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No case for longer phase in of carbon pricing

A report released today does not provide the evidence base for any sector to be exempted from a price on carbon.

The future of New Zealand business rests of adapting to higher energy costs and having a price on carbon as the world moves to users pays for the environment.

The Castalia Report, released today by the Greenhouse Policy Coalition, is another poorly based argument for a "go slow" on emissions trading, when the world is speeding up and New Zealand can gain from quick action.

The New Zealand Business Council for Sustainable Development - whose 61 member companies' annual sales equate to 34% of gross domestic product - says the likely outcome of elections in Australia and the United States is that, post 2012, most of the world will be in a treaty putting a price on carbon. This will include most of the major economies.

The Business Council's Chief Executive, Peter Neilson, says: "If we don't start moving now, the cost of a rapid adjustment later will be far greater.

"If we want to protect the long term interests of our food and tourism industries we need to be seen as taking every reasonable opportunity to reduce carbon emissions.

"For some sectors of the New Zealand economy a carbon price does impact until 2013 and assistance doesn't phase out until 2025. It is hard to see how any serious effort to reduce greenhouse gas emissions could justify a longer timetable."

The Castalia Report does not provide the evidence to exempt any sector from a price on carbon. Critics of the proposed emissions trading system (ETS) need to provide real evidence that competitiveness at risk issues really exist.

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"Continued taxpayer subsidies to any sector to be exempted from a carbon price would need a much better evidence base than argued in the report," Mr Neilson says.

There would be significant benefits from replicating for New Zealand a McKinsey Report, undertaken for the European Commission, on opportunities for emission abatement.

"Opportunities like improved home insulation, moving to more fuel efficient vehicles and using nitrogen inhibitors on farms to reduce nitrous oxide emissions, are examples of ways we can cut emissions and costs at the same time. When there are ten dollar notes on the ground waiting to be picked up there doesn't seem to be good reason to go slow on emissions reduction," Mr Neilson says.

New Zealand agriculture to date has been a significant beneficiary of climate change:

- New Zealand production has been boosted by wetter weather in the west of the country combined with the pasture growth "forcing" benefit of higher CO2 levels in the air - At the same time lower rainfall in Australia, and water restrictions caused by the receding snowline in the Himalayas has cut production in China and India - Subsidies for grain production to produce biofuels in the USA have boosted grain prices, making grain-fed dairy production worldwide less competitive.

The emissions intensity of a sector is not proof that it will have a high cost of adjustment or faces competitiveness at risk issues.

"Castalia is suggesting the Government pick carbon losers in advance and subsidise them at the taxpayers' expense until 2025. In 1984 many commentators were predicting the demise of agriculture when subsidies were removed. It remains one of our most successful sectors. If the dairy sector can't afford to pay a price on carbon when the price is $6.40 per kilogram for milk solids, when will it be able to?

"User pays for the environment is necessary if we are to preserve our quality of life and our trade."


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