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Australia and European Commission agree on pathway towards fully linking emissions trading systems

  • Start date : 28/08/2012 00:00:00
Australia and European Commission agree on pathway towards fully linking emissions trading systems

Australia and Europe are to link their emission trading systems, the two sides said today. The announcement was made by Australian Minister for Climate Change and Energy Efficiency, Greg Combet, and the European Union's Commissioner for Climate Action, Connie Hedegaard.

 

A full two-way link between the two cap and trade systems will start no later than 1 July 2018. Under this arrangement businesses will be able to use carbon units from the Australian emissions trading scheme or the EU Emissions Trading System (EU ETS) for compliance under either system.

To facilitate linking, the Australian government will make two changes to the design of the Australian carbon price:

  • the price floor will not be implemented;
  • a new sub-limit will apply to the use of eligible Kyoto units. While liable entities in Australia will still be able to meet up to 50% of their liabilities through purchasing eligible international units, only 12.5% of their liabilities will be able to be met by Kyoto units.

In recognition of these changes and while formal negotiations proceed towards a full two-way link, an interim link will be established enabling Australian businesses to use EU allowances to help meet liabilities under the Australian emissions trading scheme from 1 July 2015 until a full link is established, ie no later than 1 July 2018.

Commissioner Hedegaard said: "I welcome the changes agreed to by the Australian government which will allow the interim arrangements to proceed. The step-wise linking of the European and Australian market will ease full linking in 2018."

Minister Combet said: "Starting today, Australian liable entities can purchase EU allowances for future compliance in Australia. These arrangements provide Australian businesses with access to a larger market for cost-effective emission reductions and provide European market participants with enhanced business opportunities."

The European Commission and Australia will work to agree registry arrangements for the interim link by mid-2013. The Australian government has agreed to enter into negotiations on a full-linking agreement and the European Commission will seek a mandate to do so in the coming months.