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HG Alert: It's back! A price on carbon by July 2012

The Government's delayed and much maligned emissions trading scheme is firmly back on the agenda after a joint announcement with the Australian Greens earlier today (24 February 2011).

In what is billed an "essential economic reform", the Government has proposed a two-stage mechanism that will impose an initial fixed price on carbon from 1 July 2012, before transitioning towards an emissions trading scheme within three to five years. The proposal will impact in particular on large emitters of greenhouse gases, such as mining, petroleum, energy and transportation companies. It will also likely have flow-on effects throughout the entire economy.

The proposal is the culmination of four meetings held by the Multi-Party Climate Change Committee since September 2010, comprising members of the Government, Greens and independents Tony Windsor and Rob Oakeshott. The group has released a high-level proposal for public comment, including a set of principles to guide development of a carbon price mechanism.

The key aspects of the proposal are as follows:

  • A fixed price on carbon will commence as early as 1 July 2012 and last for three to five years.
  • At the end of the fixed price period, the scheme will revert to a flexible price emissions trading scheme.
  • The Government will examine the international environment before moving towards an emissions trading scheme, and may defer the transition based on the state of the international carbon market, progress in meeting international emissions targets, and potential impacts on the Australian economy.
  • The mechanism will cover the following six greenhouse gases identified under the Kyoto Protocol: carbon dioxide; methane; nitrous oxide; hydrofluorocarbons; perfluorocarbons; and sulphur hexafluoride.
  • Emissions from the following sources may be covered: the stationary energy sector; the transport sector; the industrial processes sector; fugitive emissions (other than from decommissioned coal mines); and emissions from no-legacy waste.
  • Agricultural emissions will be excluded.
  • Emitters may use international emissions units to assist with compliance, but only once a flexible carbon price has been introduced.

We will continue to distribute further information as more details are announced.

For more information on the Government's proposal or emissions trading, please contact HopgoodGanim's Climate Change team.