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Government dropping carbon tax labelled pathetic

21 December 2005
Media Statement
For immediate use

Government dropping carbon tax labelled pathetic

The Environmental Defence Society (EDS) has called the government's announcement that it is dropping the carbon tax "pathetic."

EDS Chairman Gary Taylor says in his opinion Ministers and the Climate Change Office have been captured by advocates for energy intensive business such as the Greenhouse Policy Coalition (GPC) which have a vested interest in getting the tax dropped.

"There has been no public consultation around this fundamental change although we understand that the GPC has been working hard behind the scenes to get the tax dropped. It is a u-turn that has no moral authority or legitimacy because it was subject to a secret process that deliberately excluded the public.

"This is in stark contrast to the highly consultative process during 2002 that led to the tax being proposed as a key plank in our domestic policy response to the greenhouse challenge.

"The tax was an essential part of New Zealand's domestic response to its obligations under the Kyoto Protocol. We simply have to put a price on carbon. Without a carbon charge investors will have no pricing signals when it comes to investment in carbon-based projects. The only alternative to a carbon charge is full-blown emissions trading but that's off the agenda as well," said Mr Taylor.

"New Zealand's emissions are over 22% above the level they were in 1990. We have a commitment under the United Nations Convention to get back to that level. But now the policy cupboard is bare and the government has simply failed on climate change.

"Announcing this just before Christmas is an attempt to hide from the world. New Zealand has been a leader on climate change and now its moral authority has been undermined.

"I think the Climate Change Office and Treasury should have another go designing the tax. It was always intended to be fiscally neutral. That meant that there should have been a commensurate reduction in company and personal tax rates so that overall burden of taxation did not increase. Instead there were complicated proposals around depreciation rates and other recycling concepts none of which clearly showed fiscal neutrality.

"If the design flaws were fixed and it was clearly a replacement tax rather than an additional one, it could still secure support in parliament. It could even have marshalled support from the business sector and the wider public. It makes clear sense to tax pollution rather than income.

"The implications of this change in direction are considerable.

"For example, the RMA was amended to preclude carbon emissions from being considered because it was argued that the carbon tax would set the correct price signals at a national level. In the absence of the tax the government must change the Resource Management Act back to its original provisions so that the effect of carbon emissions can be considered in resource consenting processes.

"With respect to the Huntly power station, dropping the tax means that under an agreement between Genesis Energy and EDS, emissions there are now capped which means the old plant cannot run at full throttle. This will have adverse implications for both power prices and availability. No consideration appears to have been given to this matter.

"Climate Change is the biggest environmental problem facing the planet. Dropping the tax raises serious questions about New Zealand's commitment to playing its part in the global effort to reduce emissions.

"The measures proposed to replace the tax are soft options merely there for investigation and will do little to help us onto a downward trajectory in our greenhouse gas emissions.

"This is a very disappointing day for the environment and seriously undermines confidence in the government's environmental commitment.

"It is also a bad day for open government because of the highly secret nature of the review" Mr Taylor concluded.


Gary Taylor is the Chairman of the Environmental Defence Society ( www.eds.org.nz) and convenor of the 2nd Australia-New Zealand Climate Change and Business Conference ( www.climateandbusiness.com) to be held in Adelaide, South Australia 20-21 February 2006

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