Carbon Pollution Reduction Scheme

The main driver of the Government's plan to reduce Australia's greenhouse gas emissions is the Carbon Pollution Reduction Scheme (CPRS). This is an emissions trading scheme which will use a cap and trade mechanism. The cap - an upper limit on the country’s carbon pollution that will be reduced in future years - achieves the environmental outcome. The ability to trade ensures that pollution reduction opportunities throughout the economy are harnessed which reduces the economic cost of meeting our ambitious carbon pollution reduction targets.  

How does the Carbon Pollution Reduction Scheme work?

Under the CPRS, the government will set an annual limit (or cap) on the total amount of carbon pollution that can be emitted under the scheme, within Australia. The cap will be gradually lowered, reducing the level of carbon pollution we produce each year. Voluntary action can contribute to lowering Australia’s emissions cap in a variety of ways.

Companies or other groups within Australia that need to emit carbon to do business will need to purchase permits (or may be issued with permits) that represent the right to emit a specific amount of carbon pollution. The total amount of permits issued overall cannot exceed the government-set cap. Businesses can trade permits among themselves if they find they have more than they need - or if they don't have enough – ensuring that abatement (reducing emissions) occurs at least cost.

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