Tony Lodge is a Research Fellow at the Centre for Policy Studies. He is author of ‘The Atomic Clock – How the Coalition is gambling with Britain’s energy policy’ published by the CPS.
Australia’s re-heated Prime Minister, Kevin Rudd, thinks he can win the imminent general election. His confidence is reflected in an extraordinary decision announced last Sunday to drop his Labor Party’s previously rock-solid support for a fixed Australian carbon tax. Introduced by his deposed predecessor Julia Gillard, Kevin Rudd has studied the polls and realises that this unpopular tax baggage needs to be urgently jettisoned. Could this be a lesson for Britain’s Conservatives?
If the Rudd government is re-elected to another term, it will pledge to legislate a move from the fixed carbon tax to a market-based emissions trading scheme effective from next July. The move could see a carbon price of $6-$10 (AUS dollars) a tonne, significantly lower than the unpopular $24 per tonne of carbon Australian emitters and electricity generators currently pay for their carbon emissions under the fixed price legislation.
So where is the lesson for the UK?
Up until April this year, the UK was part of the market based EU Emissions Trading Scheme (EU ETS) and shared the same carbon prices as the rest of the EU. This was launched in 2005 and covers more than 11,000 factories, power stations, and other energy-intensive installations in the EU. These high energy users currently receive a “trading credit” which determines the upper limit of their carbon emissions. If a high energy user’s carbon emissions exceed what is permitted by its credits, it can purchase trading credits from other energy users or countries. On the other hand, if an installation has reduced its carbon emissions, it can sell its remaining credits to other energy users.