As announced in July 2011, an effective carbon price will apply to non-transport uses of gaseous fuels from 1 July 2012.

In the light of strong representations from the gaseous fuels industry to be able to better manage their carbon liabilities under the Clean Energy Act 2011, from 1 July 2013 non-transport LPG and LNG will be covered by the carbon pricing mechanism in a similar manner to natural gas suppliers. Prior to this, from 1 July 2012 to 30 June 2013, nontransport LPG and LNG suppliers will pay an equivalent carbon price under the fuel tax system. From 1 July 2012, a carbon price will be included in the cost of the natural gas used to produce non-transport CNG. Producers and suppliers of non-transport CNG will not be required to directly participate in either the carbon pricing mechanism or pay an equivalent carbon price under the fuel tax system. LPG, LNG and CNG users in the agriculture, forestry and fisheries sectors will not pay a carbon price or effective carbon price.

Coverage of gaseous fuels by the carbon pricing mechanism

During passage of the Clean Energy legislation in 2011, the Government committed to considering the coverage of gaseous fuels in a similar manner to the way in which large liquid fuel users may opt into the scheme. This responded to issues raised by the gaseous fuels industry in the final report of the Joint Select Committee on Australias Clean Energy Future Legislation. Since then, the Government has consulted extensively with participants in the gaseous fuels sector to develop a new approach to coverage. This will allow greater flexibility for LPG, LNG and CNG suppliers when meeting carbon pricing liabilities.

Emissions from non-transport LPG and LNG from 1 July 2013

From 1 July 2013, importers, manufacturers and resellers of LPG and LNG that is not used for transport (LPG and LNG suppliers), will pay a carbon price under the carbon pricing mechanism rather than under the fuel tax system. To meet their carbon price liabilities, LPG and LNG suppliers can surrender an emission unit for each tonne of emissions attributable to the LPG or LNG they supplied. If they do not surrender a sufficient number of units, then they will be liable pay a shortfall charge. A carbon price liability will generally rest with the same entity that would have been liable to pay excise on the fuel; that is, the person who enters the LPG or LNG for home consumption under the Excise Act 1901. Where it is not known whether the LPG or LNG is to be used for transport or non-transport purposes at the time it is entered for home consumption, then an equivalent carbon price will be applied to the LPG or LNG through the fuel tax system. This could happen, for example, when LPG is delivered into a storage tank which is used for both transport and non-transport supplies.

Emissions from non-transport LPG and LNG from 1 July 2012 to 30 June 2013
From 1 July 2012 to 30 June 2013, LPG and LNG suppliers will pay an equivalent carbon price under the fuel tax system. LPG and LNG suppliers have paid excise under the fuel tax system since 1 December 2011 for transport uses of LPG and LNG. This one-year transition period is consistent with the transitional period before the start of the Opt-in Scheme for the coverage of liquid fuels by the carbon pricing mechanism.

Non-transport LPG and LNG currently receives a full automatic remission of excise and excise-equivalent customs duty imposed on gaseous fuels. This means that duty effectively only falls on gaseous fuels for transport use. To ensure consistent coverage of non-transport use of gaseous fuels, such as emissions from bottled LPG and reticulated gas, an effective carbon price will apply through a reduction in the automatic remission of excise. The remission for non-transport LPG and LNG will be adjusted on a cent-for-cent basis equivalent to the carbon content price on the fuels, had the gaseous fuels been subject to the carbon pricing mechanism.

Non-transport CNG
From 1 July 2012, the carbon pricing mechanism will cover CNG used for non-transport purposes. This removes any requirement for producers of CNG for non-transport purposes to pay excise duty. A carbon pricing liability will rest with the CNG producers natural gas supplier. A CNG producer will have the option of quoting an Obligation Transfer Number (OTN) to its supplier. This will allow it to assume carbon price liabilities for the natural gas used to create the CNG. The natural gas supplier could not refuse this liability transfer.

Why is CNG being treated differently from LPG and LNG?

Carbon pricing mechanism coverage of non-transport CNG is possible from 1 July 2012 because CNG can be treated as natural gas for the purposes of the carbon pricing mechanism.

Non-transport uses of gaseous fuels in the agriculture, forestry and fishing sectors
Under the carbon pricing mechanism, a carbon price will not apply to agriculture, forestry and fishery activities. Full fuel tax credits for non-transport use of LPG, LNG and CNG will be available for these industries.

Further information
For information on the carbon pricing mechanism and the National Greenhouse and Energy Reporting System visitwww.cleanenergyregulator.gov.au, email enquiries@cleanenergyregulator.gov.au