Carbon pricing covered:
electricity generation, stationary energy, landfills, waste water, industrial processes and fugitive emissions
Carbon pricing did not cover:
agriculture, transport fuels, synthetic greenhouse gases, decommissioned underground coal mines, legacy emissions from landfills, combustion of biomass, biofuels, and biogas.
Exclusions fell into 2 categories
- Emissions that were not covered by the mechanism but were covered by an equivalent emissions price:
- Non transport or off road use of petroleum, excl petroleum used by agriculture, forestry, and fishing
- Synthetic GHGs hydrofluorocarbons and sulphur hexafluoride)
- Aviation fuel
- Emissions without a carbon price or equivalent:
- Petroleum fuels used by cars and light commercial vehicles
- Petroleum fuels used by agriculture, forestry, and fishing
- Small uses of coal
- Decommissioned mines
- Waste deposited before July 1, 2012
- Sub threshold facilities (those emitting less than 25,000 tonnes annually)
Fixed vs Flexible Price period
- Fixed Price period:
- During this period, the government issued an unlimited number of carbon units at the specified price
- Flexible Price period:
- carbon pollution cap was to limit the total carbon units that the government can issue (by auction or free distribution) each year
Industry assistance
- ‘assistance’ provided to industries for certain ‘emissions intensive trade exposed’ (EITE) activities
- free carbon permits worth up to 94.5% or 66% of the average carbon cost in the first year
- assistance level reduced by 1.3% each year and was to be guaranteed until 2017
- provided industry ~6 years notice top reduce emissions
Assistance provided to prevent ‘Carbon leakage’
- When some manufacturers incur carbon cost & some do not
- (competing in the same)
- manufacturer incurring a carbon cost is penalised
- the market price is set by a lower cost provider who does not incur a carbon price
- result is “carbon leakage”
- manufacturer with embedded carbon cost struggles to compete
- market share gained by producer not subject to carbon price
- Manufacturer with embedded carbon cost may move manufacturing to new location where there is no carbon cost and import products instead of manufacturing locally
- emissions ‘leak’ from the country/economy without a carbon price
- no change in consumption
- only change in location of emissions
- jobs / profit sent elsewhere
