CLIMATE STRATEGIES

The document assesses the 2008 proposal for the Australian Carbon Pollution Reduction Scheme, focusing on its mechanisms for price control and international linking. It examines the implications of a domestic price cap and the potential for bilateral linking with the European Union and New Zealand, while analyzing the impact of 'hot air' units from Russia and Eastern Europe on the global carbon market.

• The proposed Australian emissions trading scheme includes a price cap starting at A$40/t of CO2e from 2010-15, rising by 5% annually plus inflation, which is independent of national target and scheme caps.
• The price cap may create significant budgetary costs for the Australian government if the international CDM price exceeds the domestic cap, as the government would effectively subsidize extra emissions by selling cheap domestic permits while purchasing more expensive international units for national compliance.
• The Australian government's proposed ban on international permit sales in the initial years is intended to prevent the domestic permit price from rising to the levels seen in other schemes, such as the EU-ETS.
• Bilateral linking with the EU-ETS is considered unrealistic in the short term due to the Australian price cap, differences in coverage (specifically agriculture and forestry), and the EU's quantitative limits on the use of CERs and ERUs.
• Linking with the New Zealand trading scheme is viewed as a more viable early option due to geographic proximity and similar goals for integrating agriculture and forestry, although the potential for 'hot air' units to enter the Australian system via New Zealand is a major barrier.
• 'Hot air'—surplus Assigned Amount Units (AAUs) from Russia and other former Soviet Union states—could significantly reduce the global demand for CERs and lower prices, potentially reducing demand for CERs by 26-29% if all hot air is banked.
• The authors argue that Australia should move toward bilateral linking and dismantle the price cap to avoid economic inefficiencies and better align with its status as an open, trade-intensive economy.

APA

Jotzo, F., & Betz, R. (2009). CLIMATE STRATEGIES. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-7.pdf

Chicago

Jotzo, Frank, and Regina Betz. CLIMATE STRATEGIES. Climate Strategies, 2009. https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-7.pdf.

Wikipedia

{{cite report |last1=Jotzo |first1=Frank |last2=Betz |first2=Regina |title=CLIMATE STRATEGIES |publisher=Climate Strategies |date=March 2009 |url=https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-7.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jotzo2009climate, author = {Jotzo, Frank and Betz, Regina}, title = {{CLIMATE STRATEGIES}}, institution = {Climate Strategies}, year = {2009}, month = mar, url = {https://climatestrategies.org/wp-content/uploads/2014/11/working-paper-linking-7.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }