Inside EPA’s Cap and Trade Scheme

Design Element

Key Features

Scheme coverage

Time frame: one year (2009 calendar year)
Emissions Included:

• Stationery energy
• Flights
• Public Transport
• Taxi use
• Fleet use

Setting a cap

The overall cap, which began as 3%, was set based on the previous year emissions data and opportunities to reduce emissions identified in the energy audits.

An EPA wide Marginal Abatement Cost Curve (MACC) was developed as well as one for each of EPA’s seven sites.   For more information on MACC’s please click here. (PDF 228 KB)

Establishing targets

The 3% cap was distributed evenly across EPA’s seven sites.  Therefore the individual emission caps were set at 3% below the site’s emissions from the 2008 year. 

Permit and Budget allocation

At the beginning of 2009, each site received their emissions cap, a site emissions profile and a budget.   The sites’ emissions caps should collectively enable EPA to meet its overall reduction target. 

Operation and trading

Each site decided whether it was more cost-effective to reduce emissions on site or buy permits from other sites. Participants explored all their options for emissions reduction and assessed the cost of these actions against the price they would have to pay for permits.

Sites attempted to implement their projects early in the Scheme.  This ensured they gained the maximum reduction during the Scheme’s life and were able to meet their target.

Governance structures

A trading platform and market rules were established so that participants could buy and sell permits. To do this EPA created the Carbon Trading Committee (CTC), an internal group, to independently oversee the market. 

Compliance framework

At the end of the year, sites surrendered permits equal to the volume of emissions they produced over the year.

Systems to support the scheme

All EPA carbon permits had a unique identity and were tracked on a permit registry.

The budget was used to invest in abatement projects, or buy carbon permits as some sites did not have any cost effective projects to implement. 

Stakeholder management

EPA ran a thorough stakeholder engagement program in conjunction with this Scheme.  Recognition and rewards were given to the best traders, those who achieved their targets, individual employees who developed the best carbon saving ideas and to teams who excelled in engaging on the concept.