Emissions Trading Scheme Essay

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Politics Assignment

Topic: The proposed emissions trading scheme to be implemented for Australia is extremely contentious, with significant impacts for business and society predicted. Discuss and evaluate these claims.

Word Count: 1334


Politics Assignment

This essay will argue that the proposed emissions trading scheme (ETS) to be implemented in Australia has many impacts for business and society. Despite the many uncertainties around the ETS implementation, the introduction of an ETS will show Australia as being proactive by taking steps along side its international peers to resolve issues at the forefront of the debate. Australia can learn many valuable lessons from studying the European Union’s Emissions Trading Scheme (EU ETS) and by taking heed of these lessons Australia will be able to develop a well designed emissions trading scheme. This paper will begin by defining what an ETS is and exploring the effects and benefits of an ETS on society and business in Australia. ‘Emissions trading is the regulatory system that is set to eclipse others as the governmentally promoted hope for a sustainable world’ (Baldwin 2008, p. 193). There are several types of ETS that can be implemented. The government is looking at a proposal of ‘cap and trade’ carbon trading, whereby companies are provided with a limited or ‘capped’ number of emissions permits. ‘If companies emit less than their allowance, they can sell their surplus permits to make a profit or if their emissions exceed their allowance they must purchase extra permits’. This proposal provides industries with an incentive to reduce emissions (Christoff 2007, p. 3 - 4).

Approximately 1000 companies who emit more than 25000 tonnes of carbon a year (which represents 75 percent of Australia’s emissions each year) will need to obtain permits (Institute of public affairs review 2008, p. 38). The ETS will only cover some industries including energy, transport and oil and gas production, with aluminium and cement industries and coal-fired energy receiving assistance for the first few years of the scheme. Initially agriculture will be excluded due to the difficulties of measuring emissions created by this sector. This decision has left many unhappy and see it as an unfair advantage (Ecos 2008, p. 4 & 22). Another factor to take into account is ‘carbon leakage’, where Australian industries move their operations to overseas areas that do not have emissions trading or impose a carbon tax. The Australian Workers’ Union (AWU) believes there is real concern that Australia may lose global competitiveness if this happens (Tilley, K 2008, p. 1). However, not all firms share this view. BP Australia is


Politics Assignment

one company that is participating in an innovative internal emissions trading system at an international level and views emissions trading and voluntary agreements as providing the most effective and economic route to reduce environmental industrial emissions (Nye & Owens 2008, p. 6; Wild 2008, p. 1). Australian companies could set themselves apart and improve competiveness by developing new environmental technologies (Pinsk 2007, p. 18 -23).

It has been noted that Emissions Trading Schemes differ to varying degrees across countries, whether they be voluntary or mandatory. Notably, the largest scheme currently in place is the European Union’s Emissions Trading Scheme (EU ETS) (Nielson 2008, p. 1). There are fears that the proposed ETS to be implemented in Australia will not be compatible with other international ETS currently in place, therefore, limiting the possibility of linking the Australian ETS to the EU and other international schemes (Christoff 2007, p. 15). ‘The idea of global trading is that profits from credits in one country can be traded to offset losses from commercially unviable projects in another’ (Oxley 2003, p. 25). Compared to countries like the United States which generates almost 21% of global greenhouse gas emissions...
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