Australia and Europe will link their emissions trading systems no later than July 1, 2018.
Registry arrangements are underway to get an interim link established by mid-2013.
To facilitate the arrangement the federal government has announced two significant changes to the design of the Australian carbon price.
A floor price will no longer be implemented and a new sub-limit will apply to the use of Kyoto units.
While liable entities in Australia will still be able to meet up to 50 per cent of their liabilities through purchasing eligible international units, only 12.5 per cent will be met by Kyoto units.
The agreement was announced jointly by the federal Climate Change Minister Greg Combet and the European Commissioner for Climate Action Connie Hedegaard earlier today.
Under the arrangement, businesses will be allowed to use carbon units from the Australian emissions trading scheme or the European Union Emissions Trading System (EU ETS) for compliance under either system.
“The European Union is the first regional emissions trading system and spans the largest part of the European continent,” Hedegaard said.
“We now look forward to the first full inter-continental linking of emission trading systems.
“It is further evidence of strong international cooperation on climate change and will build further momentum towards establishing a robust international carbon market.”
Australian businesses will be able to use EU allowances to help meet liabilities under the Australian emissions trading scheme from July 1, 2015.
Combet said the arrangements represent greater flexibility, especially for businesses with operations in both Australia and Europe, which could reduce compliance costs.
Greg Combet
