As we reported in our October Market Update, momentum is building for an agreement to be reached between the government and the crossbench on the first phase of the government’s Direct Action Plan – the Emissions Reduction Fund – with a narrow window for the Senate to vote on the CFI Amendment Bill in the next 48 hours.
Following the release of Senator Xenophon’s proposed changes to the CFI Amendment Bill, the Palmer United Party continues to progress in its own negotiations with the Coalition, with a broad framework now believed to be agreed between the parties. This will result in a revision of amendments initially tabled by Senator Xenophon, notably Xenophon’s proposed ‘strategic reserve’, which is unlikely to be included in the final legislation.
A Senate vote on the CFI Amendment Bill is expected to be brought forward tomorrow, with the timeline for progress on counter terrorism legislation (Foreign Fighters Bill) likely to determine the ability of a vote on climate policy to be called prior to the end of the current sitting period on Thursday.
The Foreign Fighters Bill, despite strong criticism from the crossbench, is expected to pass with the support of the ALP, with a government gag likely to limit debate today, minimising any potential bottleneck in the Senate, and clearing the way for the CFI Amendment Bill to be debated and voted on prior to the end of the sitting week.
Passage likely, 'strategic reserve' less likely
The government remains confident that its CFI Amendment Bill will be supported, with the bill expected to pass with amendments as agreed by the Environment Minister (and Cabinet), the PUP and Senator Xenophon.
These amendments are unlikely to include Senator Xenophon’s proposed ‘strategic reserve’, with this proposal meeting with resistance among both the Cabinet and the PUP, making it the least likely of the Xenophon amendments to be agreed.
As a result, the future of any set aside of up to 20 per cent of the ERF to purchase international carbon units is unclear. Regardless, this will have little impact on the operation of the ERF (aside from the size of the ERF itself), instead placing pressure on the future design of any safeguard scheme to reduce domestic emissions in line with Australia’s 5 per cent target – and any future 2030 ambition.
The PUP has taken significant steps with the government in recent weeks, with support largely in place for a bridging agreement to be established (as noted in our October Market Update), enabling a vote on the ERF to progress while debate continues on the future shape of any safeguard scheme or ETS.
As noted, the PUP is expected to vote in support of the CFI Amendment Bill in return for a formal report into the establishment of an emissions trading scheme, along with updates on international climate policy progress by a third party agency, potentially the Climate Change Authority.
This reporting process – be it formal or informal – is expected to satisfy PUP’s demands for a meaningful commitment to explore an ETS, which will be enough to enable a vote on the ERF to progress. As noted, we do not currently expect this to include PUP support for Xenophon’s ‘strategic reserve’ amendment.
Watch this space
The Carbon Farming Initiative Amendment Bill currently sits as the fourth in line on the Senate’s order of business, with debate expected to shift to the Higher Education and Research Reform Amendment Bill and Social Services Bill following the passage of the Foreign Fighters Bill today.
With only two sitting days remaining for the Senate in the current sitting period (the next sitting will commence on November 24), this provides a narrow window for a vote on the Emissions Reduction Fund, which barring any unforeseen delays, is expected to take place tomorrow as the government seeks to strike while the iron is hot and bring forward a vote.
As noted, assuming a vote is brought forward in the Senate prior to Thursday, passage of the CFI Amendment Bill is expected to proceed, with Senator Xenophon’s amendments forming the starting point, but not the end point for the final legislation.
RepuTex’s Market Insider publication is a monthly review of the key events and activity shaping the Australian emissions markets. It was originally published by RepuTex under its Australian emissions markets research service. For more information please click here.