FACTBOX: Australia report outlines carbon trading system
SYDNEY (Reuters) - Australia's climate-change adviser, Ross Garnaut, sketched out a blueprint for a national carbon-trading system on Friday in a report to the government. In his 600-page draft report, Garnaut called for tough limits on greenhouse gas emissions and a competitive auction for setting the price of emission permits, which would give the right to pollute, but he stopped short of giving hard numbers. Instead, he outlined the following key principles for governing an emissions-trading system:
SETTING EMISSIONS CAPS
* The nation's overall emissions cap should be set as an annual limit and lowered over time. The first cap, from 2010 to 2012, should be based on Australia's commitments to the Kyoto climate-change protocol, which aims to limit its emissions to 108 percent of 1990 levels by 2008-12. The caps decided for the post-2012 period "should reflect increasing levels of ambition".
CHANGING EMISSIONS CAPS
* Changes should be based on international policy developments and agreements. The government should give five years' notice of movement to another "trajectory", meaning a different level of emissions caps.
SCHEME COVERAGE
* Emissions caps and emissions-permit trading should apply to six greenhouse gases as defined by the Kyoto Protocol: Stationary energy (such as power plants), industrial processes, "fugitives" (which includes coal-mining and oil and gas production), transport, waste and forestry. The first four would be included from the outset in 2010 and the other two as soon as practicable. The inclusion of agriculture (Australia's second-biggest emitter) to be subject to progress on measurement and administration.
DOMESTIC CARBON CREDITS
* Domestic carbon credits will have a small role. Unlimited credits should be accepted from forestry, before and during running of the scheme. Credits for agriculture should be analysed further in the context of coverage of agricultural emissions, pending advice given in further reports.
ISSUING OR RELEASING PERMITS
* All permits should be auctioned at regular intervals. Some additional permits may be awarded, in lieu of cash assistance, to firms that are in trade-exposed, emissions-heavy industries that face competition from less-regulated rivals overseas.
INTERNATIONAL LINKS
* Opportunities for international linking of the Australian scheme should be sought in a judicious and calibrated manner.
PRICE CONTROLS
* Not supported, except during transition period to end 2012.
FLEXIBILITY IN USE OF PERMITS
* Unlimited hoarding of permits should be allowed. Official lending of permits by an independent carbon bank to the private sector should be allowed within five-year periods.
TREATMENTS OF TRADE-EXPOSED INDUSTRIES
* International sector-specific agreements on emissions caps should be pursued as a priority. If they have not been reached by end-2012, assistance should be given to account for "material distortions" arising from major trading competitors not adopting similar constraints on emissions. The level of assistance should not amount to more than 30 percent of the cost of permits.
GOVERNANCE
* Scheme should be administered by an independent "carbon bank".
COMPLIANCE AND PENALTY
* Penalty will be enforced to ensure compliance but will not release the offender from the obligation to purchase permits.
USE OF PERMIT REVENUE
* Auctioning of permits likely to raise A$15-20 billion ($14-19 billion), with some cash kept aside to cover the costs of the system and to purchase international permits or carbon credits. The rest would be returned to households and businesses or invested in renewable energy.
(Reporting by Mark Bendeich; Editing by David Fogarty)
