Banning coal-fired electricity generation to reduce greenhouse gas emissions would probably produce a significant increase in electricity prices, according to a report released by Minister of Energy Pete Hodgson today.

Modelling by the Ministry of Economic Development suggests that by 2020 a ban on all coal-fired generation would have reduced New Zealand's carbon dioxide emissions by 13 percent. But while electricity prices in 2020 could be similar to today's (in real terms) on current policy settings, a ban on coal-fired generation could raise raise them by 26 percent.

Other scenarios, such as a ban only on new coal-fired generation and a carbon pricing mechanism – tradable emissions permits or a carbon tax – are also modelled. The analysis suggests carbon pricing would spread costs more evenly across the economy, reducing the impact on electricity prices but producing a
significant increase in the price of coal.

Mr Hodgson said the report was another indicator of the size of the challenge involved in reducing greenhouse gas emissions. "There are no easy or cheap answers to global warming," he said. "There is no free lunch."

The Government is in the early stages of exploring policy options to reduce greenhouse gas emissions. New Zealand is obliged under the Kyoto Protocol, which it is in the process of ratifying, to stabilise its emissions at 1990 levels by 2008 to 2012. The Ministry's latest forecasts suggest that on current policy settings emissions would be almost 40 percent higher than 1990 levels by 2010.

"We need to consider very carefully how we can best meet our international obligations on carbon dioxide emissions, especially since these obligations are likely to tighten over time," Mr Hodgson said. "This report is a useful step in building the information base on which we can make decisions."

Mr Hodgson said the Government was proceeding in the meantime to develop measures to improve New Zealand's energy efficiency. It was also looking at the scope for increased use of public transport and renewable energy technologies.
The full report is available on the Ministry's website: http://www.moc.govt.nz

Contact: Graeme Speden (press secretary) 04 471 9707 or 025 270 9055

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