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NZ to Bring in Carbon Trading, But Still Lag Kyoto

Date: 21-Sep-07
Country: NEW ZEALAND
Author: Gyles Beckford

A mandatory cap-and-trade emissions scheme and incentives
for tree planting to reduce emissions, blamed for global
warming, will progressively be introduced from next year, if
the government can get the measures through a parliament that
rejected a carbon tax two years ago.

"An emissions trading scheme will create an incentive for
businesses and households to make decisions that are good for
the environment, and will discourage actions that cause
greenhouse gas emissions," Finance Minister Michael Cullen and
Climate Change Minister David Parker said in a joint statement.

The cap-and-trade scheme will restrict or cap groups or
companies in the amount of a greenhouse gas they can emit.
Those using less than their limit can sell excess credits.

The first stage of the scheme will start next year with a
free allocation of carbon credits to foresters, with the aim of
increasing commercial forest area by 250,000 hectares (618,000
acres) by 2020.

Liquid fossil fuels would be brought into the trading
scheme in 2009, electricity generators and industry the year
after, and the country's economically key agricultural sector
in 2013.

New Zealand is a signatory to the Kyoto Protocol, which
requires it to reduce greenhouse gas emissions to 1990 levels
by 2012. About half the country's emissions come from
livestock.

Parker said latest estimates showed that by 2012 the
country would produce 45.5 million tonnes more carbon than
allowed under Kyoto, which at June 30 would cost the country
NZ$704 million (US$518 million), based on multiplying the excess
emissions by end-June carbon market prices.

"My estimate is that what we have now announced we will
pull this back to around 25 million tonnes or less, which
compares favourably with progress in other countries," Parker
said.

Most countries are lagging their Kyoto targets.

HIGHER COSTS

New Zealand's energy and consumer prices would rise because
of the limits, although the impact on the economy was expected
to be a contraction of only 0.1 percent over five years.

Under the proposed trading scheme, a set number of
tradeable credits would be issued, some free and others sold
through a government auction. The credits could be traded on a
specialised market or directly between parties.

New Zealand Exchange the country's stock exchange
operator, and a group of local companies in May proposed a
carbon trading market be set up next year.

The Labour-led minority coalition government will still
need support of smaller parties to pass the necessary laws for
the scheme. A government plan to impose a carbon tax was
scrapped in 2005 after it failed to find enough political
support.

Parker said the aim was to produce 90 percent of New
Zealand's electricity generation from renewable sources by 2025
from the current 70 percent level, and to halve transport
emissions by 2040, through the widespread use of electric cars.

In February, the government said it would require 3.4
percent of all petrol and diesel sales to be biofuel, most
likely ethanol and biodiesel, by 2012.

(US$1=NZ$1.36)

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