Australia delays carbon trading scheme by a year

The Australian government yesterday risked the ire of environmental and carbon trading groups with the announcement that it is to delay its high-profile emissions cap-and-trade scheme by a year as a result of the recession.

Prime minister Kevin Rudd said that following intense lobbying from business leaders, the scheme, which was due to launch in July 2010, would now not come into effect until July 2011.

"The worst global recession since the great depression means we must adapt our climate change measures but not abandon them," he said.

He added that the government would also move to provide businesses with greater clarity around the costs of carbon trading by announcing a fixed price for carbon permits during the first year of the scheme of A$10 (£5).

In an attempt to appease green groups, Rudd hinted that despite the delay to the scheme the government would tighten planned caps on emissions should an international climate change deal be agreed in Copenhagen later this year.

He said that the previous target of cutting emissions by between five and 15 per cent on 2000 levels by 2020 could be upgraded to a 25 per cent cut by the same date.

The move is unlikely to satisfy the Australian Green Party, which Rudd is relying on to get his climate change bill passed when it goes before parliament next week. The Greens have been calling for emission reductions of 40 per cent in the event of an international agreement being reached, and immediately branded the delay as "unjustified" and "unacceptable".

The delay also delivers a major blow to the global carbon market, which had hoped that the Australian scheme would help bolster the liquidity of the fast-expanding market and provide a template for President Obama's planned US cap-and-trade scheme.

Adam Nathan of the Carbon Markets & Investors Association said that while it was important to note that the scheme had been delayed rather than abandoned, the postponement and the introduction of a A$10 fixed price in the first year of the scheme was "clearly a bad policy outcome in terms of creating a liquid, functioning market".