MARKETS

Carbon trading certain, cost-effective and challenging

MARKET-based approaches to reduce carbon emissions are more cost-effective than other policy meas...

Richard Collins
Carbon trading certain, cost-effective and challenging

The taskforce convened by Prime Minister John Howard has been charged with investigating carbon emissions trading against the background of Australia's "major competitive advantages through the possession of large reserves of fossil fuels and uranium".

Coupled with Howard's slip in Parliament yesterday questioning the link between human emissions and global warming, the terms of reference suggest a trading scheme is not as inevitable as some believe.

The 9-page paper makes no recommendations, but acknowledges the urgency of the issue.

"While debate continues about the precise scale, consequences and costs of climate change, and the scope for long-term adaptation to global warming, there is growing acknowledgment that governments, individually and collectively, should act to mitigate the emission of greenhouse gases. The warning signs cannot be ignored," it said.

Australia's controversial emissions path over the last few years thanks to the inclusion of land clearing is a one-off, meaning other measures are required.

Models for a trading scheme include cap and trade, baseline and credit, and hybrid schemes with cost capping. The paper, which does not explore any of them in depth, says a national scheme would help rationalise the myriad climate change measures across the states, while allowing the greatest flexible of the options. It is preferred to a tax.

"A tradeable permit market creates an explicit carbon price signal which allows business greater certainty in taking long term investment decisions and allows for the development of financial instruments to manage risk," said the paper.

Businesses should also note the comment that one essential pre-condition is "disaggregated", company-based reporting. There has been considerable debate about whether to include carbon emissions in the National Pollutant Inventory, with trials coordinated by EPA Victoria last year suggesting it would not be overly onerous.

Other complementary policies worth exploring include measures to improve end-use efficiency and support for development of low emissions technologies.

WME Environmental Management News

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