Desperate moves as the failing Gillard Government tries to back out of the despised carbon tax without too severely alienating the Aus Greens propping up the government.
The Federal Government has announced it will scrap the $15 carbon floor price and link with the European Union emissions trading scheme from July 1, 2015.
As revealed by The Australian Financial Review two weeks ago, Labor and the Greens have been in intense negotiations in recent months following strong opposition from industry over the floor price, which would require new regulations to be created.
Climate Change Minister Greg Combet on Tuesday announced a one-way linkage with the EU from 2015 and a limitation on international permits from the United Nation’s Clean Development Mechanism (CDM).
“From July 1, 2015, Australia’s carbon price will effectively be the same as that that operates in our second-largest trading bloc and effectively the same as that of 30 other countries and the same carbon price that will cover 530 million people,” Mr Combet said.
“Linking the Australian and European Union system reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions.”
As part of the announcement, Australian companies will only be able to meet 12.5 per cent of their liability under the Australian carbon scheme with UN CDM permits. The changes would require some “minor” legislative changes, Mr Combet said.
“Starting today, Australian liable entities can purchase EU allowances for future compliance in Australia,” Mr Combet said.
“There will still be a capacity to access up to 50 per cent of business liabilities from international units and they will obviously be European allowances.”
Full linking of the markets will occur no later than July 1, 2018.
There has been widespread concerns about the workability of a floor price, which is designed to ensure the price stays high long enough to effectively restrict emissions of greenhouse gases. The new system would assure investors in clean energy assets concerned about the future price of carbon.