Australia's delay on emissions strikes chord with Beehive

The Government is not averse to some emitter-friendly changes to the emissions trading scheme along the lines of those announced by the Rudd Government to the Australian scheme.

Prime Minister Kevin Rudd on Monday announced changes to the Carbon Pollution Reduction Scheme which has stalled in the Senate.

The start date is pushed back a year until mid-2011 and for the first year the price will be fixed at A$10 a tonne, about half the current world price, before being set by the market.

Citing the impact of the global recession, Rudd plans to increase the allocation of free units to emissions-intensive trade-exposed firms to the point where those most exposed to international competition will be covered for 95 per cent of their emissions for the first five years.

New Zealand's Climate Change Minister, Nick Smith, said that in the context of a long-term issue like climate change a year's delay was "small beer". Under the legislation passed by the Labour-led Government last year, the stationary energy sector is due to come into the scheme from the start of next year and transport in 2011.

"I'm not averse to reconsidering the timetable, albeit it is not necessary for harmonisation with Australia," Smith said.

More problematic than timing for Smith is the prospect that Australian emitters could face a A$10 carbon price while their New Zealand counterparts faced a world price which is currently much higher.

That possibility has also alarmed the Greenhouse Policy Coalition, which represents large industrial emitters.

On the issue of grandparenting - the free allocation of units to firms whose international competitiveness would otherwise be at risk - Smith said the main difference between the two countries' schemes is the rate at which the initial protection is wound back, an "aggressive" 8 per cent a year from 2019 under the current New Zealand scheme, compared with just over 1 per cent a year in Australia.

"We are not averse to rejigging the grandparenting arrangements, including the rate of phase-out," he said.

Rudd has also raised the possibility that Australia will set itself a tougher target for emission reductions by 2020 than the 5 or 15 per cent initially indicated. It will commit itself to cut 25 per cent from 2000 levels if there is a global deal to stabilise atmospheric levels of carbon dioxide equivalent at 450 parts per million by mid-century.

That condition was described by the Rudd Government as ambitious, by the Opposition coalition as "nigh on impossible" and by Smith as giving the Australian Government "a lot of wriggle room".

Although these changes go some way towards what the Opposition Liberals had been calling for, reports from Australia yesterday suggested the amended scheme might run into the same political brick wall as the original version.

- REUTERS reported the Leader of the Opposition, Malcolm Turnbull, as saying the amended scheme was flawed and he would not support it, while AAP reported the Australian Greens and two independent senators - all of whom are required if legislation is to pass the Senate without support from the Opposition - had also said they would not support it.

However Smith, who was in Canberra for climate change talks less than a month ago, said his reading of the politics was that the Australian Government would in the end be able to muster the parliamentary numbers.

Prime Minister John Key said yesterday that climate change policy was "work in progress" on both sides of the Tasman.

"I think it makes sense to be as closely aligned with Australia as practically possible," Key said, but it was not a "die in the ditch" matter.

CHANGING COURSE
* Australia's emissions trading scheme is pushed back a year until mid-2011.
* For the first year the price will be fixed at A$10 a tonne.
* Allocation of free units increased to up to 95 per cent of some firms' emissions for five years.
* NZ's scheme is due to start from next year.