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Business Council not surprised over carbon tax

21 December 2005
Media Release

The Business Council is not surprised that the Government will not proceed with a carbon tax and suggests that a mix of economic incentives and “cap and trade” mechanisms make a better fit

Peter Neilson, Chief Executive of the Business Council for Sustainable Development said today that The Business Council is not surprised that the Government has decided not to proceed with a carbon tax.

“Having exempted agriculture which represents around 50% of emissions and the major emitters, who could apply for a Negotiated Greenhouse Gas Agreement, from the proposed tax regime, it effectively became a tax on SMEs and the broader public – neither of which were convinced by the Government’s arguments nor persuaded that the tax would be offset by reductions in other taxes. Given the tax was mooted when it was believed that New Zealand would be a net beneficiary of Kyoto, there was inadequate discussion about the best measure to introduce. Once the deficit was announced, the carbon tax fast became an issue.”

“But this does not mean we should do nothing. Increasingly New Zealanders are experiencing more extreme weather events and higher insurance premiums reflect those risks. New Zealand’s agricultural and electricity sectors are based around reliable rainfall and if those patterns change in an adverse way the consequences for this country could be massive.”

“We need to take steps now to address these issues but a carbon tax on those sectors emitting less greenhouse gases was not likely to be the best answer The Government needs to put in place a long term strategy which addresses our obligations to reduce our emissions and this needs eventually needs to include all sectors – industry, agriculture and forestry.”

In November, the Business Council submitted to the Government its recommendations on a more business appropriate approach to fulfil our climate change commitments. It recommended that New Zealand adopt a twin track policy on climate change:

- At an international level New Zealand should use multilateral negotiations to achieve long term flexible targets that are compatible with maintaining world economic growth and that widen the coverage of the Kyoto Protocol;
- At a domestic level New Zealand should accelerate domestic policies that achieve the lowest cost greenhouse gas emission reductions.

Mr Neilson said today that both these remain imperatives: “The New Zealand Government should continue to press for an international agreement post 2012 that will slow emission growth from major emitters that are not currently signatories to Annexe 1 of the Treaty namely the USA, Australia, China, India and Brazil. It needs to signal to all sectors back home that they will eventually face the full cost of carbon once a comprehensive international treaty is in place. And in the meantime we recommend that it considers a “cap and trade” regime for those sectors where the technology to reduce emissions is available and there is not significant competition from countries that are not reducing their emissions.”

Consistent with this approach and taking steps where possible to assist the take up of lower emission technologies, the Business Council last month recommended the introduction of economic incentives to move the New Zealand car fleet to lower emissions and more fuel efficient vehicles which would in return provide an early harvest for the Government.

The Business Council says that the Government should also invite proposals from businesses to reduce emissions where the cost of doing so will be less than the cost of buying credits from the international carbon market.

Mr Neilson added: “Having recently attended the Montreal Conference on Climate Change as part of the New Zealand delegation, it is clear that a number of countries are having difficulty in putting their climate change policy in place and in that respect New Zealand is no different. Increasingly the solution favoured is that of introducing “cap and trade” regimes which was part of our original proposal to Government in May.”

“The Minister’s acknowledgement of the need to encourage greater fuel and energy efficiency and renewable energy is welcome. We believe however that introducing some economic incentives will be a necessary part of changing behaviour but whilst intervention is necessary in a limited number of circumstances, where possible New Zealand should use market mechanisms such as cap and trade to reduce greenhouse gas emissions. This is a preferable and sustainable approach compared to regulation which is subject to political discretion. We look forward to working with the Government ahead of its March deadline help provide New Zealand with a consistent and agreed policy setting that encourages a less atmospheric carbon economy.”

A cap and trade regime already exists across Europe and similar initiatives are in development across Australia and in parts of the USA. For further details on these and the Business Council’s recommendations on climate change policy refer to http://www.nzbcsd.org.nz/story.asp?id=553


ENDS

The Business Council represents 50 leading businesses in New Zealand who seek to promote economic growth that benefits all New Zealanders while maintaining our quality of life, including both the natural and social environment. It’s Statement of Principles and recommendations on the Domestic Climate Change Policy were both developed through the involvement of the Business Council’s membership.
(Refer http://www.nzbcsd.org.nz/story.asp?id=553)

The Business Council is supporting the 2nd New Zealand/ Australia Climate Change Conference to be held in Adelaide on 20-21 February, 2006

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