Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

asked the Minister representing the Treasurer, upon notice, on 18 August 2011:

With reference to the Treasury Carbon Tax modelling Strong growth, low pollution: modelling a carbon price:

Given that ‘Chart 3.5 of international carbon prices’ shows prices for the European Union emission trading scheme (EU ETS) only on a ‘3 month moving average’ basis, and only from 2008 onwards.

(1) Why does Chart 3.5 only go back to 2008, instead of to 2005 when the EU ETS started.

(2) How much more volatile would Chart 3.5 look if it were plotted on a daily

or weekly basis.

(3) How many days have there been during 2011 to date when EU permit prices have fallen or risen by:

  (a) 10 per cent or more in a day;

  (b) 5 per cent or more in a day; and

  (c) 2 per cent or more in a day.

(4) How many weeks have there been during 2011 to date when EU permit prices have fallen or risen by:

  (a) 20 per cent or more over the course of a week;

  (b) 10 per cent or more over the course of a week; and

  (c) 5 per cent or more over the course of a week.

(5) What are the lowest and highest nominal permit prices recorded in the EU ETS since its inception in 2005, and what is the current permit price.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The Treasurer has provided the following answer to the honourable senator's question:

Chart 3.5 in the Strong growth, low pollution: modelling a carbon price report shows EU ETS permit prices from 2008 to present. This period was selected as Phase II of the EU ETS was considered the most appropriate period for examination of future carbon prices. The first trading period of the EU ETS (which ran from 2005 to 2007) was designed as a pilot phase with different policy settings to the current EU ETS and the proposed carbon price mechanism — particularly in relation to the banking of permits and sectoral coverage.

Underlying market prices for financial instruments, such as EU carbon permits, are better reflected by trend movements, rather than temporary price fluctuations. For this reason a 3 month moving average was applied to the data to look through temporary daily movements.

Based on settlement prices from IntercontinentalExchange, from 3 January 2011 to 18 August 2011 (164 trading days), there were:

Over the same time (32 weeks), there were:

Since 2005, the lowest recorded EU ETS settlement price was €8.20 (on 12 February 2009) and the highest was €32.90 (20 April 2006). The EU ETS settlement price for 18 August was €12.22.

The Government’s proposed domestic carbon price mechanism will only apply to the 500 biggest polluters in Australia. These businesses have experience in managing risk in relation to a range of factors such as variable electricity prices, commodity prices and exchange rates. As such, they are well equipped to manage a variable carbon price.