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NZ And Australia Agree on linking their ETS

Minister for Climate Change and Energy Efficiency

Minister Responsible for International Climate Change Negotiations


5 December 2011

Australian Minister for Climate Change and Energy Efficiency, Greg Combet, and New Zealand Minister for International Climate Change Negotiations, Tim Groser, have welcomed progress on plans to link Australia’s and New Zealand’s emissions trading schemes.

The Ministers agreed that strengthening international carbon markets - including through linking the two emissions trading schemes - would unlock further efficiencies, and contribute to reducing pollution cost-effectively around the globe.

“Markets are the way to cut our emissions at least cost. That is why Australia is working with New Zealand to develop them domestically and internationally,” Mr Combet said.

The Ministers noted that emissions trading schemes are being introduced around the world, in parallel with the ongoing development of multilateral requirements, and discussions between countries with existing emissions trading schemes were valuable in promoting deeper, more liquid carbon markets.

“The broader, deeper, and more liquid carbon markets are, the more effectively they work, for the benefit of all countries,” Mr Groser said.

Today’s announcement followed a meeting in June between Prime Ministers Gillard and Key where they agreed to establish a senior officials group to work on arrangements to link the two countries’ emissions trading schemes. The Australia New Zealand Carbon Pricing Officials Group (CPOG) was then established to take that work forward. Ministers Combet and Groser have agreed terms of reference that will guide CPOG’s further detailed discussions on linking in 2012.

Both Ministers said that discussions regarding linking between Australia and New Zealand had begun positively in 2011. Officials are identifying a number of areas where it would be important to work through efficient and practical ways of linking the two schemes. The Ministers noted that linking could commence in 2015, at the start of the flexible pricing period of Australia’s carbon pricing mechanism.

“This is another important aspect of the close economic cooperation that characterises the way our two countries do business. Trans-Tasman collaboration, particularly on the technical details of linking the two schemes, will be important in getting the best outcome for both countries,” he said.

The terms of reference for the Australia-New Zealand Carbon Pricing Officials Group are attached below.

Terms of reference for the Australia-New Zealand Carbon Pricing Officials Group

On 20 June 2011, Prime Ministers Gillard and Key announced the establishment of a senior officials group to work on arrangements to link, at an appropriate time in the future, Australia’s Carbon Pricing Mechanism (CPM) and the New Zealand Emissions Trading Scheme (NZ ETS).

In considering the prospect of linking respective emissions trading schemes, the Australia-New Zealand Carbon Pricing Officials Group (CPOG) will:

a) Examine the mechanics of linking by:
i. scoping the different ways in which the two schemes could link
ii. identifying any areas of scheme design which might represent an impediment to linking, and where alignment might be necessary
iii. identifying timeframe options for linking.

b) Discuss potential for aligning other aspects of scheme design in the medium-term, including opportunities to reduce trans-Tasman transaction costs and competitiveness distortions.

c) Use the forum for cooperation, where deemed mutually-appropriate, in:
i. direct linking with additional jurisdictions
ii. development of international carbon markets more broadly.

d) Examine any other matters that respective Climate Change Ministers consider relevant.

In examining the prospect of linking carbon pricing schemes, the group will need to consider:
• the potential benefits and costs for each country
• the respective sovereignty of the New Zealand and Australian governments, and the differences between their two economies
• the potential nature of any post-2012 international framework
• work undertaken by each country to link with schemes in other jurisdictions

Overall, the officials group will provide advice to their respective Climate Change Ministers on specific options for direct linking of Australia’s and New Zealand’s Emissions Trading Schemes. This advice will include the possible timing for any linking arrangement to come into force and practical steps needed in each country to enact it.

Officials will work through 2012 to consider costs and benefits of potential linking options and undertake a work program to support, subject to final decisions by respective Governments, a potential start date of 1 July 2015, once Australia moves to a flexible price mechanism.

The officials group is to be jointly chaired by the Australian Department of Climate Change and Energy Efficiency (DCCEE) and the New Zealand Ministry for the Environment (MfE). Attendance by other departments is on an as needs basis.

The work is primarily expected to be undertaken by officials from DCCEE and MfE, with officials reporting to their respective Climate Change Ministers.


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