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HowdoestheCPRSworkGreenPaperWhitePaper19servicestationaustraliawinter09ssa.org.auSinceitselectioninNovember2007KevinRuddsLaborGovernmenthasembarkedonasignificantprogramofpoliciestomeasureandreduceAustraliaslevelofgreenhousegasemissions.Centraltothispolicyagendaisacap-andtradeemissionstradingschemetheCarbonPollutionReductionSchemeorCPRS.EmissionstradingschemesofthekindpursuedbyAustraliaarehighlycomplexanddetailedandlikeanypolicyrequiretheGovernmenttobalancetheneedtoreducegreenhousegaseswithabroadrangeofstakeholdersandtheimpactontheeconomy.Overthelast16monthstheGovernmenthasdevelopmentthedetaileddesignoftheCPRSandthroughouttheprocesshasengagedinwidespreadconsultationincludingthroughthereleaseofainJuly2008andainDecember2008.SubsequentlyinMarch2009theGovernmentreleaseddetaileddraftexposurelegislationwhichitselfhasbeensubjecttothescrutinyofSenateCommitteesandfurtherconsultation.YetstillthereremainsaconsiderablechallengefortheGovernmenttopassthelegislationthroughtheSenatedespiteanumberofconcessionsannouncedon4May2009whichwerelargelydesignedtoforcetheoppositiontosupportthedraftlegislationandmitigatetheglobalfinancialcrisis.Concessionsannouncedon4MayincludedpostponingtheimplementationoftheCPRSuntil2011providingadditionalassistancetoindustryandfixingalow10pricecapforanintroductoryperiod.TheCPRSworksbycappingtheamountofgreenhousegasesemittedinAustraliaandrequiringentitiesincoveredsectorstosurrenderapollutionpermitforeachtonneofcarbonthattheyaredeemedresponsiblefor.Entitieswithexcesspermitswillbeabletotradethesepermits.Inturnthisisintendedtosendastrongpricesignalthroughtheeconomytoencouragethereductionofcarbonemissions.ThecoverageoftheCPRSisextensivecrossingarangeofindustrysectorsthatincludestationaryenergytransportfugitiveemissionsindustrialprocessessyntheticgreenhousegasesandwaste.SomeofthekeyprovisionsincludethattheCPRSwillincludeemissionsfromallKyotoProtocolgreenhousegasesbeingcarbondioxideCO2methaneCH4nitrousoxideN2OsulphurhexafluorideSF6hydrofluorocarbonsHFCsperfluorocarbonsPFCstoreducecompliancecostsandencourageparticipationintheglobalcarbonmarketanunlimitednumberofeligibleKyotounitsmaybeusedbyentitiesforcompliancepurposesandtheGovernmentintendsthatalargeproportionofpermitsfortheCPRSwillbeauctioned.AsdiscussedabovealthoughtheGovernmentstillwishestopasstheCPRSlegislationin2009on4May2009theGovernmentannouncedthatitwilldelaythestartofCPRSbyoneyearfromtheoriginalstartdateof1July2010.Thismeansentitieswillnowbecomeliablefortheiremissionsfromthe2011-2012financialyearwithemissionsunitsfromthatfirstyearduetobesurrenderedinDecember2012.On4MaytheGovernmentalsoannouncedthatInthefirstyearoftheCPRS2011-2012liableentitieswillbeabletopurchaseanunlimitednumberofemissionunitsfromtheAustralianGovernmentatthefixedpriceofAU10.Thesepermitswillnotbeabletobebankedforuseinfutureyears.Thiswilleffectivelyconstituteanemissionstaxratherthanatradingschemeastherewillbelimitedincentivetotradetheseunits.FulltradingundertheCPRSwillcommenceinJuly2012.Thefirstauctionsforpermitsfor2012andlaterareintendedtotakeplacein2010-2011.Australiawillstrengthenits2020emissionsreductiontargetincertainverystringentcircumstances.ThenewproposalistoreduceAustraliasemissionsby25by2020ifthereiscomprehensiveglobalactioncapableofstabilisingCO2econcentrationsat450ppmorlower.TheGovernmentnotesthatthiswouldamongotherthingsrequireinclusionofavoideddeforestationandsoilcarboninaglobalemissionstradingmarketandreductionsbymajordevelopingeconomiesofatleast20belowbusiness-as-usuallevelsby2020.Additionalassistancewillbeprovidedforbusinesses.Theemissionsbaselineinrelationtowhichfreepermitswillbegiventoemissions-intensivetrade-exposedEITEindustrieswillbeincreasedby5forhighlyemissions-intensiveindustriesandby10formoderatelyemissions-intensiveindustries.ThisiscalledtheGlobalRecessionBufferanditwillcontinueatleastuntilthefirstfive-yearreviewoftheCPRS.