling risk/Grandfathering

  • To control the risk that products that do not comply with a new determination may be stockpiled for sale far into the future, the draft Bill imposed a limit on supplies of all non-compliant products.  The limit meant that products imported to or manufactured in Australia before a determination was made could only be sold for two years after the date on which the law was made, an approach that is commonly known as a ‘grandfathering’ or ‘sunset’ clause.
  • Stakeholders reported that in the appliance industry it is not unusual for client businesses, especially those with market power, to return products they cannot sell for a refund.  A wide variety of stakeholders advised that a universally applicable grandfathering clause would result in widespread return/refund demands from retailers who retained non-compliant products at the end of the two-year period.
  • Australian governments acknowledge the concerns with a universal grandfathering period raised by stakeholders but consider that stockpiling risk does require management.  The objectives of the GEMS program could be greatly undermined if less efficient products are stockpiled in the Australian market after new determinations are issued to improve energy efficiency and reduce Australia’s greenhouse gas emissions.
  • To strike the correct balance between risk mitigation and business impact, an optional grandfathering clause is proposed, intended for use in cases where a ban on sales is considered necessary to prevent or address stockpiling risk.
  • In most cases, products imported before a new determination comes into effect may be sold indefinitely, by all suppliers.  In no circumstances can products imported or manufactured after a determination comes into effect be supplied if they do not comply with the new determination.
  • In specific cases where a stockpiling risk is considered to require management, a determination may impose a ban on all supplies of non-compliant products imported or manufactured before the determination took effect.  Stockpiling risk may be established by previous experience with certain products, by data that indicates a surge in less efficient products before new determinations come into effect, or by assessment of the potential for goods to be stockpiled, which may be more likely with smaller and less expensive products.
  • The removal of the mandatory grandfathering clause will be balanced by monitoring of import, manufacture and sales data, which can be obtained under the Act and is discussed further in section 4.  If data indicate that products are being stockpiled to undermine GEMS determinations, this may result in more frequent application of the optional grandfathering provision.

Process for making GEMS determinations

  • Submissions raised two particular issues regarding the process for making determinations, recommending a transparent process and raising some concern that the legislative process would ‘bypass’ Standards Australia.
  • All GEMS determinations will be Commonwealth legislative instruments and subject to the Council of Australian Governments’ (COAG) guidelines on the development of new regulations, including the requirement to conduct a transparent Regulation Impact Assessment with a published Regulation Impact Statement.
  • The intergovernmental agreement between Australian jurisdictions to guide the GEMS program will record these obligations and also record an obligation for jurisdictions to conduct a transparent consultation process and Regulation Impact Assessment for any jurisdiction-specific requirements proposed.
  • Australian governments will consider supporting the COAG guidelines with a written policy outlining expected consultation processes for new GEMS determinations.
  • Submissions raising concern about the ability to ‘bypass’ Standards Australia may indicate a misunderstanding of existing legislative processes.
  • Similarly to existing State and Territory laws for energy efficiency and labelling standards, GEMS determinations will be legislative instruments.  Legislative instruments may impose legal obligations by ‘calling up’ existing documents (eg. Australian Standards) and granting their terms the force of law, or by specifying terms of the law in the instrument itself.
  • The GEMS Bill will not alter the established legislative process by introducing a requirement for new laws to call up documents drafted by a specific standards body.
  • However, organisations like Standards Australia will continue to be important stakeholders in the development of GEMS requirements and Australian governments anticipate the GEMS program will use the services of standards bodies in various cases.
  • This approach preserves the established legislative process and ensures that new GEMS determinations can call up appropriate domestic or international standards without requiring Standards Australia to duplicate an existing document, which would be time consuming and burdensome for industry and Government.

