Aust, NZ seek joint carbon market

Photo / Greg Bowker

MELBOURNE - The Australian and New Zealand governments have strengthened plans to form a united emissions trading scheme, but both admit they must first overcome significant local hurdles.

Australian Climate Change Minister Penny Wong and New Zealand counterpart Nick Smith discussed their "harmonising" plans at a breakfast at the Melbourne Convention Centre on Tuesday.

While the joint venture remains part of the big picture, the Rudd government's emissions trading scheme was voted down by the Senate earlier this month. It will try again in November.

New Zealand is reviewing its emissions-trading laws, with Dr Smith suggesting his government had some "very challenging" weeks ahead before developing a new bill by late next month.

"The first step for both of our governments is to get our legislation in place, to get our trading schemes in place," Ms Wong told reporters.

"The second point is this - we are doing the work to explore options for harmonisation. There is obviously a lot more work that needs to be done."

Dr Smith said it made sense for two countries that shared such rich "heritage and value" to eventually settle on a single scheme.

"Climate change is the issue of our time," he said.

"It certainly is the view of the New Zealand prime minister and government that our two countries should work closely together on climate change policy, both in terms of the importance of the international negotiations that are coming to a head in Copenhagen (in December) as well as in terms of the sorts of policy measures that we adopt domestically."

Australia aims to cut its emissions by between 5 and 25 per cent over the next decade; New Zealand aims for a reduction of between 10 and 20 per cent by 2020 from 1990 levels.

Australian Prime Minister Kevin Rudd and New Zealand counterpart John Key have already discussed strategies but Dr Smith said there was still much to work through as the countries had some differences.

"We have a somewhat different position than Australia in the sense we have huge agricultural emissions, 50 per cent, as well as that we have a very large plantation sector that has a big impact," he said.

Dr Smith also said his government faced challenges in including animal emissions in its bill.

"I should not understate how complex it is to bring ruminant animal emissions into an emissions trading scheme," he said.

"It will be fair to say the new government has a more cautious view of attempting that. We will be the first government in the world that is attempting that task."

Australian farmers have already voiced concerns about including agricultural emissions.

The two countries will also have to find agreement on carbon price restrictions.

"The Australian government has made plain that the price restrictions are part of the transition, rather than a long-term policy measure," Dr Smith said.

"That is why the two governments are in a pretty common space in saying we are going to start these two schemes separately but in time it is our ambition to bring them closer together."

Dr Smith said it was important the South Pacific's two biggest economies were at one on the plan so both prospered financially.

"The degree of integration of the New Zealand and Australian economies makes it important for New Zealand that climate change does not become a lowest ebb exercise, that investment decisions between New Zealand and Australia should be made on what is the best place to invest, not the place that has got the softest climate change policy," he said.

"That's an important undertone."

- AAP