The new Australian emissions market - eligible international emissions units
Thursday, 25 August 2011 13:21


One of the most interesting things for investors in the Australian emission trading scheme will surely be the eligibility of international emissions units as compliance instruments under the scheme rules.

 

 

Generally, the Commentary on Provisions of the ‘Exposure Draft of the Clean Energy Bill 2011’ of 28 July 2011 states that the mechanism is linked to other international emissions trading markets by allowing liable entities to surrender eligible international emissions units.

Hence, a liable entity may ‘import‘ international emissions units for the purposes of meeting its emissions liability under the mechanism. Eligible international emissions units cannot, however, be surrendered during the fixed charge period (i.e. till 2015).

 

The said document reserves that the Australian Government has already decided that the following units will not be eligible:

 

1. removal units (RMUs) issued by a Kyoto Protocol country on the basis of land use, land-use change and forestry activities under Article 3.3 or 3.4 of the Kyoto Protocol;

 

2. either certified emissions reductions (CERs) or emission reduction units (ERUs) from nuclear projects, the destruction of trifluoromethane, the destruction of nitrous oxide from adipic acid plants or from large-scale hydro-electric projects not consistent with criteria adopted by the EU (based on the World Commission on Dams guidelines);

 

3. a long-term or temporary CERs.

 

When it comes to ‘import’ of units it would be appropriate to mention that – on the contrary - export of carbon units (with the exception of Kyoto ACCUs) will not be permitted in flexible price years where a domestic price ceiling is in place, except as part of a bilateral link to another emissions trading scheme with appropriate provisions in place to maintain the environmental integrity of the linked schemes. Unrestricted export of units will be permitted when there is no longer a domestic price ceiling in place.

 

 

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