Europe and Australia announce ETS link

The European Union and Australia are to link their emissions trading schemes.

Under the deal, which is due to partially start in 2015 and be fully operational no later that 2018, businesses will be allowed to use carbon units from the Australian or European scheme for compliance under either system.

In advance of the alliance, the Australian government will make two changes to the design of its carbon price. It will not implement a price floor and 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 per cent of their liabilities through purchasing eligible international units, only 12.5 per cent of their liabilities will be able to be met by Kyoto units.

Until the full joining of schemes is established, an interim link will be established, whereby Australian businesses will be able to use EU allowances to help meet liabilities under the Australian emissions trading scheme from 1 July 2015.

The agreement was announced today by Australian Climate Change Minister Greg Combet and the European Commissioner for Climate Action Connie Hedegaard.

Combet said the deal would “provide Australian businesses with access to a larger market for cost-effective emission reductions and provide European market participants with enhanced business opportunities”.

He also said the arrangements would provide flexibility to businesses with operations in both Australia and Europe, which could reduce compliance costs.

Hedegaard added: “The European Union is the first regional emissions trading system and spans the largest part of the European continent. We now look forward to the first full inter-continental linking of emission trading systems.”

She said the pact would be “a significant achievement for both Europe and Australia. It is further evidence of strong international co-operation on climate change and will build further momentum towards establishing a robust international carbon market.”

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