Australia's reluctance to ratify the Kyoto Protocol is hurting business

Soon the international community will have an operational protocol without the US and Australia.

Australia produces less than 2 per cent of global emissions and the impacts on the world’s climate will be determined mainly by the emissions from Europe, the US, Japan, China and India.

Despite a relatively generous allowance under Kyoto, our emission levels are currently running at 16 per cent above 1990 and increasing.

In February, the Australian Government formed a "climate action partnership" with the US. This will allow the two countries to share technology although the consequences to Australian business are as yet unclear.

While our politicians posture on the world stage, business is becoming understandably worried.

On the one hand, not signing it would leave Australia "free" to manage its own emission targets and controls. This would assist those high-energy using industries such as the aluminium and coal industries as the capping of their greenhouse gas emissions would not be regulated.

However, the Kyoto Protocol has a second element apart from the emission targets set for countries.

It sets out market-based mechanisms to be implemented between countries and between businesses. These mechanisms set out the way businesses will be involved in the Kyoto process.

The Kyoto Protocol only recognises emission reductions in participating countries and does not allow businesses in Kyoto countries to count reductions made or carbon sinks used in a non-Kyoto country.

So Australian companies operating internationally and regulated in another country could be prevented from using greenhouse gas savings in Australia to balance the requirements of the first country.

Under Kyoto, emission trading can occur between countries or between countries and private businesses or between businesses.

Most trading will probably occur among private businesses. If Australia does not ratify, Australian businesses may be squeezed out of this international market to their disadvantage. Landholders could also lose their ability to trade sinks such as trees with overseas organisations.