Jul 10, 2008

Consistency Between The Australian and New Zealand Emissions Trading Schemes

Brian Fallow looks today at the similarities and differences between the possible Australian ETS as outlined by Garnaut and the New Zealand scheme as currently designed. Fallow notes that there are significant differences

If Australia's scheme is along the lines recommended by the Garnaut review there will be a family resemblance with the New Zealand scheme, but there are notable differences.
They need not constitute a barrier to linkage between the schemes - a common carbon market, if you will. The environmental integrity of both schemes should be the determining factor there.
But it would be prudent to be sure the differences do not pre-empt linking before anything is set in concrete.
Garnaut argues for the broadest possible coverage for the scheme. That means including transport.
But he is equivocal about including agriculture given measurement difficulties, transaction costs and trade exposure. Its inclusion may be desirable in principle, the review says, but further analysis is required to determine whether it is the most cost-effective means of reducing net emissions from the sector.
Garnaut opposes any concession to the electricity generators - most of Australia's electricity is from coal-fired stations - citing both economic theory and the European experience to argue that the price of every unit of electricity will include a carbon charge whether the generators have had to meet it or not.
So the Australian Government might as well get the money.
He opposes any free allocation of permits - a major difference from the New Zealand scheme - preferring that they be auctioned by the Government.

The Hive has long argued that we should delay work on our scheme until we know the exact shape of the Australian scheme. The more similar the two schemes are, the smaller the chance of leakage.