Australian landfills, set to make total windfall profits of up to A$200 million ($187 million), if the country's carbon tax is repealed have proposed using some of the revenue to buy millions of U.N.-issued carbon credits, the Sydney Morning Herald reported Monday.
Landfills have for the past two years been charging customers upfront to pay for future carbon emissions under the previous Labor government's carbon pricing scheme.
But if the Liberal government, in office since September, succeeds in repealing the carbon tax this July, they will not have to pay for the pollution after all - despite having collected around A$200 million from customers.
The industry has proposed to the government buying international carbon credits for up to A$20 million and pocketing the rest, the Herald wrote, citing industry sources.
That would buy them around 113 million U.N.-issued Certified Emissions Reductions (CERs) at current prices, enough to meet around a quarter of Australia's target to cut emissions to 5 percent below 2000 levels by 2020.
Such a deal would be a boost for the hugely oversupplied international carbon market, but would mark a policy change for the Australian government, which so far has insisted on meeting the target through domestic cuts only.
"Our policy to reduce emissions domestically under the ERF (Emissions Reduction Fund) remains unchanged," a spokesman for Environment Minister Greg Hunt told Reuters.
He confirmed talks with the waste industry to try to "fix this mess", but would not confirm or deny the Fairfax report.
Under current legislation, Australia collects a tax on CO2 emissions from around 350 of the country's biggest emitters, with a plan to move to an emissions trading scheme with a floating price from July 2015.
The government wants to replace this policy with an emissions reduction fund that pays companies for emission cuts they achieve.
It remains uncertain whether the government will get sufficient support in the Senate in July to implement its policy.
Most analysts say the government's plan will fail to meet the target, and industry, analysts and some independent senators say the government should reconsider its position on foreign carbon credits.
(Reporting by Stian Reklev in BEIJING; Editing by Joseph Radford)