Climate Change

A global problem requiring a global solution

Some Q&A

How are Australia and the EU cooperating on climate change?

Climate change and energy feature prominently in the EU - Australia Partnership Framework - a living document, which is currently being reviewed and updated. The EU and Australia are working together bilaterally towards a successful UNFCCC summit in December in Copenhagen and the two parties continue to exchange ideas and expertise on topics such as emissions trading and carbon capture and storage. The European Commission has also become a founding member of the Global Carbon Capture and Storage Institute, initiated by Australia .

Is there any prospect that the EU ETS will be linked to any future Australian emissions trading scheme?

Yes. Subject to certain criteria, both the EU and the Australian Government have expressed an interest in eventually linking compatible schemes. One of the key means to reduce emissions more cost-effectively is to enhance and further develop the global carbon market. The Commission sees the EU ETS as an important building block for the development of a global network of emission trading systems. Linking other national or regional cap-and-trade emissions trading systems to the EU ETS can create a bigger market, potentially lowering the aggregate cost of reducing greenhouse gas emissions. The increased liquidity and reduced price volatility that this would entail would improve the functioning of markets for emission allowances. This may lead to a global network of trading systems in which participants, including legal entities, can buy emission allowances to fulfill their respective reduction commitments. In fact, the EU would like to see the establishment of an OECD-wide carbon market from 2015.

When will the EU decide whether to move to a 30% reduction? What criteria will this decision be based on?

When approving the Climate and Energy package, the EU confirmed its objective of moving to a 30% emissions reduction target by 2020 as reflected in the European Council Spring 2007 conclusions, provided that other developed countries commit themselves to comparable emission reductions and economically more advanced developing countries to contributing adequately according to their responsibilities and respective capabilities.

Is the EU ETS working?

Yes. The ETS has been in operation since 2005 - that's over 4 years. That doesn't give much time for a big impact through change of capital stock / investment in new technologies. These are longer term developments.

But independent analysis suggests that people are factoring the ETS price signal into their decisions on the shorter term. One study suggests that companies covered by the EU scheme reduced their emissions by up to 7% in the first year to 18 months of its operation. Several analyses also show significant emissions reductions under the EU ETS from 2007 to 2008, when emissions fell by 3%. This was due in part to fuel switching towards lower-carbon fuels in the power sector as a result of the carbon price.

Will the EU implement border measures?

Not at present. They will remain part of our toolbox if needed in the future, but we firmly believe that the best way of avoiding carbon leakage and competitiveness problems is to get a comprehensive global agreement in Copenhagen.

We also believe that there are better ways of addressing competitiveness concerns. We have opted to do so through the approach to allocating allowances, by allowing more free allocation of allowances, with a slower phase in of full auctioning for energy intensive sectors and sub-sectors.