The carbon pricing mechanism has a fixed price for the first three years to provide stability and predictability. This gives businesses time to get used to the new system, understand their obligations and start reducing their pollution.
During the fixed price period, the Government sells an unlimited number of Australian carbon units at the specified fixed price for the relevant year. Liable entities automatically surrender these carbon units—they cannot be traded or banked for use in future years.
The fixed price is
- $23 a tonne in 2012–13
- $24.15 a tonne in 2013–14, and
- $25.40 a tonne in 2014–15.
During the fixed price period, liable entities are generally required to discharge 75 per cent of their estimated liability by 15 June of a fixed charge year. This may be done by surrendering the required units or by paying a unit shortfall charge.
They must then surrender units for the remainder of their liability by 1 February in the following year or pay a unit shortfall charge to cover the remaining liability.
As a form of assistance, some industries are provided with free carbon units. Freely allocated carbon units can be traded privately or sold back to the Government until 1 February after the financial year (vintage year) in which they were allocated.
Freely allocated carbon units cannot be banked.
There is no international linking during the fixed price period.
Other eligible units
Liable entities can also surrender an eligible Carbon Farming Initiative unit or an eligible international unit to meet their carbon pollution liability.
The carbon pricing mechanism transitions to a flexible price from 1 July 2015.