Overview

On 10 July 2011, the Government announced its intention to introduce its carbon pricing mechanism. The scheme will commence on 1 July 2012 with an initial three year fixed price period and will transition to a flexible price cap and trade emissions trading scheme on 1 July 2015. This briefing looks at the proposals and what they will mean for businesses.

Liable entities will be obliged to surrender permits (or certain carbon offset credits) equivalent to their emissions (in the fixed price period) and their "pollution cap" (in the flexible price period).

The Scheme is designed to ensure Australia meets its unconditional pollution reduction target of 5% below 2000 levels by 2020, which translates to 160 million tonnes of carbon abatement by 2020.

A further target has been set to reduce Australia's emissions by 80% below 2000 levels by 2050 (previously set at 60%).
The scheme is the second part of the Australian Government's climate change policy, complementing the previously announced introduction of the Carbon Farming Initiative (CFI), legislation for which is currently before Parliament.

Whilst the Scheme is broadly similar to the previous Rudd Government's blocked Carbon Reduction Pollution Scheme (CPRS), there are some significant departures, including:

- emissions from certain synthetic greenhouse gases, most on-road vehicles, the agricultural sector and decommissioned coal mines are excluded from the Scheme; and

- a more diversified assistance package covering not only household and industry compensation, but also channelling investment into clean energy and low-emissions technology.