29-Aug-2012 8:43 AM

Australia and Europe to link their emissions trading systems

Australia and Europe announced (28-Aug-2012) their intention to link their emissions trading systems. The parties will mutually recognise carbon units between their cap and trade systems, permitting businesses to use carbon units from the Australian emissions trading scheme or the EU Emissions Trading System (EU ETS) for compliance under either system. The two systems will be linked no later than 01-Jul-2018. An interim link will be established while negotiations towards an full agreement proceed. Australian businesses will be able to use EU allowances to help meet liabilities under the Australian emissions trading scheme from 01-Jul-2015 until a full link is established. The European Commission and Australia will work to agree to registry arrangements for the interim link by mid-2013. The Australian Government has agreed to enter into negotiations on a full-linking agreement, and the European Commission will seek a mandate to do so in coming months. The agreement will cover the following key policy issues:

  • Measurement, reporting and verification arrangements;
  • Types, quantities and other relevant aspects of third party units that can be accepted into either scheme;
  • Role of land-based domestic offsets;
  • Implications for supporting the competitiveness of European and Australian industries in particular sectors exposed to a risk of carbon leakage; and
  • Comparable market oversight.

To facilitate linking, the Australian Government will make two changes to the design of the Australian carbon price. These are that:

  • The price floor will not be implemented;
  • A new sub-limit will apply to the use of eligible Kyoto units. While liable entities in Australia will still be able to meet up to 50% of their liabilities through purchasing eligible international units, only 12.5% of their liabilities will be able to be met by Kyoto units.

Australia will set its price ceiling with reference to the expected 2015-16 price of European carbon units. [more - original PR]

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