Australia's Carbon Pollution Reduction Scheme
A Cap and Trade Scheme
Under the CPRS, to reduce emissions the government will permit an amount of pollution via the release of Australian Emissions Units, where one Unit grants permission to emit one tonne of CO2 equivalent. To reduce emissions by 5% is to say we will permit 95% of emissions from the previous year.
Emissions are Reduced
Emissions Units will be most sought after by those who most need them. There will always be fewer permits than actual emissions, in line with the government's targets, driving genuine reductions over 'business as usual' behaviour.
Business will reduce emissions either internally, via energy efficiencies gained, or externally via offsets.
The voluntary market influences the speed of transition to a carbon constrained future.
The mix chosen by any particular industry will vary but the outcome is always a certified level of emissions reduction.
Emissions reduced externally
Offsets
Offsets add a cost as you are paying someone else to reduce your emissions. Offsets have other collateral benefits however such as poverty alleviation and biodiversity outcomes.
Emissions reduced internally
Efficiency Gains
Internal reductions may have associated fixed or capital costs but generate longer term cost savings as they are tied to greater efficiencies.
The Secondary Market Opportunity
If a business reduces emissions below the level of the Australian Emissions Units it purchased, surplus Emissions Units can be sold on the Secondary Market.
