Action to put in place Australia’s pioneering carbon price linkage with the European Union has started.
Climate Change and Energy Efficiency Minister Greg Combet said on Wednesday it would be the world’s first intercontinental linkage of emissions trading schemes and the start of “a deep and liquid carbon market”.
He also warned of trade retaliation if Australia didn’t act on greenhouse gas emissions.
Mr Combet was introducing into parliament a suite of seven bills to establish a link between the Australian and European emissions trading schemes from July 2015 when Australia’s fixed carbon price ends.
It also removes a carbon floor price so Australia can move to “a fully flexible emissions trading scheme where the Australian carbon price reflects the price in the largest carbon market in the world”.
Mr Combet said this would mean the domestic carbon price reflected the price of Australia’s second largest trading bloc and be the same as in at least 30 other countries, including Britain, France and Germany.
The linking also meant an Australian business with a carbon price liability could buy a carbon emissions unit - effectively a permit to emit a tonne of greenhouse gas - in either the Australian or European carbon markets.
The permits could be bought now for compliance after July 1, 2015.
Mr Combet said because the Australian and EU systems both cap the overall level of emissions, the use of a European allowance by an Australian emitter would mean one less tonne of carbon pollution was released in Europe.
“Our challenge is to reduce global emissions,” he told parliament.
“One tonne of pollution reduced in Europe delivers the same environmental benefit as a tonne of pollution reduced in Australia.”
He said by opening up the trade in carbon, pollution would be reduced at the least cost and benefit households, businesses and the environment.
“Anyone who suggests to the Australian community that we can have a free ride, that other nations with lower per capita emissions and less developed economies must take all the responsibility, is engaged in an act of deceit,” he said.
“That pathway will lead to retaliation in our trading relationships.”
In a brief comment after the third of the bills was introduced, the opposition’s climate action spokesman Greg Hunt said the package represented “complete chaos” by the government.
Australia is one of the world’s top 20 greenhouse gas emitters and the highest per capita emitter among advanced economies.
Debate on the bills was adjourned.
