The need for a mechanism controlling
excess carbon permits
LOW-CAR
15 August 2013
Submissions
Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education
Submitted by Email: [email protected]
RE: AUSTRALIAN CARBON PRICING MECHANISM - BRINGING FORWARD THE START OF
EMISSIONS TRADING
The Climate Markets and Investment Association (CMIA) welcome the opportunity to provide feedback on
the proposed changes to the Australian Carbon Pricing Mechanism
About the Climate Market Investment Association
CMIA is an international trade association representing firms that finance, invest in, and provide enabling
support to activities that reduce emissions across five continents. CMIA's international membership
accounts for an estimated 75 per cent of the global carbon market, valued at approximately USD 120
billion in 2010.
The CMIA in Australia is lead by Jennifer Lauber Patterson and the CMIA Australian and NZ Working Group
is chaired by Paul Curnow, a partner at Baker and McKenzie.
CMIA is keen to work with Government to identify ways to ensure the effective and most efficient
operation of the RET in both the short and longer term.
As a leading association that represents investors who actively invest in renewable energy projects, CMIA
has the following suggestions:
General Comments
The CMIA welcomes structural reform to the Australian carbon market that promotes effective and
efficient operation of the market and which provides greater certainty so as to instill confidence for
investment in emissions reductions and avoidance. The CMIA is very supportive of the emissions trading
scheme with flexible carbon pricing that allows efficient allocation of resources across the economy to
achieve greenhouse emissions reductions. Furthermore, the CMIA is supportive of linkages to broader
markets, including the European Union Emissions Trading Scheme (EU-ETS) as an important first step in the
creation of multilateral carbon markets.
Promoting efficient market solutions to combat climate change
www.cmia.net
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The need for a mechanism controlling
excess carbon permits
LOW-CAR
1
Setting the Cap
The CMIA is supportive of bringing forward of the ETS however, is concerned that the market will not have
sufficient time to consider the impacts of the revised 2014-15 cap prior to commencement of the ETS. We
note however, the default position which provides some clarity on the likely position of the government
and commend any efforts to set caps for the next 5 years to provide greater certainty for the market.
2
Speed of Introduction
As stated above, the CMIA is supportive of faster introduction of the ETS but note that the architecture and
infrastructure to allow effective and efficient trade should be in place and operable ahead of the 1 July
2014 deadline. Failure to properly implement the infrastructure and regulations for trade in sufficient time
undermines confidence in the market.
3
Accessing International Units
The proposal to bring forward access to credible units from international markets is supported by the
CMIA. A staged approach makes sense however we note that there is no commentary on the likely
impacts that this may have on the investment in locally generated Carbon Farming Initiative (CFI)
Australian Carbon Credit Units (ACCUs). We note that these proposed changes allow for 100% local units
to be able to be used to meet liabilities under the flexible price. We note that there is currently limited
supply and the projected price means that only limited local projects will compete with the international
unit price and large scale investment in Australian generated ACCU’s is unlikely whilst the European price
remains low.
4
Budget Cuts to Complimentary Programs
Cuts to other complimentary programs including Biodiversity Protection, Carbon Farming Futures Program,
Clean Energy Investment Program and Carbon Capture and Storage Program are not supported by the
CMIA. These complimentary measures were put in place to address issues that could not be solved
through a carbon price alone. We encourage the Government to consider alternate programs and
investment in complimentary areas which the market does not reach.
5
Likely Price Reductions Reflected in Lower Prices
Treasury estimates predict that the likely price of carbon will drop from the fixed price period price of
$25.40 to an estimated price of around $6 per CO2-e tonne. As stated in the Household Costs ETS Fact
Sheet, this reduction in price is expected to reduce annual costs to households by around $380 in 2014-15.
The CMIA encourages the market regulators including the ACCC to ensure that this cost is transparently
passed on to consumers which will generate confidence in the operation of the market.
Promoting efficient market solutions to combat climate change
www.cmia.net
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The need for a mechanism controlling
excess carbon permits
LOW-CAR
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One way v two way (2018) link to EU Scheme
CMIA are supportive of a two way market link to the EU Scheme as this is crucial for the development of an
efficient market. Where carbon prices in Australia may fall below European prices in the future, it is
important for Australian companies to be able to export carbon units eligible in the Australian Carbon
Pricing Mechanism into the European ETS
Should you have any questions related to the above submission, please feel free to contact the
undersigned.
Yours sincerely,
Jennifer Lauber Patterson
Head – Australia, New Zealand, Singapore &
Indonesia
Climate Markets and Investment Association
Ph: +613 9010 5623
Email: [email protected]
Paul Curnow
Chair – Working Group, Australia and New
Zealand
Climate Markets and Investment Association
Ph: +61 2 8922 5173,
Email: [email protected]
Promoting efficient market solutions to combat climate change
www.cmia.net
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