Federal Minister for Climate Change and Energy Efficiency, Greg Cobmet, and the European Commissioner for Climate Action, Connie Hedegaard, have announced that Australia and Europe will be linking their emissions trading systems.


The agreement will see a full two-way link by means of mutual recognition of carbon units between the two cap and trade systems, with the combined emissions trading system (ETS) starting no later than mid 2018.


Under the scheme, businesses will be able to use either Australian or European carbon credits to conduct their businesses.


"Linking the Australian and European Union systems reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions." Mr Combet said.


"The European Union is the first regional emissions trading system and spans the largest part of the European continent. We now look forward to the first full inter-continental linking of emission trading systems." Ms Hedegaard said.


"This would be a significant achievement for both Europe and Australia. It is further evidence of strong international cooperation on climate change and will build further momentum towards establishing a robust international carbon market."


To facilitate linking, the Australian Government will make two changes to the design of the Australian carbon price. These are that:

  • the price floor will not be implemented.
  • 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.


"Starting today, Australian liable entities can purchase EU allowances for future compliance in Australia," Mr Combet said.


"These arrangements provide Australian businesses with access to a larger market for cost-effective emission reductions and provide European market participants with enhanced business opportunities.”


Mr Combet also said the arrangements would provide flexibility to businesses with operations in both Australia and Europe, which could reduce compliance costs.