Carbon Pollution Reduction Scheme
The Carbon Pollution Reduction Scheme (CPRS) is an emissions trading scheme which will use a cap and trade mechanism. The cap - an upper limit on the country’s carbon pollution that will be reduced in future years - achieves the environmental outcome. The ability to trade ensures that pollution reduction opportunities throughout the economy are harnessed which reduces the economic cost of meeting our ambitious carbon pollution reduction targets. The CPRS introduces a price on carbon pollution and ensures that all businesses take this into account when making their business decisions.
On 27 April 2010, the Prime Minister announced that the Government has decided to delay the implementation of the CPRS until after the end of the current commitment period of the Kyoto Protocol and only when there is greater clarity on the action of other major economies including the US, China and India.
How does the Carbon Pollution Reduction Scheme work?
Under the CPRS, the government sets an annual limit (or cap) on the total amount of carbon pollution that can be emitted under the scheme, within Australia. The cap is gradually lowered over time, reducing the level of carbon pollution produced each year. Voluntary action can contribute to lowering Australia’s emissions cap in a variety of ways.
Companies or other groups within Australia that need to emit carbon to do business will need to purchase permits (or may be issued with permits) that represent the right to emit a specific amount of carbon pollution. The total amount of permits issued overall cannot exceed the government-set cap. Businesses can trade permits among themselves if they find they have more than they need - or if they don't have enough – ensuring that abatement (reducing emissions) occurs at least cost.
The Government will establish the Australian Climate Change Regulatory Authority to oversee the operations of the CPRS. It will calculate and allocate permits to eligible businesses.
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Who will the CPRS impact?
The proposed CPRS, as per the legislation presented to Parliament on 2 February 2010, will cover around 75 per cent of Australia’s total emissions and will directly affect around 1,000 entities. As such, the great majority of Australia’s 7.6 million registered businesses will not face new regulatory obligations as a result of the CPRS. Forests can be included under the CPRS on a voluntary basis.
The CPRS is expected to have a modest impact on prices as we start to recognise the costs of carbon pollution in our everyday lives. The CPRS includes substantial assistance to help households and businesses adjust.
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Progress of the CPRS
A table outlining the development of the CPRS is available.
Related Measures
The CPRS will build on the National Greenhouse and Energy Reporting (NGER) framework.