The forces of progress are irresistible, and nowhere is that truer than in the climate change debate. Popular support for action is now so strong that governments, especially sceptical ones like our own, are being left behind, a point illustrated yesterday when Australia’s first carbon trading exchange opened.
The exchange is a joint venture between the Australian Pacific Exchange and the Australian Carbon Exchange. At exactly 12:01pm, 600 metric tonnes of Australian Greenhouse Office accredited voluntary emission reductions (VERs) were trading on the exchange at $8.50, the price of one metric tonne of carbon.
Tim Hanlin, Managing Director or ACX Ltd, was careful to point out that trading in this market would not constitute trading in hot air. But what would it be trading in?
Last week our PM failed to deliver certainty to businesses about recognisable abatement activities undertaken before the commencement of an emissions trading scheme (ETS). Without government clarification on this issue, businesses must be wary of participating in this market if they are hoping to earn themselves a competitive advantage when the national ETS comes into force. So what is the point?
In the absence of direct regulation, this voluntary market does provide eager business with a piece of the action in the climate change sphere. Participation in voluntary markets has a number of benefits with reputation and public perception being paramount. Look at Virgin Blue, Origin and AGL – as the number of companies and individuals who decide to go “carbon neutral” grows, voluntary over-the-counter markets will also grow. But instead of these players looking to overseas voluntary markets, like the Chicago Climate Exchange, Australian businesses can trade locally. This has a number of advantages, including flexibility and the opportunity to be involved in more innovative projects outside that available under a mandatory scheme.
M2 Telecommunications Group Ltd become the first buyer on the market by placing an order to purchase carbon offsets. M2’s managing director Vaughan Bowen said that “…every sector should be contributing” to environmental responsibility. This is yet another example of the tail wagging the dog in the climate debate.
Suffice to say, the emergence of and exponential growth in voluntary markets has been driven by businesses taking initiative ahead of government action. The founders of ACX are adamant that the scheme will grow and evolve to comply with all the Government changes and details of an ETS as they arise. It will need to in order to survive.
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Little information exists about the projected uptake or forecast volumes of the market – only time will tell. What we can expect — judging by the performance and growth in international voluntary markets and the eagerness from Australian companies to increase environmental responsibility — is a very active market. Once the exchange has settled in and large volumes are being traded, the exchange will provide a clear price signal for carbon, something that businesses have been craving since the announcement of an ETS by the PM.
But remember, these prices will only be indicative of value of carbon on the voluntary market. Until the details of the mandatory ETS are divulged (which may include a price limit) by the PM, there really isn’t any certainty at all as to price. The waiting game continues.