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Australian Carbon Trading Scheme Commences: All Emissions Are Not Local

Hannah Miller | Tuesday October 16th, 2012 | 0 Comments
Alcoa shipping for Australian ore - Australian carbon trading

Alcoa ore loading facility in Bunbury. The company was one of the first to get emissions credits. Photo by Dalinean, used with permission.

Australian carbon trading took another step forward last month when the first carbon credits under the Carbon Pollution Reduction Scheme were issued. The national carbon trading program has been in the works for six years, politically supported by a Labor-Green coalition government; the first three to five years of the program will see a government-fixed price for carbon, to transition to a market-derived price later.

The first credits actually issued were to three big polluters: Alcoa of Australia Ltd (the mining/refining subsidiary of the American aluminum company), and two to Queensland Nitrates Pty Ltd for production of ammonia, and ammonia nitrate. The three were given a total of 6.37 million free carbon credits under the Jobs and Competitiveness Program, an “assistance program” to companies that “produce significant carbon emissions but are constrained in their ability to pass through costs in global markets.” This is still being determined, but depending on their category, industry will receive credits for 66 to 94.5 percent of their emissions to start with, assistance which will be reduced by 1.3 percentage a year.

The carbon market in Australia has been gearing up for quite some time; there are already 55 different Australian carbon-offset providers listed in the Carbon Offset Guide. There are dozens of brokers, retailers, exchanges, with support for reforestation, renewable energy, and methane capture. Some of the companies started scoping out biomass in 2004 to get ready. You can hire someone to measure your footprint; you can buy and sell offset forests like you were playing Settlers of Catan. There’s even Carbon Jar, for individuals who want to measure their footprint with an online game.

Australia has the highest per capita greenhouse gas emissions in the world, largely due to their use and reserves of coal (which is being dug out of the ground apace and shipped across Asia). One good thing that’s going to come out of this is universal and heightened awareness of the carbon cost of everything. You simply can’t have a national market that affects industry and not have it make its way into popular culture as well – the fierce political debate over the “Carbon Tax“ has ensured that.

One of the other interesting things about this is the fact that it’s going to be internationalized. Right on the heels of the first credits, it was announced that Australian trading is going to be linked up with the E.U. and U.N. carbon trading markets. This is a big relief to Europeans, because now Australian companies’ use can offset their emissions with up to 50 percent international credits – and there’s an oversupply sinking the price in Europe. They will have to get the accreditation standards in alignment (there are a dozen competing “Good Housekeeping Seals of Approval” that attest to a offset project’s legitimacy). However, a two-way linkup is expected by 2018, on the road to the global market that will also include New Zealand, some provinces in China, California, South Korea, and the various countries sprinkled around the world under the U.N. auspices from Kyoto.

Sheep rangeland in Australia. Photo by badjonni, used with permission.

The coming age of carbon trading will mean that the effects of environmental remediation won’t necessarily be local, and, in fact, will probably be overseas. One of the ways that carbon trading (and natural capital in general) was sold by various diplomats at the United Nations Rio+20 Earth Summit this year was as an income source for the Global South. The devil really is in the details, and it all depends on what the “sinks” end up looking like – we could see wildly creative and beautiful projects, and possibly a dependable source of funding for renewable energy.

The Australian government is using the trading scheme as a way to move its agricultural industry towards sustainability. The carbon impact of farming is well documented; the use of nitrogen fertilizer produces 0.5 tons of carbon dioxide equivalent emissions per hectare. (And the cows are another two tons a year.) Sixty-one percent of Australia is covered by farms and ranches, a large part of it threatened by drought conditions expected from climate change.

Despite this, agriculture as an industry is being largely exempted from carbon regulations. Instead, the Carbon Farming Initiative will allow farmers to sell carbon credits based on their practices with their land, based on either sequestration (like restoring rangelands or increasing soil carbon) or emissions reduction,  like preventing the release of methane and nitrous oxide from rice paddies or burning field stubble.

 


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