Seafood industry fed up with Government’s plans

Seafood industry fed up with Government’s plans

16 June 2008

The Government is intent on the destruction of the seafood industry said New Zealand Seafood Industry Council chief executive Owen Symmans in response to the Government’s emissions trading Bill today. “This at a time when our country desperately needs the $1.3 billion plus export income the seafood industry provides,” he added.

The Bill is inequitable as it excludes the industry from allocations offered to other export exposed sectors.

“The world is facing a food supply crisis – and the Government is making decisions that will drive our food producers out of business. We are denied the allocation of free units provided to all other export sectors with no explanation – reasonable or otherwise – for this exclusion.

“Our opposition to the Bill is due to the unfair treatment of the industry in respect of Government assistance. While the Government’s decision to defer the introduction of the ETS for liquid fossil fuels for two years will help us adjust to the new environment, it does not remove the gross injustice of denying the industry the support offered to everyone else,” he said.

New Zealand’s fishing industry exports 92% of its output, earning $1.3 billion per annum. It is an energy intensive sector with fuel being up to around 40% of the operating costs of vessels. The Bill provides for an allocation of units to sectors such as dairy, meat, cement, steel, forestry and aluminium, but excludes the fishing industry without reasonable justification.

“Frankly, we’re fed up. The Government seems hell-bent on destroying New Zealand’s fifth largest exporter. Zero emissions will be no substitute for unemployment and a third-world economy,” Mr Symmans said.

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Background

- Finance and Expenditure Select Committee reported back the Climate Change (Emissions Trading and Renewable Preferences) Bill today.
- In respect of fishing sector, considered arguments that a special case for either exemption or access to free units was appropriate given the trade exposed nature of New Zealand fishing and competing firms do not face comparable emissions obligations.

- Rather than provide assistance, Committee on a majority view preferred to not grant assistance but to ensure that any foreign fishing vessel operating in New Zealand waters was required to pay for its emissions.

- Under the Bill foreign vessels used to catch fish for New Zealand companies will have to pay the emission charges on fuel used in New Zealand waters. Under the previous draft, they did not have to pay for those emissions.
- The Bill, if passed with its current provisions, will cost the industry in the order of $15-$18 million per annum (at current carbon price of $40 per tonne) in a sector that has an after tax annual profit of less than $50 million.

Facts

- New Zealand fishing sector is highly trade exposed with over 90% of product exported from New Zealand, earning over $1.3 billion in exports.
- Parts of the sector are very energy intensive. The sector each year consumes around 160 million litres of liquid fossil fuel (primarily diesel) and 55 gigawatt hours of electricity and has an average an energy intensity factor of 24.45 gigajoules per $1000 of added value. Diesel is used primarily in the inshore fleet while the deepwater fleets operate on fuel oil. Electricity is used in the processing of products. Energy costs make up around 40% on average of the operating costs of vessels.

Legislation
 Provides for distributors of liquid fossil fuels to pay for emissions obligations of users and collect the additional cost through increased prices from 1 January 2011.
 Provides for New Zealand companies who compete with foreign competitors not meeting the cost of their emissions to receive assistance through an allocation of free units EXCEPT where the emissions arise from the use of liquid fossil fuels
 Rather than rely on the correct application of the assistance principles contained in the Bill, the Committee/Government has made a political decision to exclude liquid fossil fuels from any consideration of free assistance. With the coastal shipping sector receiving some assistance from international shippers having to pay emission charges whilst operating in New Zealand waters, the fishing sector is singled out to receive no assistance despite the impact on the sector.

Industry comment:
Managing director of Motueka based fishing company Talley’s, Peter Talley told the select committee that expenditure on Fuel accounts for 20% - 40% of the revenue received from catch revenue.

“That level has risen dramatically in recent years. Five years ago diesel cost 42.6 cents per litre, today $1.28 per litre, a 23% annual cost increase.

“A small inshore vessel supporting two families has seen the fuel cost increase by $190,000 over the last five years. Their business has had to absorb that cost increase. For a deepwater factory vessel, the fuel bill has increased by over $3.6 million. Fishing companies had to absorb that increase,” Mr Talley said.

ENDS

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