Flawed Emissions Trading Scheme Creates Worries For Business And Government
May 7th, 2008
Ian Templeton at Parliament
• ETS will hurt exporters.
• Economy not ready for ETS.
• Householders hurting enough.
The Govt may have to bow to economic realities, and make significant adjustments to its emissions trading scheme. Some critics say the scheme is so flawed it will have to be scrapped. Climate Change Minister David Parker has conceded the ETS must be “both fair and effective” and says this is why the Govt has decided to delay the entry of the transport sector into the ETS from its scheduled target date of 2009 until 2011. There is also heavy pressure for revision to other aspects of the ETS. Support for legislation currently before Select Committee is waning: National which initially backed the scheme is becoming increasingly lukewarm, while minor parties are getting cold feet over it.
Some Beehive sources believe Finance Minister Michael Cullen has growing concerns over the impact of the ETS on an economy already suffering from soaring transport costs. The problems with the ETS will come as no surprise to readers of NZ Energy & Environment Business Week which as long ago as November 7 headlined its lead story “Emissions Scheme Ignores Economic Realities – Not Viable in Current Form.” Now newspapers are carrying headlines like “Will Cullen Save Us From this Madness?”
Other measures the Govt has proposed (the bio-fuels target, and regional petrol tax levies) are also adding to angst in the business community. The National Party has opposed the regional petrol tax, and Helen Clark now says the Govt has ruled out any chance of a 5c a litre tax being applied in Auckland next year. (Other Govt sources say the intention has always been to phase in the regional petrol tax). The bio-fuels target legislation stipulates a date of July 1 for the initial move to force oil companies to include bio-fuel in petrol and diesel but it may now be delayed.
Parker says the potential for increasing prices stemming from the Govt’s flagship programme to meet Kyoto obligations, the ETS, is now being carefully weighed. “The issue as to the timing of things has to be considered.” The Govt appears to be relying heavily on the Climate Change Leadership Forum chaired by Stephen Tindall which, though it says the ETS is properly designed and will work, has stressed the need to consider again the rate at which the free allocation of emission rights is phased out for exporters facing competition from countries which have not yet introduced emission pricing.
The political problem for the Govt in the ETS is the impact the scheme will have on household budgets, particularly through the rising cost of electricity and other fuels. Power prices have risen 48% over the last five years. Any U-turn in election year could be politically embarrassing for the Govt. Just as embarrassing could be a defeat for its legislation, particularly if the Govt’s support partners get cold feet.
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