AbstractThe Australian Government intends to introduce a price on carbon to create a clean energy economy at least-cost. The environmental aim will be achieved by creating a new market through an emissions trading scheme (ETS) – the carbon market. These are matters of public interest.
This thesis addresses the potential for abuse of an Australian ETS by entities that are not directly liable for the carbon price (non-liable entities). This thesis asserts that the gateway for this abuse is opened by unfettered ownership rights in the units of currency (emissions units) of the ETS – the statutory right to emit a defined amount of greenhouse gases (GHG).
Emissions units become commodities because embedded property rights in the ownership of the emissions unit allows transfer of the emissions units from one entity to another at an agreed price. Experience with trading of emissions units in the European Union and elsewhere reveals that abuse has occurred. Such abuse includes gaming the ETS legislation as well as theft, fraud, manipulation and excessive speculation. The absence of conditions on ownership of emissions units has facilitated such aberrant behaviours because non-liable entities may own emissions units without facing the same obligations faced by liable entities under the ETS.
This thesis argues the credibility of an Australia ETS depends on design rules that create a fair and orderly carbon market. Most importantly, a fair and orderly market would be one that enshrines a level playing field and is not susceptible to the problems experienced in operational emissions trading schemes and also in financial markets leading up to and throughout the Global Financial Crisis (GFC).
In order for Australia’s carbon market to be fair and orderly, ownership of emissions units should be conditioned. All participants in the carbon market should face the same potential liability under the Australian ETS, and abuse of ETS design rules by gaming as well as theft, fraud, manipulation and excessive speculation in emissions units, all independent of the achievement of the environmental objectives, should be arrested.
This thesis answers how an Australian ETS should arrest these aberrant behaviours, and builds upon existing legal rules by proposing new legislation for an Australian ETS as a carbon pricing mechanism. The recommended legislation addresses: the problem of fairness by proposing that non-liable entities would be deemed to be liable entities by synchronising ownership of emissions units and obligations to monitor, report and acquit emissions (called a synchronisation rule); and an orderly market by introducing an enhanced carbon market integrity regime.
New rules are also presented to reinforce the approaches by improving both ETS account opening procedures and discretions in the ETS regulator to test acceptability of participants.
|Date of Award||8 Oct 2011|
|Supervisor||Michael Weir (Supervisor)|