Renewable Energy Credits As Tax Deductions: Tax Accounting for the Renewable Energy (Electricity) Act 2000

Abstract

Australia has committed to reduce greenhouse gas emissions and part of that commitment is the enactment of the Renewable Energy (Electricity) Act 2000 (Cth). This paper focuses on the Australian Renewable Energy Target and how the REE Act impacts on the electrical generation industry to dilute greenhouse gas emissions. The paper considers the market of trading ‘carbon credits’ created under the provisions of the REE Act, and referred as renewable energy credits (RECs), to be a system of taxation and subsidisation. It aims to develop a clear understanding of the operations of the REE Act; how it interacts with Australia’s two other main taxes – Income Tax and Goods and Services Tax, and suggests 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.