Proposed ETS deal disappointing, costly, continues uncertainty

The proposed changes to the emissions trading scheme are disappointing.

The New Zealand Business Council for Sustainable Development says the arrangements which will go to a select committee with Maori Party backing mean emissions are likely to increase and cost taxpayers a lot more than under the current law.

At the same time, the prospect of a broadly based multi-party-party deal, including both National and Labour, appears to have disappeared. It means the ETS will probably remain on the political agenda for each future election.

The proposed amendments to the scheme have only been supported by the Maori Party to select committee stage so the actual outcome remains uncertain.

The process means continuing policy uncertainty and investment blight for the next three months, and possibly longer, the Business Council’s Chief Executive, Peter Neilson, says.
Capping the price on emissions and delaying the phase out of assistance for major emitters could cost the taxpayers billions of dollars, at the expected price of carbon following a new climate change deal at Copenhagen. It also reduces New Zealand’s prospects of meeting its emissions commitments because major emitters have less incentive to cut emissions. In the meantime, the taxpayer picks up the larger share of the bill.

The Business Council, whose 63 member companies’ annual sales of $59 billion equate to about 43% of gross domestic product in dollar terms, has argued for pricing emissions since 2003.

Businesses outside the heavy emitter group have indicated a desire for policy stability based on cross party support for a sensible ETS. This looks more distant than ever after today’s announcement.

One of the effects of the plan to increase assistance to large emitters was to reduce the amount of revenue available to the Crown from selling emissions units to firms which produced excess emissions.

This means less money is available to recycle into household assistance and other measures to invest in low-emission economic development.

“We would like to see the Treasury figures on the actual cost to taxpayers and future budgets of the increased assistance now available to large emitters. We expect this will run into billions of dollars. We also look forward to the detail on how Maori and non-Maori owned forests might be treated under a revised scheme,” Mr Neilson says.

Overall, this proposed policy appears to greatly reduce incentives to heavy emitters to reduce emissions, increase costs of subsidies to them, slows down the timetable for reducing emissions and allows them to be increased in the meantime, by allowing production to rise (at a set carbon content per unit) without any clear cap on this. The more production rises, the more the taxpayer must step in to pay for the additional emissions.”

ENDS

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