Data reporting – section 56

  • Section 56 of the draft Bill permits the GEMS Regulator to request information from companies with products listed on the GEMS Register, regarding the number of registered products that have been imported, manufactured and/or sold in Australia.
  • Some submissions queried what purposes the data would be used for or expressed concern that commercially sensitive material may not be protected and could be commercially damaging if shared overseas or published.
  • The data obtainable under section 56 will be an important resource for administering and monitoring the GEMS program.  The data will assist to:
  • identify which areas of the market are progressing toward greater efficiency without intervention and those areas in which intervention is required to drive greater efficiency
  • inform consideration of any extension/reduction of the statutory notice period before commencement of GEMS determinations
  • assess stockpiling risks
  • evaluate the effectiveness of existing regulations, and the accuracy of past projections of energy use and savings
  • target compliance checks to product areas and industry sectors with the heaviest traffic
  • It is appropriate to obtain this information directly from businesses as the commercially available sales data is limited in coverage and industry representatives have advised it may not always be up to date.
  • As Australian governments develop the reporting framework, particular attention will be given to the lessons learned in the similar data reporting framework established in New Zealand.  We will continue to consult with GEMS registrants to balance an effective reporting tool with ease of use, including aligning requests for information with the New Zealand reporting cycle where practical.  While requests for information are not expected to commence immediately upon the commencement of the GEMS program, Australian governments recommends that businesses consider their reporting lines throughout 2011-2012 to prepare for future requests.
  • Australian governments acknowledge the concerns about commercially sensitive information and considers the combination of statutory and procedural protections will ensure that information is appropriately protected.
  • Specific statutory protections in the Bill include the offence under section 177 for disclosing information for reasons other than authorised purposes and the prohibition against disclosing commercially sensitive information as evidence in court proceedings, under section 179.
  • Section 178 authorises the sharing of information for various reasons, including sharing information with overseas entities involved in the administration or development of energy efficiency standards.  Some submissions raised concern this would involve sharing business data that could damage Australian businesses.  The authorisation to disclose information to overseas parties is primarily intended to permit sharing of check testing reports, where this would assist the enforcement or development of standards.  There is no intention to share or publish sales or other product data that would compromise commercially-sensitive business interests, although there may be situations where sharing aggregated data could be useful in a project to monitor global trends in efficiency.  The potential business impacts of sharing aggregate data will be considered in any decision.
  • With regard to Freedom of Information (FOI) requests, section 47G of the Freedom of Information Act protects information about business, commercial or financial affairs.  Such information is exempt from disclosure under an FOI request if the disclosure would have an unreasonable adverse affect on business or commercial affairs, or if it would prejudice the future supply of information to the Commonwealth.  In any case where an FOI request might cover business or commercial information, the person to whom the information relates would be contacted prior to release and have the opportunity to advise on any potential adverse affects.
  • Australian governments understand that some concerns may remain about the protection of information obtained under the Act.  To address these concerns Australian governments will develop a publicly available information handling policy to inform the handling and sharing of information obtained under the Act, prior to the GEMS program commencing.

Registration fees

  • Submissions requested further information on the structure of registration fees.
  • Registration fees will differ between six different bands of product type, determined with reference to the cost of regulating the product type and the likelihood for products to be differentiated into many models or model families, which would affect registrants’ ability to pay multiple registration fees.
  • Regulatory costs may be influenced by the cost of store audits, the amount of technical work required to process registrations and monitor compliance, and particularly the cost of check testing, which can vary dramatically depending on the amount of time required to test product types or the requirement for sophisticated machinery.  Initial fees for new registrations under GEMS are likely to range from $250 for Band 1 product types to $650 for Band 6 products types.

Families of models

  • Some submissions raised concerns that products will be unsuited to grouping into families if families are dependent on identical efficiency levels and will therefore require multiple registrations, with multiple fees.  For example, compact fluorescent lights of the same wattage may have different performance for each different colour.
  • Family of models is an administrative concept that allows similar product models to be grouped under a single registration.  Each determination will set the parameters for families in each product type but, in general, the concept of families is intended to group like products so products that require different test reports to demonstrate compliance with energy standards are likely to constitute different families.
  • Australian Governments acknowledge the potential for certain product types to be less amenable to families than others and this could be taken into account when setting fees for product types and in the registration process.  Products types that are not likely to fall into families could be assigned a lower fee bracket and may be registrable via a group registration, attracting lower fees than individual, separate registrations.  This latter approach has been operating in the existing Equipment Energy Efficiency Program.

Penalties – Criminal sanctions and suspension of registration

  • Submissions requested more information on the application of criminal penalties and the power to suspend product registrations, or expressed concern that these penalties could apply to relatively minor infractions.
  • An enforcement policy is being drafted to guide the application of the various possible sanctions for contraventions of the Act.  This policy is expected to follow existing enforcement policies issued by regulatory agencies, which reserve the most serious remedies for the most serious breaches.
  • With regard to the power to suspend registrations, this is a discretionary remedy the Regulator is entitled but not required to exercise where there is sufficient evidence to suspect provisions of the GEMS Act have been contravened.  It complements rather than replaces voluntary halts to sale arranged between the Regulator and individual businesses and any decision to suspend a registration is subject to review by the Regulator and the Administrative Appeals Tribunal.
  • Criminal penalties, which are limited to fines rather than imprisonment, will be retained as a potential remedy as they provide an effective deterrence and sanction for serious contraventions of the Act by bodies corporate and individuals.

