Kyoto 2 crucial to carbon permits - report

BIG greenhouse gas emitters could pay more under the Gillard government's carbon price if Australia refuses to sign up to a second round of the Kyoto Protocol, a leading climate think tank has said.

In a report to be released this morning, the Climate Institute says that Australian businesses would have more difficulty accessing cheap international carbon permits unless the government joins ''Kyoto 2''.

The Kyoto Protocol is the agreement that sets legally-binding targets for developed economies, and is to expire at the end of this year. Countries are negotiating a possible second round.

The deputy chief executive of the Climate Institute, Erwin Jackson, said Australian businesses would face uncertainty in accessing the carbon permits backed by the United Nations. ''The government can't guarantee that companies will have access to international markets to reduce the cost of meeting emissions liabilities unless we take on a second Kyoto commitment,'' he said.

''International trading is based in Kyoto protocol rules and the spirit of those rules suggests that only those countries that have new Kyoto targets could have access to these mechanisms.''

Advocates say a second agreement should include developing countries with large-emitting emerging economies, including China, India and Brazil, which are not subject to the first deal.

A spokesman for the Minister for Climate Change, Greg Combet, said the government would decide ''at an appropriate time'' whether to sign up to round two, but said that agreement on important rules was still needed.

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