Credit for Early Action

23 Sep 2010Archived News Climate Change Matters

Many businesses with permit liabilities under the proposed cap-and-trade emissions trading scheme (CPRS) have planned or are exploring mitigation actions that are commercially dependent on a price on carbon.

Under CPRS, companies undertaking emissions-intensive trade-exposed activities will receive an allocation of free permits on the basis of their production and a baseline for emissions determined by the Government. These baselines have been derived from historic industry averages per unit of production for the 2006/07 and 2007/08 years. A substantial amount of work has been completed by government and industry to determine these baselines.

The new Labor Party policy is designed to ensure that the emission baselines for industry assistance will not be increased from their current levels. This means that businesses have a current incentive to improve the emissions intensity of their production so that when the CPRS commences, they will have to buy fewer permits (as they will receive the same amount of assistance regardless).

This incentive only exists in a scenario in which the CPRS commences within the planning and budgeting horizons of affected businesses, and the current transitional assistance for industry regime remains close to its current form. It is therefore implicit in the Reward for Early Action policy that current CPRS design will be implemented in the medium term. Read the fact sheet

Written by Jon Sibley, Principal Consultant at Energetics.

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