China’s announcement of a joint presidential statement with the United States on climate change will have far-reaching implications for Australia.

On Friday the world’s biggest carbon emitter (and Australia’s largest trading partner) said it planned to introduce an Emissions Trading Scheme.

The most obvious result is the pressure it puts on Australia to follow suit with its own ETS.

But Prime Minister Malcolm Turnbull has said Australia will stick with its Direct Action Plan, despite grumblings about its expense and effectiveness.

Rather than penalising those who pollute too much, the DAP effectively pays companies to reduce the pollution they produce.

 

China says it will create a ‘cap-and-trade- emissions trading scheme by 2017. This will limit emissions while also creating a market for companies to trade carbon allowances.

The system will include power generators, steel, cement, and other key industrial sectors.

At the same time China says it will contribute $4.4 billion ($US 3.1 bn) to the Green Climate Fund to support climate action in developing countries.

The US has already donated $US 3.3 bn.

 

The political implications of these moves cannot be overstated.

When the Chinese ETS is up-and-running it is estimated around 40 per cent of the world’s emission would be covered by a carbon price.

This puts enormous pressure on those countries not subscribing to an ETS. Should Australia, for instance, stick to its Direct Action Plan it risks becoming isolated. Countries subscribing to the ETS could introduce a carbon tax on our exports, making them less competitive.

But not everyone agrees with the purity of China’s motives.

China is the world’s largest producer of renewable energy systems, both solar and wind. And so stands to gain a lot by shifting the world into an ETS, with its focus on renewable energy sources.

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