Carbon pricing in Australia 

Hi, Grant Wardell-Johnson, a Tax Partner from KPMG Australia.

Well, Australia has just passed laws in relation to carbon pricing so after a long 25 year history of reviews and government backtracking and changes of leaders, we now have law in relation to carbon pricing that kicks in from 1st of July 2011. And what that does is effectively puts a price on CO2 emissions at $23 a ton and they'll be a fixed price for three years and that will be followed by a floating price with a ceiling and floor and then an open floating price. So that's the mechanism. In economics terms that would be called a hybrid. So it's a cap and trade scheme after three years. It's a fixed scheme for the first three years.

Well obviously the EU has been ahead of the pace and they have actually had a trading scheme in place since 2005, but Korea has just announced a scheme that will kick in, in 2015. So their government and the opposition have agreed in relation to that scheme. With Australian scheme coming in as a trading scheme in 2015, the New Zealand scheme following Australia, hopefully you'll have a threshold of countries that will be adopting a cap and trade scheme but the big player here that's important is actually China. So China has announced some pilot schemes, the details of which we don't know about yet, but if those schemes follow the EU and the Australia and the Korean schemes you have a very significant threshold of carbon trading internationally.

Initially there was a wave of enthusiasm following Kyoto and the EU for instance, agreed to reduce carbon emissions by 20% based on 1990 levels by 2020 and Japan made a similar promise based on 25% of 1990 levels by 2020. There was some disillusionment following Copenhagen and the inability of the world to form a solid agreement in relation to carbon emission reductions but there's been positivism from that time. Following Copenhagen, different countries are going to adopt different approaches to reducing carbon emissions. So the EU, Korea, Australia and China hopefully will adopt an ETS cap and trade based scheme and that may well become a major source of carbon reduction throughout the world.

Having a price on carbon will give rise to a lot of new thinking about reducing carbon costs. This, I believe, will lead to new industries, new businesses, new manners of thinking that will set us in train for the next fifty years.