The Carbon Conversation We Should Be Having With China

06/10/2015 5:01 AM AEDT | Updated 15/07/2016 12:50 PM AEST
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Smokestacks at Power Station, Germany

Most Australians have never heard of the Beijing Environment Exchange. But they will in the future.

The Exchange is the body that administers the trade of carbon permits under China's largest emissions trading scheme (ETS) in the capital, Beijing.

China currently has seven ETS's operating with varying degrees of success in Beijing, Shanghai, Tianjin, Chongqing, Guangdong, Hubei and Shenzhen.

The collective value of traded allowances of 536 million yuan and 14.4 million tonnes of carbon dioxide, and the fact that China will move to a national ETS, demonstrate how serious the Chinese Government is about tackling climate change through a market-based mechanism.

China's National Development and Reform Commission (NDRC) recently published its rules for the national ETS to commence in 2016 and be fully operational by 2020. By this time the scheme will regulate 3 to 4 billion tonnes of carbon dioxide in a market worth 400 billion yuan ($65 billion) -- twice the size of the European Union scheme.

The establishment of the Chinese ETS, which aims to cover about 250 million people, solidifies the foundation of the next international economic paradigm -- global carbon trading.

And despite the differences between schemes, such as those in Canada, the EU and California, their joint operation indisputably establishes the economic principle that the cheapest and most effective approach to reducing carbon emissions is to trade permits in an international market.

Just as those nations that industrialised early saw big increases in growth and living standards, the early movers to carbon trading will benefit through the establishment of trading platforms, abatement valuation, research and development and the financing and commercialisation of renewable energy.

Carbon trading is as much about economic growth as it is about cleaning up the environment.

When the Gillard Government was establishing a price on carbon we looked to Europe for the advice and expertise on establishing a scheme. Their experience and expertise is a valuable asset that is increasing global demand.

When Australia established its carbon price, China looked to us. Once again Australia was leading the Asia Pacific region on economic development. We were developing valuable expertise on market-based climate change policies in our part of the world. We had established the policies that developed expertise in the methodology of establishing a carbon-trading scheme.

Companies were developing robust carbon trading platforms. Our farmers were developing some of the world's most innovative forms of carbon farming. Government agencies kept busy working with the private sector to finance and commercialise large-scale renewable energy projects. We were realising the economic potential of our natural advantage -- an abundance of sunlight and wind.

Officials from China's NDRC were meeting with officials from our Department of Climate Change regarding the set up and implementation of a national carbon mechanism. Joint research on market based climate change policy between Australian and Chinese universities had begun. We were on the cusp of a very powerful and wealth creating economic transformation.

But then we blew it.

The Abbott Government's dismantling of Australia's carbon price robbed our nation of a major opportunity for further collaboration with China and increased income generating trade.

The Turnbull Government's continuation of Abbott's policy represents political expediency over sound economic management. It's a great shame our new Prime Minister has abandoned his conviction for carbon pricing. It will restrain our economic development.

Although the Coalition drew the curtains on Australia's clean energy future we will establish a market-based trading scheme in the future. Carbon trading is now an international reality that cannot be ignored. Like the industrial revolution it cannot be stopped by narrow-minded governments.

In the meantime, to ensure Australia is well placed to capitalise on the coming economic transformation, our nation should appoint a special envoy to China to work with the Chinese Government on opportunities for collaboration on climate change policies, in particular market-based mechanisms to reduce carbon emissions.

This is the conversation we should be having with China. The global carbon trading market is simply too important and will be too valuable for Australia to sit on the sideline.

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