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Australian Carbon Price and Carbon Farming Initiative: How it Works
A price on carbon pollution creates incentives for businesses to reduce pollution and invest in clean technologies and clean energy generation. A market based approach ensures that pollution is reduced at the lowest cost to the economy.
Under the Australian carbon pricing mechanism, approximately 500 of the country’s biggest polluters will be required to pay for each tonne of carbon pollution they emit into the atmosphere. Modelling by the Australian Government shows that this will create economic incentives to reduce pollution in the cheapest possible way with the incentives to flow through the Australian economy triggering its transformation to a ‘clean energy future’.
Australian Minister for Climate Change and Energy Efficiency, Greg Combet, has outlined the four key components of Australia’s transition to a clean-energy future:
- Establishment of a carbon price;
- Support for renewable Energy;
- Support improvements in energy efficiency; and
- Store carbon through changed land-use practices.
“A price on carbon is the most environmentally effective and economically efficient way to reduce pollution. This means our economy can continue to prosper – without our pollution continuing to grow.” - Greg Combet
Citola Carbon Farming Initiative Products
Citola provides client access to a long-term, fixed price provision of carbon offsets (Australian Carbon Credit Units - ACCUs) eligible in the Australian Carbon Farming Initiative (CFI) and subsequent carbon price legislation.
Key elements of the Australian Carbon Pricing Mechanism
Price
The carbon pricing mechanism will commence on 1 July 2012 with a price that will be fixed for the first three years at AU$23 per tonne (rising at 2.5% per annum).
On 1 July 2015, the carbon price will transition to a market mechanism (i.e. fully flexible price) under an emissions trading scheme, with the price determined by the market.
There will be a price ceiling and floor that will apply for the first three years of the flexible price period. The price ceiling will be set at $20 above the expected international price and will rise by 5% each year. The price floor will be $15 rising annually by 4%.
Coverage
There will be broad coverage from the commencement of the program encompassing approximately 60% of Australia’s emissions (360M t per annum) in the stationary energy sector, transport, industrial processes, non-legacy waste and fugitive emissions.
International linking
There will be international linking to credible international carbon markets and emissions trading schemes from the commencement of the flexible price period (i.e. 2015). At least 50% of a liable party’s compliance obligation must be met through the use of domestic permits or credits (i.e. Australian Carbon Credit Units – ACCUs).
Carbon Farming Initiative
Kyoto-compliant Australian Carbon Credit Units (ACCUs) created under the Carbon Farming Initiative can be used to meet a compliance obligation under the carbon pricing mechanism subject to a 5% limit during the fixed price period.
How Does Carbon Pricing Work?
What are the Benefits of a Carbon Price?
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