Carbon Pollution Reduction Scheme (Australia)

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Carbon Pollution Reduction Scheme (Australia)

• Lily Mu Christina Wu
• Econ HL

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Background Info

• Australia? hottest and driest continents on
  earth
• Climate Change
• Food production
• Water supplies
• Great Barrier Reef
• Tourism Industry and environmental challenges
  facing Australia and the rest of the world.

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Science Behind Carbon Pollution

• Carbon pollution?climate change
• Higher temp, droughts, extreme weather
• Human activity?greenhouse gas increase ?rise in
  global mean temperature

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Green Paper
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White Paper
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Strategy and Aims

• Mitigation
• Reduce Australias greenhouse gas emissions
• 60 emissions reduction (2050)
• Adaptation
• Adapt to climate change that cannot be avoided
• International engagement
• Achieve low carbon economy
• Households and business assistance?
• adjust to carbon price
• Ensure scheme achieves its central objectives
• Use every cent raised to assist households and
  business

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Scheme Coverage

• 75 national emissions
• 1000 firms
• 6 Kyoto gases

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Stakeholders
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Commitments to Households

• Increase payments to low-income households,
  pensioner, senior
• Provide assistance to middle income households

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Assistance to Business and Workers

• Climate Change Action Fund
• Investment in new low-emissions technologies
• spread of innovation and environment-friendly
  practices among small/medium sized businesses
• Provide assistance to regional workers

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Model Negative Externality
Quantity
(S)MSC
(S)MPC
tax
Pt
Pso
Pp
Increase in Price
(D)MPB
(D)MSB
Qp
Qso
Qt
Price
Decrease in Quantity
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What is the Market Failure?

• Carbon pollution
• Too much produced at too low of a price
• No cost

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What is the proposed remedy?

• Carbon pollution reduction scheme
• Cap-and-trade system of emissions trading for
  greenhouse gases.
• A central authority sets a limit/cap on amount of
  a pollutant that can be emitted.
• Introduce in Australia in 2010 as part of its
  climate change policy

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Green Paper

• Objectives
• Meet Australias emissions reduction targets in
  most flexible cost-effective way
• Support an effective global response to climate
  change
• Provide for transitional assistance for the most
  affected households and firms

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How does it work?

• Buy a 'pollution permit' for each tonne of carbon
  they contribute to atmosphere.
• Concentrate on biggest polluters Around 1000
  Australian companies that produce more than 25000
  tonnes of carbon pollution each year.
• 99 of all firms in Australia will not need to
  purchase permits for their emissions.

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Cap

• Limit on greenhouse gas emissions
• Creates a price for carbon ability to trade
  assures that emissions are reduced at lowest
  possible price.
• Must be consistent with longer term goals of
  reducing Australias emissions by 60 compared
  with 2000 levels by 2050

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Trade

• Price of permits will be determined by market.
• By trading amongst themselves, firms achieve
  scheme cap at least cost to economy.

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White Paper

• Government's targets for Greenhouse gas emission
  reductions
• 5 below 2000 by 2020 on a one-sided basis or
• up to 15 below 2000 by 2020 if also agreed by
  other major emitters
• Indicative national emissions path for first few
  years of scheme
• In 2010-11, 109 of 2000 levels
• In 2011-12, 108 of 2000 levels
• In 2012-13, 107 of 2000 levels

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Does it internalize the externality?

• Yes
• Best way to reduce carbon pollution while
  minimizing impact on business households.

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Citation

• Department of Climate Change. "Australian
  Government." Carbon Pollution Reduction Scheme.
  13 Mar. 2009. Australian Government of Climate
  Change. 14 Mar 2009 lthttp//www.climatechange.gov.
  au/greenpaper/index.htmlgt.
• "Carbon Pollution Reduction Scheme." Wikipedia.
  USA Wikimedia Foundation, Inc, 2009.
• . "Wikipedia." Carbon Pollution Reduction Scheme.
  12 Mar. 2009. Wikimedia Foundation. Inc. 11 Mar.
  2009 lthttp//en.wikipedia.org/wiki/Carbon_Pollutio
  n_Reduction_Schemegt.
• Socha, Tom. "Air Pollution Causes and Effects ."
  Health and Energy. 09 Nov. 2007. . 11 Mar. 2009
  lthttp//healthandenergy.com/air_pollution_causes.h
  tmgt.