4 May 2005

Climate Change Tax Welcomed

The Environmental Defence Society (EDS) has welcomed the Government's announcement regarding the proposed Carbon Tax.

"Knowing the start date and the rate for the new tax removes a significant uncertainty for business and consumers," said Garry Law, Climate Change Director for EDS.

"Investments in new projects will now be able to be made knowing the future price of carbon.

"EDS welcomes the commitment to make the tax fiscally neutral. This means that government is effectively replacing taxes on things we want more of - like income - with taxes on things we want less of - like pollution. In this case the details of tax reductions elsewhere are yet to be announced. But the idea of taxing "bads" is a positive move.

"A pollution tax like this one also gives business more opportunities to reduce their overall tax burden. If they become more efficient in their use of energy or use renewable energy sources then their tax burden will reduce. This makes good sense and should be welcomed by most businesses.

The Society also welcomed the commitment to recycle the tax and redirect some of it to stimulate energy saving projects.

"New Zealand's action on reducing carbon emissions has been relatively modest compared to many other countries. This is an opportunity to catch up.

"The announcement that other greenhouse gases from industrial processes would also be within the scope of the tax is a new and welcome move.

The Society noted that the current price of European Community pre-Kyoto carbon credits was about NZ$28.00 a tonne of CO2, in contrast to the New Zealand's proposed tax rate of $15.00 per tonne.

"The Government appears to have taken a conservative view of what price will emerge in the Kyoto market. It is likely that the international price of carbon will be higher than $15 per tonne. We note that government has reserved the right to raise the price if required to maintain parity.

"Finally, EDS sees the carbon tax as an interim measure. As soon as a mature Kyoto market emerges it would be better to move towards full emissions trading and remove the tax at that point. We accept however that moving directly to emissions trading in 2007 would be premature," Mr Law concluded.

ENDS