27 March 2007
Key Points:
The Task Group on Emissions Trading has released an Issues Paper and is calling for submissions.
The Task Group on Emissions Trading released an Issues Paper and called for public comment on the questions it raised regarding Australia's contribution to reducing greenhouse gas emissions. Submissions closed on 7 March 2006 and the Task Group is set to report on its finding on 31 May 2007.
Established in December 2006, the Task Group is a joint government-business initiative. The Task Group will advise on the nature and design of a workable global emissions trading system in which Australia could participate and set out the work that would be required on a national level that would be consistent with establishing such a scheme.
The Terms of Reference for the Task Group are as follows:
"Australia enjoys major competitive advantages through the possession of large reserves of fossil fuels and uranium. In assessing Australia's further contribution to reducing greenhouse gas emissions, these advantages must be preserved.
Against this background the Task Group will be asked to advise on the nature and design of a workable global emissions trading system in which Australia would be able to participate. The Task Group will advise and report on additional steps that might be taken, in Australia, consistent with the goal of establishing such a system."
In the Prime Minister's speech to the Business Council of Australia in November 2006, Prime Minister Howard stated that the Task Group was intended to examine "what forms an emissions trading scheme, both here in Australia and globally, might take to make a lasting contribution to a response to the greenhouse gas challenge, but in a way that does not do disproportionate or unfair damage to the Australian economy…"
Emissions trading has been identified by the Government as being potentially the most cost-effective approach to greenhouse gas abatement and a more flexible market-based policy tool than imposing a carbon tax on industry. This is due to a number of factors including that a trading scheme has a direct impact on emissions reduction and allows industry to discover the lowest cost ways of reducing emissions as opposed to a carbon tax that is usually imposed on industries where price increases do not substantially affect consumption.
In addition, it is likely that such emissions trading mechanisms will feature in any new international framework established post 2012 and one of the main challenges facing the Task Group is to ascertain how best to link international and domestic action in order to reduce emissions with the least effect on Australia's economic competitiveness.
A global emissions trading scheme
The Issues Paper states that though the international post-2012 climate change response will need to emerge from ongoing discussion, it is accepted that the framework will feature market-based mechanisms. This could include cap and trade, baseline and credit and hybrid schemes with cost capping which will have implications for the design of the international framework.
Currently, the Kyoto Protocol allows similar national trading schemes to be linked in order to create a larger and more flexible market. The Task Force states that a possible approach to emission reduction that could be utilised would be to create a single trading scheme that would be administered by an international operator in accordance with established rules. This would, however, be difficult to administer, given the different national circumstances of the countries involved and the difficulty in attaining international support generally for such a scheme or consensus amongst participants.
This is important given that the three main criteria seen as necessary in developing an effective emissions reduction policy are that the solution must be both environmentally and economically effective and politically acceptable.
Emissions trading on a domestic level
On a domestic level, the Task Group stress the importance of implementing an emissions trading scheme that will encourage the establishment of a global emissions trading scheme and will be consistent with any such initiatives.
The Issues Paper states that key issues to be addressed in this area include ensuring Australia's competitive advantages with respect to its resource base, assessing the impact on business certainty and ascertaining the overall effectiveness of any emissions scheme compared with existing domestic policies.
Other measures seen as important to address in the overall policy context include the promotion of end use efficiency and policies that encourage the research and development of new low emission technology.
Submissions closed on 7 March 2007.
For further information, please contact Paul O'Donnell.
