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Real Estate Investments,Real Estate Investing, in Turn Key Investment Properties!
http://www.USAChoiceRealty.com USA Choice Realty is an Investor focused Real Estate Investment Firm that Partners with our Investor Partner Members in Buildi… Continue reading
Carbon Pricing Mechanism – Moving To An ETS: Next Steps
Norton Rose Fulbright LLP Elisa de Wit , Noni Shannon , Edward Campbell and Hannah Gould Australia August 6 2013 Author page » Author page » Author page » Introduction As we head towards the September Federal election, the Labor Government has sought to lock in its policy of an Australian emissions trading scheme. On 16 July 2013, the Government officially announced that it will transition from a fixed carbon price to a flexible carbon price a year earlier than planned and that Australian businesses will have “ earlier access to international permits from the European Union Emissions Trading Scheme (EU ETS) and credible Kyoto units from international markets .” Under the existing arrangements, the carbon price was set to be fixed at $25.40 per tonne for the financial year starting on 1 July 2014 and was not set to move to the flexible price period (which included a “one-way” indirect link with the EU ETS) until 1 July 2015. The Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (DIICCSRTE) has now released the Starting Emissions Trading on 1 July 2014: Policy Summary and two draft Bills to give effect to the changes required to bring forward the move to the flexible price period and one-way indirect link with the EU ETS by one year. Submissions may be made to DIICCSRTE up to 5pm on 15 August 2013. Clean Energy Legislation Amendments The draft Clean Energy Legislation Amendment (Emissions Trading Scheme) Bill 2013 ( Amendment Bill ) sets out amendments to the Clean Energy Act 2011 (Cth) ( Clean Energy Act ), the Australian National Registry of Emissions Units Act 2011 (Cth) and the Fuel Tax Act 2006 (Cth) to start emissions trading on 1 July 2014. The key changes set out in the Amendment Bill are the following: Start of the flexible price period – The amendments provide for the start of emissions trading on 1 July 2014 by amending the definitions of ‘fixed price year’ and ‘flexible price year’ Price ceiling – The price ceiling will apply from 2014-15. Regulations to set the amount of the fixed charge (starting level of the price ceiling and the escalation rate) and the duration of the price ceiling must be made before 1 July 2014 Surrender limits on eligible international emissions units – Liable entities will be able to surrender eligible international emissions units (including European Union Allowances ( EUAs ) and eligible Kyoto units) from 1 July 2014. The 50% general limit on the use of eligible international emissions units by liable entities will be brought forward to apply from 1 July 2014. The surrender limit for access to Kyoto units will be decreased to facilitate the convergence of the price of EUAs and Australian carbon units. The sub-limit on Kyoto units will be 6.25% of an entity’s liability in 2014-15, increasing to 12.5% for liabilities that accrue from 1 July 2015 Energy Security Fund – Assistance provided to eligible emissions-intensive coal-fired generators under the Energy Security Fund will be revised. The allocation of free carbon units to eligible generators in the 2016-17 financial year will not proceed and the allocation of free units to eligible generators in the 2015-16 year has been brought forward to the 2014-15 financial year Equivalent carbon pricing for liquid fuels and synthetic greenhouse gases – The per-tonne carbon price equivalent will also apply from 1 July 2014. It is applied to some uses of liquid and gaseous fuels and to synthetic greenhouse gases through fuel tax, excise and tariff legislation. The Excise Tariff Amendment (Emissions Trading Scheme ) Bill 2013 sets out amendments to the Excise Tariff Act 1921 (Cth) which are also required to start emissions trading on 1 July 2014. This Bill is required to ensure compliance with section 55 of the Constitution, which requires that laws imposing duties of excise deal with the subject of excise only. Given that the Government has now entered caretaker mode, the Amendment Bill will not be put before the Parliament before the election. Whether it is placed before Parliament after the election will depend upon the election result. It is worth noting that at the moment it appears that the Greens would not support the amendments. The Coalition remain firm in their opposition to the Labor Government’s scheme as a whole. Emissions Cap The “carbon pollution emissions cap” ( Emissions Cap ) dictates how many carbon units the Clean Energy Regulator ( Regulator ) can issue for each year of the flexible price period. The Emissions Cap has not yet been set. In order to set the Emissions Cap, regulations are required to be made and passed by both Houses of Parliament. Before regulations can be tabled in Parliament, however, the Climate Change Authority ( CCA ) must provide the Minister with a report which sets out a review of the level of carbon pollution caps and recommends an appropriate Emissions Cap (known as the ‘Caps and Targets Review’). Previously, this review would only have recommended an Emissions Cap commencing on 1 July 2015. The current deadline for the CCA to provide its final report to the Minister is 28 February 2014. However, as 2014-15 is now proposed to be a flexible price year, the Government must set an emissions cap for that year. The legislation requires that the Minister must consider a report by the CCA that recommends the level of the pollution cap for 2014-15 when setting the cap for 2014-15. Accordingly, the Minister wrote to the Chair of the CCA, on 19 July 