Uncertainty over Australian and New Zealand plans to cut carbon emissions is hurting businesses in both countries, undermining stock market valuations and raising financing risks, big Australasian firms said on Tuesday.

Industry leaders from power generation to farming appeared at a carbon-trading conference in Melbourne to make urgent appeals to lawmakers on both sides of the Tasman Sea to agree on clear targets, timelines and rules for cutting greenhouse gases.

You don't shift significant billions of dollars of investment on the basis of what's likely to happen, said Barry Harris, director of milk supply for Fonterra, the world's biggest dairy exporter and a pillar of the New Zealand economy.

The financial consequences of reacting to the wrong signals are absolutely massive, he told the conference.

Australia and New Zealand have outlined separate plans to tackle carbon emissions by demanding that polluters buy emission permits on open markets, but both schemes have still to be finalized and are still vulnerable to strong lobbying and change.

The Australian government has already failed once to push its carbon-trading legislation through parliament while New Zealand effectively shelved its plans late last year after a change of government and is now awaiting the findings of a review.

There is speculation that a second defeat for the Australian legislation late this year could spark a snap election on the issue, throwing the debate wide open again.

International Power Australia, a unit of International Power and Australia's largest private-sector generator, said the uncertainty was a factor in talks with its lenders.

We are in the middle of negotiations with our lenders and the design of the carbon pollution reduction scheme is very important to that, International Power Australia chief Tony Concannon told Reuters at the conference.

Concannon did not elaborate on how the uncertainty was affecting his own firm's refinancing talks, but a recent industry survey showed that Australia's energy supply network needs almost A$100 billion ($84 billion) in refinancing and new spending over the next five years at it shifts to low-emission technologies.

New Zealand's Fletcher Building Ltd, the world's biggest maker of laminates and steel roof tiles, said it was impossible for stock markets to price in carbon costs, even though carbon trading was due to start in Australia in 2011.

The share market is now starting to value our company on 2011 and 2012 forecasts and most of them don't include carbon targets, Chief Executive Jonathan Ling told the conference.

We need to get going now or there will be serious dislocation in equity markets.

UNIFIED MARKET?

Australia's prime minister has said it makes sense to harmonize the Australian and New Zealand schemes, but there are still so many unknowns and design differences that both sides on Tuesday played down the prospects of a unified carbon market.

We are doing the work to explore options for harmonization, Australian Climate Minister Penny Wong told Reuters at the conference. But she added: As a matter of principle the schemes are not required to be identical for us to link.

New Zealand Climate Minister Nick Smith said the two governments were in pretty common space, but issues of price caps and international tradability of units would need to be resolved if the two schemes were to be brought closer.
Wellington is aiming to cut its carbon emissions between 10 and 20 percent by 2020 from 1990 levels [ID:nSP418333].

Australia's scheme aims to cut emissions by 5-25 percent over the next decade, with the higher target dependent on a matching agreement out of global climate talks in Copenhagen in December.

($1=1.196 Australian Dollar)

(Writing by Mark Bendeich; Editing by James Thornhill)

Australia Climate change