Australia softens stand on carbon trading

CANBERRA, Feb 5 (Reuters) Australia's conservative government softened its long-held opposition to carbon trading today, prompting business to warn the move could cost jobs and shift emissions offshore to China or Indonesia.

Prime Minister John Howard has regularly ruled out imposing a carbon tax or setting up a national system of carbon trading to combat greenhouse gas emissions, saying Australia would only have carbon trading as part of a global system.

But with global warming and the environment emerging as key issues for national elections due later this year, Howard said putting a price on carbon would have to be part of a long-term plan to combat global warming.

''I think we have to examine carbon pricing,'' Howard told reporters today, adding a straight carbon tax would damage Australia's economy and mineral export industries.

Australia's manufacturing industry, however, said the government had to be careful to make sure any carbon pricing or trading system helped curb global emissions and did not simply transfer emissions offshore.

Carbon trading involves putting limits on emissions and allowing companies which cut pollution to sell their left-over emissions to other companies so they can meet their targets, ensuring a financial incentive to cut carbon emissions.

PROBLEM SOLVING ''If we reduce emissions in Australia and transfer those too Indonesia or Malaysia or China, that's not going to solve the problem,'' Australian Industry Group Chief Executive Heather Ridout told Australian Broadcasting Corp radio.

Australia's mining industry said an international carbon trading system was inevitable.

''There will be a carbon price in a carbon-constrained world,'' Australian Minerals Council chief executive Mitch Hooke told Reuters on Monday, adding the industry preferred carbon trading over carbon taxes as a way of encouraging lower emissions.

Howard said a joint business-government taskforce, which is examining emissions trading, would report later this week and would outline how Australia could have a workable emissions trading system.

But Australia would only act if other nations signalled their intentions to consider carbon trading, he said.

Australia, one of the world's biggest coal exporters and a close US ally, has refused to ratify the Kyoto protocol on climate change and has previously said carbon taxes and carbon trading would adversely affect the resources industry.

Howard's comments came as the state government in Western Australia, which is the centre of Australia's current resources boom, said a national system of carbon trading in Australia was inevitable.

Reuters AKJ DS1230