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Australia’s Westpac bank has begun buying carbon offsets from New Zealand forest owners with the aim of selling them to big polluting firms as part of the country’s emissions trading scheme, according to a Reuters report.

The bank has approached about 600 foresters to pool carbon offsets issued to them to sell in large lots to firms such as refiners and cement makers that will have to meet carbon costs under the scheme.

New Zealand’s emissions trading scheme (ETS), only the second national scheme outside Europe, ramps up from July 1 with the entry of power generators, transport and steel and cement makers, which emit about half of the nation’s greenhouse gas pollution.

“We’ve done some deals,” Lloyd Cartwright, head of New Zealand financial markets for Westpac Institutional Bank was quoted as saying.

He declined to give specific details, but added: “You can see the deals in the market and nothing is going through near NZ$25 ($18.2),” Cartwright told the wire agency by telephone, referring to the scheme’s initial capped price.

The report points to price and regulatory risks of entering the fledging ETS, particularly since the scheme faces a mandatory government review in 2011.

Neighboring Australia last week further delayed its ETS and a climate bill in the United States does not yet have enough backing to pass the Senate.

Some New Zealand firms have called for the government to further water down or delay the scheme, something the government has refused to do, according to the report.

The ETS centers on trading New Zealand Units (NZUs), which represent a tonne of carbon dioxide equivalent. Polluting firms will have to surrender these to the government annually, while foresters can receive them for free as reward for growing trees, which soak up planet-warming carbon dioxide as they grow.

According to the report, under the scheme, between July 1, 2010 and Jan 1, 2013, emitters have the option of paying a fixed price of NZ$25 ($17.6) per tonne of carbon, or going to market and sourcing cheaper NZUs from foresters.

Polluters also will only have to surrender one unit for every two units of emissions.

Critics have said the ETS is too weak and will only result in muted trade in the initial years because of a large amount of free NZUs that will be allocated to energy-intensive firms that export their goods. This will cut demand for NZUs.

Brokers and other market players have reported only a small number of deals to date and don’t expect the market to take off in a major way, at least in the first year.

Some deals have gone through covering the conversion of NZUs into sovereign Assigned Amount Units, or AAUs, under the Kyoto Protocol with buyers in Japan and Europe in the range of 6 to 10 euros ($7.9 to $13.1) a tonne.

Cartwright was quoted as saying Westpac was initially focused on catering to New Zealand polluters but was also looking at the AAU trade.

He said the bank was trying to distinguish itself from brokers by taking on price risk.

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