Cut Pollution

To achieve this, a Shorten Labor Government will:

  • Introduce a domestic emissions trading scheme (ETS) that will have two distinct phases. The first phase is designed to get Australia’s pollution levels back under control and to establish the architecture for an enduring ETS. The second phase will then drive the long-term transition in our economy.

  • Phase one of the ETS will operate for two years, from 1 July 2018 until 30 June 2020 to align with the second (and final) commitment period of the Kyoto Protocol.

  • Phase two of the ETS will operate from 1 July 2020. Pollution levels will be capped and reduced over the course of the decade in line with Australia’s international commitments under the Paris agreement. There will be no fixed price or carbon tax.

The broader ETS does not apply to the electricity sector. The scheme will allow business to work out the cheapest and most effective way to operate and will not involve taxpayers handing over billions of dollars to Australia’s large polluters as occurs now.

When China’s national scheme comes online, one in every three people in the world will live under an ETS. Rejecting an ETS means isolation from the global marketplace.

Phase 1 ETS: 2018-2020

The first phase of the ETS will cover facilities emitting more than 25,000 tonnes of carbon pollution per year (“liable entities”), returning to the scope of coverage reflected in the Clean Energy Act. The Interim ETS will impose a “cap” on carbon pollution produced by liable entities. This “cap” will reflect an appropriate proportion of the limits on pollution required to achieve the bipartisan commitment to ensure that carbon pollution levels in 2020 are 5% lower than 2000. These arrangements will be finalised in Government and implemented by the Clean Energy Regulator (CER).

No price will be imposed by Government on carbon pollution under the first phase of the ETS. Liable entities will not be required to purchase or receive permits to operate. But, where a liable entity breaches or exceeds its “cap”, it will be required to provide the CER with an equivalent number of “carbon offsets” for that year.

Phase 2 ETS: 2020

Labor will introduce an ongoing Emissions Trading Scheme from 1 July 2020. Under this ETS, pollution levels will be capped and reduced over the course of the decade in line with Australia’s international commitments under the Paris agreement and any additional Government policy to reduce pollution levels.

The design of the 2020 ETS will be finalised during the 2016-2019 Parliament, to commence after the 2019 election. Those details will include rules governing the allocation of caps to liable entities, access to international markets (including the possibility of formal linkage to other schemes), the operation of the domestic offsets market and the like. The design process will also take account of the impact of the 2020 ETS on households, industry (especially emissions intensive trade exposed sectors (EITES)) and Australia’s overall competitiveness, including advice from the Strategic Industries Taskforce.

“ environmental figleaf to cover a determination to do nothing”
– Malcolm Turnbull describing the Liberals’ climate change policy in 2009.

Carbon offsets

The Clean Energy Regulator (CER) will publish rules governing the types of offsets that are eligible under the phase one of the ETS. This will include access to international offsets approved under the UN’s Clean Development Mechanism as well as Australian offsets approved through mechanisms like the Carbon Farming Initiative (CFI).

The CFI was a Labor initiative that created a market supplying offsets from a diverse range of carbon reduction projects in the land sector – including re-afforestation, savannah burning and much more. Labor is committed to reviving that market.

In order to support a vibrant domestic offsets market, Labor will work with relevant stakeholders in Government to develop arrangements around limits on access to international offsets. Given that Australia’s emissions intensive, trade-exposed (EITE) sector competes in global markets, those companies will be allowed full access to approved international offsets under phase one of the ETS.

We risk missing out on the global mega-trend towards clean energy technologies and renewable energy. In 2014, clean energy investment grew in China (32 per cent), the US (8 per cent), Japan (12 per cent), Germany (3 per cent) and the UK (3 per cent). At the same time, investment in large-scale renewables dropped by 88 per cent in Australia. In the last two years more than 2 million renewable energy jobs were added to the global economy; in the same period Australia lost 2,600 jobs in that industry.

Retaining the Climate Change Authority

To support an independent expert-driven advice to Government, Labor will commit $17.4 million over the forward estimates to reverse the Government’s abolition of the Climate Change Authority and ensure that it continues to be appropriately resourced to achieve its role.


Given Australia is one of highest per capita emitters in the developed world, accessing approved international offsets helps ensure that Australia can achieve its emissions reductions at least cost to the economy, which is good for jobs and growth. We know that unabated climate change will cause huge upheaval in financial markets across the world, markets which underpin the wealth of Australians and the retirement incomes of Australia’s ageing population.

Recent studies have put the cost of unmitigated climate change to investors around the world at US$2.4-US$24 trillion. There is a long-standing consensus amongst economists and public policy experts that market based mechanisms such as emissions trading schemes should be part of any climate mitigation policy toolkit. This is because they provide an incentive for businesses to adjust their behaviour and switch to producing their goods and services with cleaner technologies and processes.

Want more details?

Download the summary fact sheet here 
or download the full policy document here.