Carbon Pollution Reduction Scheme

clouds The main driver of the Government's plan to reduce Australia's greenhouse gas emissions is the Carbon Pollution Reduction Scheme (CPRS). This 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.

Why do we need a CPRS?

Australia is very vulnerable to the effects of climate change. We recognise that human activity is causing the climate to change, and that Australia is one of the world's biggest polluters on a per capita basis.

If we take no action to rein in our emissions, by 2020 Australia’s carbon pollution could be 20 per cent higher than in 2000, not up to 25 per cent lower as the Government intends.

The CPRS will help us meet our international obligations to reduce our emissions under the Kyoto Protocol.

How does the Carbon Pollution Reduction Scheme work?

Under the CPRS, the government will set an annual limit (or cap) on the total amount of carbon pollution that can be emitted under the scheme, within Australia. The cap will be gradually lowered, reducing the level of carbon pollution we produce 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.

Who will the CPRS impact?

The CPRS 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 will have a modest impact on prices as we start to recognise the costs of carbon pollution in our everyday lives. The Government will provide substantial assistance to help households and businesses adjust.

Progress of the CPRS

A table outlining the development of the CPRS is available. It sets out the significant milestones reached to date.

Related Measures

The CPRS will build on the National Greenhouse and Energy Reporting (NGER) framework.

A range of measures will be put in place to assist businesses and households to adjust to the carbon price introduced by the CPRS.