New Zealand's parliament passes carbon trading bill

By Jim Regan

SYDNEY (Reuters) - New Zealand on Wednesday passed a climate change bill that will set up the country's first greenhouse gas emissions trading scheme and help it meet obligations under the Kyoto Protocol, the government said.

Trading of carbon credits begins in 2009 and Wednesday's parliamentary approval means the system is the first national cap-and-trade scheme outside Europe.

Neighboring Australia has set a 2010 deadline for its scheme to begin operation.

The bill faced a rocky path to approval by lawmakers, with the minority-led government forced into months of negotiation with the Greens and New Zealand First parties to win majority support.

The bill passed into law after a 63-57 vote in parliament.

The Climate Change (Emissions Trading and Renewable Preference) Bill will eventually bring all sectors of the economy under a regime that sets limits on the amount of carbon they can emit.

Those that breach their limit will have to buy credits, called NZUs and representing the equivalent of one metric ton of carbon dioxide (CO2), from users that produced emissions below their ceiling. Participants can also import credits representing reductions made abroad, in a global trade worth over $13 billion last year, according to the World Bank.

Market estimates of the price per ton of carbon have ranged from NZ$15 to NZ$25 ($10 to $16.75), though some analysts suggest it could be up to NZ$50 after recent amendments to the bill.

By comparison, carbon credits issued under the European Trading Scheme were trading at 22.90 euros ($32.3) a metric ton on Wednesday.

The New Zealand trading scheme will phase in sectors across the economy and includes all emissions from forestry from 2008, stationary energy such as coal-fired power stations by 2010, transport fuels from 2011 and agricultural waste by 2013.

About 60 percent of New Zealand's power comes from hydro-electricity, while agricultural emissions, such as methane from livestock, comprise about 47 percent the nation's total greenhouse gas emissions.

CLIMATE-FRIENDLY INVESTMENT

The plan would act as a catalyst to bring forward clean technology and would create incentives for climate-friendly behavior and investments, according to David Parker, minister for climate change.

"For the first time we will start factoring in the true cost of greenhouse gas emissions into our economy," Parker said.

New Zealand is joining 27 European Union nations that adopted a continental emissions trading scheme in 2005. Several other countries, including Canada and Japan, are developing national schemes as well.