Carbon Tax will damage economy - Shirley

The Labour Government’s foolish adherence to the Kyoto Protocol and their flawed carbon tax proposals are poised to deliver serious damage to the New Zealand economy with no beneficial outcome, ACT Energy spokesman Ken Shirley predicted today.

“Market instruments such as carbon taxes can be effective tools to change behaviour if the market is allowed to operate. Instead Labour nationalised the carbon credits of the forestry sector thereby removing any incentive or encouragement to increase planting and the absorption of atmospheric carbon dioxide,” Mr Shirley said.

“On the other side of the ledger, Labour has decided to dish out largesse to selected businesses under their Greenhouse Gas agreements, totally distorting business decisions and effectively forcing energy efficient businesses to subsidise the inefficient.

“In the electricity market we know that under current structures all generators are paid the amount bid by the highest price generator that is selected to generate. As a result of the carbon tax, Huntly burning coal will be setting the price most of the time. This will increase the payment to all generators by about one cent per kilowatt-hour. It’s been estimated that if Huntly sets the price 60 percent of the time the carbon tax will cost consumers about $240 million a year. Approximately $170 million of this will be what is effectively a carbon tax imposed on power from hydro and other non-carbon sources.

“$120 million of this will be profits by the state owned enterprise generators Meridian, Mighty River Power and Genesis that go straight back into the Government coffers.

“Contact will get windfall profits from its hydro power stations and from the two gas fired stations that will pay a much lower carbon tax. If the intent was to encourage new renewable generation then paying most of the money to existing generators is a very clumsy and ineffective way of achieving that outcome.

“While the Government is claiming that the carbon tax is said to be $350 million per annum, the real cost will be nearer $600 million.

“Perhaps the worst aspect of the carbon tax as intended to be imposed by Labour is that all the economic levers reside with the Government with politicised decision-making. The market economy will be curtailed further with this substantial step towards a command economy,” Mr Shirley said.

ENDS

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