Australia to join EU’s emissions trading system

Connie Hedegaard. Brussels, January 2012. [Shutterstock]

Australia will scrap its planned floor price for carbon emissions and will link directly with the European Union's emissions trading system by 2018, Climate Change Minister Greg Combet said today (28 August).

Australia, one of the world's highest per capita emitters of pollutants blamed for causing climate change, imposed a fixed €19.08 per tonne carbon tax on around 300 of its biggest polluting companies in July, covering around 60% of emissions.

The €12.45 floor price was due to underpin the scheme when it moved to a floating emissions trading scheme in July 2015.

The floor price adjustment is the first major change to Australia's controversial plan to price carbon following concerns from businesses facing higher costs than in Europe.

"Linking the Australian and European Union systems reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions," Combet said in a joint statement with European Commissioner for Climate Action Connie Hedegaard.

The move means business in Australia will be able to use EU allowances to cover Australian liabilities from July 2015 but European companies will have to wait until 2018 to use Australian allowances.

Combet said business had made it clear they wanted more flexibility on the carbon price once Australia moves to a trading scheme.

"At the end of the day, I think this is the best public policy outcome," Combet told reporters, adding Australia was continuing negotiations on linking its scheme with New Zealand's emissions trading scheme.

In contrast to the Australian prices, carbon permits in the European Union are currently trading around €8.16 a tonne.

Combet said Australia would also impose a new limit on the use of eligible Kyoto units. Companies will still be able to meet up to 50% of liabilities with international units, but will only be allowed to meet 12.5% of liabilities with UN-backed Kyoto units.

The price on carbon emissions is Australia's key policy to fight greenhouse gas emissions, blamed for global warming. Australia is one of the world's highest per capita emitters due to a reliance on coal-fired power stations.

“The European Union is the first regional emissions trading system and spans the largest part of the European continent. We now look forward to the first full inter-continental linking of emission trading systems,” Commissioner for Climate Action Connie Hedegaard said in a joint statement with Australian Climate Change Minister Greg Combet. “This would be a significant achievement for both Europe and Australia. It is further evidence of strong international cooperation on climate change and will build further momentum towards establishing a robust international carbon market."

With a turnover of some €90 billion in 2010, the EU's Emissions Trading System (ETS) is the world's largest carbon market. Around 80% of it is traded in futures markets and 20% in spot markets.

The ETS aims to encourage companies to invest in low-polluting technologies by allocating or selling them allowances to cover their annual emissions. The most efficient companies can then sell unused allowances or bank them.



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