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Australia: Green plans under pressure

THE COUNTRY has postponed the start of its carbon-trading scheme by a year, until 2011. It says it needs to protect domestic business from further financial hardship during the global economic downturn. At the same time, a government anxious to maintain its green credentials has launched incentives for renewables development and tougher objectives for carbon-emissions cuts, although conditions placed on the latter raise doubts over whether they will be realised.

Emissions trading will now start in July 2011, when a one-year fixed-price period will be introduced. Permits will cost $10 a tonne of carbon in 2011-12, with full market trading starting in July 2012. Companies most exposed to the economic downturn are to receive varying amounts of free permits during the first five years of the scheme as part of a "global recession buffer", as well as financial assistance.

The decision was welcomed in the energy sector, where companies already suffering in the economic crisis stood to incur significant extra costs next year. But it surprised some market observers, who had expected the government to make concessions to particular industries when the carbon-trading bill was considered in the Senate, rather than to announce a delay to the scheme.

However, the government also announced a more ambitious stance on carbon cuts than previously. Labour prime minister Kevin Rudd said the country would back a 25% cut from 2000 levels by 2020 at the climate-change conference in Copenhagen later in 2009 (see p4), if there was widespread support among participants. Australia's previous position on carbon emission cuts, announced as recently as December 2008, was that it would make reductions of between 5% and 15% by 2020 compared with 2000 levels, if enough other developed countries agreed to do the same.

The new objective would be considerably closer to matching the UN Climate Panel's conclusion that developed nations need to cut emissions to between 25% and 40% below 1990 levels by 2020 if global warming is to be held in check. But, as it depends on wider support among developed countries, it may not happen.

Nevertheless, support from Australia, whose previous Conservative government had refused to ratify the existing Kyoto mechanism, will be welcomed by other governments pushing for tougher targets – notably the Barack Obama administration in the US – and will give Rudd more negotiating clout at Copenhagen.

There was more support for climate-change measures in the government's annual budget, announced in mid-May, which included a commitment to provide A$4.8bn ($3.6bn) in fresh funding to fight climate change. That would bring the total amount available to more than A$15bn over nine years.

Some A$1.5bn has been earmarked for four large solar-power plants using photovoltaic and solar-thermal technology, with a combined generating capacity of 1 gigawatt. Meanwhile, A$2bn is to be spent on a number of coal-fired power plants fitted with carbon capture and storage (CCS) technology. Some A$100m is also to be invested in a city, yet to be decided on, which will become a green energy showcase.

"The funding is a welcome boost for Australia's solar sector, which has not taken off," says Baldive Singh, Asia-Pacific editor at consultancy New Energy Finance. The country has yet to develop producers of solar cells, modules or panels. "But for renewables as a whole, the focus of the funding is heavy on demonstration projects, and what companies really would have liked are incentives to expand their markets," Singh says.

This spending could still be in jeopardy, as, in late May, the government faced a struggle to push the budget as a whole through the upper house of parliament. The opposition Conservative party, which dominates the Senate, is unhappy with the extent of some spending measures outlined, although it had not said it would target extra renewable-energy spending specifically.

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