Australia's plan to start an emissions trading system to tackle global warming is set to add to costs for the nation's liquefied natural gas producers, Citigroup Inc. said.

Carbon may initially be priced at about A$20 ($19.38) a metric ton when trading starts in 2010, potentially rising to as much as A$60 by 2020, Citigroup said in a July 22 report. The cost of carbon would then be as much as 6 percent of LNG revenues for the Woodside Petroleum Ltd.-operated North West Shelf venture and less for Woodside's Pluto project, it said.

Australia's Climate Change Minister Penny Wong last week outlined plans for a trading system that will cover about 1,000 businesses, each producing more than 25,000 tons a year of carbon dioxide. Under the plan, the LNG industry wouldn't qualify for free carbon permits because its emissions per dollar of revenue fall below a proposed threshold, Citigroup said.

``If LNG does not qualify for free emissions permits, we estimate that carbon costs would equate to 1 percent to 6 percent of revenues under different carbon price assumptions,'' Citigroup analyst Elaine Prior said in the report.

Perth-based Woodside and Chevron Corp. are among LNG producers in Australia to have voiced concern that the carbon trading plan will crimp growth in the industry.

Citigroup calculates that a carbon price of A$20 a ton would equate to a carbon cost per ton for LNG of A$6-A$7 for Woodside's Pluto project and of A$7-A$10 for the North West Shelf venture. At a carbon price of A$60 a ton, that cost rises to A$18-A$21 a ton of LNG for Pluto and A$21-A$29 for the North West Shelf, it said.

`Tough' Targets

Assuming an LNG price of A$500 a ton, the potential carbon cost under the trading system could be 1-2 percent of revenues at A$20 a ton, and 4-6 percent of revenues at A$60 a ton, Citigroup said.

Still, the carbon price will be driven by the level of Australia's emission reduction targets and the government is only likely to impose ``tough'' targets if there is an international commitment to ``significant action,'' Citigroup said. In that case, while Australian LNG ventures would experience higher carbon costs, they would also benefit from a likely increase in LNG demand and prices, it said.