Australia and EU announce world’s biggest carbon trading system

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Australia and the European Union plan to link their ‘cap-and-trade’ systems to create the biggest emissions trading market on the globe, energy and climate change officials announced Tuesday.

Under a cap-and-trade system, countries cap the amount of pollution they are willing to allow, then issue permits for how much each business or entity can pollute. Businesses or entities that pollute more than their share can buy credits from others that pollute less than allowed.

Although the idea has struggled to gain traction nationally in the United States, it has taken off elsewhere in the world, most recently in South Korea, and was adopted last year in California.

Joining the European and Australian systems is meant to help lower carbon emissions at a lower cost. Australian polluters can start buying credits from Europe in mid-2015, when its carbon trading system starts. Europeans, in turn, will be able to start using Australian units no more than three years later. The two systems will be completely linked by July 2018.

Linking the two systems ‘provides businesses with more opportunities to trade, as businesses with excess units will have access to more buyers and businesses that need more units can purchase them from a wider range of sellers,’ the Australian government said on its website.

The Australian Conservation Foundation said it was ‘encouraged by the moves to build a global network to cut pollution,’ though it had hoped to keep an Australian ‘floor price’ for polluting that was scrapped with the new plan. Other Australians had mixed feelings about hitching the price of polluting to Europe.

‘I’ve never believed it is Europe that should benchmark our energy policy,’ Peter Anderson, the chief executive of the Australian Chamber of Commerce and Industry, said in a statement. ‘At a time when Europe has deep economic woes caused by complacent policy, there’s no joy in aligning our trade-exposed nation with their carbon price experiment.’

Curbing pollution has been particularly pressing for Australia because it is one of the world’s biggest greenhouse gas polluters per capita, chiefly because of its dependence on coal.

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-- Emily Alpert in Los Angeles

Photo: A coal-burning power plant officially went into operation on Aug. 16 near Grevenbroich, Germany. Credit: Juergen Schwarz / Getty Images