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Australia To Join EU Emissions Trading Scheme

Tue, 08/28/2012 - 9:15am
Rod McGuirk, Associated Press

CANBERRA, Australia (AP) — Australia announced Tuesday it will join the European Union's carbon emissions trading scheme starting in mid-2015 in a major rethink of its own plans to curb greenhouse gas emissions.

The government said Australia's major polluters can start buying European carbon permits now to cover their liabilities from July 2015 when Australia merges with the EU system, where permits to pollute are traded at prices set by free market forces.

But European polluters, who have been part of the world's largest trading scheme of its kind since 2005, will not be able to buy Australian permits until mid-2018.

The linking of the Australian and EU systems will answer business concerns that Australian companies would lose their competitive edge if they are charged more for their emissions than other countries charge.

The center-left Labor Party government introduced a deeply unpopular carbon tax from July 1, 2012, that requires almost 300 of Australia's biggest polluters to pay 23 Australian dollars ($24) for every metric ton of carbon dioxide, or an equivalent carbon gas, that they emit.

The government had planned to replace the carbon tax with an emissions trading scheme in three years. But the Australian scheme would have been underpinned by a AU$15 floor price to support price stability. The European carbon price is currently less than AU$10 a metric ton.

Climate Change Minister Greg Combet said the floor price would be scrapped as part of the new plan to merge with the European system.

The link would provide flexibility to businesses with operations in both Australia and Europe, which could reduce compliance costs, he said.

"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 statement.

European Commissioner for Climate Action Connie Hedegaard said that Europe looked forward to "the first full inter-continental linking of emission trading systems."

"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 toward establishing a robust international carbon market," she added.

Australia is one of the world's worst greenhouse gas emitters per capita, largely because of its heavy reliance on abundant reserves of coal to generate power.

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