Preliminary pages

Chair’s foreword

There exist a number of carbon markets around the world. Individually, these markets work in a localised way to reduce pollution, but linked, they can create an international market place that fosters least-cost abatement and helps contribute to a global solution to climate change.

The Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012, and six associated bills, provide the framework for Australia’s emissions trading scheme to link with other schemes, which will contribute to the development of a global carbon market.

The provisions will initially facilitate a one-way link with the European Union Emissions Trading System (EU ETS) from 2015, through which Australian entities can acquit up to 50 per cent of their annual carbon liability through eligible international carbon units like EU allowances. A two-way link between the Australian and European schemes will commence from 2018.

The committee’s inquiry focused on four issues raised by the bills: the implications for Australia of linking with international emissions trading schemes; the removal of the price floor; the surrender limit on Kyoto units; and the treatment of natural gas.

Following its inquiry, the committee considers that linking the Australian emissions trading scheme to other schemes will deliver the Government’s overarching policy objective to foster a low-cost transition to a low-carbon pollution future. Witnesses generally supported the concept of linking emissions trading schemes to this end. The committee also believes that the process of formally linking with other schemes provides the Government with the opportunity to participate in treaty negotiations to ensure Australia’s interests are promoted.

To facilitate a link with the EU ETS, the Government agreed to remove the floor price for carbon units, which these amendments provide for. Evidence presented to the committee in its inquiry corroborated that the Government’s approach was sound in this regard. The link to the EU ETS should present carbon price stability to the Australian carbon market in absence of the price floor.

A limit on eligible Kyoto units was another condition of the linking arrangement, which the amendment bills also provide. The committee believes some limitation on Kyoto units is necessary to ensure the integrity of the linked schemes and for this to help foster a transition to a low‑carbon economy in Australia.

The committee further found that the amendments relating to the coverage of the natural gas sector were necessary to give effect to the original policy intent of the clean energy legislation. These amendments aim to ensure that liability for carbon pollution is realised as high as possible in the natural gas supply chain and that the principle of universal coverage for all liable entities applies. The committee was satisfied that the remit of the amendments was limited, and was also encouraged by the proposed consultation arrangements with the natural gas sector.

The committee supports the provisions of the amendment bills and recommends that the House of Representatives pass them.

I would like to thank the submitters and witnesses who appeared before the committee at its roundtable hearing in Canberra. I also thank my colleagues on the committee for their contribution to the report.

Julie Owens MP
Chair

Membership of the Committee

Committee Secretariat

Terms of reference

On 20 September 2012 the Selection Committee asked the House of Representatives Standing Committee on Economics to inquire into and report on the:

n  Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012;

n  Clean Energy (Charges—Excise) Amendment Bill 2012;

n  Clean Energy (Charges—Customs) Amendment Bill 2012;

n  Excise Tariff Amendment (Per-tonne Carbon Price Equivalent) Bill 2012;

n  Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012;

n  Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012; and

n  Clean Energy (Unit Issue Charge—Auctions) Amendment Bill 2012.

Under Standing Order 222(e), the House is taken to have adopted the Selection Committee’s reports when they are presented.

List of abbreviations