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Australia and California discuss linking CO2 schemes

1 October 2012

Australia and California discuss linking CO2 schemes

Government officials from Australia and California pledged on Sunday to work towards linking their emerging carbon markets, reports Point Carbon. Speaking on a state visit to the US Mark Dreyfus, Australia’s climate change secretary, said the two governments would set up a forum to share experiences on climate policy, including how best to build carbon markets.

“California has long been at the forefront of U.S. efforts to reduce carbon pollution. What happens here is watched closely by others states and nations,” said Dreyfus in a prepared statement.

Next year California will launch a carbon market in attempt to return its emissions to 1990 levels by 2020. By 2015 the initiative will cover 85% of the state’s emissions and become the third biggest carbon market in the world after the EU’s $148-billion scheme and one currently being developed in South Korea.

“California’s cap and trade program has some similar design features to Australia’s, covering around 350 businesses,” said Dreyfus in the statement released ahead of a formal meeting of major economies in New York. “It also includes the ability to establish domestic programs to generate carbon offsets. Across a range of different areas, we can learn from each other’s experiences and share methodologies.”

Comment

Last month Australia and the EU said they would link their respective carbon markets from 2015. Extending ties to California could lead to a single carbon market covering more than 5 billion tonnes of CO2e annually, more than 10% of global GHG emissions. This in turn could pave the way for further linkages with other established and emerging emissions trading schemes.

It makes sense for the California and Australia schemes to link (perhaps even more so than the Australia and EU schemes), given they have some similar design features – a pre-requisite for linking. We are in favour of connected carbon markets, since they enable a cheaper overall cost of abatement.

Perhaps the reason Australia is looking to establish a number of linkages is to make it more difficult to overhaul the national ETS in the event of a change in government following next year’s election. Until recently climate sceptic Tony Abbott was odds-on favourite to oust current PM Julia Gillard next year, although the polls have evened out in recent weeks. Either way, establishing inter-continental linkages will make it significantly more difficult to overturning the Australia ETS. 

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