Australia, New Zealand Plan to Link Emissions Trading Schemes

14 December 2011

While discussions at this year's UN climate negotiations in Durban, South Africa were still underway, some countries also made moves outside of the multilateral setting in an attempt to strengthen international climate change co-operation. Australia and New Zealand revealed plans last week to link their emissions trading systems as soon as 2015, once Australia has moved from a fixed carbon tax to a flexible price mechanism.

Australia's Clean Energy Bill overcame its final hurdle last month, with the Senate passing the law to introduce a carbon tax in July 2012 (see Bridges Weekly, 9 November 2011). The controversial tax targets five hundred of Australia's most polluting producers, and has come under fire from a variety of fronts, particularly the coal industry - Australia's largest export industry.

The Australian plan will create the largest emissions trading scheme outside of the EU when the fixed tax develops into a market-based trading system in 2015.

Earlier this fall, when the future of the Australian carbon tax was still unclear, the domestically controversial scheme received strong backing from the EU. Along with providing public support, Brussels also indicated that it would be holding discussions with Canberra on a possible linkage of the two carbon trading systems (see Bridges Weekly, 7 September 2011).

Now that the Australian plan has been passed into law, the EU and Australia have been exploring ways of linking their carbon markets.

Australia is now planning the same with its neighbour New Zealand, which has had its own trading scheme since July 2011. On the sidelines of the global climate summit in Durban, Australian Climate Change Minister Greg Combet and his New Zealand counterpart Tim Groser expressed their intention to link their respective emissions trading schemes as soon as possible.

"Markets are the way to cut our emissions at least cost. That is why Australia is working with New Zealand to develop them domestically and internationally," the Ministers stressed in their joint statement.

Officials from both countries have already identified areas for linkage as well as a possible start date, currently planned for 1 July 2015.

In Australia's case, linking its carbon market with other countries could have the additional advantage of locking in the scheme, making its removal - as planned by the conservative opposition in case of victory in the country's 2013 elections - more difficult.

The outcome of the two-week Durban climate talks also sparked a renewed attack of Australia's carbon tax law by Australian opposition leader Tony Abbott. "That Durban has broken up without any significant outcomes just proves that this is going to be a do-nothing decade for global action on climate change," he said. "It demonstrates that Australia's carbon tax is an international orphan."

The new global climate deal, which was eventually hammered out one day and a half after the planned end to the Durban talks, involves a plan among the 194-party conference to begin negotiations on a legal climate agreement involving all major emitters - including the US, India and China. This agreement would be concluded in 2015 at the latest. For more on the conclusion of the Durban talks, see our Special Section of this issue.

ICTSD reporting; "Climate conference approves landmark deal," ASSOCIATED PRESS, 11 December 2011; "Coalition, Greens attack Durban climate pact," THE AUSTRALIAN, 12 December 2011; "Australia, New Zealand could link carbon trade schemes in 2015," REUTERS, 5 December 2011.

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