Australian and European officials announced the possibility of linking the European Union Emissions Trading System (EU ETS) and the Australian emissions trading scheme. A full two-way link, by means of the mutual recognition of carbon units between the two cap and trade systems, is to commence no later than 1 July 2018. Under this arrangement, businesses will be allowed to use carbon units from the Australian emissions trading scheme or the EU ETS for compliance under either system.
To facilitate linking, the Australian Government will make two changes to the design of the Australian carbon price. Firstly, the price floor will not be implemented; secondly, a new sub-limit will apply to the use of eligible 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 of their liabilities will be able to be met by Kyoto units.
In recognition of these changes and while formal negotiations proceed towards a full two-way link, an interim link will be established, whereby Australian businesses will be able to use EU allowances to help meet liabilities under the Australian emissions trading scheme from 1 July 2015 until a full link is established, i.e. no later than 1 July 2018.
The European Commission and Australia will work to agree registry arrangements for the interim link by mid-2013.
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