Plea to join global carbon trading scheme

A GROUP of powerful institutional investors want to link Australia's emissions scheme to a global trading scheme to create a more liquid market.

Plea to join global carbon trading scheme

A GROUP of powerful institutional investors has urged Prime Minister Kevin Rudd to lobby for a global carbon market when he attends the UN Bali talks next week.

Linking Australia's emissions scheme to a global market could see a higher carbon price than some energy intensive sectors would like when trading begins in 2010.

But the Investor Group on Climate Change (IGCC) yesterday called for global trading links in order "to create deep and liquid markets''.

The 22 IGCC members manage $375 billion in assets and they include AMP Capital, Goldman Sachs JBWere, Colonial First State and Catholic Super Fund.

If trading is linked, the price of carbon in Australia would eventually track with overseas carbon prices, GS JBWere's Andrew Gray said.

"In the short term, elements of the scheme would be overridden by regulation, but within five years, we could see similar carbon prices here to those in the EU,'' Mr Gray told BusinessDaily.

Catholic Super executive Tim Hughes agreed that as more trading schemes were introduced that "integration on the edges'' would lead to price uniformity.

"It is not going to be quite like the adoption of the euro where you have semi-fixed exchange rates in several countries . . . but there does need to be sufficient interface between schemes.

"The carbon lobby has an agenda to delay these things and try to minimise the likely impact on themselves, but it won't work,'' Mr Hughes said.

Both fund managers said that a carbon price needed to be set at a high enough level to drive measures to cut emissions.

If trading begins at too low a level, it would be insufficient incentive for polluting industries to change their practices.

The IGCC has delivered a 10-point wishlist to Mr Rudd on what it believes a renegotiated UN climate change treaty should look like when the Kyoto Protocol expires in 2012.

"As long-term universal investors, investing across industry sectors, asset classes and country boundaries, a broad based global framework is critical,'' IGCC executive director Joanne Saleeba said.

Heads of state and delegates from the 190 nations at the Bali climate change talks are expected to begin considering a framework for the new pact next week.
The global financial community has urged the negotiaters to conclude revised carbon emissions targets by December 2009 so that it can continue investing with certainty.