Australia’s carbon price system passes in historic vote in lower house, 2012 start now virtually guaranteed

Australia is likely to pass legislation next month that will give it the largest carbon price system in the world outside of Europe. (Thanks and photo credit to Flickr user Urban Gazelle)

In a historic vote Wednesday Oct. 12, Australia’s lower house passed a legislative package to put a price on carbon starting mid-2012.  This will put the country – which is comparable to the United States as one of the developed world’s largest per-capita emitters – on the path to reducing its emissions and shifting energy to renewable, less-polluting sources.

The bill, passed by a predictably close margin, is now virtually guaranteed to pass in the Senate when it comes to a vote, likely in November.  That will give Australia, the third-most coal-dependent country in the world, the largest carbon-price system in the world outside of the European Union (at least until California’s program takes effect six months later).

What Australia’s "Clean Energy Future" legislation will do

The Clean Energy Future package consists of 18 bills that aim to cut Australia’s emissions 5% below 2000 levels by 2020 (though the target can be strengthened based on international action), and 80% below 2000 levels by 2050.

The legislation reaches these targets through programs that will start shifting Australia’s energy to renewable sources by:

  1. Placing a price on carbon.
    • Starting July 2012, Australia’s largest industrial emitters, which cover roughly two-thirds of the country’s greenhouse gas pollution, will have to pay a fixed price for the carbon pollution they produce — $23 (Australian) per ton of carbon, rising by 2.5 per cent each year.
    • In 2015, the fixed price system will automatically transition to a market-based cap-and-trade system open to trading carbon credits in the international market.
  2. Designing the market-based system to link to international carbon markets, with plans to link with already operational cap-and-trade programs in New Zealand and Europe after 2015.
  3. Giving a big boost to renewable energy research and development and deployment through a new $10 billion financing vehicle, the “Clean Energy Finance Corporation.”  The money will be invested in jump-starting Australian commercial-scale renewable energy projects to reduce the country’s dependence on fossil fuels.

The Australian system has strong support from key international players in global carbon markets: the European Union and the United Kingdom have both praised the Australian approach, and a senior visiting Chinese official has observed that China is also looking to the Australian system as a potential model as China designs its six proposed regional cap-and-trade trials.

The link to international markets that’s built into the system also sets up Australia to become a key player in the international offset market – and will enhance Australia’s influence at the UN climate conference in Durban at the end of this year.

We look forward to Australia’s Senate vote in November, and to the critical momentum the country will bring to the development of international carbon markets when it becomes the newest member in the group of the world's carbon market leaders.

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