Hon Dr Nick Smith
Minister for Climate Change Issues
24 September 2009 Media Statement

Improved ETS will better protect jobs & environment

The Government today introduced a Bill to the House that will make the emissions trading scheme workable and affordable and ensure the New Zealand economy and jobs are not put at risk.

Minister for Climate Change Issues Nick Smith says the Climate Change Response (Moderated Emissions Trading) Amendment Bill carefully balances New Zealand’s environmental and economic responsibilities.

“These improvements to the ETS are pragmatic. The changes agreed with the Maori Party and United Future will halve the costs for households for fuel and electricity, discourage carbon pollution, improve energy efficiency and encourage tree planting by creating internationally valuable credits for forest owners. These changes are good for New Zealand.

“This Bill is about the National Government delivering on its election promises We said we would legislate and implement a carefully balanced, all sectors, all gases ETS. We said we would take an emissions intensity approach. We said we would align our ETS more closely with Australia. We said we would not pocket billions of dollars by nationalising our emissions allowance. We said we would not discriminate against small business, and we said we would align the phase-out of industry support with our trade competitors. This Bill does all these things.”

Changes in the Bill include:
• Revised entry dates of 1 July 2010 for transport, energy and industrial sectors and 1 January 2015 for agriculture
• A transitional phase until 1 January 2013 with a 50% obligation and $25 fixed price option for the transport, energy and industrial sectors that will half power price and fuel price increases
• A production-based industry average approach to allocations for trade exposed, emissions intensive businesses
• A two-tier system of allocations of 90% for highly intensive and 60% for medium intensive trade exposed businesses
• A phase-out of industry support aligned with trading partners and the Government’s long-term -50 by 2050 emissions reduction target
• Incentives for afforestation created by a domestic and international market for carbon credits
• Enhanced transitional support for the fishing industry.

“The Bill also makes more than 34 changes to address anomalies and errors in the previous Government’s legislation. These include removing the liabilities created by the clearing of wilding pine trees and removing the liability associated with nitrogen curing of cabling that could have cost New Zealand manufacturing jobs. We have taken a pragmatic approach to make the law as workable as possible.

“This emissions trading scheme will be the first of any country outside of Europe and, as of 1 July 2010, will be the most comprehensive by including transport, industrial and energy emissions. The transitional support is about providing a gradual phase- out in and limiting the costs for households and business as New Zealand pulls out of the recession.

“There have been extravagant claims about the cost of these changes. There are costs for the initial transitional phase to 2013 of $415m and savings of $493 million between 2013 and 2018. Cost estimates beyond 2018 are very uncertain.

“The issue beyond 2018 is that under Labour’s existing scheme industry support is phased out at 8% as compared to Australia’s 1.3% and the EU’s 1.7%. We are not absolutely married to the 1.3% phase-out rate this far out into the future and note there are five year reviews of the rate beginning in 2011. However, we are committed to moving in line with our trading partners. Our worry with Labour’s phase-out rate – five times faster than any other country – is that it would discourage jobs and investment in New Zealand.

“It is important that these improvements are passed before the existing ETS comes into effect on 1 January 2010 and by the time of the Copenhagen climate change conference in December. If we can meet this timeline we will position New Zealand well in the global challenge of tackling climate change.”

ENDS

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