Endings and Fairness: The Clean Energy Act 2011 (Cth) and Queensland Nickel: Queensland Nickel Pty Ltd v Commonwealth

By Brad Jessup

Queensland Nickel Case Page

Australia’s first national laws to put a price on carbon were effective to their end; reportedly leading to reductions in Australia’s combined greenhouse gas emissions. In their absence it has been reported that increases in emissions have resumed. While our new Prime Minister grapples with how to rein in these emissions, the High Court last year confirmed that the carbon price laws were lawful, and through the prism of the Constitution fair, to their end. The history books will show, however, that politicians failed to make the case for a carbon price law, but they devised and crafted a successful, if complex though geographically unfair, legal policy. Over the past few days the protagonist in the High Court case, Queensland Nickel, with the business faltering, has brought claims of fairness into the political discourse around this business’ carbon intensive operations.

The Constitution and no interstate discrimination

In Queensland Nickel Pty Ltd v Commonwealth [2015] HCA 12, notable also as Nettle J’s first judgment, the High Court dismissed a claim by Queensland Nickel that regulations supporting the principal Act, the Clean Energy Act 2011 (Cth), were unconstitutional based on their geographic effect. Arguments relying on s 99 of the Constitution, the non-discrimination provision, that the regulations inadvertently and indirectly discriminated against the Queensland-based refinery business wholly owned by Clive Palmer MP, the federal parliamentary member for Fairfax, were rejected.

The High Court concluded that the additional financial liability imposed on Queensland Nickel relative to other refineries in Western Australia that triggered the case was not a cause of a difference or discrimination on the grounds of physical or jurisdictional geography but a result of past decisions made by Queensland Nickel on purely financial grounds. The effect of the laws as experienced by Queensland Nickel relative to its Western Australian competitors may have had an increased financial burden on Mr Palmer’s company, which has not been attributed to the company’s financial woes, but that burden was not attributable to the law; rather business decisions made by the company in its infancy.

In the High Court case, Nettle J adopted the plurality view in the Fortescue Metals case, and found that the particular parts of the carbon price regulation that set out liabilities for nickel refineries ‘did not discriminate between States. In terms, it applied equally to eligible persons carrying on the production of nickel regardless of the State of production’ (at [56]). Although Nettle J acknowledged a difference in practical effect of the laws for Queensland Nickel, he considered that ‘in this case it does not appear that any of the differences between the plaintiff’s and the Western Australian nickel producers’ inputs, production processes or outputs were due to differences between Queensland and Western Australia in natural, business or other circumstances’ (at [58]).

Instead, Nettle J focussed on past decisions about mining processes as giving rise to the different effect of the laws. The mining process adopted by Queensland Nickel was found to have been the reason for the greater financial burden under the laws. Although Nettle J conceded that the mining process decision ‘was informed by geographic considerations’ (at [61]), the decisions were ultimately based on delivering to each firm the greatest possible financial windfall at the time the decisions were made in the historical technological settings.

This conclusion, which eschews considerations of the geography of place, effect, and time in preference for considerations of financial autonomy offers an appropriate and consistent ending for the Clean Energy Act 2011, because financial interests trumped geographic interests and fairness throughout its invention, implementation and repeal.

The carbon price laws and unfairness

In the lead up to the last federal election Clive Palmer claimed to have advice that the carbon price legislation was unconstitutional, drawing in the then federal opposition leader, Tony Abbott, and then Queensland Liberal National leader Campbell Newman in support of his case. One of the frames developed to oppose the carbon laws was fairness and justice. This particularly included fairness to Australia internationally and fairness for businesses in Australia, especially those smaller businesses facing higher electricity costs, and fairness to families facing higher electricity costs (not all caused by the carbon price laws). At that time, in 2013, however, opposition to the laws was not widespread or strong, with most people ambivalent towards them (as distinct from the deeply felt opposition to the then Prime Minister’s popularly understood broken promise not to introduce a carbon tax). Moreover, opposition to the carbon price laws diminished further in the year following the election of the Tony Abbott led government and in the lead up to their repeal.

