The first round of public submissions on the NZ ETS show a late burst of enthusiasm for a carbon tax - at least as a transition measure - from an array of interest groups spanning environmentalists, consumer advocates, and major energy users.The NZ Business Roundtable submitted strongly the current ETS has been passed without a review of its regulatory impact, which all such law is meant to receive before getting to a Select Committee. The Roundtable wants the Select Committee to delay its findings until a regulatory impact study is completed, and submissions based on it are heard.

Having previously opposed a carbon tax, the BRT now prefers it as a simpler and equally legitimate market intervention to change economic behaviour, and explains the about-face by citing the international consensus on carbon reduction, which did not exist when Aust and the US were standing outside the Kyoto Protocol. The BRT submission says “the overwhelming weight of opinion among economists favours a (carbon) tax. Taxes and tradeable permits are both market-based interventions.”

Todd Group CEO Richard Tweedie warns of the potential for volatile world carbon prices to place unwanted extra pressure on “already stressed corporate balance sheets.” This is a major reason for opting for a simple carbon charge, administered as part of the tax system rather than a new form of financial derivative trading in an immature global carbon market. The Domestic Energy Users Network and GreyPower are taking the same line, preferring a tax to a trading scheme for carbon. Only the influential environmental lobbyist, ECO, supports the ETS.

It originally supported the carbon tax proposals the previous Labour Govt was forced to abandon, but now wants the ETS to go ahead rather than be used as an excuse for further inaction on climate change. However, Climate Change Minister Nick Smith is pouring cold water on the potential for a backtracking, telling NZ Energy & Environment Business Week the tide has turned internationally in favour of emissions trading. “When you have the Europeans having an ETS, and Japan, and individual US states and Australia heading that way, even if we thought a carbon tax was a better tool, it is too far down the road.”

Smith says an ETS is particularly important also for NZ to establish carbon sinks using forestry plantation, and if the NZ ETS adopted a price cap, “then some of the uncertainty that’s associated with an ETS dissipates.” He says an ETS is a more flexible tool than a carbon charge, and has a “natural corrective element,” with carbon prices likely to fall during periods of economic weakness. Also key is the recent alignment of the NZ and Aust positions.

Where NZ has stopped seeking to lead the world on carbon reduction, Aust is no longer a climate change “recalcitrant.” Smith says the potential for trans-Tasman harmonisation has never been greater.

 Copyright © Media Information Ltd
NZ Energy & Environment Business Week