In the period from 1 July 2012 to 1 July 2015 the new Australian emission market won’t really be a fully-fledged cap-and-trade.



For the interplay of emission units’ demand and supply the investors will have to wait until the beginning of the so-called ‘flexible charge period’, because earlier (in ‘fixed charge years’), the amount of the fixed charge per carbon unit will be set by the regulator - at the level of $23.00 in 2012-13, $24.15 in 2013-14 and $25.40 in 2014-15.


Pollution caps restricting the total number of carbon units that are issued each year will be set only as of flexible charge years (i.e. as of 2015), hence the number of carbon units whose vintage year is a fixed charge year will be unlimited.


The adopted approach relates to fundamental issues, and it will have, consequently, many implications for particulars and practical functioning of the Australian scheme in its first years.

As effect many important features of the mature emission market in the ‘fixed charge period’ will be disabled. Among these shortcomings are:


No eligible international emissions units

Eligible international emissions units cannot be surrendered during the fixed charge period.


No possibility for banking

In the fixed charge period free carbon units issued by the regulator to liable entities will be transferable but must be surrendered only in the eligible financial year that corresponds to their vintage year and cannot be ‘banked’ for future use (if not surrendered, will be cancelled at the end of 1 February of the next financial year).


No possibility for borrowing

‘Borrowing‘ will not be allowed during the fixed charge years (a liable entity cannot surrender a carbon unit of a later vintage to meet its obligations for a fixed charge year).


What will be the consequences of the said restrictions for international emission trading? The Australian Government declares in the Commentary on Provisions of the ‘Exposure Draft of the Clean Energy Bill 2011’ of 28 July 2011 that ‘The Government has also stated that linking with the New Zealand and European Union schemes is in Australia‘s national interest.’

In the light of the above circumstances, this declaration for linking seems, however, not feasible before 2015. The inherent market mechanisms will be dysfunctional in the Australian model in the period from 1 July 2012 to 1 July 2015.



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