Draft legislation could point the way for the world's largest polluters to follow
At the third attempt, the Australian government has published new carbon pricing legislation, implementing a regime that will first establish a fixed tax rate for Australia's largest emitters in 2012, and will then move to an openly traded market price from 2015. As one of the highest per-capita emitters of CO2 in the world, Australia's announcement is seen as a move that could establish the direction for other non-EU nations to follow over the next 5-10 years.
The market-led scheme has been planned as revenue-neutral, in that revenues will be matched by cuts in general taxation. Mining, farming, and small business are largely exempt from the scheme, leaving approximately 60% of Australia's emitters of carbon included. Opposition has focused on the impact on Australia's commercial competitiveness - the country currently enjoys some of the lowest electricity prices in the world.
The legislation still requires approval by parliament later in the year, but the announcement has added momentum to the development of carbon pricing schemes around the world. In particular, the other natural resource producing nations in the region are expected to see this as a boost to a future global carbon pricing market. However, it is China's progress in this area that will be of even greater interest. As the world's largest emitter of CO2, it has initiated pilot schemes in carbon reduction, but no national carbon pricing scheme is yet in place.
As ever, the finalisation of details of the Australian scheme has the potential to upend the intentions of its authors - as has been seen in the stuttering EU market over the last decade. With about three-quarters of Australia's existing capacity based on coal, a significant switch to gas and solar generation will also need to be effected if the government's targets are to be met.
Posted by Ben Thacker
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