KEY POINTS:
New Zealand and Australia will work closely together in the development of carbon-trading systems, with the potential to develop a model for similar systems throughout the region.
Pushed by New Zealand and the more recent conversion to climate change by Australian Prime Minister John Howard, emissions trading will also be discussed at September's Asia Pacific Economic Co-operation summit in Sydney.
Wellington has been recognised in Australia as a global leader in climate-change policies, with its carbon-neutral ambitions and its decision to set up a greenhouse gas emissions trading system by the middle of next year.
With the added emphasis of a looming election this year in which the environment has become a central issue, Howard this month accepted the recommendations of an inquiry into climate change and also announced his intention to introduce carbon trading.
Although he has refused to set an emissions-reduction target until after the election, Howard has been moving fast to catch up with Labor's environmental lead.
The announcement in Sydney by Howard and Prime Minister Helen Clark of collaboration in the development of carbon-trading systems has been built on 25 years of closer economic relations and recent moves towards a single economic market.
Both played a prominent role in last week's five-day trade mission led by Clark and Economic Development Minister Trevor Mallard to Melbourne, Brisbane and Sydney.
In Brisbane, Clark and Premier Peter Beattie agreed to accelerate co-operation in several key areas of climate-change science, including the development of clean-burning coal and moves to reduce greenhouse gas emissions by farm animals which comprise 50 per cent of New Zealand's emissions profile.
Important differences remain in transtasman approaches to climate change.
New Zealand has ratified the Kyoto Protocols setting down targets for emissions reduction, while Canberra has steadfastly refused ratification.
Howard's conservative Coalition Government also supports nuclear power as a greenhouse-friendly alternative energy source despite bitter controversy, and believes Australia should work towards its own nuclear industry.
Wellington remains opposed to nuclear energy.
But Canberra - which has also discussed compatible carbon-trading systems with Canada - will now work closely with New Zealand on emissions trading.
"It has been agreed to establish a working group of officials from the two countries to ensure that as each of us moves towards an emissions trading system in our two countries, we achieve as much compatibility and harmonisation as possible, and as much acceptance of common standards as might be possible," Howard said after meeting Clark.
"Clearly, we have taken some different approaches to aspects of climate change in the past.
"But both of us see the merit in our respective countries of developing emissions trading systems, and there is no reason why we can't pool our experiences where possible to harmonise our approach."
Howard said the developing transtasman climate change relationship could be something of an example of what could be achieved in this region, particularly in the context of Apec.
Clark said collaboration on carbon trading could build on the existing close relationship between the two countries.
"We have agreed we should work hard on seeing the systems we are designing be compatible schemes," she said. "Who knows where we could lead after that?
"Who knows where co-operation around Apec can lead after that if there are willing parties and countries over time?"
Clark said that at this stage of designing carbon-trading systems New Zealand and Australia certainly needed to co-operate closely, comparing notes in such areas as verification and forms of measurement.
She said that that although some countries were more exercised on climate change than others, those that were further down the track towards designing emissions trading systems could be seen as pacesetters, or pathfinders.
"I think there will certainly be interest from a number of countries in the sort of work were doing," she said.
"If we can get it right, that sets a model for others as well."
