FACTBOX: Australia-EU carbon trade differences

(Reuters) - Australia's Senate defeated draft legislation on the world's broadest emissions trading scheme on Thursday. The carbon trade bills are expected to be presented to parliament for a second vote in November.

The Carbon Pollution Reduction Scheme, expected to begin for most sectors from mid-2011, draws heavily from the European Union's emissions trading scheme (EU ETS) but there are significant differences.

Following is a brief comparison of the two.

NATIONAL TARGET

The EU's policy is to cut emissions to 20 percent below 1990 levels by 2020, or 30 percent if other rich nations commit to comparable emission reductions and developing states contribute adequately according to their responsibilities and capabilities.

Australia has pledged to cut emissions by at least 5 percent below 2000 levels by 2020, or up to 25 percent if there is a global agreement to limit carbon dioxide levels in the atmosphere to 450 parts per million or less by 2050.

Australia could also choose to make deeper cuts outside the domestic scheme if the government wished to, the policy White Paper on the scheme said in December, for example through the purchase of U.N. credits called Assigned Amount Units under the Kyoto Protocol.

If the laws are eventually passed this year, forestry will be the first sector to start, beginning on July 1, 2010, allowing forestry carbon offset projects that meet national guidelines to opt into the scheme.

COVERAGE

Australia's scheme covers 75 percent of total national greenhouse gas emissions and involves 1,000 firms. The EU ETS covers 40 percent of industrial emissions.

PERMITS

Majority of EU emissions allowances are given out free from each of the 27 member states. This will change from the scheme's third phase from 2013 when there will be increased auctioning, including up to 100 percent for the power sector with certain exceptions.

Australia will auction most of its permits, called Australian Emissions Units, but will give a proportion away depending on a complex formula that looks at a company's emissions per million dollars of revenue.

In particular, substantial assistance will be given to energy intensive firms or operations deemed "trade exposed" because of the carbon scheme to prevent them moving to other countries, or what is called carbon leakage.

PRICE CAP

Europe has no price cap. Australia has opted for a A$10 fixed price for the first year from July 1, 2011 and then full auctioning and trading from mid-2012.

IMPORTING U.N. OFFSETS

Australia allows 100 percent of emissions obligations to be imported through the purchase of U.N. offsets called certified emissions reductions, or CERs, under the Kyoto Protocol. Europe allows only a small percentage overall.

(Sources, Australian Department of Climate Change, Norton Rose, Reuters)

(Editing by Bill Tarrant)