Emission scheme madness

The Government has been taking a slamming over its ambitious ‘planet saving’ emissions trading scheme as the public becomes more aware of its cost to the economy.  
BY ALAN TITCHALL

As the Climate Change (Emissions Trading and Renewable Preference) Bill was attacked during its select committee hearing, the Government started backing down on its full implementation, extending free allocation of carbon units for a further five years beyond 2013. It has also delayed the entry of the liquid transport fuel sector until 2011, to avoid inflationary fuel hikes.

Fierce opposition to the emission scheme came from trade-exposed business and the agricultural sector; concerned they will face unfair competition from products coming from countries where there is no price on greenhouse gas. There’s also the threat of ‘leakage’ – industries pulling out of New Zealand to re-setup in markets with no or more lenient carbon emission regimes.

The biggest blow to the Government’s ambitions to become the ‘first country in the world to be carbon neutral’ came from the conservative New Zealand Institute of Economic Research. In a report issued last month, the institute says the cost of the proposed scheme to the economy will be eight times more than the obvious option of simply paying for carbon credits (under out Kyoto Protocol obligations) from overseas projects and schemes that have already succeeded in reducing global emissions. Paying directly for emission reductions, will also make a greater contribution to a reduction in global emissions than could be achieved through the proposed ETS.

“As long as there is no comprehensive global commitment, paying directly for emissions reductions out of general taxation is cheaper and more effective,” the NZIER report says.

Paying for our greenness

A number of other countries that signed the Kyoto agreement and are committed to cutting their greenhouse emissions, such as the UK, can simply achieve their obligations by converting from coal fired power generation to gas. Electricity generation in New Zealand is already 70 percent from renewable sources, offering little scope for gains in efficiency and putting pressure on other sectors. This has meant including agriculture in the ETS scheme, despite very limited opportunities for this sector to control its emissions.

The Government’s emissions trading scheme also includes all greenhouse gases by 2013 which, in association with its ban on new thermal generation, are radical and ambitious proposals that no other country has currently planned. As proposed, the ETS will not only be economically crippling for the economy, say critics, but will be way out of kilter with our trading partners – including Australia, which has yet to announce a scheme, and others, such as China, that are ‘exempt’ as ‘developing countries’ from reducing their greenhouse emissions under the Kyoto Protocol.

The Greenhouse Policy Coalition has long been critical about the lack of good economic analysis behind the introduction of the scheme and backs the findings of the NZIER. It is very concerned that the scheme does not cap carbon.

“We believe there should be price safety valve in the scheme, so that if the price of carbon becomes too high or volatile in this emerging market, it can be capped,” says the Coalition chief, Catherine Beard.

 “In our view we should be trying to avoid a situation where New Zealand has to spend the next 20 years travelling to international meetings begging other countries to cap their emissions growth – from all sectors and all gases; in the same way we have been unsuccessfully pleading for a reduction in agricultural tariffs and subsidies for the last 20 years,”

At the very least we need to slow down the introduction of the ET scheme in New Zealand until we see the detail of what Australia is proposing to do (July), she adds. 

The full NZIER report is available at www.nzier.org.nz and the ‘bigger’ picture on the whole climate change saga can be found at www.climatedebate.com.