An emissions trading scheme will help grow a green economy
What is an emissions trading scheme?
Australians citizens – along with business groups, industries and unions – want action on climate change.
This means that we must put a limit on how much greenhouse pollution we pump out.
Governments, industry and environment groups agree that one of the best ways to do this is through a carbon emissions trading scheme.
Rather than putting a greenhouse pollutionlimit on each factory, power station or car, under carbon trading there is one national limit, known as a cap. The national cap is then divided into individual permits, which businesses and organisations can buy.
If a company wants to emit a tonne of greenhouse pollution they will need to have a greenhouse permit. These permits cost money. So, just as you would pay to dispose of a trailer-load of rubbish at the tip, big companies will pay to deposit a tonne of greenhouse pollution into the atmosphere.
Most importantly, there is a set number of national greenhouse permits available and, correspondingly, a limit on the total amount of pollution permitted.
The term ‘trading’ when applied to carbon emissions refers to companies’ ability to buy and sell their greenhouse permits. This is why carbon trading is sometimes referred to as ‘cap and trade’.
A price on greenhouse pollution
The price of greenhouse permits isn’t set by the government but by consumer supply and demand – that is, how much people are willing to pay for a permit. This is similar to other markets where goods are traded, such as houses or cars.
So there is a price attached to creating greenhouse pollution and, therefore, an incentive to live and work in ways that create less pollution, such as generating electricity from renewable sources like solar and wind.
The number of greenhouse permits is reduced each year so that Australia’s greenhouse pollution levels keep falling. As we know from house and car markets, scarcity inflates price. So as the cost of pollution increases, so does the incentive to pollute less.
Will it cost me money?
Only big companies (about 900 across Australia) are required to buy greenhouse permits but the cost of greenhouse pollution can be passed on via electricity bills and petrol prices.
Burning petrol in our cars and burning coal to create electricity at power stations causes climate change. Carbon trading puts a price on greenhouse pollution so it does mean that the price of electricity and petrol can go up.
Recent CSIRO research found that while energy costs might go up, because wages and income keep going up less of the household weekly budget will be spent on electricity and fuel in the future for most Australians (visit the Climate Institute web site for more information).
By making our houses and cars more energy efficient we can have lower electricity and petrol bills, even lower than if there wasn’t a price on greenhouse pollution. Most of us won’t have to spend more of our weekly budgets on electricity and fuel under an emissions trading scheme, but we do need to make sure there is a safety net for low-income households.
For more information on this see our joint report with ACOSS and CHOICE, Energy and Equity.
Selling greenhouse permits can create a multi-billion-dollar investment fund, which the Government can use part of to help households become less reliant on coal and oil and reduce our overall energy costs.
Will it work?
Over time a good carbon trading scheme with strong national caps can help Australia to become a world leader in tackling climate change with a booming clean energy economy. CSIRO research shows that strong action on climate change will see three million new green collar jobs.
ACF supports the introduction of an effective carbon emissions trading scheme that drives down pollution, avoids loopholes and giveaways, and generates revenue to invest in a smooth, fair transition to a clean economy.
If Australia is serious about tackling climate change, our Government must ensure we reduce Australia’s greenhouse pollution by at least 40 per cent by the year 2020. A carbon trading scheme is not the ‘silver bullet’ to cutting our emissions, but it can play a big part in helping us avoid dangerous climate change.
If you’d like the details of how our carbon emissions trading scheme should be designed see our submission to the Garnaut Review.
Tell the Prime Minister he needs to lead on climate change.
Fill in the PM's web form »
