Australia, the developed world's highest polluter of carbon dioxide (CO2) per head of population, is joining the European Union carbon emission market.
The country plans to link its carbon trading scheme with the EU's to enable Australian companies to use European permits from mid-2015 to emit CO2.
A full two-way link, by means of the mutual recognition of carbon units between the two cap and trade systems, will commence no later than 1 July 2018.
The agreement will enable firms to use carbon units from the Australian emissions trading scheme or the European Union Emissions Trading System for compliance under either system.
Australia will scap its planned carbon floor price of €12.4 per tonne, which would have been introduced in July 2015, and more options for meeting their CO2 reduction targets will now be available, reports the BBC.
In July 2012, the nation introduced a carbon tax that triggered fierce opposition as it forces over 300 polluting companies to pay a levy of A$23 ($24) for every tonne of greenhouse emitted.
Each EU carbon permit currently trades at about €8 per tonne. The EU's carbon market had a turnover of some €90bn in 2010, the Euractiv news website reports.
European Commissioner for Climate Action, Connie Hedegaard, 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.
"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."
Australian Minister for Climate Change and Energy Efficiency, Greg Combet, added: "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."
Image: The agreement will enable energy firms to use carbon units from the Australian emissions trading scheme or the European Union Emissions Trading System. Photo: courtesy of Uwe Hermann.