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Carbon pricing

What is a carbon price?

Carbon pricing is the generic term for efforts to put a price on carbon. Carbon refers to carbon dioxide equivalent (CO₂-e) which is the standard unit of for measuring greenhouse gases, which takes into account that different greenhouse gases have different global warming potentials (GWP). Specific carbon pricing schemes may include some or all greenhouses gases, and some or all emission sources.

The Emissions Overview page describes the different types and source sectors of greenhouse gas emissions in NSW and the common unit, carbon dioxide equivalent (CO₂-e), used to quantify greenhouse gases.

Paying a price for carbon emissions is a way of motivating countries, businesses and individuals to reduce carbon emissions. A carbon price provides an incentive to invest and deploy low carbon technology and as a disincentive to invest in relatively more polluting technologies

Various approaches to a carbon price are already being implemented including:

• the Department of Climate Change and Energy Efficiency released a snapshot of emissions reduction targets and policies in key countries.
• a market-based emissions trading system such as "cap-and-trade", or “baseline and credit”. For example the NSW Government's Greenhouse Gas Reduction Scheme (GGAS) is a baseline and credit scheme
• subsidies, rebates or tax concessions for technologies or activities that emit few greenhouse gases. For example the UK Government exempts “zero-carbon homes” from stamp duty
• a carbon tax on technologies or activities that emit greenhouse gases. For example the British Columbian Government ‘s carbon tax applies to the purchase or use of fossil fuels within the province.

Carbon trading, also known as emissions trading, is a market-based approach to address climate change. An emissions trading scheme sets a target for reducing greenhouse gas emissions by allocating a fixed number of permits, and enables market participants to find the cheapest way of meeting the target - be it by cutting their own greenhouse gas emissions, or buying and selling permits from other parties.

Establishing a national carbon price in Australia

NSW initiated the National Emissions Trading Taskforce, a collaborative process between States and Territories to design and implement an emissions trading scheme.

In September 2010, the Australian Government announced the establishment of the Multi-Party Climate Change Committee to consult, negotiate, and report to the Cabinet, through the Minister for Climate Change and Energy Efficiency, on agreed options for the implementation of a carbon price in Australia; and to provide advice on, and participate in, building community consensus for action on climate change.

The Australian Government has also commissioned an update of the Garnaut Climate Change Review by Professor Ross Garnaut by 31 May 2011.

The review update will update elements of the Climate Change Review where:

• significant changes have occurred, or the sum of expert knowledge has increased, since the original analysis for the 2008 Review was undertaken; and
• where such changes or improvements in expert knowledge could have significant implications for the key findings and recommendations of the 2008 Review, such that they should be updated.

The Australian Government proposed a Carbon Pollution Reduction Scheme (CPRS) with an expected carbon market of $8-11 billion per annum. On 27 April 2010, the former Prime Minister, the Hon Kevin Rudd MP, announced that implementation of the CPRS would be deferred.