Business Roundtable Wants Carbon Tax
November 26th, 2008
The Business Roundtable has welcomed the Govt’s indication it will consider a carbon tax rather than the ETS. Executive Director Roger Kerr says its belief a carbon tax might be superior to an ETS is not a reversal of its earlier views. Kerr notes the Business Roundtable’s submission on the ETS Bill last year favoured a carbon tax, coupled with a subsidy for forestry sinks. Kerr says this position is based on “the overwhelming weight of opinion among eminent economists” a tax/subsidy regime is superior to an ETS.
Kerr says some business sector players are approaching the issue from their own self-interest in benefiting from trading in carbon, rather than the national interest. He argues a tax provides much greater certainty for business and investment decisions. With an ETS, prices may be extremely volatile, as EU experience has shown. The economic costs of volatility may be very high. A tax/subsidy regime is likely to be simpler and less costly to administer.
Kerr says an initial carbon tax should be set at a low level, around $5-10/tonne of CO2. Even this would be a significant burden for some emitters. For NZ Steel, for example, which emits around 2m tonnes of CO2 annually, a tax of $10/t would represent a cost of $20m. This would be a severe hit to its profitability and put jobs at risk. The petroleum exploration and production industry has also welcomed the moratorium on the ETS and endorses the Business Roundtable’s call for a carbon tax instead.
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