GLOBE Foundation

Australia to link carbon pricing to world carbon markets


Source: GLOBE Foundation

From July 2015, Australia's carbon pricing mechanism will be linked to carbon markets around the world according to a press statement from the Australian Department of Resources, Energy and Tourism.

This will allow reductions in carbon pollution to be pursued globally at the lowest cost. Carbon pollution is not confined to national borders - it affects the whole planet.

International linking of carbon markets will allow businesses that release carbon in one country to be matched up with businesses in other countries that are able to reduce their carbon pollution at lower costs.

International linking encourages action to reduce carbon pollution around the world, and plays an important role in helping developing countries adopt clean technologies.

Australian businesses will be able to buy international permits from credible international carbon markets or emissions trading schemes in other countries. They will be allowed to use these permits to meet some of their local obligations.

When an Australian business buys an international permit, it means that a tonne of pollution cannot be released overseas. Farmers will be able to sell their Carbon Farming Initiative credits to international markets.

Safeguards will be in place to ensure international permits are credible and do not undermine the environmental integrity of Australia's pollution reduction efforts.

Until 2020, businesses will have to meet at least half of their annual obligations each year by buying Australian carbon permits or Carbon Farming Initiative credits.

It will be more efficient and less costly to reduce Australia's carbon pollution by a mixture of domestic reductions and international permit purchases compared with relying on domestic action alone.

International linking allows Australian businesses to pursue credible, cheaper carbon pollution reduction opportunities wherever they are available.

The price of international permits will act as an additional safety valve on carbon prices in Australia, says the Department.

If reducing carbon pollution in Australia is more expensive than reducing carbon pollution in another country, Australian firms will be able to purchase an international permit. With international linking, the carbon price in Australia will be set by international supply and demand for permits.

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