Australia commits to July 2010 for carbon trade

Reuters, Monday December 15 2008
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By James Grubel

CANBERRA, Dec 15 (Reuters) - Australia committed on Monday to adopting the most sweeping carbon trade scheme outside Europe in 2010, resisting industry calls for a delay, but its plan to cut greenhouse gases fell well short of demands by green groups.
Climate Change Minister Penny Wong set a target range to cut Australia's greenhouse gas emissions by between 5 and 15 percent by 2020, based on year 2000 levels, to give Australia flexibility in global talks for emission cuts beyond 2012.
"These are hard targets for Australia," Wong told reporters, adding that the policy was designed to ease the economic impact of the scheme in light of the global financial crisis.
"Our economy, including food production, agriculture and water supplies, is under threat. If we don't act now, we will be hit hard and fast. We will lose key industries and Australian jobs."
Scientists and green groups wanted cuts of at least 25 percent but the carbon scheme comes at a politically sensitive time for the government, with the mid-2010 start date set only months before it is due to hold elections to seek a second term.
"It's a total and utter failure," Greenpeace climate campaigner John Hepburn said.
While the emissions targets are lower than the European Union's target of 20 percent by 2020, and incoming U.S. President Barack Obama's proposed cuts of 25 percent, Wong said the targets were stronger on a per-capita basis.
Wong said carbon trading would cover 75 percent of Australia's carbon emissions and involve 1,000 of the nation's biggest firms, although big-polluting exporters would receive up to 90 percent of carbon permits for free.
The price of carbon will be set by the market, with the first permits to be auctioned in the first half of 2010. The government expects a price of about A$25 ($16.70) a tonne, and will impose an interim price cap of A$40 a tonne.
Participating firms will need to surrender a permit for every tonne of carbon emitted.
The auction of permits is expected to raise A$11.5 billion in 2010/11, which will all be used to compensate business and households for higher costs for electricity and transport.
The government said the scheme would trim about 0.1 percent off annual growth in gross national product from 2010 to 2050, with a one-off increase in inflation of around 1.1 percent.
Australian farmers, who have suffered more than seven years of severe drought, will be spared from taking part in carbon trading for at least five years. Agriculture accounts for about 16 percent of Australian emissions.
But transport and fuel will be included in the scheme.
The government will introduce carbon-trading laws into parliament in 2009, where it needs the support of the Greens and two independent senators, or the conservative opposition, which want the scheme delayed due to the global economic downturn.
Australia's greenhouse emissions are one of the highest per-capita levels in the developed world and five times more per person than China, due to its reliance on coal for electricity.
($1=A$1.49)
(Reporting by James Grubel, Editing by Mark Bendeich)
(james.grubel@reuters.com; =612 6273 2730; Reuters Messaging: james.grubel.reuters.com@reuters.net))