Market News

 August 17, 2006
Australian states propose emissions trading plan

 Sydney, Australia - Australia's states and territories have unveiled proposals for a national greenhouse gas trading scheme; a plan that puts these governments on a collision course with Australia's federal government which is opposed to emissions trading.

The scheme, which could be up and running by 2010, initially would target the electricity generating sector. It would set emissions limits out to 10 years, with indicative targets available for a further 10 years, to give as much certainty to industry as possible.

The scheme would apply to electricity generators with a capacity greater than 30MW, which covers about 100 generators that account for 35% of Australia's total GHG emissions. Electricity prices are expected to increase slightly as a result of the scheme, which has prompted proponents of the scheme to suggest subsidies for poor families and for selected industries.

After five years, coverage would be extended to include all stationary energy sources emitting more than 25,000 tonnes of carbon dioxide or equivalent, as well as gas retailers and gas pipeline operators. This would take in another 150 facilities, including pulp mills, cement kilns and the iron and steel sector, and would extend the scheme's coverage to include another 10% of the nation's GHG emissions.

The proposals do not specify the caps to be imposed. Instead they present a number of scenarios -- ranging from 5% below 2005 emissions by 2030, to 19% below.

The scheme would be open to carbon credits from the Kyoto Protocol's Clean Development Mechanism, and a domestic offsets program would also be established.

According to Martijn Wilder, Sydney-based head of the global climate change practice of law firm Baker & McKenzie, the scheme "represents the first real step towards a long-term approach for capping Australia's national greenhouse emissions". Wilder is also chair of the New South Wales Premier's Greenhouse Gas Advisory Panel.

However, Australian Prime Minister John Howard was scathing in his words about the proposal, claiming it would have "a devastating impact" on resource-exporting states. "While we have control of policies in this area, we are not going to sell out the Australian resource sector and we are not going to sell out the workers in the resource industry," Howard told parliament.

The National Emissions Trading Secretariat is inviting comments on the proposed scheme