Carbon pricing takes a turn in Australia

Australia to link carbon pricing plan with the European Union

The Australian government has announced that it will be abandoning its own carbon pricing scheme in order to participate in one developed by the European Union. Climate Change Minister Greg Combet announced the move this week, noting that the new carbon pricing plan is expected to take effect between now and 2018. Government officials claim that this is further proof that there is international cooperation in the fight against climate change. Australia’s participating in the EU carbon pricing plan is likely to have an impact on the country’s businesses.

Plan will allow companies to purchase credits from international markets

The plan will allow Australian companies to purchase 50% of their liabilities from international markets. Only 15% of these liabilities can be met through so called “Kyoto units,” which are generated by the United Nations’ Clean Development Mechanism. Australian companies will be able to purchase emissions permits, also known as carbon credits, from international markets, but foreign companies will not be able to purchase these same permits from Australia until 2018. The government does not believe that Australian companies will face an “uneven” playing field in terms of carbon pricing.

EU carbon pricing plan seen as more efficient than Australia’s

Government officials believe that participating in the EU carbon pricing plan will relieve some of the uncertainty that surrounded its own plan. The EU plan is likely to change the fundamentals of the Australian carbon market as it will introduce companies to factors that they have not been planning for. These factors could have a wide range of effects on Australian companies, especially for those that do not yet comply with the standards established by the European Union.

Australia may pursue similar plans coming from other countries

Australia believes that carbon pricing plans shared amongst international governments will become more common in the coming months. Minister Combet notes that China, South Korea, and California may introduce such a plan, if they have not done so already. Australia may seek to participate in these plans as well and has been in negations with New Zealand to create a linked carbon pricing plan.