Kyoto Liability Revised Upwards

New Zealand's Kyoto liability for breaching its greenhouse gas emission reduction targets has climbed a further $252 million to nearly $1 billion, according to Treasury’s latest calculations.

The new figures are based on a carbon price of just over $21 a tonne, bringing the forecast liability to $966 million, which is still on the conservative side, according to the Greenhouse Policy Coalition.

The Greenhouse Policy Coalition represents large industrial employers in New Zealand, who are monitoring the cost of carbon closely.

Catherine Beard, executive director of the Greenhouse Policy Coalition says since the emissions trading scheme was announced on 20th September, the Treasury has revised the cost of carbon up by 35% (from NZ$15-21) but even this was an optimistic price.

“Good quality carbon credits are currently trading at NZ$32.00, and the only way the government can come up with a lower figure is if they take a portfolio approach to buying credits – with some that are at greater risk of non-delivery and therefore cheaper to buy”.

Catherine Beard said in a mandatory market with heavy penalties for non-compliance, the private sector was unlikely to have that luxury and would need to go for certainty of credit delivery, which pushed companies to the expensive end of the carbon credit project market.

“It was not that long ago when the carbon tax policy was to be enacted that a price cap of $NZ25/tonne CO2 was considered to be appropriate, because anything above that would be detrimental to the economy.”

“Now we are contemplating prices in the region of NZ $32/tonne and rising and yet there is no serious provision for capping the price in the recently released Climate Change (Emissions Trading and Renewable Preference) Bill.”

Catherine Beard said like Australia, we should be considering a price safety valve that caps the price of carbon to a level acceptable to our economy in order to prevent significant economic damage.

ENDS

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