Australia: What will the end of the carbon tax and start of carbon trading mean?

Energy, Infrastructure and Resources
Last Updated: 31 July 2013
Article by Fiona Melville, Elizabeth Thomas and Jo Garland

Draft legislation1 released on 25 July 2013 proposes terminating the carbon tax and bringing forward carbon emissions trading to 1 July 2014. This article sets out some key features of what the move to carbon emissions trading will mean.

What Will Moving to Carbon Trading Mean?
'Terminating the carbon tax' refers to ending the fixed price period of the carbon-pricing mechanism set out in the Clean Energy Act 2011 (Cth) one year early.

Under the proposal, from 1 July 2014 the price of carbon will not be fixed at AUD25.40 per tonne of emissions, but will instead be a market price. In addition, the interim one-way link with the European Union Emission Trading Scheme (EU ETS) which was scheduled to start on 1 July 2015 will be brought forward to 1 July 20142. This will bring the Australian carbon price into line with the carbon price prevailing under the EU ETS one year ahead of schedule. The carbon price under the EU ETS is expected to be much lower than the Australian fixed price and is currently trading at around AUD6 per tonne of emissions.

Some of the key features of the proposed move to carbon trading one year early are:

  • The Government will set a new pollution cap for the year beginning 1 July 2014 (the pollution cap refers to the number of Australian carbon units that will be issued each year) with the legislated default position being 25 million tonnes below total covered emissions for 2012-2013.
  • Eligible international emission units, including European Union allowances and eligible Kyoto units, which may be used to acquit liability under the carbon trading scheme from 1 July 2014, are subject to a 50% quantitative limit on the surrender of eligible international emission units (and a 6.25% sub-limit for Kyoto units (certified emission reductions and emission reduction units) in the first year from 1 July 2014 and a 12.5% sub-limit from 1 July 2015).
  • A price ceiling will be set for the year beginning 1 July 2014. The ceiling will be set by regulations, following consultation.
  • It is expected that the Australian carbon unit price and the price of certain units created under the Carbon Farming Initiative3 which can be used to acquit liability under the Australian carbon trading scheme (CFI Units), will track slightly higher than the European price.
  • The Regulator will conduct eight auctions of Australian carbon units in each flexible price year, including the year beginning 1 July 2014 (including two advance auctions held between February 2014 and June 2014 of up to 40 million units, with an opening price of 80% of the European allowance price). Businesses wanting to participate in the auction will need to hold an ANREU registry account.
  • Consistent with the move to an emissions trading scheme from 1 July 2014, Australian units issued in the year beginning 1 July 2014 and beyond can be banked for use in later compliance years, and units with a 2015-2016 vintage can be borrowed to satisfy up to 5% of an entity's liability in the year beginning 1 July 2014.
  • Assistance provided to eligible emissions intensive coal fired generators under the Energy Security Fund will end one year earlier than anticipated to reflect the earlier start of the carbon trading scheme. In addition, the allocation due in 2015-2016 year will be brought forward and combined with the 2014-2015 year.
  • For the year beginning 1 July 2014, there will no longer be a requirement to make a provisional surrender of units on 15 June 2015. Instead, units will be surrendered in one tranche on 1 February 2016.

A choice of Trading Documentation is Available

  • The International Swaps and Derivatives Association, Inc (ISDA) has prepared Part 7 to the ISDA Agreement for trading eligible international emission units referable to compliance under the EU ETS.
  • The Australian Financial Markets Association's Carbon Markets Committee has also prepared a Part 7 to ISDA based documentation for trading Australian carbon units and eligible international emission units referable to compliance under the Australian carbon trading scheme.
  • In addition, the Australian Financial Markets Association's Environmental Products Committee has prepared ISDA based documentation for trading CFI Units referable to compliance under the Australian carbon trading scheme.
  • Australian parties therefore have a choice of documents to utilise for trading eligible international emission units. The choice of which document to use will largely be dictated by price and risk of repeal, with the lowest price being associated with ISDA Part 7 (as under that document the repeal risk is a risk of repeal of the EU ETS and not the Australian carbon trading scheme).
  • The greatest area of uncertainty is scheme regulatory risk and the documentation has taken an 'all or nothing' approach to this risk which may mean the documentation needs to be revised to address specific concerns of trading parties.

As a final point, it is expected that the 'black' electricity wholesale price will fall from around AUD55 MWh to AUD37 MWh, reflecting the drop in the carbon price, and the renewable energy certificate price should increase by a similar amount. The overall effect on electricity consumers however is an anticipated reduction in the electricity prices of around 7.5%.

Submissions on the draft legislative amendments can be made to the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education by Thursday, 15 August 2013.

Further developments
On 30 July 2013 the Clean Energy Regulator announced that it has signed a Memorandum of Understanding with the California Air Resources Board to establish a framework to share information and move towards an international carbon market. If the Australia scheme is subsequently linked with California the consequence will be a link between the trading schemes of Australia, California, Quebec and the EU ETS with further price convergence between units which can be surrendered under each scheme.

With our global presence we are well placed to keep you informed of international developments as they occur.


1The draft Clean Energy Legislation Amendment (Emissions Trading Scheme) Bill 2013.
2Under this link Australian liable entities can surrender European allowances for compliance with their Australian carbon liabilities. A two-way link is scheduled to start on 1 July 2018.
3Carbon Credits (Carbon Farming Initiative) Act 2011.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

K&L Gates has been awarded a 2012 EOWA Employer of Choice for Women citation acknowledging our commitment to workplace diversity.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.