Carbon 'black market' emerges

GOVERNMENT indecision over how to tackle climate change has led to the emergence of a "black market" in carbon credits in Australia.

Australia's largest companies are buying carbon credits outside the boundaries of existing government schemes, creating a "behind the scenes" market in emissions trading, Minter Ellison senior associate Scott Singleton will tell the Australian Petroleum Production and Exploration Association conference in Adelaide today.

The outing of the speculative green market comes as a federal government task group on emissions trading prepares to report its findings to the Prime Minister.

The task group has received more than 100 submissions, with Australia's biggest companies giving qualified support to a carbon pricing mechanism.

Mr Singleton said yesterday companies were taking a position in the speculative market in the belief that the Government would move to establish a price on emissions, either through a carbon trading scheme or a tax.

He said companies were learning about carbon trading in preparation for a future carbon constraint, but were also moving early in the hope that the credits they acquire will have value under a future regime.

"We've worked with clients on various legal and commercial strategies to develop carbon credit projects and structure the sales of credits to maximise their value under any potential carbon regime," he said.

Among the companies looking for a first mover advantage is mining behemoth Rio Tinto, which has bought carbon credits derived from land clearing permits held by Queensland farmers through an Australian trading house called The Carbon Pool.

Mr Singleton said Rio received immediate benefits under the Government's Greenhouse Friendly program.

"But if something happens down the track then Rio has a ready supply of carbon credits," he said.

Energy giant AGL recently joined the Chicago Climate Exchange, a US-based program for trading greenhouse gas emissions, while Origin Energy has made itself a broker for businesses who want to offset their carbon emissions.

"This is being done even though there is no current legal obligation on business to acquire these sorts of credits and as yet the credits have no statutory legal basis or real monetary value in Australia," Mr Singleton said.

He said the black market was unlikely to prevent the introduction of a government-regulated system.

"I think what these schemes will do will set up a framework of familiarity and knowledge," he said.