Building Code of Australia

  • A limited number of submissions recommended that the GEMS program should be aligned with the Building Code of Australia, or queried what additional benefits the scheme would add to the existing Building Code.
  • Australian jurisdictions agree the GEMS program will not be a de facto building code but consider there are benefits in enabling Australia’s energy efficiency program to establish labelling requirements to inform purchase choices, and potentially minimum performance standards, for individual product types that affect energy consumption and greenhouse gas emissions.  The GEMS program focus on mandatory consumer information and standards for individual product types contrasts with the Building Code’s predominant focus on structural systems, and voluntary labelling schemes.
  • Despite the difference in focus, the GEMS determinations will be aligned with the Building Code to avoid discrepancies.  Consultation on all new GEMS determinations will grant businesses and individuals the opportunity to raise any perceived conflicts.

Transfer of registrations

  • A final important issue for Australian businesses is the process for transferring existing registrations from the current State and Territory energy efficiency program to the national GEMS program.
  • The intended commencement date for the GEMS program is 1 July 2012 and businesses will have until 1 July 2013 to transfer any existing registrations to the national scheme.
  • Registrants may apply for a new, five-year registration under the GEMS program, with applicable fees, or apply to transfer the existing registration for the remainder of its life, without a fee.  The mechanism to transfer registrations will be developed in time for the commencement of the GEMS program.
  • Existing registration obligations under State and Territory law will continue to apply throughout the transition period and products that are not registered after 1 July 2013 risk attracting penalties under Commonwealth law.

Following is an edited version of the parliamentary address by Mark Dreyfus:

“The Greenhouse and Energy Minimum Standards Bill 2012 implements a commitment by this government and the Council of Australian Governments to achieve nationally consistent regulation of equipment energy efficiency.

“The national framework established by the bill will, for the first time, establish uniform national legislation for energy efficiency. In doing so, it will replace seven overlapping pieces of state legislation and allow future expansion of the Equipment Energy Efficiency Program, commonly known as the E3 program.

“Today, the E3 program now includes New Zealand and covers 23 product types in the residential, commercial and industrial sectors, delivering energy and financial savings to Australian households and businesses.

“It relies on two main tools: mandatory minimum efficiency levels, and energy rating labels.

“Minimum efficiency levels help to keep the most inefficient products out of the Australian market (while) energy rating labels help Australian consumers and businesses compare upfront costs with costs over time, assisting them to make the best purchasing decisions.

“Despite the successes of the E3 program, further improvements are possible. Australian governments have coordinated well to achieve energy savings, but over 26 years inconsistencies have arisen across the state-based programs.

“These inconsistencies increase the regulatory burden for businesses and governments alike.

“To address these inconsistencies the Council of Australian Governments agreed in 2009 to establish national legislation to regulate energy efficiency.

“The Greenhouse and Energy Minimum Standards Bill 2012 will implement the joint commitment to address the inconsistencies in the E3 program and streamline processes for Australian businesses.

“The bill will establish a single national regulator and a single program framework. The new law will replace seven state based legal frameworks. The new national regulator will replace four state based regulators.

“Obligations, efficiency standards, registration processes and fees will be harmonised. The national system will improve the regulatory framework while retaining the best of the existing system.

“Existing efficiency standards and the popular energy rating label will remain unchanged.

“Over the past two decades the E3 program has focused primarily on electrical equipment. The new national framework will allow Australian governments to regulate energy efficiency for a greater range of products.

“The expanded E3 program can cover electricity, gas or other energy sources. It can regulate products such as windows and insulation, which affect the energy use of heating and cooling systems. Into the future Australians will benefit from increased energy efficiency across a greater range of products.

“For the first time, businesses that directly import products for commercial use will also be subject to these obligations. The existing E3 program only targets businesses that supply products in Australia and does not regulate businesses that purchase products overseas.

“In conclusion, the E3 program is an important part of ensuring affordable energy for all Australians and assisting Australia’s transition to a low-carbon future.

“The benefits are real and significant. By 2020 existing E3 measures are forecast to save Australian households and businesses $5.2 billion per year and reduce household electricity use by 13 per cent per year compared with business as usual.

“The planned regulatory program is forecast to bring about a further reduction of almost 15 per cent, saving Australian households more than 25 per cent of their yearly power bills.

“The Australian government is committed to reducing energy costs for Australian households, to reducing market barriers for Australian businesses and to reducing greenhouse gas emissions for the entire country.

“The improvements made by the Greenhouse and Energy Minimum Standards Bill will ensure a strong foundation to continue this important work well into the future.”