Australian Government targets 5-15% emissions reductions by 2020

15 December 2008

Australia's entry into the club of nations participating in an emissions trading scheme was advanced considerably today with the release of the Government's White Paper on a Carbon Pollution Reduction Scheme. It will begin delivering emissions reductions in 2010, with just a 5 per cent reduction from 2000 levels by 2020. The Government has said it will increase this to 15 per cent reduction by 2020 if there is a comprehensive international agreement in Copenhagen next year.

While Prime Minister Kevin Rudd also offered that the government could adopt more ambitious targets post 2020, in response to the achievement of a more ambitious international outcome or a renewed mandate from the Australian electorate, the medium term target range is set. The targeted reductions - a result of strong industry lobbying and concerns over the impact of the current financial crisis - are nowhere near enough to put us on a path to avoid dangerous climate change (i.e. the 25-40 per cent reduction on 1990 levels, as recommended by the IPCC).

Growing momentum towards Copenhagen

Still, given recent announcements by EU, UK and US President-elect Barack Obama, the Australian Scheme shows that momentum is building towards a good outcome in Copenhagen. Prime Minister Rudd, in a media briefing today, emphasized the Government's commitment to contributing to a global solution, and its intention to work with developed and developing countries to reach a post-Kyoto deal in Copenhagen next year.

Details on the Scheme

In addition to introducing an emissions trading scheme with broad sectoral coverage, the Scheme will make available multi-billion dollar funds for low-emissions technology and energy efficiency, and see the introduction of a raft of other 'complementary measures', such as a renewable energy target of 20% by 2020. Auctioning of the majority of permits will generate AU$11.5 billion in the first year, increasing in later years, providing the revenue for assistance to households, communities and businesses to adjust to the scheme. Not all permits will be auctioned. Twenty-five percent of permits will be allocated to Energy Intensive Trade-Exposed Industries and AU$3.9 billion worth of permits will be delivered to the most emissions-intensive coal-fired generators, who are deemed unable to pass costs on to consumers.

To avoid price volatility risks in the early market, the Government has introduced a cap on the price of carbon for the first five years, starting at AU$40 per tonne of {CO2}e, rising at five per cent real per annum. Unlimited access to international abatement through the Kyoto Protocol mechanisms and the ability to bank and borrow will also reduce volatility. The decision to ban export of permits in the initial years of the scheme and to defer decision on the scope for domestic offsets to 2013 will not be welcomed by Australia's burgeoning offset developers and suppliers, who will have to wait longer for market expansion.

Other climate initiatives in the works

International efforts from Australia are already underway with the recent launch of the Government's Global Carbon Capture and Storage Initiative which aims to support the global development and deployment of industrial-scale CCS technology; and the AU$200 million International Forest Carbon Initiative, which supports efforts to reduce emissions from deforestation and forest degradation in developing countries.

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