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Carbon Price Floor At Risk Of Being Scrapped (In Australia)

IT WAS MEANT TO BE one of the key planks of the government’s carbon policy – a floor price of $15 when emissions trading starts in 2015. But Federal Labor is now secretly negotiating to dump – or dramatically rejig – the proposed three year floor price.

Three separate sources have confirmed for Radio National Breakfast that the government wants to walk away from the price floor.

One said that negotiations are at “a pretty sensitive stage”.

Crossbench MP Rob Oakeshott said two months ago that he wanted to abandon the floor price.

He said yesterday: “There are rights and wrongs on both sides of this argument. In the end, what I am interested in is how we can get full bang for our buck in regards market confidence, how we can get bi-partisanship built into the Australian emissions trading scheme, and how we can link internationally as soon as possible.

“I am watching closely and listening closely to where a carbon floor price may be working against market confidence rather than for it, and where it may be working against international linking, rather than for it.”


A price floor is an economic tool used to manipulate a market into behaving a certain way. The government declares that a minimum amount must be paid for a commodity – in this case, permission to release a tonne of carbon dioxide to the air. The idea is that carbon dioxide permits never become too cheap to justify not undertaking carbon abatement works in a business. Another example of a price floor is the minimum wage an employer must pay for an hour of a worker’s time.

Despite the passing of the original Clean Energy Act in November 2011, it’s now understood that to impose a price floor, new regulations need final sign off by both houses of parliament. So is it a dead duck?

Rob Oakeshott is not sure. “Not necessarily. I think we are still having a conversation amongst friends of an emissions trading scheme rather than any attempt to rip apart emissions trading in Australia or cause political trouble.”

What’s not widely known is that the government has hit a ‘perfect storm’ in trying to nut out the practicalities of delivering a floor price on carbon once trading starts. And it’s not just because business is lobbying furiously to ditch it. In fact, in some ways it’s hard to believe that last year Labor ever agreed to implement one.

It was opposed by Treasury, and the Department of Climate Change – and still is. But the real problem for the government at the moment is what’s called “international linkage” – Australia trading its carbon credits with the rest of the world. Put simply, these markets just don’t like a floor price.

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