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Analysts' view: Australia passes carbon reduction laws
November 8, 2011 / 2:02 AM / in 6 years

Analysts' view: Australia passes carbon reduction laws

11 Min Read

(Reuters) - Australia's parliament passed laws that impose a price on carbon emissions on Tuesday in one of the biggest economic reforms in a decade, giving new impetus to December's global climate talks in South Africa.

Key Points

- Tax to take effect mid-2012 before moving to a carbon-trading scheme in mid 2015

- Price initially set at A$23 per tonne

- Aims to cut carbon pollution by 159 million tonnes by 2020 or by 5 percent based on year 2000 levels

- To spend A$9.2 billion to help heavy polluting industries like steel and aluminum, and close dirtiest power stations


Energy Sector

Lane Crockett, Managing Director, Australia, Pacific Hydro

"We're hoping the passage of the legislation should provide the certainty for us to invest in the long term. We think it's the first step toward providing a level playing for the first in this country and that it will provide both a trigger for investment to go toward clean energy rather than staying the way we used to be.

It's an historic moment for this country, for our economy, and for this company.


"It does give you a level of certainty, I'll acknowledge that. Realistically, no one's going to run out and invest on the basis of A$23. So if it's above the international price, I think it's just a cost that we are bearing.

A$23 is not representative necessarily of the future. You could make investments and find that it's stranded. So people will not invest (based) on the A$23 fixed price now.

They'll wait and see where the market starts to trend in the future. The fixed price now is not going to support any immediate investment in large generation."



"It is certainly good news that Australia has proceeded with some climate policy, after all of the prior disappointments. In terms of its impact on the wider market, that will have to wait until 2015 when the market moves from its fixed price stage to a trading stage and CERs then become an eligible offset.

"As such, while we estimate that 450-500 Mt of CER demand could arise from this scheme, most of this is concentrated at the back end of the decade.

"For the CDM, this is again good news as it starts providing some demand during the period when the demand from the EU ETS is likely to be at its lowest, as the quantitative restrictions begin to be exhausted."

Di Brookman, Oil & Gas Analyst, Clsa in Sydney

"There's just so many other issues now, I think everyone knew that was going to come in, there was no standing in front of that train," said.

"If I had to say, I'm kind of surprised that it's gone so smoothly getting through the Senate, but it has. If there was a surprise, that would be it. But in terms of the market, I think the market's not that surprised with it."


"Costs, managing the business will go up, anything to do with trying to offset this carbon tax. They will have to put it somewhere, they are not going to just wear it. There are going to be cost increases across the board, and of course the consumer at the end of the day will somehow have to pay for it...I don't think margins will decrease,"


"It is the single most important policy mechanism that Australia has had and as result it will increase certainty for participants. Certainty on a price on carbon, albeit one that fluctuates in a market, the certainty of that signal being there makes the decision to proceed with a project easier across all sorts of spectrums.

"This is about re-incentivizing investment in technology across a number of industries, sectors. That includes electricity. Having a very broad-based carbon price will give more certainty for people and as a result they can make business decisions in a more structured fashion.

"In terms of trading, the passing of the legislation is a significant step in increasing certainty for people who are looking to plan their response to their liabilities and also those who are looking to use the forward price as an investment signal to make a decision to go with energy efficiency or renewable energy."

Tim Jordan, Carbon Analyst, Deutsche Bank, Sydney

"Today's vote ends a five-year debate on the detail of carbon pricing in Australia. It's a significant change for energy markets and carbon-intensive firms, but for most people the change will be barely noticeable.

This is a very positive step for the global effort on climate change. It shows that the world's most emissions-intensive advanced economy is prepared to use a market mechanism to cut carbon emissions in a low-cost way."

Emissions Trading

Daniel Crawford, Carbon Trader, Om Financial New Zealand

"In the medium term the emergence of the Australian market will have a positive impact."

"We will need markets to sell our (carbon offset) units into and vice versa. Ultimately we will need to be able to purchase and get credits from international markets. New Zealand units, in the long term, won't have enough supply to satisfy the demand, so Australia will be very significant in that regard.

"I don't think the price at this stage will impact New Zealand because there are cheaper units offshore."


"We hope the global market can follow and that people can take note of this and see the importance of international linkages.

