December 23, 2010 / 3:31 AM / in 7 years

NZ announces review of carbon trading scheme

SINGAPORE, Dec 23 (Reuters) - The world’s only national carbon trading scheme outside the European Union will be reviewed in 2011, New Zealand’s government said on Thursday, with a key focus on what other nations are doing to fight climate change.

The government released the terms of reference for the review, mandated under legislation, for the scheme that covers about half the country’s greenhouse gas emissions during its first phase that runs until the start of 2013.

A government statement said key areas for the review would be how to change the scheme’s design to match any possible new global deal to fight climate change, whether to ramp up the scheme and to include new sectors.

The review panel would also look at whether to include powerful synthetic greenhouse gases produced by industry.

(For a factbox on the main points of the scheme, click on [ID:nSGE6600L6])

The government has faced criticism from some business groups, particularly agriculture, saying the scheme should not be ramped up when competitors, such as the United States and neighbouring Australia, have failed to put a price on carbon.

Australia shelved its emissions trading scheme (ETS) in April after fierce political opposition blocked its passage through parliament. The government is now reviewing how best to price carbon, either through a tax, a limited emissions trading scheme or a hybrid and has pledged to make a decision next year.

“All the international evidence confirms that pricing emissions is the most efficient way of addressing climate change,” New Zealand’s Climate Change Minister Nick Smith said in a statement.

“However, we need to keep a close eye on international developments and how the ETS is working in New Zealand to ensure we keep doing our fair share on climate change at least cost to consumers and businesses.”

New Zealand’s scheme, considered by green groups as too soft on big polluters, allocates up to 90 percent of pollution permits for free to energy-intensive firms that export their goods to nations without carbon caps. Each permit represents a tonne of carbon emissions.

Power generators and transport firms receive no free permits. But until the start of 2013 all firms covered under the scheme have the option of buying permits for a fixed NZ$25 (about $18.50) a tonne and will only have to surrender one permit for every two tonnes of emissions.

The review, to be completed before end-2011, will look at whether the scheme will roll back some of the sweeteners after 2012.

Agriculture, which is responsible for half the country’s greenhouse gas emissions, mainly methane from livestock, is excluded until 2015. The sector welcomed the review but urged caution on changes that would increase costs.

“It’s important the review panel asks the right questions about how we are managing our emissions and how it compares to what our trading partners are up to,” Don Nicolson, Federated Farmers President, said in a statement. “In a world stuck in economic crisis these types of schemes have definitely gone on the backburner,” he added. (Editing by Ron Popeski)

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