Australiaas Renewable Energy Target Legislation: The Renewable Energy (Electricity) Act 2000 (CTH) Examined by a Solar Farmer

Abstract

Australia has committed to tackle climate change in accordance with its international agreements as a member of the United Nations. This paper examines Australia’s taxation legislation, enacted in response to its duty to reduce greenhouse gas emissions. Part of Australia’s commitment to reduce greenhouse gas emissions, produced from the combustion of fossil fuels to generate electricity, was the enactment of the Renewable Energy (Electricity) Act 2000 (CTH). This paper focuses on the impact of the Renewable Energy (Electricity) Act 2000 (CTH) on the electrical generation industry to dilute greenhouse gas emissions. In addition the research is supported from data provided by the Solex solar project, which receives economic benefits at the expense of the fossil fuelled electricity generators. The paper views the trading market created by the economic process of creating, selling, purchasing and the surrender of ‘carbon credits’ to be a system of taxation and subsidisation by the Australian Government. In Australia such ‘carbon credits’ are referred as renewable energy credits (RECs). The compulsory purchase and surrender of RECs by the fossil fuel based electricity generators – the liable parties or taxpayers, is considered to be ‘a compulsory monetary contribution demanded by a government’ – and therefore by definition, a tax. Accordingly the fiscal benefit of the receipt of funds, from the creation and sale of RECs, by ‘an accredited power station’, is considered to be ‘a grant by a government to a company, organisation, or individual, for which it receives nothing in return’ – and therefore by definition, a subsidy. The aim of this paper is to develop a clear understanding of the operations of the Renewable Energy (Electricity) Act 2000 (CTH); how it interacts with Australia’s two other main taxes – Income Tax and Goods and Services Tax, and how the trade of RECs may be treated in the accounts of the respective trading entities – the liable parties and renewable energy based electricity generators.