Australia passes CO2 offset laws, carbon pricing next

CANBERRA Mon Aug 22, 2011 5:55am EDT

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CANBERRA (Reuters) - Australia's parliament endorsed the world's first national scheme that regulates the creation and trade of carbon credits from farming and forestry on Monday, to complement government plans to put a price on carbon emissions from mid-2012.

The laws, the first major bills passed by the government with Greens support in the Senate since the Greens took the balance of power on July 1, are a precursor to the carbon price legislation to be put before parliament later this year.

Known as the Carbon Farming Initiative (CFI), the new laws allow farmers and investors to generate tradeable carbon offsets from farmland and forestry projects. Land use including agriculture accounts for 23 percent of Australian emissions.

"Green carbon is one of the four pillars of the climate package, alongside putting a price on pollution and investing in renewable energy and energy efficiency," Greens deputy leader Christine Milne said.

"The passing of this bill augurs well for passing of the whole package."

The laws passed with minor Senate amendments backed by the government, with the House of Representatives now due to rubber-stamp the changes.

The step came as hundreds of truckers circled Australia's parliament on Monday in a campaign aimed at forcing the government to withdraw the proposed carbon tax law, and call new elections.

Projects backed by the CFI include tree plantations that soak up carbon dioxide as they grow, cutting methane emissions from burping camels and livestock, reducing fertilizer use and better fire management of northern grasslands.

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The government said the offsets can be traded domestically and overseas. However, the scheme is expected to start off slowly until parliament passes laws to put a price on carbon emissions from July 2012.

Prime Minister Julia Gillard plans a carbon tax starting at A$23 a tonne on about 500 of Australia's biggest polluters from July 2012, ahead of emissions trading from mid-2015, and has staked her government's future on securing parliamentary support for her plan.

Agriculture is not included in the carbon price scheme, but the government wants farmers to be able to benefit from the market for carbon credits.

Under the carbon price plan, Australian industries which buy carbon offsets will need to ensure at least 50 percent of the offsets are domestic credits.

"This is fantastic. It gives us the ability to export (credits), it gives a boost to the voluntary market and it gives confidence that we can get an administrative structure that we desperately need," said Andrew Grant, CEO of CO2 Group,, the country's main developer of tree plantations for carbon offsets.

The government estimates the carbon farming initiative will help cut Australia's carbon emissions by 460 million tonnes by 2050.

"There is increased interest in the CFI from across market and the first wave of investment activity will start to unfold now the Act has been passed," said Martijn Wilder, global team leader for environmental markets at law firm Baker & McKenzie in Sydney.

"But the really significant activity under the CFI will come with the approval of carbon pricing laws," he added.

Australia accounts for about 1.5 percent of global emissions, but is the highest per-capita polluter in the developed world because coal is used to generate most of the country's electricity.

The government has committed to cut total emissions by five percent of year 2000 levels by 2020.

The conservative opposition strongly oppose putting a price on carbon emissions and has promised to scrap the scheme if it wins the next election, due in the second half of 2013.

But a report by the left-leaning Australia Institute on Monday said the opposition plan would create a prolonged period of uncertainty, even if the conservatives win the next election, as the polls suggest.

It said the conservative Liberal and National Parties would have to wait until mid-2016 before they could win enough seats in the Senate to repeal the carbon-trade laws, and its direct action plan for tackling emissions could be delayed until 2018.

(Reporting by James Grubel; Additional reporting by Stian Reklev of Point Carbon News; Editing by David Fogarty)

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