Australia adds opt-in rule for polluters in CO2 scheme

Wed Sep 14, 2011 3:20am EDT

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* Firms with large fuel bills allowed to opt in to CO2 scheme

* Scheme could help them manage carbon costs, govt says

* Airlines, miners, rail firms among those set to opt in

By David Fogarty

SINGAPORE, Sept 14 (Reuters) - Big fuel users such as airlines, miners and rail transport firms may opt-in to Australia's carbon pricing scheme to help manage their carbon costs, the government said on Wednesday.

The rule change, included in a suite of carbon pricing laws introduced into the lower house of parliament on Tuesday, was made at the request of major companies such as Qantas to improve risk management.

Under the national carbon pricing scheme, about 500 top polluters responsible for 60 percent of the country's greenhouse gas emissions will have to pay A$23 ($23.5) for each tonne of carbon emissions from July 1 next year.

Emissions trading and more flexible pricing follows three years later, assuming parliament passes the package before the end of this year.

Large companies, such as miners with large diesel bills for transport, will have to pay an effective carbon price through fuel excise and fuel tax credit schemes. Opting in allow firms to manage these carbon costs themselves, such as buying domestic carbon offsets.

"This will enable large users of specified fuels to voluntarily opt into the carbon price mechanism instead of paying the equivalent carbon price under the fuel tax or excise systems," a spokesman for Climate Change Minister Greg Combet told Reuters.

The opt-in arrangements apply from July 1, 2013.

"There are around 20 or so additional companies, on top of companies already expected to be covered by the carbon price mechanism, for whom opt-in could make commercial sense. It is up to those companies to make their own decisions about whether they opt into the carbon price mechanism," said the spokesman.

Qantas welcomed the change, which was made after a recent public consultation period for the carbon legislation.

OFFSETS

"Qantas' strong preference has always been for the ability to manage our carbon liability directly, and we are pleased that the legislation includes an 'opt in' provision," a company spokesman told Reuters in an email.

"Our estimated domestic emissions footprint in the first year of the scheme, 2012-13, is around 5 million tonnes," he added.

Some businesses were attracted to this approach for marketing reasons, said Combet's spokesman, or because they already have teams that manage carbon costs in other countries.

"The opt-in approach may allow these companies to enter into long term relationships with creators of carbon credits that may allow them to pay a lower carbon price," he added, such as carbon credits from long-term tree plantations.

That could benefit carbon offset firms such as Carbon Conscious and CO2 Group, , the country's main developer of tree plantations for carbon offsets.

Others wanted to be able to take advantage of carbon pricing hedging instruments that are expected to be offered by banks and exchanges once the scheme starts.

"It makes sense for large players," said Tim Jordan, carbon analyst for Deutsche Bank in Sydney.

"Just as they manage their foreign currency risk, or a whole range of input costs through financial instruments, they would like to manage their carbon liability that way too," he told Reuters. (Editing by Himani Sarkar)

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