Amid the recent frustrations of the carbon markets, on the 28th August 2012 arrived the exciting announcement of the intention of the EU Emissions Trading Scheme (the “EU ETS”) to link with the Australian Carbon Price Mechanism (the “CPM”). To say that this development came as a welcome surprise to the market would be an understatement.

According to the announcement, the linkage will occur in two stages: a partial one-way unilateral link allowing transfers of EU allowances ("EUAs") to and use the use of EUAs by Australian compliance entities commencing on 1 July 2015 and a full two-way bilateral link providing for full mutual recognition of each other's units commencing on 1 July 2018. The unilateral link will not require further legislative approval from the respective government legislatures but the bilateral one will need approval both in the EU and Australia. This client alert explores some of the potential issues and questions arising from these proposals.

Please see full Alert below for further information.