[Updated: 25 August 2009]Australia and New Zealand have discussed harmonising their emerging emissions trading schemes at talks in Sydney today. Both nations have long expressed interest in a harmonised carbon market and the prospect was furthered at the first ever joint cabinet meeting between the two governments amid more extensive two-day talks over closer integration of the two economies.
Australian climate change minister Penny Wong would only say that the two governments were “considering possibilities” at this stage. But New Zealand prime minister John Key said a single carbon trading market could happen fairly quickly once both nations bed down their emissions trading laws.
Climate change ministers from both countries emphasised in a joint press appearance on August 25 that the priorities are to see their domestic trading schemes passed into law before taking steps in earnest toward harmonisation.
Plans for cap and trade schemes are in limbo in both countries as the two governments struggle to negotiate the required parliamentary support from their respective oppositions. Australia’s Labor government failed to win support in the Senate for its Carbon Pollution Reduction Scheme (CPRS) bill at the first time of asking last week. The Liberal opposition wants a range of amendments to increase assistance to industry and consumers and give agricultural carbon offset opportunities to farmers.
New Zealand’s conservative National government has its Labour Party predecessor’s planned NZ ETS on hold subject to review by a parliamentary select committee. It is expected to report in early September after which the government will formulate amendments to the existing NZ ETS bill and seek to pass an emnded bill before Copenhagen. The government is also currently trying to negotiate changes with Labour over the size of subsidies to the agricultural sector to be borne by taxpayers.
The countries have quite different emissions profiles but the trading schemes as they stand are similar in the extent of coverage across the economy, both including the transport sector. The major differences are in the treatment of international offsets; to be restricted in Australia and freely available in New Zealand.
For New Zealand, the prospect of access to a much bigger markets offers potential to lower emission reduction costs in the smaller economy. But the New Zealand forestry industry says close linking to Australia would be detrimental forest investment returns.
A fixed price of $A10 per tonne would apply from 2011 to 2012 under the CPRS and beyond that an rising indexed price cap starting at $A40 per tonne in the early years following. Such restrictions in New Zealand would undermine investment in planting forests, which will be crucial in the country’s emissions reduction effort, the local Kyoto Forestry Association says.
But the New Zealand leader continues to talk up the trans-Tasman linkage. Ultimately, I think we can be in a position where Australia and New Zealand have not only a very similar response to carbon trading [but] a single trading market," Key told Australia’s National Press Club.
"If we can get to a point where our abatement rates are similar and our grandfather clauses are similar then that puts us in good shape," he said. "There are a number of things that need to be nutted out, not the least of them being that, currently, the way [Australian] emissions trading legislation is proposed, you don't allow for credits from international markets, with a few exceptions."
New Zealand trade and climate negotiations minister Tim Groser also announced the launch a global initiative to tackle greenhouse emissions from livestock. The international research body would take a similar form to Australia’s $US80 million coal carbon capture and storage institute, launched by prime minister Kevin Rudd earlier this year. Both countries have committed support for the other’s initiatives.
New Zealand Herald 18-21/8/09, Australian Associated Press 20/8/09
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