There could have been a more sophisticated level of opposition to the laws, not triggered by the financial costs created by the laws (as that was their very deliberate intention), but based on geographic fairness. By geography I mean the distribution between places and jurisdictions and across space, time and scale of social, environmental, political and economic advantages and burdens, whether deliberate or consequential.

The remainder of this short piece tries to record those geographic bases for opposition to Australia’s recent political and legal responses to the issue of carbon emission reductions, which, unlike Mr Palmer’s claims, did not rise to prominence in law or the media. With Mr Palmer’s recent attempt to deploy a discourse of fairness in the context of the financial predicament of Queensland Nickel it is a timely to record these fairness bases.

Geographer Lesley Head has demonstrated that those Australians with lowest incomes experienced the greatest burden of reducing emissions from electricity use under the carbon price legislation. In contrast, the rich simply paid more to run their air conditioners and wine fridges. Indeed, any consideration of the distribution of effect of climate policies and laws across the spectrum of advantage in Australia is typically not prioritised. The recent history of Australian climate policy has examples of ignorance of their geographic fairness, and the discourse of ‘climate justice’ is rarely highlighted in this country while claims about financial business injustices are.

Moreover, the way the carbon price laws were comprised and then administered demonstrated a lack of concern for geographic fairness in place of economic purity and attention to dominant financial interests. For instance, the laws were ultimately not accompanied by regulations that mandated improvements on those coal-fired generators that disproportionately affect carbon exposed communities. Rather the laws did include exemptions to protect trade-exposed business. Moreover, the promise to close down the least efficient power generators in order to achieve significant additional reductions, and indirectly improve the environmental health of the host communities, came to nothing. The long-advocated greenhouse trigger for environmental assessments in the federal Environment Protection and Biodiversity Act 1999 (Cth), which would have protected more communities from future pollution, was dismissed again — this time as being incompatible with the market approach of the carbon price regime.

The repeal of the laws, however, has entrenched localised pollution (an exception is in Anglesea where the generator supplying the local aluminum smelter has been decommissioned on financial grounds). Large coal fired generators are now not required to reduce their emissions at all. The Australian domestic approach to emissions reductions now also reflects its international agenda of using offsets in place of reductions: a policy approach I have previously questioned as being geographically unfair.

While the High Court’s approach to the issue of the geographic effect of the carbon laws was cursory, that should not leave us to think that the recent and current approaches to carbon emissions reduction laws and policies passed the geographic ‘fairness’ test. Rather, these laws created and have embedded geographic discrimination of a type that s 99 of the Constitution is unable to redress.

Queensland Nickel’s financial struggles and retorts to fairness

As for Mr Palmer’s claim that the Queensland government should have guaranteed Queensland Nickel’s immediate financial security on the basis of fairness, that’s far more difficult to unpack. As Antony Green alludes to it seems that Mr Palmer was attempting to use ‘fairness’ as a slogan in the same way the present government has for its current reform agenda: an agenda focused on matters economic and overlooking the geographic unfairness of climate change law and policy. Lost also in the framing of the debate by Mr Palmer, but identified by the Queensland opposition, is the fairness of the State potentially being called upon to rehabilitate the refinery site lest the local community continue to bear environmental harms without any economic advantages from the operation of the refinery.

AGLC3 Citation: Brad Jessup, ‘Endings and Fairness: The Clean Energy Act 2011 (Cth) and Queensland Nickel: Queensland Nickel Pty Ltd v Commonwealth’ on Opinions on High (22 January 2016) <http://blogs.unimelb.edu.au/opinionsonhigh/2016/01/22/jessup-nickel>.

Brad Jessup is a Lecturer at Melbourne Law School and Editor of Opinions on High

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About Brad Jessup

Brad Jessup joined Melbourne Law School in 2012 from the ANU, where he had been teaching and researching since 2007. From 2001 to 2006 Brad worked in commercial legal practice. Brad’s principal research area is environmental and planning law, particularly the exploration of environmental legal conflict and the regulation of places, landscapes and protected areas.