The Federal Government's proposed carbon trading scheme could be seriously undermined by a lack of adequate legal reform, a Queensland University of Technology researcher said.
Queensland University of Technology (QUT) researcher Nicola Durrant, from the Faculty of Law, has completed a PhD study into the legal requirements for a successful carbon trading scheme in Australia.
Ms Durrant said that there were a number of unresolved legal issues that could jeopardise the Government's proposed Carbon Pollution Reduction Scheme, including the Government's decision not to introduce any new laws regarding ownership of the tradeable carbon permits.
"For the carbon market to be effective it must be supported by an appropriate legal framework, however, there is no new legal framework proposed in the Federal Government's carbon pollution reduction scheme," Ms Durrant said.
Ms Durrant said that because no federal legislation had been set, the legalities of owning carbon permits would be subject to the existing property law systems of the states and territories, which varied greatly and were not created with the novel concept of carbon trading in mind.
"Ultimately, this will affect the inherent financial value of the permits and may undermine the overall effectiveness of the carbon market system," she said.
"It is critical to define and characterise the legal nature of the tradeable permit as this is essential to facilitate trade within the market."
Ms Durrant said that owners of carbon permits should be able to hold, use and sell their permits as well as being able to protect their permits from third party interference and take mortgages or charges out against them.
"Ideally, this should be done through the creation of a consistent national legal framework rather than through the ad hoc application of existing state laws," she said.
Ms Durrant said that legal reform was critical, given that the government intends to eventually link with overseas markets and permit international trade in these permits.
"The legal framework for carbon trading in Australia must be compatible with the international legal framework and the emerging international, regional and domestic carbon trading systems world-wide," she said.
"The effectiveness of the global carbon market depends on it. However, it is difficult to see how this might be achieved through a state-based framework."
Ms Durrant said the purpose of carbon trading was to reduce Australia's greenhouse gas emissions by creating permits to emit greenhouse gases and enabling trade in those permits within a capped market.
"Regulated industries will be required to acquire sufficient permits equal to their emissions and surrender these to the regulator but the number of permits will be limited according to the emissions cap for the scheme," she said.
"The resulting scarcity of permits is intended to influence the market price of permits to emit and encourage change in business behaviour to reduce emissions."
Editor's Note: Original news release can be found here.