2013, requesting a “special review” under section 59 of the Climate Change Authority Act 2011 which will require the CCA to provide a recommendation on an Emissions Cap for 2014-15 in its review. Additionally, the Amendment Bill provides for a pollution cap to be in place by 1 July 2014, either as set in regulations (in accordance with the process set out above) or as a default cap. The default cap, which protects against the possibility of the Government not being able to legislate a suitable Emissions Cap, will be 25 million tonnes below total covered emissions for 2012-13. Auctions The Clean Energy (Auction of Carbon Units) Determination 2013 ( Auction Determination ) has already come into force and provides a mechanism for the auctioning of carbon units. The Auction Determination, however, specifically refers to carbon units with a vintage year beginning 1 July 2015 or later. Although the Government has not prepared amendments to the broad range of existing secondary legislation to give effect to starting emissions trading on 1 July 2014, DIICCSTRE has indicated that the following provisions of the Auction Determination will be amended: sections 6 and 13(2) (concerning the auction schedule and the number of units to be auctioned in 2013-14) to add additional auctions for the 2014-15 carbon unit vintage, including advance auctions to be conducted in 2013-14. We note it is possible the Emissions Cap may not be set by the time these auctions are due to commence, therefore the volume of carbon units available at these auctions in 2013-2014 is proposed to be set at 40 million; and section 19, to make additional provision for the setting of an opening price for carbon unit auctions including advance auctions at 80% of the EUA price for the duration of the interim link. Although we understand that it will take another couple of months for the Regulator to technically design the auctioning software, even prior to the Government’s announcement to move the ETS forward a year, auctions had been scheduled to commence in the first quarter of next year, so there should be no timing issues in relation to this aspect. Linking with the EU ETS Amendments have already been made to the Clean Energy Act and the Australian National Registry of Emissions Units Regulations 2011 which will enable the linking of the carbon pricing mechanism with the EU ETS. There are no additional legislative steps which need to occur in order to make the one-way link operational. It appears the EU is supportive of the early move to an ETS with the EU’s climate commissioner, Connie Hedegaard, tweeting that it is “great” to see Prime Minister Rudd’s decision to seek a move to trading from mid-2014, and adding that the EU is “Speeding up #ETS linking discussions”. Nevertheless, there remain a number of technical developments which need to be implemented in order to harmonise the Australian and European registries. This is necessary because under the linking system, allowances are issued under both the Australian ETS and EU ETS and are solely represented by electronic entries in a registry. It is therefore necessary for the registries to be linked or ‘harmonised’ before linking can occur. The Government has officially said that the interim link will be in place by 1 July 2015 (that is when it was originally planned) and specifically states that this is “seven months before the 2014-15 compliance date of 1 February 2016” and that “in the meantime, liable entities and other market participants are able to open accounts in the EU Registry and trade in EU allowances”. Not linking with the Californian ETS In a cautious move towards a global carbon market, the Clean Energy Regulator ( CER ) has entered into a Memorandum of Understanding with the California Air Resources Board ( CARB ) which will run until 1 January 2016 ( MOU ). The purpose of the MOU is to establish the framework for the CER and the CARB to collaborate and share information on: the implementation of their respective market-based programs; opportunities for complementary actions (including the harmonisation of reporting and technical standards) to expand carbon markets, lower costs and preserve the environmental integrity of the programs, and the development and implementation of complementary programs to reduce greenhouse gas emissions. The MOU also provides for each party to build the capacity of their respective experts in the area with the option of temporarily exchanging personnel. It appears, however, that this collaborative process is not intended as the groundwork for linking the Australian and Californian schemes, at least not yet. In her public addresses last week, Mary Nichols, the chair of CARB, made it clear that the philosophy behind the Australian and Californian programs (for example, the different approach to offset credits) and the politics and current uncertainty surrounding the future of Australia’s programs, meant full linkage would be very difficult. How far the parties will be able to move along this collaborative path will be clearer in a matter of months, once the result of the Federal election is known and the policy of the winning party is able to be put into practice. Market expectations on price Given the decision to link Australia’s ETS to the EU ETS and given that the EU ETS is a much larger market than our own (Europe’s covered emissions are more than 6 times those of Australia) it is more likely than not that the price of Australia’s carbon units will match that of European Union Allowances, which as at July 2013 are trading at around A$6-$7.50. However, Europe is currently trying to make changes to its ETS which are aimed at pushing the carbon price up. A recent vote in the European Parliament has taken the first step towards implementing these changes. Accordingly, it is