Pan industry letter to all MPs regarding ETS Bill

Please find attached a pan industry open letter to all political parties and MP’s regarding the ETS Bill. The 14 pan industry signatories to this letter were (in alphabetical order)

• Business New Zealand
• Deer Industry New Zealand
• Federated Farmers
• Greenhouse Policy Coalition
• Major Electricity Users’ Group
• Meat Industry Association
• Meat and Wool NZ
• New Zealand Business Roundtable
• New Zealand Chambers of Commerce
• New Zealand Minerals Industry Association
• Petroleum Exploration and Production Association
• Road Transport Forum
• Seafood Industry Association
• Wood Processors Association of NZ
This letter and the two attachments referred to in the letter were emailed to MP’s late yesterday.

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Attachments:
NZ_ETS_vs_EU_ETS_Comparison.xls
ETS_Sector_Comparison.doc

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24 June 2008

Pan industry letter to leaders of all political parties and members of Parliament

Dear Political Leaders and Members of Parliament

The undersigned are writing to you to express on behalf of our collective memberships, and in the national interest, our strong concern at the process underway to introduce an emissions trading scheme via the Climate Change (Emissions Trading and Renewable Preference) Bill. We request the opportunity to provide further written submissions on the vast number of changes proposed in its latest iteration.

The Bill, as reported back from the Select Committee, has not taken heed of the serious concerns raised by those in the productive sectors of the economy, the sectors that generate the export receipts and employment in New Zealand.

In what is one of the most far reaching economic reforms New Zealand has ever attempted, many submitters to the Select Committee were given only 10-15 minutes to present on their concerns, while the Select Committee considered over 60 reports in 12 hours, and had three days to consider over 1000 amendments to the Bill. The Departmental Report on the Bill is longer than the Bill itself. This is a very rushed process for a matter of such great economic significance to New Zealand.

The complexity inherent in the introduction of an emissions trading scheme is immense, even more so when it is the most comprehensive scheme in the world. A scheme including all sectors and all gases is something that no other government in the world has yet attempted, and there is no precedent to follow. A comparison of the only other mandatory emissions trading scheme, the European Union ETS, shows that the New Zealand scheme (because it is much more comprehensive and there are proportionally less free allocations) is five times more expensive than the EU scheme on a per unit basis and 10 times more expensive on a population basis (see attached appendix).

A combination of the emissions trading scheme and the heavy restrictions on new thermal electricity generation are expected to increase the price of electricity by up to 40%. The costs of the scheme will be ultimately borne by households as business will reflect the cost in their prices or be forced to down-size or relocate.

All the economic analysis undertaken indicates the impact on the economy, on jobs and wages will be severe, particularly if other countries choose not to follow New Zealand’s ambitious lead.

As it is drafted, the effect of the Bill will be the loss of industry and agricultural production to other parts of the world where they do not face a cost on carbon, because the Bill fails to adequately address the loss of international competitiveness of our productive sectors.

There will be a transfer of wealth to developing countries as industry and agriculture are forced to buy units from international brokers to cover their emissions, and investment in New Zealand will become less competitive once an additional cost of carbon is factored in.

The reported back Bill fails to provide any safety valve to protect against a high and volatile price of carbon, in an international carbon market that lacks liquidity and where the price of carbon reflects political decisions made in Europe, rather than the least cost emissions abatement.

New Zealand business and agriculture are supportive of the need to take action to contribute to the global effort to address climate change and are prepared to take action. Indeed, many large industrials in New Zealand have already reduced their emissions below 1990 levels. We would be supportive of an emissions trading scheme that puts a marginal price on greenhouse gas emissions and would send a price signal to incentivise on-going improvements in emissions intensity.

If the Bill is passed in its current form, economic analysis shows the result will be increasing global emissions as our productive capacity progressively exits New Zealand, a wealth transfer from New Zealand to developing countries through the purchase of units on international carbon markets, fewer jobs, lower wages, higher electricity, fuel and food bills.

There is too much of importance in the Bill being left to regulation, which is constitutionally bad practice and likely to result in poor policy outcomes. We believe policy of this magnitude should have the scrutiny of the whole of Parliament. In addition, the administration of the scheme is to be put in the hands of Ministers and Officials. We believe a better approach would be an independent regulator, such as mooted for Australia.

We urge all political parties to act in the best interest of New Zealand Inc and take the time to get this complex matter right and we respectfully request that stakeholders now be invited to make written submissions on the reported back Bill.

Yours sincerely

Catherine Beard, Executive Director, Greenhouse Policy Coalition.

Frank Brenmuhl, National Board, Federated Farmers

Tony Friedlander, Chief Executive Officer, Road Transport Forum Ltd.

Ralph Matthes, Executive Director, Major Electricity Users Group

Roger Kerr, Executive Director, New Zealand Business Roundtable

Doug Gordon, Chief Executive Officer, New Zealand Minerals Industry Association

Charles Finny, Director New Zealand Chambers of Commerce

Peter Bodeker, Chief Executive, Wood Processors Association of New Zealand

John Pfahlert
Executive Officer
Petroleum Exploration and Production Association

John Scurr
Chairman, Deer Industry New Zealand

Phil O Reilly, Chief Executive, Business New Zealand

Owen Symmans
Chief Executive
Seafood Industry Association.

Tim Richie
Chief Executive
Meat Industry Assoc

Mike Petersen, Meat and Wool NZ Chairman

ENDS

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