NZ sees carbon market with Australia, possibly with EU

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New Zealand said on Tuesday it hoped to tie its carbon market to a counterpart envisaged in Australia as a stepping stone to wider international trade in greenhouse-gas emissions.

Tim Groser, New Zealand's minister for climate negotiations, said on Monday he announced in Durban "a commitment to try to tie our carbon markets together" to provide liquidity, a key factor in sustained trading.

But he said the process would be long and complicated and added he could not set a deadline for when a joint carbon market would be operational.

"We've just had some interesting discussions with the state of a particular country about linking in with Australia and New Zealand possibly in the long term and we may link up ultimately with the ETS [Emissions Trading System] of Europe," Groser added in an interview with AFP on the sidelines of the world climate talks.

"What we are trying to do is provide what we call the glue around an international carbon market. That's going to take decades, I assume, to evolve and it will take place on an incremental basis."

Groser refused to identify the state or its country with which he had the talks about teaming up with Australia and New Zealand.

In September, California, which would be the world's eighth largest economy if a country, approved a so-called cap-and-trade ETS from 2012.

Ten states on the US East Coast have also run a cap-and-trade system that started last year, but the initiative is limited to the power sector.

Traders are looking to the November 28-December 9 talks in Durban for signals to boost the carbon market, which is battling turbulence linked to economic downturn and political bickering over climate change.

They are also hoping for clues on what will tie together national or regional cap-and-trade markets that are emerging around the globe, often with different approaches and regulations.

New Zealand introduced its ETS in 2010. Phased in progressively, it should cover all sectors by 2015.

Under laws passed last month, Australia's coal-fired power stations and other major polluters face a levy of Aus$23 (US$23.80) per tonne of carbon dioxide (CO2) from next July 1. The country will move to an ETS in 2015 with a floating price.

China is working on pilot schemes in carbon trade while South Korea is pursuing a "cap without trade" initiative involving some 450 companies from next year in preparation for a full ETS from January 2015. Japan shelved national ETS plans late last year.

The turnover of the worldwide market was some 142 billion dollars in 2010, although it also marked the first drop in five years. The EU's ETS, launched in 2005, accounted for 97 percent of this.

© 2011 AFP

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