May 4 (Bloomberg) -- Australia delayed plans to trade carbon-dioxide emissions by a year to 2011, blaming the economy, while remaining open to reducing greenhouse gases under an international agreement.

The decision was made amid signs the proposal will detract from growth as the nation’s economy heads into its first recession for 17 years.

“These are very difficult circumstances for the global economy,” Prime Minister Kevin Rudd told reporters in Canberra. “The government will introduce legislation through the Senate; our objective is to provide business certainty for the future as this effects the wider economy long term.”

The delay may be a reprieve for liquefied natural-gas producers and steelmakers who say the program will hurt growth and cost jobs. Advocates of trading said opportunities to make money in the worldwide recession will be postponed by avoiding needed reductions to gases blamed for global warming.

“I don’t think it is good idea to delay,” said Michael Molitor, Chief Executive Officer of CarbonShift Ltd., a Sydney- based carbon-management strategy group. “This is a giant wealth-creating opportunity. This is exactly the kind of opportunity you want in a downturn.”

The decision to delay was “disappointing,” said Robert Matthews, chief executive officer of the Australian unit of Ausra Inc., the California-based developer of solar thermal- power projects. “The concern is that if it’s being delayed by a year at this stage, it means there’s a possibility it will be delayed even further and that would be disastrous.”

Effects on Business

Liquefied natural gas producers continue to be disadvantaged by the proposed system, which will harm the industry’s growth and cost jobs, Don Voelte, chief executive of Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, said in an interview today. Woodside shares rose 5.4 percent in Sydney, the biggest gain in four months.

Australia, the world’s biggest coal and iron ore exporter, ranked 15th in the world by carbon emissions from burning fossil fuels in 2006, according to U.S. Department of Energy figures on Bloomberg. The nation released 417 million tons the gas in that year, just behind France in a list lead by China and the U.S.

The government wants to give incentives to companies to cut emissions by making it more expensive for big polluters and rewarding those with lower emissions. Mining makes up some 9 percent of the Australian economy and employs 342,000 people, the Minerals Council of Australia said on its Web site.

Cutting Emissions

Australia plans to cut its emissions from 2000 levels by between 5 percent and 15 percent in 2020. Today Rudd said the nation would increase that target to 25 percent “if the world agrees to an ambitious global deal.” That would require stabilizing carbon dioxide at 450 molecules for every million molecules of atmosphere, he said.

Several nations including the U.S. are studying carbon trading as a way to give companies a financial incentive to trim emissions, letting them sell unused emission permits.

Australia’s government has set an A$10 ($7.36) a metric ton carbon price for a year until July 2012, from when the market will set the cost.

The European Union, operator of the world’s largest trading system, aims to reduce greenhouse gases 20 percent from 1990 levels by 2020 with help from a so-called cap-and-trade system that’s also being considered by the administration of U.S. President Barack Obama.

25% Gas Reduction

“Businesses face substantial costs in implementing the CPRS and their competitiveness remains at risk until there is a global price on carbon,” said Business Council of Australia President Greig Gailey and chief executive officer of zinc producer Zinifex Ltd. until 2007. The 25 percent target “will be difficult for Australia to achieve, both physically and economically,” he said.

Heavy polluters will be given an extra 5 percent of free permits and moderately intensive industries will get an extra 10 percent to help them adjust in the first year of the system. The government will also provide A$50 million to establish a climate trust in laws to be introduced to parliament as soon as next week, Rudd added about a so-called “recession buffer.”

“There are whole areas of the economy that are not included at all,” said Julie Toth, senior economist at Australia and New Zealand Banking Group Ltd. in Melbourne. “The businesses that are affected, the additional assistance, mainly in the form of free permits, is going to dilute the scheme further, in terms of its effectiveness.”

Contracting Economy

The Reserve Bank of Australia has cut its benchmark interest rate 4.25 percent since September and the government has announced some A$90 billion in spending to boost an economy that contracted in the fourth quarter for the first time in eight years. The unemployment rate will rise to 5.9 percent last month, the highest in almost six years, according to a Bloomberg News survey.

Companies including BHP Billiton and Rio Tinto Group are firing workers as a global recession erodes demand for mining exports.

About 180 nations will take part in negotiations for an accord to replace the Kyoto Protocol, which expires in 2012. The final round of talks will take place in Copenhagen in December.

The emissions-trading plan has been criticized by several companies for making them pay for carbon pollution while competitors based overseas don’t face similar costs.

The proposed carbon trading system could act as a A$2.5 billion “de-stimulus package,” according to Graham Kraehe, chairman of BlueScope Steel Ltd., Australia’s largest steelmaker.

BlueScope shares rose 8.9 percent to A$2.57 in Sydney, the most since April 3.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

Last Updated: May 4, 2009 05:56 EDT