Australia’s Carbon Price Scheme Starts Up; Large Emitters to Pay $23.50 Per Metric Ton

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Australia's Carbon Price Regime Begins

Key Development: As of July 1, large greenhouse gas emitters must pay $23.50 per metric ton of carbon dioxide.

What's Next: The carbon price will rise to $24.75 in the 2013-14 fiscal year and to $26 in 2014-15.

By Murray Griffin  

MELBOURNE, Australia--July 1 marked the start of Australia’s carbon price scheme, which requires large greenhouse gas emitters to pay A$23 ($23.50) per metric ton of carbon dioxide.

The scheme affects almost 300 organizations with facilities that emit more than 25,000 metric tons of greenhouse gases a year. Most are companies, but more than 30 local government authorities that operate large landfills are also affected (35 INER 455, 5/9/12).

Emissions-intensive companies that face international competition will receive free carbon units to help them adjust to the scheme. In the first year, the most emissions-intensive will receive units equivalent to 94.5 percent of average carbon costs for their industry and those that are moderately emissions-intensive will receive units equivalent to 66 percent of costs.

The government is also providing assistance worth A$5.5 billion ($5.64 billion) spread over six years to coal-fired electricity generators and is negotiating with five of the most emissions-intensive generators for a managed shutdown of up to 2,000 megawatts of generating capacity, which would allow time for the commissioning of replacement gas-fired and renewable energy power plants (35 INER 611, 6/20/12).

Separate assistance packages are available for the steel and coal mining industries, while the government has also implemented several large-scale grant schemes to help businesses implement energy efficiency and clean energy projects.

Price to Rise in 2013-14

The carbon price will rise to A$24.15 ($24.75) in the 2013-14 fiscal year and to A$25.40 ($26) in 2014-15. The scheme will then convert to a trading phase involving a market-determined price, although to reduce volatility it will have a price ceiling and floor for at least the first three years.

The scheme is administered by an independent Clean Energy Regulator. A separate Climate Change Authority will advise the government on annual emission caps for the trading phase that begins in mid-2015 and will also review the effectiveness of industry assistance measures, as well as the performance of several federal climate change programs.

A matching charge of A$23 per metric ton (in carbon-equivalent terms) will be levied on importers of refrigerants that are potent greenhouse gases. These synthetic greenhouse gases are not manufactured in Australia.

Some off-road users of fossil-based liquid fuels such as gasoline and diesel will pay a matching charge, notably mining companies, which will be imposed through adjustments to the nation’s fuel tax system. However, off-road users of these fuels in the farming, forestry, and fishing industries will be exempt. The government also plans to apply a carbon price to fossil fuel used by heavy on-road vehicles starting in mid-2014.

Encouraging Investment in Renewables

The carbon price scheme is the centerpiece of a clean energy package negotiated last year by the minority Labor government; Greens members of Parliament, who hold the balance of power in the Senate; and key independents, who have the balance of power in the House of Representatives.

Other elements of the package include a A$10 billion ($10.25 billion) Clean Energy Finance Corp., which will leverage private sector investment in renewables and energy efficiency projects, and a carbon offset scheme focused on the landfill, carbon sink forestry and agriculture sectors, known as the Carbon Farming Initiative (35 INER 556, 6/6/12).

The government is also considering introducing a national scheme that would subsidize energy efficiency activities in households and businesses.

In anticipation of the federal carbon price scheme, several state climate change-related programs have been abolished, most notably a trading scheme applying to the electricity sector in New South Wales, and this process is expected to continue.

State governments have also stopped imposing greenhouse gas conditions as part of their approvals for major projects.

The main opposition alliance, the Liberal-National Party coalition, is committed under its current leadership to repealing the carbon price scheme if it wins office at the next election, as well as much of the supporting policy architecture.

However, while it currently leads by a substantial margin in the polls, election rules and procedures would make it challenging for either major party to gain control of the Senate in its own right.

The debate over pricing carbon has dominated Australian politics for the past five years and climate change-related policy maneuvers have contributed in large part to the downfall of several party leaders over that time.

Former Liberal-National Party Leader Malcolm Turnbull was deposed the day before a crucial 2009 carbon-related Senate vote largely because of his advocacy of emissions trading, and former Labor Prime Minister Kevin Rudd was replaced in June 2010 by current leader Julia Gillard after his decision to defer a trading scheme led to a plunge in his standing in voter polls.

By Murray Griffin  


Information on the Clean Energy Regulator is available at http://www.cleanenergyregulator.gov.au/Pages/default.aspx.

A guide to the carbon price scheme is available at http://www.cleanenergyregulator.gov.au/Carbon-Pricing-Mechanism/Reports-and-publications/Documents/Guide%20to%20Carbon%20Price%20Liability.pdf.

Information on the Climate Change Authority is available at http://www.climatechangeauthority.gov.au/.