26 August 2009
Media Statement

High stakes in Trans Tasman ETS harmonisation move: Kiwis risk $200M a year in extra costs

New Zealand taxpayers face paying an extra $200 million a year if the Government fails to properly think through how to harmonise Australian and New Zealand emissions trading schemes, Labour’s Climate Change Issues spokesperson Charles Chauvel says.

The money would go in higher subsidies to big carbon polluters, Mr Chauvel said at a Climate Change Conference in Melbourne.

“Labour remains willing to assist the Government to pass legislation confirming the Emissions Trading Scheme law. But we can only support the legislation if it retains the integrity of the ‘all sectors, all gasses’ approach.”

Mr Chauvel's comments come ahead of the ETS select committee report back later today.

"Labour is particularly concerned about National's commitment at the joint NZ-Aus Cabinet meeting last Friday to harmonise the two schemes.

“There are clear benefits in harmonising the administrative aspects of both schemes as much as possible when economies are as integrated as ours.

"But New Zealand has a scheme already. Australia does not – its ETS is in draft form only and it is possible that it may not become law until next year at the earliest.

“If New Zealand adopted the draft Australian scheme’s proposals in their current form, this could cost New Zealand taxpayers more than $1 billion over the next five years*. The cash would simply go to paying large polluters extra subsidies.

“At the same time, the incentive to plant carbon sink forests would disappear if New Zealand adopted an Australian proposal to cap carbon prices at $A10 a tonne for the first year, then adopt a cap starting at $A40 and increasing at 5 per cent each year for three years*.

“Harmonising could mean banning international trade in New Zealand emission units for up to five years, and adopting a longer and slower subsidy phase out for heavy emitters,” Mr Chauvel said.

“We are looking at billions of extra dollars that must come from the taxpayer if we ‘hamonise’ on these aspects of the draft Australian scheme. None of it will go to planting new forests and other moves to cut emissions.

“If the Cabinet decided at the weekend to ‘harmonise’ with Australia we’d like to see the detailed Treasury analysis of the fiscal and other implications. What exactly are they talking about – and what will it cost? How can a policy of such huge magnitude be made without that information?

Mr Chauvel said Labour is also still waiting for a formal response from the Prime Minister to a letter sent last week by leader Phil Goff, raising concerns over proposed ETS policies.

"Contrary to what John Key said at his post-Cabinet press conference this week, we have been told that there will be no more discussions until after the Prime Minister has responded to our letter. We have had no response to date."

“The Prime Minister and Minister of Finance need to get both hands on the wheel on ETS policy,” Mr Chauvel said.

* see accompanying page for details.

Carbon costs

The current New Zealand emissions trading law provides heavy emitters with free credits to cover of their 2005 emissions for the first four years.

It then reduces by 8 per cent a year until about 2030.

The Australian draft scheme proposes a 3.6 per cent a year phase down at the moment.

Altering this phase out rate could cost $1 billion extra over five years -- at a carbon price of $30 a tonne (it is now $28).

If it goes to $50, or the $100 figure the Government used to set its 2020 targets, then the cost escalates greatly.

So does the cost of a cap. At $10 a tonne, which it has been raised that the Government is contemplating, taxpayers will be left paying the extra $18 per tonne on excess emissions at today’s prices.

If the world price of carbon goes to $50 a tonne, the taxpayer-funded subsidy becomes $40 a tonne.

ENDS

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