We hope the pre-compliance market starts trading because otherwise we need to take a short holiday since the fixed-price period really doesn't give an opportunity for us to trade.

Having said that, if the liable parties, or polluters, take some certainty from this, we think the pre-compliance market will start trading, potentially in the next six months. That's what we're excited about. It's really the opportunity to start that forward carbon price curve and to start trading contracts."



"This is a big achievement, coming at an opportune time. With South Korea planning to follow suit, momentum toward carbon emission reductions in the Asia Pacific is starting to build."

"Although this is not the most efficient way to reduce emissions, the fact that it is being undertaken by the world's largest emitter means that we still have a chance to reverse the growth in global emissions before it is too late."


"The passage of this legislation will provide clear direction and certainty for business and the community to plan the future of the Australian economy, contrary to much of the rhetoric that has accompanied the debate around these bills."

Professor Kevin Parton, Charles Sturt University

"Australia joins the league of carbon pricing nations. With the passage of the carbon tax legislation through the Senate, Australia has become the 33rd country to introduce a price on carbon. In addition to the 32 other fully operational schemes, Japan and Korea have an emissions trading scheme under development, as do major cities in China, and two groups of states and provinces in the United States and Canada."


STEVE SARGENT, CEO, GE AUSTRALIA (on whether it can be repealed)

"I think it's unlikely they're going to be able to unwind this....Once you've put A$1,000 in a bunch of people's pockets to help them with higher energy prices, boy, it's hard to take that out. I just don't know how you do that and get the messages right."


"It is highly significant policy reform that should not only reduce national levels of greenhouse gas emissions to safer levels but one that now presents the platform for real innovation across industry and an opportunity to develop alongside our existing resources sector a vibrant and more efficient manufacturing and energy sector.

The passage comes at a time when carbon markets face challenging times. Europe is in financial crisis, U.S. federal action on climate change has all but evaporated and the escalating trade war over the EU ETS applying to airlines may bring about potential trade wars.

In addition, many countries strongly oppose adoption of a second Kyoto commitment period. Nonetheless, many of those developing countries with who we have key economic relationships -- China, South Africa and India -- are moving ahead on climate policy and this makes Australian action all the more critical."

Don Henry, Ceo, Australian Conservation Foundation

"Scientists have warned about climate change for decades ... and now we have a law to make polluters pay.

Industries that do want to contribute to creating a cleaner and healthier future for our children and grandchildren now have a financial incentive to find new, cleaner ways to do business."

John Connor, Ceo, the Climate Institute

"This is a vital cog in Australia's pollution reduction machinery with the potential to help cut around 1 billion tonnes of carbon pollution from the atmosphere between next year and 2020.

This vote means Australia now brings greater credibility going into international climate negotiations starting later this month in South Africa. It also puts wind in the sails of other jurisdictions about to introduce, or considering, emissions trading schemes which similarly price and limit carbon pollution."

Dae Levine, Greenpeace Australia

"The passing of today's legislation is an important first step in Australia's shift from a high risk, high polluting economy to a safe, sustainable, low carbon economy. It will also result in serious investment in renewable clean energy - helping establish a viable industry, creating thousands of jobs and giving certainty to investors."


Julia Gillard, Prime Minister

"Today Australia has a price on carbon as the law of our land. This comes after a quarter or a century of scientific warnings, 37 parliamentary inquiries, and years of bitter debate and division.

Today our nation has got this done. It has taken the most effective step it can to cut carbon pollution."

Tony Abbott, Opposition Leader

"Today Julia Gillard and the Labor Party have confirmed in law their betrayal of the Australian people.

The carbon tax is a toxic tax based on a lie from a Prime Minister who promised six days before the last election 'there will be no carbon tax under the government I lead'.

The longer this tax is in place, the worse the consequences for the economy, jobs and families. It will drive up the cost of living, threaten jobs and do nothing for the environment. In the absence of action by other nations, all that the Gillard government has done today is export jobs and emissions overseas."

Bob Brown, Greens Leader

"It is a great day for Australia, it's a great day for the Barrier Reef, for the Murray-Darling Basin, Ningaloo (reef), for Kakadu, for this nation's future. And a great day for this planet earth."

Reporting by Australia/NZ bureaux and David Fogarty in SINGAPORE; additional reporting by Jeff Coelho in London; Editing by Ed Davies

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