Carbon Markets

Back to the Future? The ALP’s “soft-start” Emissions Trading Scheme

Following the release of its indicative target to reduce emissions by 45 per cent on 2005 levels by 2030, the Australian Labor Party (ALP) is expected to provide further detail on its proposed Emissions Trading Scheme (ETS) policy in the new year. The new ETS will be designed to achieve a range of climate and renewables policy objectives, including the ALP’s final 2025 and 2030 emissions reduction targets and a long term goal to derive 50 per cent of electricity from renewable energy.

In this Market Update, we examine the design of the ALP’s proposed ETS policy, including the lessons learned from the former Carbon Price Mechanism (CPM), policy objectives and the expected design features of the new scheme.

While the ALP will utilise the former CPM as a starting point, its updated framework will look very different. The new ETS is expected to be underpinned by a “soft start” first phase, rather than any fixed price period, with gradual compliance obligations likely to be imposed on liable entities prior to 2020, ahead of a more ambitious Phase II from 2020.

In order to ensure low cost compliance costs, the scheme may utilise both international units and low-cost “efficiency” ACCUs drawn from current emissions reduction methodologies. These “low-cost ACCUs” may be utilised in Phase I, displacing the immediate need for international units to be used ‘without restriction’ in the local market. Critically, this is expected to facilitate low compliance costs, while ensuring that control of domestic policy – and the local carbon price – is not immediately lost to international stakeholders such as the United Nations (CDM) or the European Parliament (EU ETS), with both markets continuing to navigate their own policy shortcomings.

In addition to a soft start design, the ALP is expected to propose separate caps on the electricity and industrial sectors, with a “closed system” emissions intensity baseline scheme (EIBS) likely to be developed for the electricity sector, operating in parallel to a broad-based ETS for the industrial sectors, encompassing “full” and “partially” emissions-intensive trade-exposed (EITE) activities.

This may facilitate a “two-speed market” to be developed after 2020, designed to achieve a range of policy objectives, including the transition of the electricity generation, coal mining, and land-use sectors to a clean energy economy through investment in domestic (and international) offsets, and the take-up of renewable electricity in line with the ALP’s stated 50 per cent goal by 2030.

Learn More

This report is published under RepuTex’s Carbon Market Intelligence service, providing detailed analysis, supply and pricing information on the Emissions Reduction Fund, the Safeguard compliance market, Australia’s post-2020 target and policy developments, including the ALP’s proposed Emissions Trading Scheme.

To learn more about this report, please click here.

Restricted Access

This is a subscriber report. Please login to access this content.

Become a Carbon Insider today

Unlock our latest analysis, briefings and price information with our new Carbon Insider service.

Click below to see our plans.

Sign up for regular insights

LATEST UPDATES

  • Carbon Markets

    UPDATE: Carbon Offset Market Report – Buyers ‘rush to regeneration’ ahead of ACCU review – but are HIR projects without risk?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The price for Australian Carbon Credit Units (ACCUs) has continued to drift sideways, with spot […]

    Research Insights | July 4th, 2022
  • Carbon Markets

    REPORT: Modelling Potential Futures for Australia’s Safeguard Mechanism (Carbon Market Institute)

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    RepuTex has been engaged by the Carbon Market Institute (CMI) to analyse the current operation […]

    Research Insights | June 30th, 2022
  • Carbon Markets

    UPDATE: Carbon Offset Market Report – Nature-based ACCUs dominate as divergence between broker and bilateral spot price grows

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The spot price for Australian Carbon Credit Units (ACCUs) fell 0.7% on the week, with […]

    Research Insights | June 13th, 2022
  • Carbon Markets

    UPDATE: Carbon Offset Market Report – Positive sentiment returns as ACCU buyers favour regeneration over land-based avoidance projects

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The change of government has proven to be supportive for the local ACCU market, with […]

    Research Insights | May 30th, 2022
  • Carbon Markets

    INSIGHTS: Election 2022 – Market impacts, and where to next for the ALP’s “Safeguard Mechanism 2.0”?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The Federal Election has been run and won, with the Australian Labor Party (ALP) confident […]

    Research Insights | May 24th, 2022
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone