Australia joins EU carbon emissions market

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Australia plans to link its carbon trading scheme with the EU's, enabling firms to use European permits from mid-2015 to emit carbon dioxide (CO2).

The EU's carbon market is the world's largest and the deal is being seen as a significant step towards cutting greenhouse gas emissions globally.

The aim is to have the Australian and EU schemes fully linked from July 2018.

Australia is the developed world's highest CO2 emitter per head of population. It now taxes big polluters.

The carbon tax introduced in Australia last month has triggered fierce opposition. It forces about 300 of the worst-polluting firms to pay a levy of A$23 (£15; $24) for every tonne of greenhouse gases they produce.

The EU Commissioner for Climate Action, Connie Hedegaard, said "we now look forward to the first full international linking of emission trading systems".

"It is further evidence of strong international co-operation on climate change and will build further momentum towards establishing a robust international carbon market," she said on Tuesday.

The deal with the EU aims to give Australian firms more options for meeting their CO2 reduction targets. That could dilute criticism of the government over the carbon tax, which opponents say puts Australian firms at a disadvantage internationally.

Polluter pays

Both the Australian and EU carbon schemes are based on cap-and-trade - they set emission caps for the biggest polluters, forcing them to buy permits if they want to go above their emission targets.

The greenest firms can sell any surplus permits to heavy polluters, creating a financial incentive for industry and power generators to cut emissions.

Each EU carbon permit currently trades at about eight euros (£6; $10) per tonne. The EU's carbon market had a turnover of some 90bn euros in 2010, the Euractiv news website reports.

As part of the plan to link up with Europe, Australia will scrap a carbon floor price of 12.4 euros per tonne that it was going to introduce in July 2015. That would have made carbon permits more expensive in Australia than in Europe.

The 300 firms in Australia's scheme can meet up to half of their carbon targets through internationally approved green projects in developing countries. But in future the maximum will be only 12.5% for UN-certified carbon offsets - green projects that come under the Kyoto Protocol.

Australia's Climate Change Minister Greg Combet said linking the Australian and EU systems "reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions".

He added that Australian firms would now be able to buy EU permits in advance of trading them in 2015.

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