Carbon Pollution Reduction Scheme (CPRS) in Australia and critique its impact on financial managemen

There is no doubt that the climate change situation caused by emissions of greenhouse gas (GHG) is now a worldwide problem (Parker, 2009).

?Global warming? is a phrase we talk about the climate effect which has been done by human activities, especially the utilizing on fossil fuels such as coal, oil and gas and a numerous deforestation, which cause the releasing to the atmosphere of ?greenhouse gases (GHG)?, carbon dioxide is the most important gas in it. These gases will absorb infrared radiation released by the surface of the Earth and act as sheets cover the surface keeping it warmer than it would be. Together with this, the climate is changed (Houghton, 2005). We are in debt for the Earth?s response to this carbon dioxide (CO₂) and other GHG because it has controlled condenses of these gases which has carbon as their majority components for a very long time through the system called ?sources and sinks? (Australian Academy of Science, 2000).

Carbon sources (in the form of CO₂ and methane) are released by volcanoes and by decomposition plant and other organic substance and then it has been segregated or absorbed by plants, planktons, soils and water (sea, ocean, and lake). This cycle is already balanced by the Earth. When human activities have been involved such as burning coal, oil, and natural flower gas ? which are types of carbon that have been kept underneath the surface of the Earth for millions of years ? associated with accelerated land clearance such as deforestation. Carbon sinks cannot maintain, and GHG in the atmosphere continues to rise more and more. The world climate is warming rapidly (Australian Academy of Science, 2000).

Source: National Greenhouse Gas Inventory 2007, Australian Government Department of climate change.

The figure in table 1 demonstrates net emissions of greenhouse gases. In 2007, Australia?s national inventory of greenhouse gas emissions which is not including the land use, land use change and forestry (LULUCF) sector was 541.2 million tons (Mt) CO₂ equivalents (CO₂-e). This illustrates a rise of 1.3% (6.7 Mt) and 30% (125 Mt) of total emissions recorded on 2006 and 1990 levels respectively (Department of Climate Change, 2009). We need to take a measure on this.

One of the Australian government responses is the initiation of a new national emissions trading scheme named the Carbon Pollution Reduction Scheme (CPRS) (Parker, 2009). By the idea of charging cost on carbon, consumers may avoid from carbon cost-related products and services and suppliers may also think about either stop or look for alternative way to decrease the emissions and carbon costs (Queensland Resources Council, 2010). The implication of the law of this scheme will be effective for more than 1,000 Australian companies. This means the company board and executive need to know the detail in the scheme well before it takes action by law (Petersen, 2009). All of Chief Financial Officers (CFO) in the Australian companies will have a new line of responsibility to manage. The creation of greenhouse gas is now coming with price (Wilson, 2009). This essay will discuss the Carbon Pollution Reduction Scheme in Australia in detail and then criticize its impact on financial management decisions on coal-fired electricity generation industry.