Australie : May 20, 2009

The delay in the federal government’s proposed emissions trading scheme had an immediate, yet virtually unreported, effect on the country’s financial markets. Within minutes of the announcement earlier this May, the year old national carbon market had simply evaporated into thin air and electricity prices for delivery after the scheme’s former starting date of July 2010 fell 10 percent.

Although there has been less than one million tons of carbon emission traded since the national market opened in May 2008, the market had acted as a leading indicator as to what actions the business community was contemplating to reduce emissions. The pace of trade and price-making was quickening as companies began to put their carbon abatement plans into motion, but now investments in new technologies, renewables and efficiency programs could come to a halt due to the government’s recent inaction.

“We were beginning to see companies taking action on carbon emissions,” Arcadia Energy head of trading James Gillard said. Newedge Australia vice-president of energy commodities, Gary Cox, said the lack of certainty about policy direction means price-making activity in the carbon markets will remain closed until legislation has passed through parliament – an event that now seems no more likely than before the policy change.

There will be a broader effect on business than just the eradication of a nascent carbon market. Most affected by the delay will be the power generation industry where the biggest and most urgent transformation would need to take place should Australia pursue a 25 percent carbon reduction target. Origin Energy chief executive Grant King told a senate committee that the industry craved certainty in order to make investments and that the cost of uncertainty was likely to be greater than the cost of the scheme itself. Origin Energy is a top 20 company and one of the largest energy retailers and generator in the country.

BlueScope announced this month that it had indefinitely put on hold plans to build a $1 billion co-generation plant and companies, such as explosives group Orica, are unlikely to rush to implement filtering technology that would reduce more than half of the estimated 3 million tons of greenhouse gases that flow from their ammonia plants. Orica is one of the country’s heaviest greenhouse gas emitters, but Citi analysts have estimated the $50 million investment would parlay a significant liability into a 9 percent lift in earnings under a $40 carbon price.