What's the impact of the emission trading scheme?

What the impact of the emission trading scheme should be.

The introduction of a mechanism such as the emissions trading scheme (ETS) gives businesses an excuse to increase their prices more than necessary to maintain margins, with the very convenient explanation “it’s the Government’s fault”.

Today sees the commencement of the ETS for fossil fuels, including those used for electricity generation. On the radio this morning we have heard various spokespeople saying “we don’t know what it will cost us yet”. The facts are straight forward. For renewable power generators there is no extra cost associated with generation. For the fossil fuel burners, there is and they should know the emissions profiles of their fuels (ie coal, oil or gas).

The ValueAdd Company has developed a series of online calculators that can be used to see what the actual cost increases should be. Some of the answers may come as a pleasant surprise to many people. (See www.carboncalcs.com/nz/ets.htm). However the cost landscape is likely to change significantly after 2012, if there is a successor to the Kyoto Protocol.

Today, the major cost increases for households are going to be fuel and electricity. A large car doing 20,000 km per year will cost an extra $87 (including the new 15% GST) while a 1c per Kwhr for electricity will cost a family using 10,000 Kwhrs per annum $115.00.

Freight companies have been suggesting that their costs will go up significantly but our calculations suggest the extra cost will be around $58 per thousand tonnes of freight or 23c per km for a 12 tonnes payload.

All assumptions are variable if users wish to change them.

ENDS

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