By James Grubel
CANBERRA (Reuters) – Australia should set up an independent carbon bank to guarantee the integrity of its emissions-trade scheme, the government’s top climate adviser said on Tuesday, in a move that would help avoid the problems that have plagued Europe’s carbon market.
Europe’s $100 billion market has been hit by a series of scandals over the past two years, including tax fraud and the re-sale of used carbon credits, and trading was temporarily shut in January after the theft of millions of emissions permits.
The Australian government’s top climate adviser Ross Garnaut said good governance would be key to the success of Australia’s planned carbon tax and emissions trade scheme.
“There will be no success in mitigation, at a national or international level, without good governance,” Garnaut said in a report to the government, referring to steps to fight climate change.
“The policies that will mitigate climate change cut across strong interests of many kinds. These are circumstances in which it is easy, indeed natural, for vested interests to capture policy, and for the ultimate reasons for policy to be forgotten.”
The government wants the carbon tax on 1,000 of the country’s biggest polluters to start in July 2012, with a transition to a full emissions trading scheme three to five years later.
Government, Greens and independent lawmakers are currently working out details of the carbon tax, including the starting price and levels of compensation for industry and households, with final details expected by early July
Garnaut will deliver his final report on climate policy to the government later on Tuesday, which will look at carbon measures overseas, and examine revenue from the tax and how it should be spent to compensate households and industry.
But in supplementary note issued early on Tuesday, Garnaut said the government should set up three independent bodies, to advise on emissions targets, compensation to export industries and for the carbon bank to run the trading scheme.
In his previous reports to the government, Garnaut has recommended a carbon price should start at between A$20 and A$30 a tonne, and urged the government to introduce temporary loan guarantees for coal-fired power stations.
Garnaut has also previously recommended the government establish a small secondary carbon market during the initial carbon-tax period, with five to 10 percent of permits available to trade, to help establish a forward price for carbon and to help build the market.
Garnaut on Tuesday said his carbon bank would be an independent government body which would implement the carbon tax and emissions trading scheme, similar to the way the Australian Prudential Regulation Authority oversees Australia’s financial services industry.
The carbon bank would oversee the issue of carbon permits during the fixed-price carbon tax period, and the auction of permits under the emissions trading scheme.
Garnaut said the carbon bank would also administer assistance to emissions-intensive export exposed industries once a full trading scheme was introduced.
He said a second independent committee should be set up to advise on targets and emissions caps, similar to Britain’s Committee on Climate Change.
A third independent committee would advise on assistance to export-exposed industries.
(Reporting by James Grubel)