NZ government committee backs carbon trading scheme

WELLINGTON Mon Aug 31, 2009 3:59am EDT

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WELLINGTON (Reuters) - New Zealand should retain emissions trading as its primary tool to fight climate change, a parliamentary review panel said on Monday, but gave few specifics on how the existing trading scheme might be changed.

The committee, established late last year, only gives broad recommendations in its 132-page report. It is now up to the government to decide on the final shape of the scheme, largely stalled after the ruling National Party won elections last November.

Among the recommendations by the Emissions Trading Scheme review panel is that a carbon trading scheme covering all economic sectors was preferable to a carbon tax.

The National Party, which has previously said it wants a less onerous scheme, will now be looking to gain the support of other parties in parliament to pass a revised trading system, said Wayne King, a director at consulting firm Carbon Market Solutions.

"The existing scheme set the benchmark, and now this report seems to be stepping back from that," King said.

The committee was asked to review the emissions trading scheme (ETS) as part of a political deal struck when the center-right National Party came to power last year.

At the time, the new government said the existing scheme was too expensive and ambitious, suspending its implementation except for the forestry sector.

Climate Change Minister Nick Smith said on Monday the government would take its time considering the report.

"The government will continue its discussions with all parties to find a way forward that balances our environmental responsibilities and our economic opportunities," Smith said in a statement.

He said it was the government's ambition to decide on the shape of a revised ETS before U.N. climate change negotiations in Copenhagen in December.

The report also revealed divisions within parliament over the best approach to mechanisms to deal with climate change and includes reports from each of the other four parties on various issues.The document is available: here e mean.pdf

HARMONY

Smith has consistently said he wants a scheme which is in harmony with the system still to be approved by Australia, New Zealand's largest trading partner.

The report noted international linkages with other schemes under the U.N.'s Kyoto Protocol would help ensure liquidity and the efficient functioning of the New Zealand scheme.

It also said all sectors should be included in the scheme, and a case could be made for price caps, although no specific prices or dates were recommended.

On August 10, Smith said New Zealand would aim to cut carbon emissions by between 10 and 20 percent below 1990 levels by 2020, with an emissions trading scheme one of the key tools in meeting the target.

The Labour-led government, which lost the November election, had implemented the initial cap-and-trade scheme, which involved the gradual introduction of various industries and wanted New Zealand to become carbon neutral by mid-century.

The National Party campaigned on a less onerous scheme, saying the country should balance its environmental and economic interests.

Despite indications the government does not intend sweeping changes, investors in sectors such as forestry had criticized the lack of certainty after the scheme was put under review.

On August 14, Australia's parliament rejected an emissions trading scheme, although the government has pledged to try to push through the legislation before the end of the year.

Under the Kyoto Protocol, New Zealand's emissions are meant to show no increase from 1990 levels between 2008 and 2012, the pact's first commitment period. But Smith has previously said emissions rose by 24 percent between 1990 and 2008.

(Editing by David Fogarty)

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