COP 18/CMP 8, Doha 1 December 2012 Australia’s Emissions Trading Scheme 1

Carbon pricing: A central part of Australia’s Clean Energy Future Plan 2 Australian Renewable Energy Agency Energy Innovation: Clean Energy Finance Corporation Energy Efficiency measures Energy Innovation: Renewable Energy Target Land Sector Abatement Carbon pricing mechanism

A staged path to emissions trading 3 Emissions reporting 1 July 2008 Fixed price emissions trading 1 July 2012 Flexible price emissions trading with price ceiling and interim link to the EU ETS 1 July 2015 Fully flexible emissions trading with full link to EU ETS 1 July 2018

International Linking Australia’s ETS is designed to link to international carbon markets. From 1 July 2015, international units are expected to be used by a significant number of liable entities. –Subject to qualitative and quantitative restrictions. The domestic carbon price is expected to be set by the European price from Export of Australian emissions units will be permitted once the price ceiling is no longer in place from 2018, or earlier if part of an international agreement. 4

Australia’s ETS linking restrictions Quantitative limits –at least 50% of annual liabilities must be met with domestic permits –up to 12.5% may be met with Kyoto units Qualitative limits on units from: –nuclear projects –destruction of trifluoromethane –destruction of nitrous oxide from adipic acid plants –large-scale hydro-electric projects not consistent with EU criteria –long-term and temporary CERs. 5

Use up to 12.5% Kyoto Units Use up to 50% European allowances Australian companies will still have access to the same domestic and international units, however Australian carbon units will also be able to be exported to the EU ETS from Details of the full linking arrangement will be agreed by mid Reduce emissions Use up to: 100% from Australian Carbon Units 100% from Carbon Farming initiative Units Whilst no international permits can be used until 2015, businesses can still purchase European allowances and Kyoto units during this period to use for compliance from Reduce emissions Use up to: 100% fixed price Australian Carbon Units 5% from Carbon Farming Initiative Units Linking in practice under the Australian scheme – onwards Australia International Fixed price period ETS with interim EU linking and Kyoto unit access ETS with full EU linking and Kyoto unit access

More information 7 Department of Climate Change and Energy Efficiency Clean Energy Future Clean Energy Regulator Climate Change Authority Treasury

Role of overseas abatement 8 Australia’s emissions in the core policy scenario Source: Treasury estimates from MMRF (2011) With carbon pricing Without carbon pricing Including overseas abatement

Australia’s 2050 target 9 Note: Emissions trajectories and projections are indicative only and do not represent official projections

Implementation and Future Steps On 2 April 2012, the Clean Energy Regulator commenced operations. –In October 2012, it began issuing free carbon units under the Jobs and Competitiveness Program. –Preparations underway for first surrender process in June Linking amendments approved by Australian Parliament in late November. Registry arrangements for EU link agreed by mid First auctions scheduled for early Climate Change Authority will advise on pollution caps by February –Government will announce caps in the Budget soon after. 10