EU carbon scheme to save Australian firms $2.5bn

5 September 2012 (Last Updated September 5th, 2012 18:30)

Australia's plans to link its carbon pricing schemes with the European Union's (EU) could save Australian companies $2.5bn over five years, according to a report from carbon analytics firm RepuTex.

Carbon emission

Australia's plans to link its carbon pricing schemes with the European Union's (EU) could save Australian companies $2.5bn over five years, according to a report from carbon analytics firm RepuTex.

According to RepuTex's forecast, European and international carbon units will trade between 2016-2020 at an average of A$11.50 ($11.77) per tonne - much lower than the A$15 ($15.3) floor price.

The report shows that power generators will be the major benefiters from the EU link, with the sector expected to register a net gain of up to $1.5bn over five years.

Paul Bourke, RepuTex research associate director, said the report forecasts an average saving to Australian firms of about 16%, or $2.5bn, between 2015 and 2020, compared to the previous floor price scenario.

"Depending on policy measures taken in the EU, we anticipate Australian companies to take advantage of a more credible price trajectory than under the previous floor price," Bourke added.

"We expect European and international carbon units to trade between A$17 and A$7 over the financial years 2016-2020, with Australian buyers using cheap international permits to meet around 22% of their total liability over this period, before switching to European permits towards the latter part of the decade."

The report shows that power generators will be the major benefiters from the EU link, with the sector expected to register a net gain of up to $1.5bn over five years.

"The larger and more permanent any European set-aside, the greater the compound impact of the new demand from Australia will be on EUA prices post-2015, once the schemes become linked," Bourke said.

"We anticipate that permits set-aside in the short term will be re-introduced to the EU market in 2018, but if this is pushed back to 2020 we should see stronger overall carbon prices and higher liabilities for Australian liable companies compared to the floor price scenario."


Image: Power generators will register a net gain of up to $1.5bn over five years. Photo: courtesy of Uwe Hermann.