Why an emissions trading scheme (ETS) is our preferred policy for tackling climate change

Along with leading economists, we strongly support an ETS because it is the most environmentally effective and economically efficient option. It also provides the lowest cost option for cutting carbon pollution, which means we can afford stronger pollution reduction targets. Here’s why we believe a price and limit on pollution, like an ETS, should be a part of any future climate change policy mix:

  • It’s a market based approach where businesses decide how best to cut emissions and at what cost.
  • Big polluters pay to pollute, which provides an incentive for them to cut their carbon pollution.
  • It has an annual pollution limit and the limit can be tightened to achieve deeper cuts.
  • It raises revenue to reinvest in clean technology and other areas.

The current ETS is working and can do more in the future.

In the 12 months since Australia’s ETS was introduced:

  • Carbon pollution from the National Energy Market has fallen by 7.4%, saving the equivalent of 10 million tonnes of pollution.
  • Renewable energy generation has increased by 30% and electricity from brown coal has decreased by 12%.
  • Nine low carbon projects have been invested in, including a large scale solar energy power station in Moree. The projects are funded through the Clean Energy Finance Corporation (CEFC) which was allocated $10 billion from ETS revenue to help finance renewable energy, energy efficiency and low emissions technologies.
  • Over 640 businesses have received financial support (raised from ETS revenue) to implement energy efficiency or clean technology measures.
  • According to the Australian Bureau of Statistics, Australia’s economy grew by 2.5%.
  • According to Westpac, the ETS has added only 0.7 percentage points to the Consumer Price Index, in line with what Treasury predicted before the scheme was introduced.

Major economies have already done this

Emission trading schemes are already in place in 35 countries and 12 states including the European Union (i.e. UK, France and Germany), Switzerland, and California, with schemes also being established in China and South Korea.

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Did you hear?

The ETS currently has a fixed carbon price of $24.50 per tonne, but the ALP has pledged to shift to a floating carbon price linked to the European Union market (currently priced around $6 a tonne) from July 2014. This is one year earlier than currently scheduled. To read more about this specific issue, click here.

If you want a real solution to help tackle climate change, then this election make your voice heard and help shape the policies of our political parties