Australia's Carbon Pricing Mechanism
Australia’s Clean Energy Future plan is a comprehensive set of national policies aimed at reducing greenhouse gas emissions and driving investments in clean energy. At its core is a carbon pricing mechanism starting in July 2012 and covering approximately 60 percent of Australia’s emissions. The pricing mechanism begins with a fixed carbon price for the first three years, then transitions to a cap-and-trade program. Revenue generated by the carbon price will be used to ease costs for households and industry and for investment in renewable power, energy efficiency, and other low-carbon alternatives. This brief summarizes the carbon price mechanism and other key features of the Clean Energy Future plan.
On November 8, 2011, the Australian Senate gave final approval to the government’s Clean Energy Future climate change plan outlining a series of measures to reduce greenhouse gas (GHG) emissions and drive investment in clean energy. A central element of the plan is a carbon pricing mechanism directly covering 50 percent of Australia’s emissions and providing direct financial support for renewable energy, energy efficiency, reducing emissions from land-use and forestry, and other elements. The mechanism starts with a fixed price for the first three years from 2012 to 2015 (AUD 23, rising with inflation to about AUD 25 at the end of the fixed-price period). It then transitions from 2015 to 2018 to a cap-and-trade program, with a price cap and price floor. Regulations to implement the plan are being developed. Other principal elements of the plan include:
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