Government announces cap and trade emissions scheme

The Federal Government has announced it will increase spending on combating greenhouse gas emissions by $627 million.

The "cap and trade' scheme means that the government will determine limits on greenhouse gas emissions and issue tradable emissions permits up to this limit.

Each permit represents the right to emit a specified quantity of greenhouse gas. Businesses must hold enough permits to cover the greenhouse gas emissions they produce each year.

Permits can be bought and sold, with the price determined by the supply of and demand for permits. The government can also choose how they wish to allocate permits.

Mr Howard believes that the new emissions scheme will help lower Australia's greenhouse gas emissions without sacrificing the country's economic prosperity.

The scheme is expected to be up and running by 2011.