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Treasury Backs Kyoto Forestry Association Position

MEDIA STATEMENT

Monday 21 November 2005

For Immediate Release

Treasury Backs Kyoto Forestry Association Position

The Treasury has slammed the current tax-and-subsidise approach to implementing the Kyoto Protocol and has urged the new Government to tackle climate change with Kyoto market mechanisms – an approach broadly in line with that advocated by the Kyoto Forestry Association (KFA) to get tree planting underway again.

KFA Spokesman Roger Dickie said today that the association was delighted with the sensible and pragmatic position taken by Treasury and believed there was now a good chance that positive policy change would be made by Forestry Minister Jim Anderton and Climate Change Minister David Parker.

“Both Mr Anderton and Mr Parker want New Zealand to implement Kyoto, meet our targets and see trees being planted around New Zealand again,” Mr Dickie said. “Both will be dismayed that tree planting has plummeted to zero in recent years with no prospect of a recovery in sight. Both will also be dismayed that New Zealand’s carbon emissions have leapt 22 percent in the last 15 years, placing an even greater Kyoto financial burden on New Zealand unless we can reduce the cost by planting more trees. The Treasury advice offers both Ministers and the industry a way forward and we urge everyone with an interest in climate change and Kyoto to take it very seriously.”

In Sustaining Growth: Briefing to the Incoming Government (pp 13-15), the Treasury said that the Government’s current Kyoto implementation policies “make only a limited contribution to meeting our Kyoto obligations but at a relatively high cost”. It said that the Government’s planned carbon tax “will induce almost no change in transport use” and “is distortionary because it excludes methane and nitrous oxide”.

The Treasury also criticised the Government’s Negotiated Greenhouse Agreement (NGA) approach, under which big polluting business can avoid the planned carbon tax. It said “it is not clear that NGAs will deliver material emissions reductions” and that they “have high transaction costs and are proving to be difficult to achieve in practice”.

Consequently, Treasury says “it may not be appropriate, therefore, to continue to pursue current policies”.

Instead of the tax-and-subsidise approach favoured till now, the Treasury urges more market-based approaches to implementing Kyoto. Specifically, it says there should be:

- Increased reliance on price-based measures – either through emissions trading or a reconfigured carbon tax, applying to as many greenhouse emitters as possible, and with no or few exemptions. The effect of such price-based measures will be to bring about structural change in the economy towards activities with lower carbon emissions. In the medium term, it is likely that it will be most efficient for New Zealand to adopt some form of emissions trading.

- Devolution of a very large part of New Zealand’s climate change obligations to firms and individuals, and allowing markets to determine the most efficient way for New Zealand to meet its emission reduction goals. This could include the devolution of forest sink credits, and all international obligations for deforestation to the forestry sector.

- A strategy for appropriate use of international emissions trading and the other Kyoto flexible mechanisms. Using emissions trading early would allow New Zealand to buy the time to plan for long-term mitigation strategies.

“This is almost exactly what KFA has been urging,” Mr Dickie said. “The proposed approach would remove the financial risk of Kyoto from taxpayers, while punishing those who pollute and rewarding those who reduce pollution or plant trees. That is exactly what the proponents of Kyoto wanted and we are confident the advice will ultimately be accepted by Mr Anderton and Mr Parker.”

ENDS

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