Why link the Australian and European systems?
Linking the Australian and EU systems benefits both parties and provides an example of how, through international cooperation and the use of markets, countries can work together to reduce carbon pollution.
The arrangement represents the first step towards linking the established carbon market in Europe with developing carbon markets in the Asia Pacific. Together, the linked Australian and European emissions trading systems will be the world’s largest carbon market and a major driver of the global transition to a low carbon economy.
Linking will provide business with access to more and lower cost emissions abatement units through a well developed, highly liquid carbon market. As Australia is expected to be a net importer of international units, linking with the EU ETS will provide Australian businesses with enhanced access to international units for use from July 2015. Linking will also provide European market participants with enhanced business opportunities.
By connecting markets that would otherwise be isolated, linking will create a more liquid carbon market that reduces carbon pollution at a lower cost. A more liquid carbon market will offer a more stable carbon price signal. It also provides businesses with more opportunities to trade, as businesses with excess units will have access to more buyers and businesses that need more units can purchase them from a wider range of sellers.