THE BOURSE WHISPERER: Carbon Conscious has raised its hand in support of the announcement by the Australian federal government of plans to link the Australia carbon market to the European emissions trading scheme (ETS) by 2015.
The European ETS is the largest carbon market in the world covering 30 countries and in excess of 530 million people.
Carbon Conscious said it considered the announcement provides greater certainty to Australian liable emitters who have been waiting for confirmation as to how the proposed floor price would operate in 2015, or if it would be in operation at all, making investment decisions difficult.
The company said the announcement by the government would allow emitters to hedge their liabilities into the longer term to mirror more effectively the assets that emitters own and operate.
“A key aspect to the link with the European ETS is that there will be a major reduction on the allowable use of low priced imported CER offsets in Australia from the previous 50 per cent limit down to 12.5 per cent,” Carbon Conscious explained in its ASX announcement.
“The impact of this change is that Australian liable emitters will need to secure more carbon credits from the higher priced European scheme or from Australian sources such as carbon forestry.
“A link to the European scheme will provide Australian liable emitters with access to a much larger and liquid market in order to manage their carbon price exposure.
“Whilst the European forward price for 2015 is approximately AUD $12 at this time, a number of initiatives are expected to be enacted by the European market regulators over the coming months which are expected to have a positive impact for the forward carbon price.”
It is proposed that the Australian and European schemes will go to full linkage by 2018 meaning that
Australian credits will be able to be exported into Europe.
Carbon Conscious said it would benefit from by potential market for offsets increasing beyond just the Australian market and credits generated by the company would be able to be sold into the European ETS.