Australia to introduce cap-and-trade scheme in 2010

The Australian government yesterday released its long anticipated plans for a cap-and-trade scheme designed to curb emissions from one of the world's most carbon intensive economies.

The climate change minister Penny Wong said that the proposed scheme would come into effect from July 2010 and would effectively put a price on carbon emissions. "Placing a limit and a price on pollution will change the things we produce, the way we produce them, and the things we buy," she said.

The government said that the new scheme would cover 75 per cent of the country's emissions and include 1,000 of its biggest polluters, including energy providers, mining companies and heavy manufacturers. The scheme will also be extended from 2015 to include emissions from the large Australian agricultural sector.

Wong also unveiled a package of measures designed to limit the impact of the scheme on fuel prices, and help carbon intensive firms transfer over to cleaner technologies.

She said that low earners would be protected from rising consumer good prices through new tax breaks, while petrol price inflation would be limited " cent-for-cent" fuel tax cuts designed to negate any rise in prices caused by the scheme.

Energy intensive firms that face stiff international competition, such as cement and aluminium manufacturers, were also promised grants to help them invest in more energy efficient technologies, while energy firms were told they would initially receive up to 30 per cent of their emission permits free of charge.

The government said that in the long term, the scheme could be integrated into a global carbon trading regime, adding that it would release a more detailed report outlining the exact level of the caps it wants to set and the likely price of carbon in October.

Carbon trading experts welcomed the scheme, claiming it offered broad coverage of the economy, a significant level of credit auctioning and a workable model for proposed cap-and-trade schemes across Asia, such as those being planned in South Korea and Japan.

However, environmentalists gave the proposals a more muted welcome, claiming the government had watered down the scheme in the face of lobbying from carbon intensive industries.

Speaking to Reuters, Greenpeace Climate spokesman Simon Roz predicted that the scheme "would result in nothing more than paper shuffling". "All this proposed ETS does is prop up dirty industries, such as coal-fired electricity generation, allowing them to maintain the status quo," he added.