Isra-Mart srl: New Zealand proposes joint emissions scheme

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NEW Zealand Prime Minister John Key has flagged that permits for greenhouse gas emissions could be traded across the Tasman to cut the cost of reducing emissions - highlighting differences between Australian and New Zealand conservatives.

Mr Key, who introduced emissions trading in New Zealand last year, yesterday became the first New Zealand Prime Minister to address the Australian Parliament. But he found himself jammed between Prime Minister Julia Gillard and fellow conservative leader Tony Abbott on the issue dominating politics here.

While declining to take sides, he was enthusiastic about New Zealand's scheme, and joined with Ms Gillard in setting up a group to work out how the two countries might link their emissions trading schemes.

''What I can tell you about the emissions trading scheme is that it's worked,'' Mr Key said.

''In the time that we've had it in place, all applications for new electricity generation have been in renewables, as opposed to 50/50 coming from thermal energy. Secondly, we've now had a period of afforestation … as opposed to a substantial period of deforestation. So those price signals are working in the marketplace.

''Generally speaking, the feedback we're getting from business and the NGO sector is that they are more positive now that the scheme is actually in place, because it gives them surety of investment.''

Mr Abbott hit back subtly when welcoming Mr Key to Parliament. While praising him for ''dramatically watering down the ETS that you inherited from Labor'', he added: ''In this country, your sister party will go further and do better. Should we inherit any carbon tax, we won't just reduce it, we will rescind it.''

Earlier, Mr Key said his government would rebuild earthquake-shattered Christchurch, even though one in three buildings in the CBD, and more than 10,000 houses, would have to be demolished, leaving New Zealand with a bill equal to 8 to 9 per cent of its GDP.

''It's an enormous cost, but it's also an opportunity,'' he said. ''We are no more earthquake-prone than San Francisco. Christchurch was subject to a one-in-2500-year quake, and most of the modern buildings held up very well.''

Mr Key said rebuilding would lift New Zealand's growth rate next year to 5 per cent.

He told Parliament that Australia and New Zealand were ''family'', and should collaborate even more closely. ''We have no better friend and closer ally than Australia. We are stronger for each other.''