ETS “Could Destroy NZ’s Productive Sector”
May 7th, 2008
A new report by the NZ Institute of Economic Research claims the Emissions Trading Scheme is so flawed, it could sink the productive sector, and asks why NZ should place itself at risk against other economies which are acting more cautiously on climate change. The NZIER concludes it would be much cheaper if the Govt simply bought carbon credits to offset NZ’s Kyoto liability.
It adds if the Govt bought credits, it would be contributing positively to carbon offset schemes in other countries, which would do more to reduce global emissions than could be achieved as a result of an ETS forcing a reduction in NZ emissions. The NZIER estimates the cost to the NZ economy of trying to reduce emissions would be more than eight times as great as the Govt paying for credits from overseas projects and schemes. It notes NZ is the only country in the world to include agriculture in an ETS scheme, despite very limited opportunities for this sector to control its emissions.
The report warns agriculture, which delivers more than a third of the country’s export earnings, will be particularly hard hit because it can’t make quick adjustments and its ability to do so is largely reliant on unknown future improvements in technology. It predicts dairying land could drop in value by 40% in 2025 and sheep and beef farms could lose 23% of their value. NZIER CEO Brent Layton says NZ could reduce the amount of agricultural products its produces (at great cost to the economy) but the slack would simply be taken up by a less efficient overseas producer not covered by an ETS scheme.
Layton warns rural economies in Southland and Northland will face a double hit from the loss of sheep, beef and dairy farmers as well as contraction in the refining and metal production sectors. He adds, “Other countries can make spectacular gains by increasing the efficiency of electricity generation plants, but NZ is already a world leader with 70% of our electricity produced from renewable sources, and accordingly, small scope for gains in efficiency.” Layton says the impact of the Govt’s current ETS proposals on an already faltering economy will be major, and include rising prices, reduced export earnings and reduced employment, as the country’s standard of living falls further behind Aust.
By 2012, the equivalent of 20,000 jobs will be lost as the economy adjusts. And by 2025, NZ’s GDP will fall by almost $6bn, household spending will be down by $3000 per household and hourly wage rates will be down by $2.30 in today’s prices.
Copyright © Media Information Ltd
NZ Energy & Environment Business Week
Amalgamated Dairies