mike mckensey, westpac: carbon permits, the cap and trade system - australia’s place in the global...

Carbon trading

with the Institutional Bank.

Nov 2013 | Mike McKensey

The Carbon Pricing Mechanism

The expected price of carbon in Australia

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Source: Westpac

Fixed price

Floating price

ACU price

Historical EUA and CER prices

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Repeal of the “Carbon Tax”

Repealing the ‘carbon tax’

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Draft legislation released in October 2013 would:

• Remove the carbon price from 1 July 2014

• Remove the equivalent carbon price on heavy transport fuels /

synthetic GHGs

• Abolish the Climate Change Authority

• Cancel additional income tax compensation scheduled for 2015

• Give the ACCC greater powers to monitor and enforce price-gouging

Timing and likelihood of repeal

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16 June 2014

Provisional

surrender for

13/14 year

01 July 2014

1) Senate changes hands

2) The 14/15 emission year begins

01 Jul 1419 Nov 13 01 Sep 14

01 Sep 14

ACU buyback

begins

1) Labor and Greens control Senate

2) Double dissolution possible

Senate make up after 1 July

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Party Seats

Coalition 33

Labor 25

Greens 10

Palmer United Party 2

Independent 1

Liberal Democrat 1

Family First 1

Democratic Labor Party 1

Aus Motor Enthusiasts Party 1

Aus Sports Party 1

Total 76

?

What does the market think?

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Source: Westpac

Direct Action

Emission Reduction Fund

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Source: Westpac

Commodities, Carbon and Energy – Westpac Institutional Bank

‘terms of reference’

1. Sources of “low-cost, large scale abatement

2. Facilitating the “development of abatement projects”

3. Cost effective auction mechanism

4. Operational responsibilities and governance

5. Monitoring, verification, compliance and payment arrangements

6. Transitioning from the Carbon Farming Initiative

7. Business As Usual emissions baselines

Questions

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What baseline will be used?

What penalties will be imposed if liable entities emit over their baselines?

What will occur if counterparties don’t deliver emission reduction?

What will be the process for approving projects?

How will the Government meet its target of 5% below 2000 levels by 2020?

Thank you

Commodities, Carbon and Energy (CCE)

Mike McKensey

Head of Carbon Trading

+61 28204 2883

mmckensey@westpac.com.au

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Unique credentials...

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The offset market (fundamentals by BNEF)

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