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Fiscal responses to climate change in Australia: A comparison with California


Global initiatives to reduce emissions can be categorised as either regulatory measures or measures that seek to place a price on carbon. Most jurisdictions employ a combination of the two, with pricing measures generally preferred by economists. Where carbon is priced, this is typically achieved by imposing a carbon tax and/or an emissions trading scheme (ETS).

Australia introduced a nationwide ETS from 1 July 2012, with California (and Quebec) following suit from 1 January 2013. The Australian ETS was set to link with that of the European Union from 1 July 2014 and linkage with New Zealand was also being explored. Meanwhile, California and Quebec linked six months earlier. The first tentative steps towards a global carbon market seemed underway.

However, the Australian Opposition party rallied against the ETS and, with its subsequent election to government, repealed the regime. The prime mechanism to achieve Australia’s emissions reductions commitment is now the emissions reduction fund (ERF). Under this scheme, the government holds “reverse auctions” whereby the cheapest emissions reduction proposals put to it by industry are funded. As a “safeguard” measure, large emitters are to remain subject to emissions caps with default (possibly) leading to fines where offsets cannot be sourced elsewhere. Thus, carbon pricing and (limited) trading will still feature under the revised Australian regime.

Author profile

Dr Justin Dabner CTA
Justin ia an Associate Professor, Law School, James Cook University, Cairns, Australia; Adjunct research fellow in Business Law and Taxation, Faculty of Business and Economics, Monash University, Australia. - Current at 01 April 2016
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