Australian Government releases green paper on emissions trading

17 July 2008

On 16 July, the Government of Australia released a Green Paper for the creation of a Carbon Emissions Reduction Scheme. The strategy is based on three pillars: reducing Australia's greenhouse emissions, adapting to climate change, and helping shape a global solution.

At the core of the Government's strategy is an emissions trading scheme that should start in 2010. At least 70 per cent of the permits would be auctioned in the first years in order to create revenue to assist structural adjustment. Thirty percent of permits will be allocated for free to emissions-intensive trade-exposed activities, based on a simple formula that will take account of the extent of assistance required. No barriers will be imposed on who purchases permits.

The Green Paper maintains that Australia can maintain economic prosperity while making emissions cuts, and that implementing a trading scheme is necessary for maintaining competitive advantage. However, it makes clear that business that has not already factored in a carbon-constrained future will meet with limited sympathy - but early action will be rewarded.

Supplementary measures will ease the transition, including support to low and middle-income households, design features such as banking and borrowing of permits, and specific industry support through two adjustment funds, the Climate Change Action Fund and the Electricity Sector Adjustment Scheme.

Like the Europeans, the Australians are keen to see a limit put on the amount of international offsets brought into the trading scheme in the first years. Over the longer term they are keen to see complete international linking of schemes and for now see the value of trading in Kyoto credits (CERs, ERUs, and RMUs).


Ambitious timetable


The Green paper follows close on the heels of the much talked about Garnaut Climate Change Review. That draft review, which updates the influential Stern Review, paints an even more convincing argument for immediate and drastic action against climate change. That the two reports came out so close together reveals both the Government's desire to have the scheme set-up ahead of the Copenhapen COP and its close cooperation on Garnaut's review.

The Australian scheme aims to inspire the confidence of the international community by getting the design right, and it has clearly built on the experience of others. It remains to be seen whether this design will survive until December when the White Paper is released - in particular, the 2010 start. However, the Government has already put in place a number of instruments and processes to assist in meeting the ambitious implementation timetable, such as the administrative foundation for the scheme, the National Greenhouse and Energy Reporting Act 2007, which came into force on the 1st of July this year.

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