Two of Australia’s largest energy companies have embarrassed the federal government by announcing their commitment to carbon trading schemes, and it’s a move that raises questions about Australia’s political leadership on this issue.

From a corporate perspective, committing to reducing carbon emissions is not without cost and risks, yet many companies now consider the greater risk is that of failing to act at all. This is a textbook example of the tail wagging the dog.

On 19 March, AGL Energy announced that it had formally committed to join the Chicago Climate Exchange, the world’s first voluntary and legally binding greenhouse gas emission reduction, registry and trading program. The following day, Origin Energy, perhaps in an act of corporate keeping-up-with-the-Joneses, announced that it was launching a new Carbon Reduction Scheme offering Australian businesses a program to reduce their carbon footprint.

While commendable and necessary, moves like these also raise issues of consistency within the Australian carbon market.

The disparity in the types of schemes in which each will be participating is significant. AGL, as a participant in the Chicago Carbon Exchange and as Australia’s first utility member, will trade closely with US companies forging global connections within this market. Alternatively, Origin will be participating in a scheme that it has devised itself. Other participants will primarily be Australian corporations.

Although both are fundamentally designed to plug into future carbon markets, invariably, the standards and terms of the schemes will differ (further details on Origin’s scheme have not been released). Within the corridors of federal parliament, this alone signals that time is of the essence with respect to carbon trading.

The sooner the federal government implements a mandatory national emission trading scheme, the sooner Australian companies will be participating in the same carbon market with the same standards. Creating a standardised system of carbon trading will allow smoother integration to international or global markets in the future. The presence of a mandatory scheme does not prohibit companies participating in voluntary schemes, but it does result in the bulk of trading occurring under a standardised system.

By implementing such a scheme sooner rather than later, companies like AGL and Origin will not have to invest valuable time and money into entrenching themselves within voluntary schemes, only to be forced to participate in a mandatory scheme later. The regulatory and cost issues associated with that will be onerous, and that’s something our future federal governments will hear all about.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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