The rise and fall of carbon trading

A fractured state proposal to introduce a carbon trading scheme had support from environmental groups, but has failed to find backing from the federal government.

A group of state and territory governments that includes NSW announced a plan in August to develop a carbon emissions trading scheme.

Environmental groups appear to have embraced the concept, but the federal government has been quick to reject the proposal. Even the states do not uniformly agree on the scheme, with Queensland and Western Australia both rejecting the idea.

According to NSW premier, Morris Iemma, the overall objective is to reduce greenhouse gas emissions from electricity generators. The plan involves the capping of emissions and the establishment of a trading mechanism that would see certificates or credits able to be traded in the marketplace.

Power companies would be issued with permits for a certain amount of carbon emissions. These companies could then sell their surplus permits to bigger polluters and could gain credits through actions such as tree planting.

And while there's no denying the federal government thinks the concept of reducing greenhouse gas emissions is worthwhile, Prime Minister John Howard responded to the recent proposal by claiming he believed the scheme would cripple the resources industry.

The Federal Industry and Resources Minister, Ian Macfarlane, then reinforced the Prime Minister's comments by stating that the Commonwealth would not be a part of what it believes is nothing more than a carbon tax.

The federal government believes the scheme will have the effect of increasing the price of both electricity and petrol, without significantly reducing greenhouse gas emissions. It favours a solution that involves clean coal and carbon sequestration innovations where the carbon dioxide is captured and stored underground.

This solution has been rejected elsewhere, though. An ABC Lateline report on 21 August saw key advisor to former US Vice President Al Gore, Ross Gelbspan say he believes there is no such thing as clean coal and that there is no evidence that the carbon dioxide will stay underground.

Even worse, Gelbspan said there is new evidence available that the carbon dioxide pumped underground produces a toxic chemical that erodes the limestone and sandstone that is supposed to be capturing it.

Australian Democrats leader Lyn Allison has also joined the debate by accusing the Prime Minister and McFarlane of refusing to consider the proposal because they are "pandering to the petroleum and coal industries".

Allison says this attitude to greenhouse gas emissions and climate change is dangerous and will hinder Australia's ability to seriously address climate change.

"Climate change will have serious economic, social and environmental consequences for Australia. The debate is over about whether it exists and what causes it, and has shifted to how we take action," Allison said.

"Studies by the Australian Business Roundtable and AGL, Frontier Economics and WWF have demonstrated that we can begin reducing emission with our current technology and renewable energy, and that a carbon price signal would facilitate this."

At the end of the day, the states don't need the support of the federal government to implement the plan.

Environment Victoria recently told the ABC of a situation in the US that saw a number of states band together despite the federal government's position and successfully implement an emission trading scheme.

But at this stage, it's unlikely the scheme will flourish in Australia unless it has the support of the federal government as well as all state and territory governments.