Designing an emissions trading scheme to encourage the reduction of greenhouse gas emissions: A comparison of Australian and European experiences

Many States have implemented measures that create a price for one or more greenhouse gas (GHG) emissions to encourage their reduction and facilitate the transition towards an emissions-constrained economy. In the European Union, an emissions trading scheme (ETS) has operated since 2005. In July 2012, Australia's Clean Energy Act 2011 (Cth) created a price for some GHG emissions using a combination of tax and ETS components. Formal trading commences under this legislation in 2015. This article compares the design components of the Australian and European ETSs and considers whether particular features, incorporated into the Clean Energy Act to account for Australia's national circumstances, undermine or strengthen an ETS as a tool to encourage the mitigation of GHG emissions. This article concludes that the design of the ETS in Australia's Clean Energy Act has been manipulated to such an extent to account for national circumstances that its potential effectiveness to encourage the reduction of domestic GHG emissions could be undermined.