Australian polluters to save A$2.5 billion in CO2 costs: analyst
Author: James Grubel
Australia's top polluters, from steel firms and coal miners to airlines, will save about A$2.5 billion over 5 years after a decision to align the nation's carbon scheme with Europe's, a leading analyst firm said on Tuesday.
Carbon analysts RepuTex also said in a report polluters did not need to rush in to buy European carbon permits ahead of a merger of both carbon markets, with the price of European allowances to remain low.
The European Commission and Australia last week agreed to fully link their carbon trade schemes by 2018, allowing trade of pollution permits between both markets, a step that traders say would improve liquidity and increase opportunities for hedging carbon costs. Each permit equals a tonne of carbon emissions.
Australia also scrapped a controversial A$15 floor price for permits from 2015 to clinch the agreement with the Commission.
"We forecast an average saving to firms of around 16 percent, or $2.5 billion, between 2015 and 2020, relative to the previous floor-price scenario," RepuTex associate director of research Paul Bourke said in a statement.
RepuTex said winners would include power generators, which would save about A$1.5 billion on previously expected costs, and up to A$560 million for coal miners.
Australia will allow polluters to use European carbon allowances, called EUAs, from mid-2015 to meet a portion of their carbon liabilities, meaning Australian firms can now buy EUAs and bank them for future use.
Since July 1, the country has imposed a carbon tax of A$23 per tonne, which covers emissions from around 300 large polluters and around 60 percent of national emissions.
By mid-2015, the tax becomes an emissions trading scheme with a floating price and polluters will be allowed to meet up to half of their emissions liabilities by buying EUAs or up to 12.5 percent with U.N.-backed Certified Emission Reductions credits, currently trading around 3 euros ($3.68) each.
EUAs are trading around 8.30 euros ($10) a tonne.
"We expect European and international carbon units to trade between A$17 and A$7 over FY 2016-2020, with Australian buyers using cheap international permits to meet around 22 per cent of their total liability over this period, before switching to European permits towards the latter part of the decade," said Bourke.
"The current EUA price curve does not suggest there is an imminent need for Australian compliance buyers to lock in EUAs," he said, adding European prices could rise if policy makers move to limit supply.
The European Commission in July outlined plans to delay the auction of carbon permits in a move designed to bolster its carbon market and address an oversupply of permits.
Australia is one of the developed world's highest per-capita polluters, largely because of its reliance on coal-fired power stations. The government has pledged to cut greenhouse emissions, blamed for global warming, by 5 percent of year 2000 levels by 2020.
($1 = 0.9772 Australian dollars)
(Reporting by James Grubel; Editing by David Fogarty and Clarence Fernandez)