possible that these changes could be in place prior to 1 July 2014, in which case the European carbon price is likely to be higher than its current level and this will flow through to the price of Australia’s carbon units. Next steps Subject, of course, to the outcome of the Federal election, liable entities may wish to start considering a compliance strategy which includes the purchase of EUAs and Kyoto units (the latter of which are currently at record low prices). Our extensive experience in advising on transactions within the EU ETS means we are extremely well placed to advise you on the different options available. Liable entities will also wish to ensure that they have put in place appropriate internal arrangements to enable participation in the forthcoming auctions. In the meantime, it will be important for liable entities and others associated with the emerging Australian carbon market to keep a close eye on developments within Europe, and in particular the progression of the backloading proposal and longer term structural reforms. We can assist with a tailored updating service to keep you linked in to these developments. Please contact a member of our climate change team if you would like to investigate this opportunity. Continue reading
Four Reasons Farmland May Be the Investment of the Decade
By Igor Zhitnitsky and Victor German NEW YORK ( TheStreet ) — Over the last several years, U.S. farmland prices have seen astounding gains, outperforming most other asset classes by a lot and leading some to speculate that farmland is the latest in a series of asset bubbles set to burst. But while the run-up in agricultural land is cooling off for the moment and the market may be ripe for a temporary pullback, the overall trend is fundamentally positive. Here are four reasons the long-term outlook for U.S. agricultural land is strong: Foreign demand for meat: The rapidly expanding middle class of the developing world has a growing appetite for meat. While China has been able to meet its own demand, its grain production capacity is inadequate to feed its livestock, which cannot be sustained on grazing alone. Per-acre grain productivity is much lower in China than in the West, and so the country has turned to the U.S. and other large producers for feed grains. This foreign appetite has led to a sharp increase in demand for corn and soybean-producing land in the U.S., and that pressure will only increase as the Chinese and other developing world consumers continue to increase their meat consumption. That points to the increasing importance of agricultural land. Historically low grain supplies: The 2012 drought showed that supplies of corn and other grains are unusually low. Average stocks-to-use ratios — an industry standard for measuring the amount of supply cushion available to the market — is historically low and has been trending down over the decade. That indicates that growth in demand is generally outpacing supply, and price shocks like last year’s will likely become more commonplace. Historically low debt levels: During the 1980s, when farmland did go boom and then bust, the market saw high levels of debt. Farmers racked up loans and rushed to buy out their neighbors’ properties before prices went any higher, leading to a crash in land values when grain prices faltered. In this decade, however, farmers’ debt levels are very low and stable. In addition, agricultural lending institutions and Farmer Mac ( AGM _ ) have heeded lessons learned from the 2008 credit crisis and kept lending practices on the conservative side. Technologically driven productivity gains: The per-acre production of U.S. farmland has grown consistently and rapidly for decades, outpacing both the productivity of agricultural sectors in other countries, as well as other industries in the U.S. In this decade, many high-tech productivity drivers are emerging, ranging from the use of GPS for precision farming to the bioengineering of more efficient grain strains. The trend hasn’t gone unnoticed by the elites of the investment community – Ray Dalio’s Bridgewater Associates holds a sizable position in Monsanto ( MON _ )and Warren Buffett’s Berkshire Hathaway ( BRKA ) made a long-term bet on Deere & Co. ( DE _ ) So how can a sophisticated investor benefit from this macro trend? Investing in established companies that dominate the industry is one route, the one taken by some high-profile names. A more ambitious investor willing to take on more risk might also do well by picking winners from among smaller more volatile agricultural ventures springing up in the sector. Companies based outside the U.S., like Adecoagro ( AGRO _ ) and Cresud ( CRESY _ ) are examples, but one should weigh carefully the potential instability and political risks that loom over the agricultural sectors of developing countries. The best way to benefit from rising land prices is the obvious one — to own a geographically diversified portfolio of land. There are unmatched advantages to directly owning farmland, including high reliable yields and tax advantages that other asset classes lack. Owning land, however, is very involved. It comes with complexity many smaller investors don’t think they can navigate on their own — CSR ratings, proximity to transportation and irrigation, working with land managers, protecting land from erosion, commodity hedging, complying with a multitude of state laws affecting absentee landlords and liquidity issues. But for those motivated to finding opportunities in the Corn Belt, a gold rush for fertile land may be the investment frontier of the decade. At the time of publication the author held no positions in any of the stocks mentioned. This article was written by an independent contributor, separate from TheStreet’s regular news coverage. Continue reading
