Carbon Pricing Options for a Post-Kyoto Response to Climate Change in Australia

On 24 February 2011 the Australian Prime Minister Julia Gillard announced proposals for introduction of a 'carbon price mechanism' to commence as early as 1 July 2012.1 This announcement follows the establishment of a Multi-Party Climate Change Committee on 27 September 2010 with instructions to 'explore options for the implementation of a carbon price [and] help to build consensus on how Australia will tackle the challenge of climate change', starting from the position that 'a carbon price is a necessary economic reform required to reduce carbon pollution'.2 Earlier in 2010 a major review of the Australian taxation system by Dr Ken Henry was released, providing extensive insights into how the tax system should be restructured 'to deal with the ... environmental challenges of the 21st century', and its 'interrelationships [with] ... the proposed emissions trading system'.3 These developments are largely driven by the need for Australia to develop a credible climate change agenda once the Kyoto Protocol arrangements come to an end in 2012.4 Whilst Australia seems to be on track to meet its Kyoto commitments, setting acceptable greenhouse reduction targets and introducing effective greenhouse abatement strategies for the 'post-Kyoto' period will be a huge challenge.