Climate Change Minister Nick Smith says changes to the Government's emissions trading scheme (ETS) may be necessary to prevent an exodus of industry across the Tasman.
Dr Smith told a parliamentary select committee reviewing the scheme, and 266 public submissions made on it, that the ETS needs to be "harmonised" with Australia's.
But he won't know for a couple of weeks precisely what changes are likely to be needed, after he has met his Australian counterpart, Penny Wong.
Australia is this week expected to release a draft of its proposed legislation and has committed to reducing carbon emissions by between 5 and 15 percent of 2000 levels by 2020.
Dr Smith said NZ's target of a 50 percent reduction on 1990 levels by 2050 was comparable with the Australian target of a 60 percent reduction on 2000 levels, by the same date.
But Dr Smith said there were key issues around the allocation of carbon credits on each side of the Tasman, and that the abatement of credits in Australia was around 1.3 percent a year, compared a more aggressive level of 8 percent in New Zealand.
The difference could potentially provide incentives for NZ industries to move across the Tasman.
Prime Minister John Key has previously warned that trans-Tasman economic integration and co-operation could be undermined if the differences between the approaches taken by the two nations are too big.
Dr Smith said today there had been a shift, since the change of government, from New Zealand aspiring to be a world leader to now wanting to do its "fair share".
He is having new studies done in an attempt to reconcile differing analysis of the economic implications of the proposed carbon trading.
And he said that with key trading partners around the world also moving to trading schemes, it was unlikely to make sense for New Zealand to go back to the concept of a carbon tax. He preferred an ETS because its heaviest impact on the economy would be when the economy was flourishing.
The parliamentary inquiry was set up in response to the new Government's decision to replace the ETS set up by Labour, which National believed was flawed and too damaging to the economy.
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