National Experiences in Environmental Sustainability
Critical Issues in Environmental Taxation series
Edited by Larry Kreiser, David Duff, Janet E. Milne and Hope Ashiabor
Chapter 8: Levelling the playing field or playing on unlevel fields: the industry assistance framework under the European Union ETS, the New Zealand ETS, and Australia’s CPM
Assistance to emissions-intensive trade-exposed (EITE) sectors in the form of free-of-cost allocation of permits has been justified on the grounds of ‘levelling the playing field’ and preventing carbon leakage. As a result, emissions trading schemes are adopting different criteria and levels of assistance to deal with this issue, which raises the following question: is it possible that instead of a level playing field, these assistance measures are creating a slightly more uneven arena? This chapter looks at the allocation of free-of-cost emissions permits to EITE sectors. It does so by comparing the industry assistance framework under the European Union Emissions Trading System (EU ETS), the New Zealand Emissions Trading Scheme (NZ ETS) and Australia’s Carbon Pricing Mechanism (AUS CPM). The comparative analysis demonstrates that there are significant discrepancies, not only with regards to the eligibility thresholds, but also the levels of allocation to industry sectors across the different schemes. Consequently, these assistance measures may impact trade decisions such as the relocation of new investment. This may be particularly the case where ETSs are linked.
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