Australia’s top emissions regulator says the national carbon market is stepping up to the next level as the government gives away the first permits to polluters ranging from Rio Tinto Group to Alcoa Inc., with banks showing an interest in buying the units.
Australia’s Clean Energy Regulator has issued about 45 million free permits as part of the government’s program to help businesses that are constrained in their ability to pass on the costs of a carbon price. Businesses can sell the carbon units back to the government or to other companies.
“We’re seeing transactions,” Chloe Munro, the regulator’s chief executive officer, said in an interview in Melbourne, where she’s attending a carbon conference. “The market is starting to do what you’d expect it to do.”
Australia began charging about 300 of its largest polluters a price of A$23 ($24) a ton for their greenhouse gas emissions on July 1 and plans to introduce a cap-and-trade system in 2015. While Prime Minister Julia Gillard won support last year for her carbon legislation, she has trailed in the polls behind Tony Abbott, the opposition leader. Abbott has pledged to end what he has called a “toxic tax.”
The “vast majority” of the carbon units for the year will be issued by December, said Munro, who started at the Clean Energy Regulator in April overseeing the government’s carbon price and has a staff of about 350 people. “Banks are interested in acquiring those units,” she added.
Climate Change Risk
The regulator also has approved seven projects under the government’s program allowing farmers and land owners to earn credits by storing carbon or reducing greenhouse gas emissions, resulting in additional carbon units coming onto the market. By June 15, Australian companies subject to the carbon price will be required to purchase permits amounting to 75 percent of their 2012 emissions unless they show that their obligations will be less, Munro said.
Australia abandoned an attempt to set a minimum price for carbon permits and announced Aug. 28 it was linking to the European Union market, preparing for global emissions trading.
“From an administrative point of view, it’s definitely a positive,” said Munro, who previously worked as chairman of the National Water Commission. “From a client point of view, it should also be seen as a positive because having access to a larger market with a forward price is very good.”
Munro said she started thinking about the idea of putting a price on carbon emissions 20 years ago, describing herself as “an open-minded skeptic” at the time.
“The weight of scientific opinion is that there’s a risk of dangerous climate change as a result of human activity, so if that’s the case, and you can see the consequences in making an investment in adjusting the economy to reduce that risk, that’s a sensible strategy,” she said.
The threat that Australia’s carbon market will be terminated and industry opposition to paying for their emissions aren’t distracting Munro from her focus on building trust in the regulator, she said. Political arguments against carbon pricing are being debunked because the start of carbon pricing didn’t result in the catastrophic scenarios that opponents were predicting, she said.
The country’s emitters are making a “clear distinction” between having a professional relationship with the regulator and any opposition they might have to the country’s carbon policy, she said.
“Most liable entities simply don’t want to get into that territory on non-compliance,” Munro said. “That’s not to say they are complying with huge enthusiasm.”