Australia’s Clean Energy Future

For instructors looking to expand the ambit of their discussion of cap and trade systems beyond the EU-ETS, the centerpiece of Australia’s Clean Energy Future Package, its carbon pricing mechanism, is poised to begin operation on July 1, 2012. The legislation, passed in 2011, will establish a carbon price for approximately 60% of Australia’s emissions, including fuel use associated with electricity generation and industry, fugitive emissions from mines and waste, and household emissions via upstream liability for fuel distributors. The scheme will initially launch with a de facto carbon tax of AID $23. with a transition in three years to an emissions trading system.

The next few entries of this blog will summarize some good potential readings for students in this context, beginning with a two-page article (open access) in the most recent issue of Nature Climate Change. Among the take-aways from this article:

  1. Efforts to compensate households for price increases associated with the scheme include income-tax cuts for lower income groups, an approach that hasn’t been implemented often in carbon pricing schemes; however, the government has struggled to effectively communicate the impacts of this approach;
  2. While emissions-intensive industries will receive free permits valued at over AUD $3 billion, there’s very little evidence to justify shield trade-exposed companies from competition; there’s no real economic justification for payments to emissions-intensive coal-fired power plants These payments smack of the fruits of lobbying by industry;
  3. The Liberal opposition party has expressed a desire to repeal the carbon pricing scheme, and while this would likely prove to be a daunting political task, it could transpire after the next election in 2013.

The piece also includes a concise history of the development of the carbon pricing mechanism, as well as excellent discussion of the difficult politics in Australia that may imperil the scheme’s future.

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