A market-based approach would help meet future emissions reduction targets

The Carbon Market Institute says the design of the government’s Emissions Reduction Fund can and should allow for a market-based mechanism to evolve to cost effectively meet current and future emissions reduction targets.

In its submission to the government’s ERF Green Paper, CMI outlines how the key features could be designed to enable emissions to be reduced at least-cost over time.

“The Climate Change Authority’s final report of its Targets and Progress Review released today is a highly credible and comprehensive analysis reminding us why Australia needs strong and enduring policies to reduce domestic emissions,” says Carbon Market Institute chief executive officer Peter Castellas.

Castellas says the final design of the ERF should allow for the development of a secondary market, facilitating trading between entities participating in the ERF, covered under a safeguard mechanism or as part of a voluntary market in order to help meet emissions reduction targets at least-cost to the economy.

“If the ERF is to continue as the primary basis for reducing emissions leading up to and beyond 2020, the call on the government budget may increase to very high levels. Therefore the transition into a market-based scheme, using the safeguard mechanism in concert with other regulations and the Renewable Energy Target, will be necessary to defray the ongoing, indefinite public cost of funding emissions reduction,” says Castellas.

The following diagram summarises the conceptual design features outlined by CMI and how the ERF and the safeguard mechanism could be linked through a market-based approach.

CMI’s submission to the ERF Green Paper is available via the Institute’s website (http://www.carbonmarketinstitute.org/knowledge/emissions_reduction_fund).

The Climate Change Authority Report of the Targets and Progress Review is available at http://climatechangeauthority.gov.au/.

The Carbon Market Institute is an independent membership-based not-for-profit organisation. Our aim is to assist Australian businesses in meeting the challenges and opportunities associated with market-based approaches to emissions reduction and the transition to a low carbon economy.

As the peak body for carbon market participants, CMI has established an important role in the evolution of the carbon market in Australia. The Institute facilitates the networks, knowledge exchange and commercial interaction amongst key government policy makers and regulators, industry, financiers and investors, professional services companies and technology solution providers.

CMI membership represents a broad range of professionals, organisations and industry. Our members include leading professional service providers, NGERs reporting entities, secondary market participants, offset providers, academia and international organisations. Individuals within the CMI membership base are some of the most respected Australian carbon market innovators and leaders.

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