Europe and Australia to Link Carbon Trading Systems

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) -- Europe has signed a landmark agreement with Australia that could help prop up the ailing carbon emissions scheme, the European Trading System (ETS).

The European Commissioner for Climate Action, Connie Hedegaard, and the Australian Minister for Climate Change and Energy Efficiency, Greg Combet, jointly announced that they will be linking their emissions trading systems - the first time that carbon trading systems will be integrated. The move will initially allow Australian companies to purchase cheaper European Union (E.U.) U carbon credits, which will in turn will boost the weak price of carbon credits Europe and boost investment in renewables.

The ETS is the world's largest carbon cap-and-trade program but has been struggling in recent years. A combination of chronic oversupply of carbon credits and plummeting carbon prices has made investing in European renewable energy projects less attractive to investors. In April this year, the E.U. intervened, proposing key changes to the ETS to stop the decline. Hedegaard announced then that it was planning to review the auctioning rules and proposed delaying the release of permits to deal with the oversupply problem. For additional information see April 27, 2012, article - E.U. to Fix Ailing Emissions Trading Scheme.

The schemes will be linked fully by 2018. Australian companies will be able to start buying credits from the ETS in July 2015, when the Australian scheme kicks off. It allows them cover up to 50% of their country's emissions. European companies will not be able to buy Australian credits until 2018.

"The European Union is the first regional emissions trading system and spans the largest part of the European continent," Hedegaard said. "We now look forward to the first full inter-continental linking of emission trading systems. This would be a significant achievement for both Europe and Australia. It is further evidence of strong international cooperation on climate change and will build further momentum towards establishing a robust international carbon market."

Combet added: "Linking the Australian and European Union systems reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions. Australia's carbon price will effectively be the same as that that operates in our second largest trading bloc, and effectively the same as that of 30 other countries, and the same carbon price that will cover 530 million people".

The move has been cautiously welcomed by some independent carbon research groups.

"While our preference is for a longer term price floor than in current legislation, linking with the world's biggest carbon market is welcomed so long as it is combined with strong policies for clean energy and energy efficiency", said Erwin Jackson, Deputy CEO, The Climate Institute. "Without a carbon price floor or strong limits on the import of international offset credits from developing countries, Australian carbon prices would fall to single digits in 2015. Linking with the E.U.'s carbon laws and limiting the use of carbon credits from developing countries should help to ensure Australia's carbon laws don't become a toothless tiger in 2015," he added.

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