Australia Needs Global Carbon Trading Now, Industry Lobby Says

Australia should scrap its fixed price on carbon because it puts domestic companies at a disadvantage and immediately start emissions trading linked to global markets, the nation’s top industry lobby group said.

“Australian businesses could be taking advantage of these low international prices through emissions trading,” the Australian Industry Group said in an e-mailed statement today. “Instead we are stuck with the government’s high fixed prices.” The group also expressed reservations about the climate strategy proposed by the opposition party favored to win an election scheduled for Sept. 14.

The nation’s ruling Labor party set the price of carbon at A$23 ($23.60) a metric ton in July 2012 as its main tool for reducing Australia’s reliance on coal and meeting its target for a 5 percent cut in greenhouse gases by 2020. While the country is scheduled to phase out fixed-cost emissions in favor of market-based prices in 2015, the industry group is pushing to immediately jettison a rate that is currently about four times what emitters pay in the European Union, which runs the world’s biggest cap-and-trade system.

Prime Minister Julia Gillard’s government amended its carbon legislation in August 2012, linking Australia’s emissions market with the EU. The revisions enabled emitters to begin immediately buying EU permits for compliance when Australia’s cap-and-trade system starts in 2015.

Since Australia opened the door to EU permits on Aug. 28, they have dropped by almost 50 percent, settling yesterday at 4.28 euros ($5.56) a metric ton on the ICE Futures Europe exchange in London. EU prices collapsed as the European Commission struggled to eliminate an oversupply of allowances.

Record Low

“Australia’s emitters understandably want cheap carbon, and right now we have record low EU prices,” said Seb Henbest, the Sydney-based head of carbon-market analysis for Bloomberg New Energy Finance.

Industry support for carbon trading recognizes that it is the most cost-effective way to reduce emissions and that Australian opposition leader Tony Abbott, favored to win the next election, may find it hard to fulfill his pledge of scrapping the nation’s carbon price, Henbest said. While Abbott’s Liberal-National coalition is leading in opinion polls, it probably won’t win enough seats to repeal Gillard’s Clean Energy Act, Henbest said in Feb. 27 report.

“The manufacturing sector may not be confident that the coalition will be able to get rid of the carbon price,” said Henbest, who predicts that Abbott has a one-in-three chance of succeeding. “Even if it can, there is an expectation that sooner or later carbon price policy will be brought back, and that ongoing uncertainty makes life difficult.”

‘Pledge in Blood’

The Australian Industry Group, which represents more than 60,000 businesses, said it doesn’t support the alternative proposed by Abbott. The opposition leader gave a “pledge in blood” that he will scrap the levy for about 300 of the nation’s largest polluters, calling it a wrecking ball for Australia’s economy.

Abbott wants to replace it with his so-called Direct Action Plan that would commit as much as A$750 million a year to reward entities that demonstrate the most cost-effective spending to cut emissions, opposition climate spokesman Greg Hunt said in November 2012.

“The alternative approach from the opposition would only permit domestic abatement without international linkage and, even on the most optimistic assumptions, would see abatement prices more than double international levels,” the group said.

To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editors responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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