Australian Carbon Permit Price Rises in Latest Trade

By Angela Macdonald-Smith

Aug. 8 (Bloomberg) -- Australia's latest trade in carbon emissions drew a higher price than earlier transactions, said broker Newedge Australia Pty, as the government invites comment on plans to start a national system in 2010.

The over-the-counter sale of 20,000 metric tons of carbon dioxide in the so-called Calendar 11 contract for settlement Feb. 1, 2012, was priced at A$21.50 ($19.32) a ton, Gary Cox, Sydney- based manager of environmental derivatives at the Australian unit of Newedge Group, said today. Earlier transactions have been priced as low as A$18.


The latest price in Australia is still less than half the price of 26.15 euros ($39.92) for a similar contract in the European Union market on London's European Climate Exchange. Australia's Climate Change Minister Penny Wong released a Green Paper, or discussion document on the government's carbon trading plans last month.

``Since the Green Paper there are more bullish thoughts on where the price should be,'' said Marc Barrington, head of eco- markets at AGL Energy Ltd., the nation's biggest electricity and gas retailer. Sydney-based AGL initiated Australia's over-the- counter trading in emissions permits in May, in a transaction with Westpac Banking Corp. at A$19 a ton and has been involved in most of the trades since, he said.

About 12 over-the counter trades have taken place so far in Australia, either directly between parties or through brokers, all in the Calendar 11 contract, Cox said. The Calendar 12 contract is being offered at A$23.50 and bid at A$20, he said.

`Steady Start'

``I have a feeling this price is now getting a little bit towards the top'' given the government's indications it will have a ``nice, steady, easy-rolling start'' to emissions trading, Cox said by telephone. The government may set a cap for prices in the first five years of the system that may be ``not that much further away from the current price levels,'' he said.

Australia's carbon market could be worth as much as A$11 billion a year within the first few years of operations, Oslo- based researcher Point Carbon said last month. The government has started consulting industry about the design of the system.

The Treasury department will release economic modeling in October, followed by a White Paper at the end of 2008 that will include proposals for medium-term emission-reduction targets. Legislation is due to be introduced in the third quarter of 2009 and the targets will be firmed up after international talks on global emission-reduction targets, to take place in Copenhagen in December next year, Wong said this week.

The government has a long-term goal of cutting greenhouse gas emissions 60 percent from 2000 levels by 2050. The EU system, the world's biggest greenhouse gas market, has been operating since 2005.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net