22 Dec 2010

Multi-Party Climate Change Committee takes another step to a carbon price mechanism

by Brendan Bateman

The Multi-Party Climate Change Committee has settled the principles which will guide its deliberations on a carbon price mechanism.

The third meeting of the Australian Parliament's Multi-Party Climate Change Committee on 21 December has taken a significant step towards the formation of a carbon price mechanism with the development of 11 principles to guide its deliberations.

It's also started considering the key design choices to be made when developing a carbon price, including scheme architecture, impacts, assistance measures and the issues of scheme coverage and international linking, according to the Communiqué released just after the meeting.

The 11 policy principles for the Committee's deliberations are:

Environmental effectiveness: The mechanism should be capable of delivering reductions in carbon pollution that are informed by the climate science, to ensure that Australia contributes to the global mitigation task and to help transform our economy by driving investment and innovation in clean energy and low emissions technologies and processes.

Economic efficiency: A mechanism to price carbon should harness the most cost-effective pollution reduction options and facilitate informed and efficient investment decisions. It should also minimise costs of our pollution reduction to the economy as a whole and be consistent with Australia’s broader economic reform agenda.

Budget neutrality: The overall package of a carbon price mechanism and associated assistance measures should be budget-neutral. This does not preclude other measures to address climate change being funded from the Budget, consistent with the Government’s fiscal strategy.

Competitiveness of Australian industries: The overall package of carbon price design and associated assistance measures should take appropriate account of impacts on the competitiveness of all Australian industries, having regard to carbon prices in other countries, while maintaining incentives to reduce pollution.

Energy security: Introduction of the carbon price should be accompanied by measures that are necessary for maintaining energy security.

Investment certainty: A mechanism to price carbon should provide businesses with the confidence needed to undertake long-term investments in low emissions technology and infrastructure, which will reduce costs for households and businesses in the long-term. It should keep our industries at the forefront of the research, development and deployment of new clean technologies, attracting global investment flows and creating new jobs.

Fairness: The introduction of a carbon price will affect Australian households and communities. Assistance should be provided to those households and communities most needing help to adjust to a carbon price, while striving to maintain incentives to change behaviour and reduce pollution.

Flexibility: Internationally, climate change policy is continuing to evolve. A mechanism to price carbon should be sufficiently flexible to respond to changing international circumstances, including improvements in international accounting rules, developments in climate change science, and tangible international action to deliver an effective global solution.

Administrative simplicity: A mechanism to price carbon should be designed with a view to minimising both compliance costs and implementation risks.

Clear accountabilities: A mechanism with transparent scheme rules and clear accountabilities will help promote business and community confidence in carbon pricing.

Supports Australia’s international objectives and obligations: An effective global solution requires action from all major emitters to limit the global temperature rise to less than 2 degrees. A carbon price mechanism should support the goal of promoting international action to deliver an effective global solution, and be consistent with Australia’s foreign policy and trade objectives.

The next major steps in the process will be reports by the Committee's experts, Professor Ross Garnaut, Professor Will Steffen, Mr Rod Sims and Ms Patricia Faulkner, which are expected to be completed by June.

The Committee will meet monthly until the end of 2011, at which time the ongoing need for the Committee will be considered.


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