Australian carbon should be auctioned: adviser

By James Grubel

CANBERRA (Reuters) - Australia's farmers, coal miners and power generators should have to bid at auction for carbon permits when carbon trading starts in 2010, the government's top climate adviser said on Thursday.

Ross Garnaut, appointed by the government to help work out how to best introduce carbon trading, said giving major polluting industries free carbon permits would make no difference to the higher prices people would pay for energy or goods.

"Whether permits are allocated freely or auctioned to existing (electricity) generators, the price impact on households will be the same," Garnaut said in a discussion paper on Thursday.

The recommendation is a major shift from plans put forward by the previous conservative government last June, which recommended free carbon permits for the coal industry and exemptions for farmers, allowing them to not be involved in carbon trading.

Australia's centre-left Labor government won power last November, immediately signing the Kyoto Protocol on climate change, which sets binding limits for rich nations on greenhouse gas emissions that are blamed for global warming.

Labor also promised a carbon trading scheme by 2010 to give business a financial incentive to cut pollution, with companies that clean up emissions able to then sell their excess carbon permits to bigger polluters.

Australia is responsible for about 1.2 percent of global carbon emissions, but remains one of the highest polluters per capita because of the nation's reliance on coal and other fossil fuels.

Australia is the world's largest coal exporter and relies on coal to generate about 80 percent of its electricity.