The price of the carbon permit caps will be determined by market auctions, and not set at the proposed $10 fee, an advisor to the government's emissions trading scheme (ETS) said.
The ETS, pushed through government in June this year and to be implemented in July 1 2011, aims to cut greenhouse gas emissions by 25 percent by imposing a price on pollution.
Jesco d'Alquen, who advises the Department of Climate Change and is a contributor to the Carbon Pollution Reduction Scheme white paper, told the Australian Computer Society conference today the $10 permit fee slated for the first operating year will not stick.
“My personal opinion on the $10 [fee] the market will take care of it because in a recession, emissions go down and the gap will not be meaningful and the price will reflect that,” d'Alquen said.
“About 1000 companies will be buying permits, and banks and aggregators too."
d'Alquen, who is CEO of Tradeslot, a carbon credit advisory and technology company, said the market-based system would avoid abuses of power by including the allocation of additional permits.
Australian carbon reporting obligations under the National Greenhouse and Energy Reporting Act 2007 is expected to initially affect 700 companies and 1700 facilities over the next two years, and will hit corporate businesses hardest, he said.
The Act will give rise to Australia’s ETS and requires organisations that emit more than 125 kilotonnes of greenhouse or 500 terajoules of energy a year to monitor and report on their carbon output.
Similarly, companies that control facilities emitting more than 25 kilotonnes of greenhouse gases or 100 terajoules of energy a year must do the same. Some large businesses will receive up to 95 percent of their carbon permits for free.
While the scheme, expected to total $5-$10 billion in trades annually from 2010, has yet to hit, d’Alquen said businesses should prepare alternative carbon reduction measures.
“When it comes to buying the permits, companies will remember their plans for things like server consolidation, and switching off equipment which can be cheaper,” he said. “Now is the time to take those plans back off the shelf and get them implemented.”
Companies will be “flying blind” buying permits, d'Alquen said, unless they have established the alternative carbon measures. He said this will also help establish a maximum price to be spent on carbon permits during auctions.
The government has not mandated tight reporting as yet — enterprise resource planning tools tailored to local regulation have not been developed — but companies should articulate carbon cutting schemes along terms that make sense to the business. Indeed, a Mackenzie report last year found Australian organisations on average can cut carbon emissions by 17 percent and produce a return on investment.
“There is a correlation between companies that have a handle on economics and good carbon reduction initiatives,” d'Alquen said. “If you don't know what's coming out of your stack, then what else don't you know.”