Carbon economy

New Gen Coal

Carbon economy

 

Emission reductions

There is no single climate change solution; a range of approaches must be taken to pave the way for a low emissions future. These approaches include carbon offsets and emission trading schemes that present a financial cost of greenhouse gas emissions to businesses, providing an incentive to reduce emissions.

 
 

Carbon offsets

The total amount of greenhouse gas emissions produced by an individual, organisation or a country is known as a carbon footprint. A carbon offset is an investment into projects or activities that reduce levels of greenhouse gas emissions to compensate for these carbon footprints. When the level of CO2 emissions is equal to the carbon offsets purchased, it is said to be carbon neutral.

A common form of investment is into forestry projects and new tree plantations to soak carbon from the atmosphere as they grow and photosynthesise.

Emissions trading schemes

Emission trading schemes (ETS), also known as emission cap and trade, set an overall annual limit on the combined level of CO2 emissions that can be produced by certain industries. For every tonne of CO2 produced, these industries must purchase a permit, often referred to as a carbon credit. The total number of carbon credits available is equal to the emissions cap that has been set by the government.

The cost of carbon

Because the affected industries must purchase these carbon credits, the scheme creates a market for carbon emissions, or a carbon economy. Carbon credits are freely tradable with a price determined by the market. For some businesses, it will be more cost effective to reduce their emissions rather than to purchase additional carbon credits. They can sell leftover permits to those who have higher abatement costs and find it cheaper to purchase additional carbon credits. This carbon cost may make emissions intensive goods and services more expensive.

Australia’s carbon pollution reduction scheme

The Australian government has committed to reducing Australia’s greenhouse gas emissions by 60% on 2000 levels (551.5Mt of CO2 equivalent1) by 2050 through their carbon pollution reduction scheme which includes a proposal to introduce an emissions cap and trade scheme. This would affect a wide range of emitting industries, including stationary energy, transport and forestry, covering 75% of Australia’s greenhouse gas emissions2. Find out more about Australia’s commitment to climate change.

  1. 1 Australian Government National Greenhouse Gas Inventory 2006
  2. 2 Australian Government Department of Climate Change, Carbon Pollution Reduction Scheme White Paper, December 2008
 
 

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