KEY POINTS:
New Zealand power producers and major industries may have their emissions capped as early as next year under Government plans to encourage greater use of non-polluting power sources and better energy efficiency.
Energy Minister David Parker said yesterday that the Government would spend the next three months designing a system to limit emissions and allow trading of surplus entitlements.
Industries, including dairy and meat companies, would be included over time based on their ability to reduce pollution at least cost.
Parker said trading would start "next year, if this proceeds, for some sectors".
He added: "Some sectors can do more because they have more cost-effective choices."
He refused to say which industries would be included first.
About half New Zealand's green-house gas emissions come from agriculture, with about 10 per cent from power generators and 32 per cent from transport. Even though power production's emission volumes are low, Parker previously advocated a carbon tax on utilities to hasten development of wind farms and dams and quickly reduce emissions from coal-fired electricity generation.
He said yesterday that no new work was being done on that plan, which would have put a price on carbon emissions without imposing a volume limit. It would also have unfairly focused on the electricity industry when all parts of the economy needed to bear the cost of their emissions, he said.
New Zealand's emissions rose 24.7 per cent from 1990 through 2005, as the expanding economy increased energy and transport use, and a slump in forestry earnings reduced planting of trees, which absorb many of the gases blamed for global warming.
About 15 companies, including Fonterra and Rio Tinto's Tiwai Pt aluminium smelter, account for about 80 per cent of the nation's emissions.
Parker said fewer than 100 companies were likely to be directly involved in trading.
Under the earlier carbon tax plan, exporters including the smelter and oil refiner New Zealand Refining were granted exemptions to protect their competitiveness.
Parker said exemptions were unlikely under the proposed trading system and risk to industry would instead be reflected in the timing of some companies' entry into the regime and the stringency of the emission caps they faced.
Parker said the Treasury estimated that the impact of emissions trading on economic growth through to 2017 would be negligible.
-BLOOMBERG
