The deal represents a major milestone for the global carbon market and significantly increases the extent to which businesses around the world have to take account of the carbon price when planning new investments.
Australian Climate Change Minister Greg Combet has stated that "a full two-way link" between the two cap and trade schemes will start no later than 1 July 2018, creating what would be the world's largest carbon market.
From 2018, EU companies would be able to meet their carbon goals by purchasing Australian-generated emission credits, while, under an interim deal also announced this week, Australian businesses will be able to do the same from 1 July 2015.
"Linking the Australian and European Union systems reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions," Combet said in a joint statement with European Commission for Climate Action Connie Hedegaard.
Australia, one of the world's highest per capita emitters of pollutants blamed for causing climate change, imposed a fixed A$23 ($23.88) per ton carbon tax on around 300 of its biggest polluting companies in July, covering around 60 percent of emissions. From 2015, this fixed tax was due to be replaced by an emissions trading scheme, underpinned by an A$15 (£10) carbon floor price.
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