February 27, 2009 / 6:44 AM / 9 years ago

Low EU prices no concern for carbon scheme -Australia

CANBERRA, Feb 27 (Reuters) - Australia’s climate change minister on Friday said she had no concerns about the fall in carbon prices in Europe and said the low price would not force changes to Australia’s plans for carbon trading in 2010.

Penny Wong is coming under mounting business and political pressure to delay carbon trading because of the global economic downturn, with business groups and conservative opposition parties calling for the July 2010 start date to be delayed.

Analysts are also concerned the low price of carbon in Europe could prompt changes to Australia’s plans for the world’s broadest carbon trade scheme.

“There are a range of decisions we made ... which we believe will provide better certainty for business in terms of both up-side and down-side price risk,” Wong told reporters.

“We do believe we have learnt from Europe’s experience. Obviously, if you set a market mechanism up, it’s going to reflect economic circumstances and that is in fact one of the advantages of a trading scheme over a carbon tax.”

Benchmark EU Allowances (EUAs) CFI2Z9 plunged to 8.05 euros ($10.30) on Feb. 12, an all-time low for the EU trading scheme’s second phase, from nearly 31 euros last year.

Heavy selling of EUAs from industry trying to raise cash has helped push down prices. But the financial crisis has also curbed industrial output in Europe and cut carbon pollution, reducing demand for the offsets.

Wong will release draft laws for Australia’s carbon trading system on March 10, but says the laws will match the proposals outlined in the government’s policy paper in December.

JUNE DEADLINE

The Australian plan will allow the market to set the carbon price, which the government expects to be around A$23 ($15) a tonne, with an initial cap of A$40 a tonne, rising by five percent a year above inflation to ensure price stability.

Wong said the government wanted a Senate inquiry and public consultation on the draft laws to be completed by April 14, with the government aiming to pass the laws through parliament by the end of June this year.

But in a blow to the government, the influential Australian Industry Group, which represents manufacturing, engineering and construction firms, on Thursday called for the scheme to be delayed two years because of the global downturn.

Wong said the government was determined to meet its target to cut greenhouse gas emissions by at least 5 percent by 2020 from 2000 levels, and any delays would lead to higher costs for business.

“The longer we delay, the higher the costs. It means a shorter period between now and 2020 to achieve our targets. So on that issue the government remains committed to the 2010 start date,” Wong said.

Australia’s carbon trading plan will cover 75 percent of the nation’s emissions and 1,000 of the nation’s biggest firms, including major resource companies, which are already feeling the impact of the global downturn.

Australia, the world’s biggest coal exporter and a growing supplier of LNG, accounts for 1.5 percent of global carbon emissions but is one of the highest per-capita polluters, with 80 percent of electricity from coal-fired power stations.

Major exporting polluters, including iron ore and aluminium producers BHP Billiton, Alcoa and Rio Tinto, and liquefied natural gas (LNG) producers Chevron and Woodside Petroleum, will get significant exemptions for their emissions. ($1 = A$1.55; Euro = US$1.273) (Editing by David Fogarty)

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