Kyoto units are certified emissions reductions (CERs) under the Clean Development Mechanism program applying to: emissions reduction projects in developing nations; emissions reduction units; and removal units. This means that while Australian liable entities will still be able to surrender eligible international emissions units to meet up to 50 per cent of their liability from 1 July 2015 to 30 June 2020, they will only be able to meet 12.5 per cent of their liability using Kyoto units.
The Australian Greens and key independent members of Federal Parliament have been consulted on, and have supported, these changes to the Australian carbon pricing scheme. Legislation to give effect to the changes was released for public comment and recently introduced into Parliament. The legislation is expected to be passed shortly.
Relevance for Australian business
Scrapping the floor price is intended to address a key industry concern that the Australian carbon price was set too high and out of step with the low EU and international price.
It will not affect the Australian fixed price between now and 30 June 2015 ($23 per tonne of carbon dioxide in 2012-13, $24.15 in 2013-14 and $25.40 in 2014-15).
Rather, the floor price will be removed with effect from 1 July 2015, which is the date the fixed-price phase of the Australian carbon price mechanism gives way to a flexible price phase under an ETS. In the flexible price phase, the carbon price applying in Australia will be influenced by the EU price.