California downplays possibility of Australia CO2 market link

California officials said they have no plans to sign any agreement with Australia linking their carbon markets down the road, despite interest on the part of Australian officials to expand its coming emissions trading system.

Top Australian and Californian climate policy officials met for the second time in four months this week to discuss how their governments can tackle carbon emissions and to explore potential market links in the future.

In July, Australia implemented an AUD $23/tonne (US $24.31) carbon tax, a policy it will transition into a cap-and-trade system on July 1, 2015.

Australia has already approved plans to link is market to the European Union emissions trading scheme (EU ETS), the world’s oldest and largest carbon market, a tie up that is expected to be complete by 2018.

At a conference at the University of California, Davis, Mark Dreyfus, Australia’s cabinet secretary for climate change and energy efficiency, said the country is eager to expand the market’s reach further.

“We think it is very important that carbon markets be as deep as possible… and clearly the larger the scheme and the more linkages that can be achieved, the better for finding low-cost emissions reductions,” he said.

He said the link with the EU ETS will pave the way for linking to other schemes, including subnational efforts like California’s, which he said had “tremendous similarities” to Australia’s system.

Australia and California have comparable targets, he said, while noting that California would on its own represent the world’s ninth largest economy.

Australia seeks to cut it output of greenhouse gas emissions 22 percent from projected business as usual emissions by 2020, while California’s goal is about a 30 percent cut over the same time period.

But California officials, who are currently negotiating a link with the Canadian province of Quebec, downplayed the likelihood of a tie up with Australia – and hence the EU ETS – anytime soon.

“We’re here talking about forms of linkage, but we’re not in any negotiations to sign anything,” Mary Nichols, chair of the California Air Resources Board (ARB), told reporters on the sidelines of the conference.

Experts cite the absence of an auction reserve price in Australia’s carbon market as one of the obstacles to linking with California, where permits will have a floor price of $10.71/t at quarterly auctions this year.

Still, Nichols said California wants to be part of a broader effort, and plans to learn from Australia and other cap-and-trade programs in the years ahead.

“There are other forms of linkage,” she said.

“We see opportunities not only for sharing our information, expertise and experience, but for finding the most cost-effective means for cutting carbon pollution, (low-carbon) technologies, and the market enforcement mechanisms that are going to be necessary to move us in the direction of some form of global pricing system," she said.

(Source: Thompson Reuters)