Australia to Embrace Carbon Trading

On 10 December 2006 the Australian Prime Minister announced the establishment of a joint government-business Task Group on Emissions Trading. Yesterday, the Report of the Task Group on Emissions Trading was publicly released. It “outlines the state of play in international cooperation on climate change and the possible development of emissions trading at the global level. Against this background, the Report outlines a proposed Australian domestic emissions trading scheme, together with a set of complementary policies and measures, that would enable Australia to position itself for international developments while maintaining economic growth and safeguarding our competitive advantage.”

The report includes comment that, “The most common type of emissions trading systems are known as ‘cap and trade’ schemes. Under such a scheme, the government determines limits on greenhouse gas emissions (that is, sets a target or cap) and issues tradable emissions permits up to this limit. Each permit represents the right to emit a specified quantity of greenhouse gas (for example, one tonne of CO2-e). Businesses must hold enough permits to cover the greenhouse gas emissions they produce each year. Permits can be bought and sold, with the price determined by the supply of and demand for permits. Governments can choose how they wish to allocate permits, for example, by auctioning, grandfathering, benchmarking, allocating to meet specific equity objectives, or any combination of these options (a more detailed discussion of these methodologies is included in Chapter 7).
By placing a price on emissions, trading allows market forces to find least cost ways of reducing emissions by providing incentives for firms to reduce emissions where this would be cheapest, while allowing continuation of emissions where they are most costly to reduce. This underlines the fact that emissions trading is not an objective in itself, but a means of achieving a certain level of abatement at the lowest cost possible.”

Paul Kelly writing in The Australian newspaper has commented, “The essence of John Howard’s belated response to climate change is to commit early, think global and implement slowly. After years of dispute and scepticism, Australia now has a strategic blueprint for action — a blueprint superior to the defect-ridden European emission trading regime.

“This is the start of Australia exerting serious influence on the global debate. In substantive terms, it closes the gulf between Howard and Kevin Rudd on climate change. It insists that Australia must act now and not wait for global agreement. It makes the timetable for emission trading almost bipartisan — Howard in 2011 and Labor by 2010.

“While Howard’s report does not specify a target — in response to Rudd’s 60 per cent cut by 2050 — its entire “cap and trade” scheme depends upon a long-term target to be finalised next year after more analysis. Labor, equally, wants the scheme’s design finalised “by the end of 2008”.

And yesterday the Australian Prime Minister announced his support for a new US climate change initiative, a new post-Kyoto framework.

John Howard said, “The Australian Government welcomes the United States’ initiative announced overnight to build a broader coalition for practical international climate change action. This is a genuine attempt to get past the political stand-offs of previous negotiations, to cut through the entrenched positions of the north-south divide enshrined in the Kyoto Protocol and instead to focus on real solutions.

“My Government has consistently championed the need for practical action that makes a difference. In particular, we have advocated meaningful co-operation with developing countries and a new global framework in which all major economies feel able to participate.

“The US initiative – and the recent statement by Japan calling for a new global response that goes beyond Kyoto and brings in all major emitters – is further evidence that a new international consensus on climate change is starting to emerge.

“Australia has been very active in shaping this emerging consensus, which represents a significant move away from the empty symbolism of Kyoto towards the approach the Government has consistently advocated. The Government has been in frequent contact with the US Administration and our other key international partners.

“We have been at the forefront of practical, regional initiatives such as the Asia-Pacific Partnership on Clean Development and Climate (AP6) and the Clean Coal Partnership with China. The Government has launched a $200 million Global Forests Initiative to tackle deforestation and has put climate change at the centre of the APEC leaders’ agenda in September.

“The US approach recognises that to deal with climate change a multi-pronged strategy is required, including areas such as energy efficiency, technology development and transfer – including nuclear power – and forestry, as well as ways to adapt to changes in the climate.”