Fiona Harvey Australia’s emissions trading scheme delayed: the implications for industry and climate change negotiations

What effect will the delay to the start of the Australian emissions trading scheme have?

Kevin Rudd’s government made the U-turn on Monday, announcing the introduction of the scheme would be put off by one year to mid-2011. It was embarrassing for the prime minister as only recently he insisted said any change to the original plan would be “irresponsible”.

However, in a nod to proponents of stronger action on climate change – and don’t forget that global warming was a big part of Mr Rudd’s election campaign – the government said it would raise its target on emissions reduction.

Australia will commit to cutting its emissions by between 15 and 25 per cent from 2000 levels by 2020, if other countries agree an international treaty on the climate requiring substantial cuts. Previously, the government had committed only to cuts of between 5 and 15 per cent by 2020.

Australia’s heavy industries, which had been lobbying hard for concessions on emissions trading, are the most obvious beneficiaries of the change of plans on carbon trading. The Australian Industry Group said the delay to the Carbon Pollution Reduction Scheme would give companies more time to prepare for the impact of the scheme.

They were also cheered by confirmation that for the first year of the scheme, carbon permits will have a fixed price of AUS$10 each. In addition, the biggest energy users will receive an extra 5 per cent of permits free, while others will receive an extra 10 per cent of permits free.

Carbon trading specialists in Australia were less pleased, with several pointing out that contracts to buy and sell permits which had already been negotiated would have to be torn up because of the changes. Renewable energy companies were also disappointed.

However, at the international level, Australia’s strengthened commitment to emissions cuts was welcomed. Ed Miliband, the UK’s environment secretary, said: “I very much welcome Australia’s more ambitious targets for 2020. This will provide significant momentum towards a global deal in Copenhagen. We need all developed countries to set ambitious targets to cut greenhouse gas emissions by 2020 as part of a collective effort from developed and developing countries to prevent dangerous climate change.”