John Banks obstacle to saving New Zealand carbon market

Media release – op-ed

2 October, 2012

John Banks obstacle to saving New Zealand carbon market

By Adelia Hallett, Editor, Carbon News

The Government may be weakening in its opposition to restricting the number of international carbon units allowed into New Zealand.

But it faces a problem: John Banks.

CarbonNews understands that some members of the Government are becoming concerned about the ramifications of a politically motivated decision not to include some sort of restriction on international units in the latest amendments to the Emissions Trading Scheme.

Earlier this year, with domestic carbon prices collapsing in the face of an international glut of cheap units, the Government supported bringing in some sort of limitation on the use of international credits to meet carbon liabilities under the ETS.

In a consultation document released in April, the Government said that it proposed “introducing a mechanism" that would let the Minister for Climate Change restrict the proportion of international credits used.

This was followed with a statement by the minister himself, Tim Groser, who told the Iwi Leadership Forum that “the Government also proposes to enable in legislation the introduction of a mechanism that would place a restriction on the proportion of international units a participant can surrender to meet their ETS obligation”.

Groser said that under current rules, there was a “serious danger of New Zealand essentially exporting capital for no good reason, resulting in a loss of economic welfare”.

But the provision is missing from the Government’s final proposal to amend the scheme, now before Parliament.

The Government says that this is to make sure that New Zealand emitters have access to carbon at the international market price, but this argument ignores the fact that other countries with schemes in place – including the European Union and Australia – have included such restrictions.

What’s worse, these restrictions mean that New Zealand will be the only destination for these units. As forestry investment chief Roger Dickie says, with Russia about to release 300 million EURs, the chances of prices holding up in New Zealand’s 16 million tonne annual market are not good.

In a display of strategic lobbying not seen since the Labour Government proposed keeping all forestry Kyoto credits for itself, the forestry sector has launched a multi-pronged attack to get the Government to change its mind. As Craigmore Sustainables founder Forbes Elworthy - the son of former Federated Farmers chief the late Sir Peter Elworthy - put it, they're fighting for their lives.

It has a good argument; the planting of 20,000 ha a year of exotic forests is an essential part of the Government’s plan to reduce greenhouse gas emissions, and with carbon prices touching as low at the $2 range in recent week (down from more than $20 last year) plans for future planting are non-existent.

While the weight of opinion among members of the Finance and Expenditure Select Committee, which is hearing submissions on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, apparently remains implacably opposed to restrictions, sources suggest that others in the Government are starting to develop different views.

And that’s where Banks comes in. As part of the confidence-and-supply agreement with Banks’ Act Party that got the National Party back into government last year, it agreed to support “legislation to reduce the impact of the Emissions Trading Scheme on New Zealanders, consistent with the recommendations of the independent review, including by deferring the introduction of agriculture into the ETS in 2015 and holding down the increase in energy prices”.

Banks claimed the omission from the bill of provisions to restrict international units as a win for Act, saying the party had negotiated provisions which would “preserve the unrestricted importation of overseas carbon units”.

The issue that the Government now faces is now one of politics versus sound economic and environmental policy. Allowing domestic carbon prices to be destroyed by cheap foreign units that no-one else wants will cost the country money in 20 years’ time, when we start to feel the lack of today’s planting. It is already costing us our international reputation in this space, as Carbon Match’s Lizzie Chambers points out.

Act’s single vote in Parliament is critical to the balance of power, but with the Prime Minister’s dogged loyalty to Banks over the Kim Dotcom affair, perhaps National does have the political capital in the bank to negotiate a change over international carbon credits.

• Adelia Hallett is Editor of Carbon News, New Zealand’s specialist information service on the emission trading markets.

ENDS

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