The Australian government said on 15 December it will cut emissions to 5 per cent below 2000 levels by 2020 regardless of what other nations agree under international negotiations.
If a comprehensive global agreement to handle climate change is in place, Australia will slash emissions 15 per cent below 2000 levels by 2020, the government said.
This would have to be an agreement “where major economies agree to substantially restrain carbon pollution and advanced economies take on reductions comparable to Australia.”
At UN talks in Bali in 2007, Australia supported a statement that developed nations should cut their emissions 25-40 per cent below 1990 levels by 2020.
The government argued that a 5-per cent cut in total emissions to 2020 would equal a 27-per cent cut in per capita emissions.
The 5-15 per cent cut from 2000 levels equals a 4-14 per cent cut from 1990 levels.
In 2006, Australia emitted 576 million tonnes of carbon dioxide equivalent, an increase of 4.2 per cent from 1990.
Green groups slammed the government target, accusing Prime Minister Kevin Rudd of having “raised the white flag of surrender on climate change.”
”Kevin Rudd has put the coal industry ahead of Australia’s children and grandchildren. It will be much more expensive to rectify this historic mistake in the decades ahead. The 2010 federal election is shaping up as a referendum on tackling climate change,” Greens Senator Christine Milne said.
”This target is completely unacceptable,” said WWF Australia’s Paul Toni.
”The Australian Treasury’s economic modelling has shown that cuts of 25 per cent are affordable and achievable if part of an international agreement. This should be the government’s aim,” he said.
The Australian government on 15 December proposed rules for its emissions trading scheme.
Guided by an emission reduction target of bringing greenhouse gas output to 5-15 per cent below 2000 levels, Australia said it will implement its carbon pollution reduction scheme (CPRS) on 1 July 2010.
It published a ‘white paper’ on the scheme, and hopes to see the legislation pass in parliament next year.
The scheme features include:
• A cap for participants to be set after the UN climate meeting in Copenhagen in December 2009;
• 1,000 facilities to be covered;
• A price cap of A$40 (US$26.66) from the start, to be increased by 5 per cent annually and phased out after five years;
• Indefinite banking of allowances, 5 per cent borrowing from future vintages allowed each year;
• A ban on exportint Australia emissions units (AEUs);
• Unlimited use of project-based Kyoto credits;
• Lowered threshold for free allocation to trade-exposed industries;
• 31.2 million free AEUs per year to the most inefficient coal generators.
The government said it will spend the revenue from AEU auctions to assist households and businesses to adjust to the scheme.
Price control measures
The government proposed a series of measures aimed at controlling the price of carbon permits, especially during the first years of the scheme’s operation.
While it dismissed the idea of launching the CPRS with a fixed price for AEUs, it has proposed an initial price cap to reduce the cost of the scheme.
Australia plans to cap the price at A$40 when the scheme takes off in 2010. The price cap will be increased by 5 per cent annually, then removed after five years.
The cap, equalling €19.82, is likely to prevent a formal link between the CPRS and the EU emissions trading scheme.
The government also proposed to allow firms to borrow 5 per cent from future vintages for compliance purposes each year. This could help companies control costs in case of a supply squeeze.
The government also wants to ban the export of AEUs so as to keep supply of permits at a sufficient level.
The white paper said this ban would only be lifted with a five-year notice, unless a bilateral link is established with a similar carbon scheme in another country, for example New Zealand.
Kyoto credits
Hard pressed by the difficult economic situation, the government abandoned its previous proposal to set a limit on the use of carbon credits issued by the UN under the Kyoto protocol.
From compliance year 2012/13, Australian firms can use an unlimited amount of credits from Kyoto’s clean development mechanism (CDM) and joint implementation (JI) for domestic purposes.
CDM credits issued by the UN from 2008 onwards will be eligible for use, except credits that stem from forestry projects.
The government proposed however not to recognise government Kyoto credits – assigned amount units (AAUs) – under the scheme.
Such credits are controversial as they are thought to have limited environmental integrity because most AAU sellers have a surplus originating from the economic turmoil in eastern Europe in the 1990s rather than from ambitious climate change policies.
The white paper did not bar the government from buying AAUs should it need to in order to comply with its Kyoto target.
More free permits
The white paper said it is unlikely that a significant amount of emissions would leak to other countries as a result of the CPRS, but nevertheless the government decided to boost the amount of permits handed out for free.
It lowered the threshold for energy-intensive trade-exposed industries to qualify for free permits under the scheme.
The green paper published in July suggested that industries emitting at least 2,000 tonnes of CO2 per million dollars of revenue be given 90 per cent of their needed permits for free.
Firms emitting 1,500 tonnes per million dollars of revenue would get 60 per cent of permits for free.
The threshold for the lower range of compensation has been lowered to 1,000 tonnes of CO2 in the white paper, qualifying many more facilities to get free permits.
The white paper also allows for a new way of calculating whether a company qualifies: if a company’s trade share is defined as more than 10 per cent of the value of its domestic production in any year between 2004/05 and 2007/08, it will qualify for free allocation.
Dirty coal
The government also proposed to compensate coal generators as a strongly affected industry.
During the first five years of the CPRS the government will allocate A$3.9 billion worth of AEUs for free to the highest polluting coal generators.
The government said the allocation will be decided using an assumed AEU price of A$25, meaning the coal industry will get 156 million AEUs for free over the period, or 31.2 million per year.
The free permits will be reserved for coal plants emitting more than 0.68 tonnes of CO2 per MWh generated.
The white paper also outlined a A$6-billion compensation package to households, A$2.4 billion in fuel-related assistance to consumers and a A$2.15 billion climate change action fund to help businesses and organisations make the transition to the CPRS.
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