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COP 18/CMP 8, Doha

1 December 2012

Australia’s Emissions Trading Scheme

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Carbon pricing: A central part of Australia’s Clean Energy Future Plan

Australian Renewable Energy Agency

Energy Innovation: Clean Energy Finance Corporation

Energy Efficiency measures

Energy Innovation: Renewable Energy Target

Land Sector Abatement

Carbon pricing

mechanism

A staged path to emissions trading

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Emissions reporting

1 July 2008

Fixed price emissions trading

1 July 2012

Flexible price emissions trading with price ceiling

and interim link to the EU ETS1 July 2015

Fully flexible emissions trading with full link to EU

ETS1 July 2018

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International Linking

• Australia’s ETS is designed to link to international carbon markets.

• From 1 July 2015, international units are expected to be used by a significant number of liable entities.– Subject to qualitative and quantitative restrictions.

• The domestic carbon price is expected to be set by the European price from 2015.

• Export of Australian emissions units will be permitted once the price ceiling is no longer in place from 2018, or earlier if part of an international agreement.

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Australia’s ETS linking restrictions

• Quantitative limits– at least 50% of annual liabilities must be met with domestic

permits– up to 12.5% may be met with Kyoto units

• Qualitative limits on units from:– nuclear projects– destruction of trifluoromethane– destruction of nitrous oxide from adipic acid plants – large-scale hydro-electric projects not consistent with EU

criteria – long-term and temporary CERs.

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• Use up to 12.5% Kyoto Units

• Use up to 50% European allowances

Australian companies will still have access to the same domestic and international units, however Australian carbon units will also be able to be exported to the EU ETS from 2018. Details of the full linking arrangement will be agreed by mid 2015.

Reduce emissionsUse up to:• 100% from Australian

Carbon Units• 100% from Carbon

Farming initiative Units

Whilst no international permits can be used until 2015, businesses can still purchase European allowances and Kyoto units during this period to use for compliance from 2015.

Reduce emissionsUse up to:• 100% fixed price

Australian Carbon Units

• 5% from Carbon Farming Initiative Units

Linking in practice under the Australian scheme

2015 – 2018 2018 onwards2012 - 2015

Aust

ralia

Inte

rnati

onal

Fixed price period ETS with interim EU linking and Kyoto unit access

ETS with full EU linking and Kyoto unit access

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More information

Department of Climate Change and Energy Efficiency www.climatechange.gov.au

Clean Energy Futurewww.cleanenergyfuture.gov.au

Clean Energy Regulator www.cleanenergyregulator.gov.au

Climate Change Authority www.climatechangeauthority.gov.au

Treasurywww.treasury.gov.au

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Role of overseas abatement

Australia’s emissions in the core policy scenario

1 2 3 4 5 6 7 8 9 100

200

400

600

800

1000

1200

97

455

54

442Domestic abatement

Internationally-sourced abatement

Mt CO2-e Abatement 2020 2050 152 897

Source: Treasury estimates from MMRF (2011)

With carbon pricing

Without carbon pricing

Including overseas abatement

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Australia’s 2050 target

Note: Emissions trajectories and projections are indicative only and do not represent official projections

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Implementation and Future Steps

• On 2 April 2012, the Clean Energy Regulator commenced operations.– In October 2012, it began issuing free carbon units under the Jobs and

Competitiveness Program.– Preparations underway for first surrender process in June 2013.

• Linking amendments approved by Australian Parliament in late November.

• Registry arrangements for EU link agreed by mid-2013.• First auctions scheduled for early-2014.• Climate Change Authority will advise on pollution caps by

February 2014.– Government will announce caps in the Budget soon after.