Media release
16 November 2009

ETS amendments bill should not pass, says Environment Commissioner

“It is extremely disappointing that the Committee has not reached a consensus to improve the bill.”

“As it stands, the amendments to the bill virtually guarantee the ETS will not achieve its stated goal of reducing our greenhouse gas emissions, so I cannot support the bill being passed,“ Dr Wright, Parliamentary Commissioner for the Environment said today, referring to the Finance and Expenditure Committee report back on the ETS.

“Putting a price on the carbon you emit, which the ETS does, nudges us towards becoming a low carbon economy. Unfortunately, the amendments almost remove the price signal altogether. And it’s the taxpayer who will bear the cost of Parliament’s failure to address fundamental problems with the bill.”

“My major concern with the proposed amendments is the changes to allocation - or subsidies - after 2012. The allocation of free carbon credits to industry is extremely generous and removes the carbon price signal where New Zealand needs one the most.”

The Commissioner’s full submission to the Finance and Expenditure Committee and list of recommendations can be downloaded at www.pce.parliament.nz

Background - Summary of the Commissioner’s recommendations

Allocation of free carbon credits should only be granted if there is a genuine reason for it, and these reasons should be stated publicly for each particular activity, industry or sector that receives allocation.

New Zealand should not align itself with Australia’s proposed scheme.

A cap on the number of carbon credits freely allocated is vital to create the right incentives, and to reduce fiscal risk to the Government and policy uncertainty for business.

The phase-out of free carbon credits is far too slow. The phase-out rate of allocation should specify the latest year that allocation will be given.

Allocation to the agriculture sector should be reviewed, because current plans are inadequate for many reasons.

Transparency, which is critical for building public trust in the scheme needs to be increased, particularly regarding allocation There are two clear ways to do this:
• The number of free credits that are allocated, as well as the rationale for it, should be reported each year, by activity, industry or sector, by the Registry for emissions units.
• Greater scrutiny to past and future allocation should be applied during the review process.

Allocation provided to protect competitiveness should be re-assessed more regularly than 5 yearly, and a mechanism to fast-track allocation changes should be created.

The provisions that are meant to reduce the negative impacts of the ETS on the tree weed problem should be strengthened.

ENDS

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