National Emissions Trading Scheme

The Victorian Government supports the introduction of a national emissions trading scheme as the central policy tool to delivering greenhouse gas emissions abatement at the least cost. Under an emissions trading scheme, a cap is placed on emissions and emissions permits will be available in the market, equivalent to the emissions cap. It is likely that emissions caps will tighten over time to enable Australia to meet international and domestic targets.

Emissions permits will be traded in the market, thereby setting a price for greenhouse gas emissions. Participants (such as electricity generators and other emitters) will be required to surrender emissions permits equivalent to their actual emissions for the period, or face a penalty. A firm will decide whether it wants to reduce its own emissions or buy permits in the trading market, depending on the relative costs of taking abatement action versus buying permits. Investment in emissions reduction will enable participants to avoid purchasing emissions permits, or sell permits already held.

In this way, an emissions trading scheme will provide incentives for emitters to reduce greenhouse gases where this is cheapest, while allowing the continuation of emissions where they are most costly to reduce. A central issue will be the price of carbon and cost of permits, as this will determine how hard or difficult it is for certain sectors to adapt.

The Australian Government is leading the development of the Carbon Pollution Reduction Scheme, and the Victorian Government is committed to assisting the Commonwealth in developing and implementing the scheme.

Victoria has been a strong leader in supporting the introduction of a national emissions trading scheme, as a central policy tool for reducing greenhouse gas emissions and responding to climate change. A national emissions trading scheme is a key component of the Victorian Government’s Greenhouse Challenge.

The Final Report (external link) prepared by the Taskforce was published in December 2007.