Australia and European Commission set to link their emission trading systems

An agreement announced on August 28th by the Hon Greg Combet MP, The Australian Minister for Climate Change and Energy Efficiency and the European Commissioner for Climate Action, Ms Connie Hedegaard presented a mutual recognition of carbon units between the two countries. Businesses will no later than July 2018 be allowed to use carbon units from the Australian emissions trading scheme or the European Union Emissions Trading System (EU ETS) for compliance under either system.

 The linking of the separate emissions trading systems is an important first step towards linking the established carbon market in Europe with developing carbon markets in the Asia Pacific. The linked Australian and European emissions trading systems will, when in place, be the largest carbon market in the world. The linked systems will also help reducing the cost of cutting carbon pollution, increasing market liquidity and supporting global cooperation on climate change.

Lars Zetterberg, Mistra Indigo researcher and expert on linking, comments the agreement:

“Although the size of the Australian carbon market is moderate, roughly one sixth of the European trading system, linking these two carbon markets constitutes a significant step in international climate policy. Linking cap and trade systems is an essential step toward creating an efficient, effective and global carbon market and the EU-Australian example shows that this is possible both politically and technically."
For the EU, the agreement comes very timely. Once the locomotive in international climate policy, the EU has recent years lost initiative. Plans for strengthening its reduction target to 30 per cent failed due to internal disagreement.

“The EU vision of creating a transatlantic carbon market suffered a serious set-back when California announced plans to link with Quebec instead of pursuing earlier plans of linking with the EU. But with the new agreement with Australia the EU shows leadership again and puts pressure on the US to move forward on the international arena, Zetterberg concludes."
For any further questions, please contact Lars Zetterberg, +46 (0) 8 598 563 57.

Updated: 2012-09-03

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