Earlier this month Australian prime minister Kevin Rudd announced that the country will replace its carbon tax with a market-based trading system one year ahead of schedule. The change is expected to sharply cut the July 2014 cost of carbon, from a projected US$23.30 per metric ton to about $5.50 – and is expected to cost the government about $3.5 billion in tax revenue over the next financial year.
The Australian market system will link to its European counterpart – meaning that the low carbon prices seen in Europe now become an Australian problem as well. The European Parliament is trying to address the issue – on July 3 lawmakers voted 344 to 311 in favor of “backloading,” which would hold about 900 million allowances off the market. But it will take more than that to fix the system.
Tamar Wilner is Senior Editor at Environmental Leader PRO.